Since the beginning of 2022, the market has continued to pay attention to the actions and effects of policy steady growth. However, due to the lack of effective tracking indicators, market fluctuations are vulnerable to some policy remarks. For example, last week (January 10-14, 2022), the support policies for new infrastructure increased, and Shanghai Transportation Commission plans to add 10000 public (including special) charging piles and 10 taxi charging demonstration stations in 2022, The State Grid plans to invest 380 billion yuan in UHV during the 14th Five Year Plan period. Reflected in the stock market, the performance of the new infrastructure index was significantly better than that of the old infrastructure index last week.? The difficulty in tracking the steady growth of infrastructure is mainly that, on the one hand, the publication of economic data lags behind, on the other hand, there is noise in high-frequency data. For example, many raw materials and commodity prices may be difficult to capture the signal of marginal change due to the influence of supply and price stabilization policies and seasonal factors. In this report, we provide three perspectives for investors’ reference:
Clue 1: does the financial data in December 2021 show that government spending has begun to accelerate? In December 2021, the growth rate of social finance continued to rebound, and the main support was government bond financing (an additional 1171.8 billion yuan, a new high in the same period since the data were available). However, another concern is that the government deposits of financial institutions decreased by 1030.2 billion yuan in December, an increase of 76.2 billion yuan year-on-year. How much is the force of fiscal expenditure between an increase and a decrease?
From the relationship between Treasury revenue and expenditure and fiscal revenue and expenditure, the fiscal revenue reduction in December 2021 may be the main factor, and the increase of expenditure may be limited. Most of China’s fiscal revenue and expenditure have been included in the centralized collection and payment management of the national treasury. From a large number, there should be “fiscal revenue – fiscal expenditure = changes in fiscal deposits”. If we divide the fiscal revenue into general public fiscal revenue, net financing of government bonds and income of other government funds (mainly the income from the transfer of state-owned land use rights), we can change the above equation into: “net financing of government bonds – change of fiscal deposits = fiscal expenditure – general public fiscal revenue – income of other government funds”, In December, the left end of the equation increased significantly to 2202 billion yuan, which may mainly reflect the impact of phased tax deferment (it is estimated that 217 billion yuan will be deferred in November and December 2021) and the reduction of land transfer fee income, and the growth rate of actual expenditure may be limited.
Clue 2: the order growth rate of the construction company stabilized in December 2021, and the rebound is not obvious. We can also see some clues from the contracts of listed construction companies. The leading enterprise China State Construction Engineering Corporation Limited(601668) of China’s major construction companies will announce the new contracts signed for housing construction and infrastructure every month. From the business focus of different construction companies, China State Construction Engineering Corporation Limited(601668) is more comprehensive, but China Railway Group Limited(601390) and China Railway Construction Corporation Limited(601186) are more prominent in railway and rail transit, Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) and China Energy Engineering Corporation Limited(601868) are more professional in power, and China Communications Construction Company Limited(601800) is a good hand in ports and bridges. We found that the order change in China State Construction Engineering Corporation Limited(601668) infrastructure has a good correlation with the growth rate of narrow infrastructure (excluding electricity), and the data show that the growth rate of infrastructure in December has stabilized compared with November, but the rebound is relatively limited.
Clue 3: how strong is the rebound of infrastructure shown by regional cement inventory? Cement is an important raw material for real estate and infrastructure, which will be affected by both. Generally speaking, the cement output in East China is the highest, and its cement price is the wind vane of the national market. In terms of the composition of fixed investment, the proportion of real estate investment in Northwest China is relatively small, and cement may be more sensitive to the marginal change of infrastructure investment. Historically, there is an obvious reverse relationship between the cement storage capacity ratio and the growth rate of infrastructure investment in Northwest China, This may mean that the monthly year-on-year growth rate of infrastructure investment in December 2021 is not optimistic. In terms of high frequency, compared with the beginning of December, the storage capacity ratio at the end of the month decreased slightly. The growth rate of infrastructure investment may be better than that at the end of 2019 and the beginning of 2020, but the rebound may not be as strong as that at the end of 2018 and the beginning of 2019.
What information does the high frequency data reveal this week (January 10-14, 2022)? The demand side data is not good-looking. Due to the expansion of the spread of the epidemic and the impact of last year’s high base, the year-on-year growth rate decreased to varying degrees. It is worth noting that the real estate sales in the third tier cities and the land supply in 100 cities decreased by 56% and 87% respectively year-on-year. The production side data improved, and the year-on-year decline in operating rates of steel, automobile, asphalt and other industries continued to narrow; In terms of price, under the condition of stable supply and stable price, the prices of pork and vegetables continue to fall. Under the condition of tight overseas energy supply and falling epidemic concerns, Brent crude oil continues to rise, reaching a new high since September 2018, which is an important factor supporting the continued high US bond yield this week. In the stock market, we continue to track the index performance of infrastructure. As we have not seen the signal of infrastructure development, the market is still “skeptical”. The relevant indexes retook most of the gains since the beginning of 2022 this week, and the construction machinery and infrastructure engineering sectors closed down 4.6% and 5.4% respectively.
Risk tip: the epidemic spread exceeded expectations, and China’s foreign policies exceeded expectations
