Real estate investment accelerated downward, consumption was depressed, and the urgency of “steady growth” of infrastructure appeared. In December 2021, real estate investment decreased by 13.9% year-on-year in a single month, 9.6 PCT more than that in November. Important indicators such as new construction, land acquisition and capital availability showed an accelerated downward trend; In December, the nominal value of social zero increased by 1.7% year-on-year, and the growth rate slowed down by 2.2 PCT. Due to the repeated impact of the epidemic, consumption is still relatively low. At present, there is great downward pressure on the economy. As a government led investment field, infrastructure is expected to bear fruit in the short term and play a pillar role in stabilizing growth. Last week, the national standing committee pointed out the need to speed up the implementation of the key planning projects of the 14th five year plan. The statements of “accelerating the implementation”, “doing a good job in guarantee”, “simplifying procedures” and “speeding up the implementation” all show the urgent willingness of the government to promote the accelerated implementation of investment. Since the end of last year, a series of important meetings have continuously demonstrated the current determination to stabilize growth. The necessity and policy attitude of stabilizing growth are relatively clear. It is expected that the follow-up policies will continue to work and achieve results, and promote the continuous improvement of infrastructure investment this year.
The central bank cut interest rates and stated that the policy should be “sufficient”, “active” and “ahead” to promote the improvement of the monetary and credit environment. On January 17, the bid winning interest rates of the central bank’s medium-term lending facility (MLF) and open market reverse repurchase (Omo) decreased by 10 basis points, exceeding market expectations. On January 18, Liu Guoqiang, vice governor of the central bank, said at the press conference: “At present, the key goal is to be stable, and the policy requirement is to make efforts. Specifically, first, make sufficient efforts, open the monetary policy toolbox a little larger, maintain the stability of the total amount and avoid credit collapse; second, make accurate efforts, and the financial sector should take the initiative; third, make efforts forward, hurry up, forward-looking operation, walk in front of the market curve and respond to the general concerns of the market in time.” The central bank’s interest rate cut and policy guidance are expected to provide good financial support for “steady growth” and promote the improvement of the monetary and credit environment of the industry.
The national development and Reform Commission has made great efforts to accelerate the implementation of major projects, and the approval of projects and other links are expected to be accelerated. On January 18, the national development and Reform Commission said at a press conference: “appropriately carry out infrastructure investment in advance, accelerate the promotion of 102 major engineering projects in the 14th five year plan, implement the local government special bonds issued in the fourth quarter of last year to specific projects as soon as possible, pay close attention to the issued quota, and strive to form more practical workload in the first quarter.” The national development and Reform Commission is in charge of project approval and communication and coordination among multiple departments. It is expected that relevant links of follow-up projects are expected to be accelerated and implemented as soon as possible, forming a physical quantity.
Investment suggestion: resume the historical market. In the initial stage of policy adjustment and improvement of monetary and credit environment, the excess return of the construction sector is obvious (such as Q4 in 2008, Q4 in 2014, the second half of 2018, etc.). At present, with the increasing downward pressure on the economy, the strengthening of the policy of stable growth in infrastructure and the improvement of the industry’s financial environment, the leader of high-quality construction is expected to meet the driving force of valuation improvement. Key recommended undervalued building blue chips: China Communications Construction Company Limited(601800) (pe6x), China Railway Group Limited(601390) (pe5x), China Railway Construction Corporation Limited(601186) (pe4x), China National Chemical Engineering Co.Ltd(601117) (pe11x), etc., and infrastructure design leaders China Design Group Co.Ltd(603018) (pe7x), Anhui Transport Consulting & Design Institute Co.Ltd(603357) (pe12x), Jsti Group(300284) (pe11x). In addition, focus on steady growth and high business elasticity: 1) affordable housing: focus on China State Construction Engineering Corporation Limited(601668) (pe4x), Shanghai Construction Group Co.Ltd(600170) (pe7x), Shenzhen Capol International&Associatesco.Ltd(002949) (pe14x); 2) Steel structure: mainly recommended Changjiang & Jinggong Steel Building(Group)Co.Ltd(600496) (pe11x), Anhui Honglu Steel Construction(Group) Co.Ltd(002541) (pe19x); 3) New power system: focus on recommending and paying attention to Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) (pe13x), China Energy Engineering Corporation Limited(601868) (pe13x), private distribution network EPCO leader Suwen Electric Energy Technology Co.Ltd(300982) (pe24x), enterprise energy efficiency control expert Acrel Co.Ltd(300286) (pe34x).
Risk tips: policy promotion is less than expected, epidemic impact is more than expected, accounts receivable risk, overseas operation risk, credit risk impact of the real estate industry.
