Iron Ore and A-share Market Weekly Report and Global Capital Market Weekly Report 20240122
Overall
• The amount of domestic resources arriving in Hong Kong declined further in the later stages, while steel companies continued to resume production. Together, the two led to a marginal improvement in ore fundamentals, which helped stabilize ore prices after a continuous decline. At the same time, the flow of imported ore stocks to ports and steel mills is accelerating, and we are concerned about the price pressure brought about by the increase in port ore stocks.
On the supply side
• Global shipments of 26.936 million tons, an increase of 31,000 tons over the previous week, of which Australia shipped 15.739 million tons, a decrease of 1.237 million tons over the previous week, Brazil shipped 7.131 million tons, an increase of 2.95 million tons over the previous week, and 4.07 million tons of non-mainstream shipments, a decrease of 1.69 million tons over the previous week.
• Global ore shipments remain relatively low, but in the later stages, the impact of the FMG train derailment incident is over, and FMG shipments are expected to pick up markedly. At the same time, shipments from some non-mainstream mines are expected to remain high, and overall ore shipments are expected to pick up. Nearly 30 million tons of ore arrived in Hong Kong last week, the second highest in recent history. Later, with the decline in Australian shipments since the beginning of the year, the arrival level is expected to decline to a high level.
Demand side
• The operating rate of blast furnaces in 247 steel mills was 76.23%, up 0.15% from last week, up 0.26% from last year; blast furnace iron production capacity utilization rate was 82.98%, up 0.42% from month to month, down 0.12% year on year; steel mill profit ratio was 26.41%, down 0.43% month on month, down 0.86% year on year; average daily iron and water output was 2.191,000 tons, up 11,000 tons year on month, down 183,000 tons year on year.
• Steel companies resumed production further this week, but the increase in iron and water production fell short of expectations. Considering that large steel companies in central and southern China will resume production this week, iron and water output is expected to increase further next week. According to steel companies' maintenance and resumption plans, output changes are not expected in other regions.
In terms of inventory
• The total stocks of iron ore imported from steel mills across the country were 102.438,800 tons; according to statistics, 45 ports imported iron ore stocks were 126.419 million tons, an increase of 207,900 tons over the previous month; the average daily dredging volume was 3.1921 million tons, an increase of 64,000 tons. $SSIF DCE Iron Ore Futures Index ETF(03047.HK$
This week's A-share weekly report:
Microchip structure pressure is the core reason for this round of index adjustments. On January 18, the market experienced a sharp adjustment. Under the risk of knockout of snowball products and the pressure of large-scale hedging, the Shanghai Stock Exchange index gradually fell to 2760.98 points, and the futures base of the four major stock indexes once widened to an extreme level of 3%-4%.
The lack of buzz in the market (the daily turnover of the entire market hovered around 600 billion dollars, before 800 to 100 billion dollars), increasing the spread of sentiment. Recently, incremental capital has continued to buy broad-based ETFs such as the Shanghai and Shenzhen 300, and the stabilization effect is remarkable. The market looks backwards:
1) The current liquidity pressure on the stock market has gradually eased. The follow-up pace refers to 2015. Relieving liquidity pressure on the stock market may also have its ups and downs; it may not necessarily happen overnight.
2) The mid-term market is not pessimistic. The domestic economy is more stable than last year, and the global liquidity environment is much better than in the past two years. At the same time, the cost performance ratio of domestic assets is already in the best range in history.
3) Signals that the market needs to pay attention to in the future: communication and easing between China and the US, continuation and changes in incremental capital, and potential easing of domestic monetary policy. At the allocation level, medium-term growth stocks are worth deploying. Limited by institutional chip pressure, short-term performance concerns, and declining market risk appetite, investors were unanimously optimistic about growth industries such as TMT, pharmaceuticals, machinery, and military at the end of last year. The decline at the beginning of the year was at the bottom of all industry rankings. Currently, the level of pessimism and asset valuations are similar to those at the end of 2018.
Looking at the whole year, a large number of high-quality growth stocks, even if their valuation shrinks further (such as 10%) and only earns profit growth income (such as 20%), the current implied return (about 10% under calculation) is quite impressive. The opportunities for medium-term high-profit/growth stocks are already quite obvious, and it is worth making a long-term layout. $BABA-SW(09988.HK$
Global Capital Markets Weekly Report:
Software stocks covered by our SMID limit (application/vertical) performed slightly better than the S&P 500 in 2023, averaging +28%, compared to +24% for the S&P 500. In other words, the main performance in 2023 was marked by significant dispersion, including high performers (VERX +84%, ALKT +61%) and underperformers (ETWO -27%, MODN -34%), with varying executive narratives and terminal market exposure. Put simply, 2023 will reward exceptional, narrative-driven investments, and we expect 2024 to largely reflect this trend. $Vertex(VERX.US$ $Model N(MODN.US$
Divergence will continue in 2024, and we expect share price performance to continue to diverge for the following reasons:
1) The product cycle story causes investors to expect to face upward risks;
2) The resilience of high-quality companies facing cyclical or business model headwinds in 2023, and investor sentiment has remained sluggish since this year.
We believe that as the macroeconomic impact on growth continues until the end of the year, we expect most companies to adopt a conservative approach to the initial guidance for 2024, which will reinforce this, which will provide more opportunities to outperform through the year's quarterly performance growth. Instead, we believe that many of the potentially defensive themes driving fundamental elasticity and stock prices of select companies in 2023 (essential product features, flexible time to achieve value, countercyclical revenue retention) are largely embedded in share prices at relative prices. Despite our positive views on these business models, the popularity of these stocks is getting lower and lower.
• The amount of domestic resources arriving in Hong Kong declined further in the later stages, while steel companies continued to resume production. Together, the two led to a marginal improvement in ore fundamentals, which helped stabilize ore prices after a continuous decline. At the same time, the flow of imported ore stocks to ports and steel mills is accelerating, and we are concerned about the price pressure brought about by the increase in port ore stocks.
On the supply side
• Global shipments of 26.936 million tons, an increase of 31,000 tons over the previous week, of which Australia shipped 15.739 million tons, a decrease of 1.237 million tons over the previous week, Brazil shipped 7.131 million tons, an increase of 2.95 million tons over the previous week, and 4.07 million tons of non-mainstream shipments, a decrease of 1.69 million tons over the previous week.
• Global ore shipments remain relatively low, but in the later stages, the impact of the FMG train derailment incident is over, and FMG shipments are expected to pick up markedly. At the same time, shipments from some non-mainstream mines are expected to remain high, and overall ore shipments are expected to pick up. Nearly 30 million tons of ore arrived in Hong Kong last week, the second highest in recent history. Later, with the decline in Australian shipments since the beginning of the year, the arrival level is expected to decline to a high level.
Demand side
• The operating rate of blast furnaces in 247 steel mills was 76.23%, up 0.15% from last week, up 0.26% from last year; blast furnace iron production capacity utilization rate was 82.98%, up 0.42% from month to month, down 0.12% year on year; steel mill profit ratio was 26.41%, down 0.43% month on month, down 0.86% year on year; average daily iron and water output was 2.191,000 tons, up 11,000 tons year on month, down 183,000 tons year on year.
• Steel companies resumed production further this week, but the increase in iron and water production fell short of expectations. Considering that large steel companies in central and southern China will resume production this week, iron and water output is expected to increase further next week. According to steel companies' maintenance and resumption plans, output changes are not expected in other regions.
In terms of inventory
• The total stocks of iron ore imported from steel mills across the country were 102.438,800 tons; according to statistics, 45 ports imported iron ore stocks were 126.419 million tons, an increase of 207,900 tons over the previous month; the average daily dredging volume was 3.1921 million tons, an increase of 64,000 tons. $SSIF DCE Iron Ore Futures Index ETF(03047.HK$
This week's A-share weekly report:
Microchip structure pressure is the core reason for this round of index adjustments. On January 18, the market experienced a sharp adjustment. Under the risk of knockout of snowball products and the pressure of large-scale hedging, the Shanghai Stock Exchange index gradually fell to 2760.98 points, and the futures base of the four major stock indexes once widened to an extreme level of 3%-4%.
The lack of buzz in the market (the daily turnover of the entire market hovered around 600 billion dollars, before 800 to 100 billion dollars), increasing the spread of sentiment. Recently, incremental capital has continued to buy broad-based ETFs such as the Shanghai and Shenzhen 300, and the stabilization effect is remarkable. The market looks backwards:
1) The current liquidity pressure on the stock market has gradually eased. The follow-up pace refers to 2015. Relieving liquidity pressure on the stock market may also have its ups and downs; it may not necessarily happen overnight.
2) The mid-term market is not pessimistic. The domestic economy is more stable than last year, and the global liquidity environment is much better than in the past two years. At the same time, the cost performance ratio of domestic assets is already in the best range in history.
3) Signals that the market needs to pay attention to in the future: communication and easing between China and the US, continuation and changes in incremental capital, and potential easing of domestic monetary policy. At the allocation level, medium-term growth stocks are worth deploying. Limited by institutional chip pressure, short-term performance concerns, and declining market risk appetite, investors were unanimously optimistic about growth industries such as TMT, pharmaceuticals, machinery, and military at the end of last year. The decline at the beginning of the year was at the bottom of all industry rankings. Currently, the level of pessimism and asset valuations are similar to those at the end of 2018.
Looking at the whole year, a large number of high-quality growth stocks, even if their valuation shrinks further (such as 10%) and only earns profit growth income (such as 20%), the current implied return (about 10% under calculation) is quite impressive. The opportunities for medium-term high-profit/growth stocks are already quite obvious, and it is worth making a long-term layout. $BABA-SW(09988.HK$
Global Capital Markets Weekly Report:
Software stocks covered by our SMID limit (application/vertical) performed slightly better than the S&P 500 in 2023, averaging +28%, compared to +24% for the S&P 500. In other words, the main performance in 2023 was marked by significant dispersion, including high performers (VERX +84%, ALKT +61%) and underperformers (ETWO -27%, MODN -34%), with varying executive narratives and terminal market exposure. Put simply, 2023 will reward exceptional, narrative-driven investments, and we expect 2024 to largely reflect this trend. $Vertex(VERX.US$ $Model N(MODN.US$
Divergence will continue in 2024, and we expect share price performance to continue to diverge for the following reasons:
1) The product cycle story causes investors to expect to face upward risks;
2) The resilience of high-quality companies facing cyclical or business model headwinds in 2023, and investor sentiment has remained sluggish since this year.
We believe that as the macroeconomic impact on growth continues until the end of the year, we expect most companies to adopt a conservative approach to the initial guidance for 2024, which will reinforce this, which will provide more opportunities to outperform through the year's quarterly performance growth. Instead, we believe that many of the potentially defensive themes driving fundamental elasticity and stock prices of select companies in 2023 (essential product features, flexible time to achieve value, countercyclical revenue retention) are largely embedded in share prices at relative prices. Despite our positive views on these business models, the popularity of these stocks is getting lower and lower.
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3047 is a team specializing in the research of commodities and smart beta. We like to exchange investment strategies.
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