On October 16th, local Sichuan stocks defied the market trend and surged, with stocks related to Chengdu and Chongqing triggering a wave of price limits.
Chengdu Road & Bridge, Huaxi Securities, Sichuan Shuangma, Chongqing Steel, Chongqing Port, Chongqing Construction Engineering, Chengdu Pioneer, and more than ten other stocks were capped at the daily limit, simultaneously driving the real estate, building materials, infrastructure construction, and machinery equipment sectors to strengthen. Even the electronic CXO sector was stimulated.
This cross-sector "name speculation" seems to have come somewhat suddenly.
"Recently, market rumors have claimed that factories from coastal industries such as Jiangsu, Zhejiang, and Shanghai are migrating to Sichuan, and Sichuan has launched a 2.15 trillion yuan infrastructure plan, with 330 major projects to start within 2-3 years."
However, institutional investors have indicated that the infrastructure sector has its own logic for strengthening. The latest research report from China Galaxy Securities' strategy analyst stated: "Multiple factors are brewing to boost the recovery of the infrastructure sector."
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On one hand, infrastructure has a counter-cyclical adjustment function and is an important stabilizing factor during the key period of new and old kinetic energy conversion.
When economic下行 pressure increases, the government stabilizes economic growth by expanding infrastructure investment. This investment behavior is mainly based on the government's "stable growth" policy orientation and has a clear positive correlation with the growth of Gross Domestic Product (GDP).
On the other hand, since October, fiscal and monetary policies have turned positive, and the construction of infrastructure projects will be accelerated.
On October 8th, the National Development and Reform Commission (NDRC) stated at a press conference held by the State Council Information Office that it plans to issue a list of "two heavy" construction projects and a central budget investment plan of 100 billion yuan in advance by the end of this month according to procedures.
On October 12th, the Ministry of Finance stated that in 2024, the new local government special debt limit will be 3.9 trillion yuan, an increase of 100 billion yuan compared to the previous year, which is the largest scale in history. It specifically mentioned increasing support for special bonds in major economic provinces, allocating quotas to areas with well-prepared projects and high investment efficiency, and supporting the construction of major projects in major economic provinces. The proactive fiscal policy is expected to accelerate the advancement of infrastructure project construction and increase the growth rate of infrastructure construction.Finally, under the framework of the "New Nine Articles," infrastructure central state-owned enterprises (SOEs) will accelerate reform and restructuring to enhance profitability.
The New Nine Articles have put forward specific requirements for the reform of central SOEs, with the core focus on promoting strategic reorganizations and professional integration, optimizing resource allocation, and enhancing industrial synergy. At the same time, the New Nine Articles also emphasize the importance of improving the modern enterprise system by raising the decision-making level of the board of directors and market-oriented operating mechanisms, strengthening term system and contract-based management, and stimulating enterprise vitality.
In addition, the New Nine Articles propose to increase the intensity of delisting supervision, deepen the reform of the delisting system, and accelerate the formation of a normalized delisting pattern that allows for timely clearance, as well as to strengthen the supervision of securities and fund institutions, promoting the industry to return to its roots and become stronger and better. The infrastructure industry is expected to benefit from the reform and merger and acquisition concepts of central SOEs.
At the transaction level, the high dividend and low valuation of infrastructure enterprises are also very attractive.
The latest market value management plan released by the China Securities Regulatory Commission (CSRC) is also expected to reshape the valuation of related infrastructure enterprises. The current valuation of the infrastructure index still needs to be improved, especially in the traditional infrastructure industry.
At the same time, the dividend yield of the traditional infrastructure index in the past 12 months is 3.27%, higher than the Shanghai Composite Index (2.67%) and the CSI 300 (2.55%); the dividend yield of central SOE infrastructure is 2.55%, and there is still room for improvement.
Related ETF: Infrastructure 50 ETF (159635.SZ), tracking the target index CSI Infrastructure Index (930608.CSI), the top ten weighted stocks of the index include China State Construction Engineering Corporation (10.62%), China Railway Group Limited (9.31%), PowerChina (6.70%), China Railway Construction Corporation Limited (5.65%), etc.