Steel stocks stop falling and stabilise

- Jan 31, 2019-

The first day of the full rebound, yesterday's shock intensified in the two cities, the plate is mixed, and the earlier decline in the steel sector rose first, again by many investors. Since the third quarter, while the price of black-system assets as a whole has fallen, analysts believe that the current undervaluation of the plate has fully reflected the pessimistic expectations of the industry, some of the company's valuation has been in a lower range. In this context, the fundamental rebalancing, the plate still has a certain allocation value.

Excellent plate performance

Yesterday, the two cities in the main index shock recovery, in this context, the steel plate in 29 CITIC first-class industry in the first increase. On the plate, yesterday slightly lower after the steel plate quickly pulled up in the early trading, the whole day to maintain a strong range. By the close, the sector had risen 1.76%.

From the performance of the industry's stocks, wind data showed that, as of the close, only Juli special and Zhejiang merchants in the 46 constituent stocks of the industry fell, a performance in yesterday's market has been quite excellent. Analysts said yesterday's disk shock showed that risk appetite was still unspeakable to a full recovery. In this context, there is no doubt that the rise and fall between the plates is still inextricably linked to the flow of capital. Wind data showed that yesterday, the main funds in most of the industry at the level of a return to a net outflow.

In the context of the overall net outflow of funds has not been completely reversed, only 7 industries, including steel, yesterday experienced a net inflow of funds, but the steel sector net inflow amount of less than 100 million yuan. In response to the aftermarket, Citic Securities said that in the short term can focus on the trader winter storage mood recovery. On the one hand, this round of thread prices slashed, one of the reasons is the market for winter storage low expectations, once the winter storage is expected to stabilize, then may usher in the price end of the stabilization. It is important to observe the changes of traders ' winter reserves (the active involvement part of social inventory accumulation). On the other hand, the profit of all varieties in the whole industrial chain is in a relatively balanced position, from the profit distribution of the Black series, the Coke is high, the coking coal is higher, and the snail ore is again. If, as the recent price correction leads to a rebalancing of profits across the entire industrial chain, the short-term wave of falling prices is expected to end, ushering in a period of price stabilization.

Configuration value still exists

National Sea Securities pointed out that the three quarter of the industry profit high or has been established, since the beginning of the year, the steel industry macro demand is pessimistic, micro-demand good scenario has changed substantially, the industry situation has been "weak supply, demand is OK" into a "supply loose, demand downward", The persistence of low spot prices confirms the grim facts of the downturn.

In the context of weaker fundamentals, investment in the steel sector should be cautious. However, China-Thailand securities believe that in the background of a sharp fall in inventory, October crude steel daily consumption still reached 2.522 million tons, an increase of 14.43% year-on-day, indicating that terminal procurement is more vigorous. From the perspective of horizontal comparison, October cement production data continued to increase significantly by 13.1%, the cumulative year-on-year growth rate of 2.6%, corresponding to the price of multiple cement increases, which is more matched with the daily consumption performance of steel. Demand toughness mainly comes from the investment end of the ultra-expected performance, on the one hand, real estate is to support this year's steel demand *** important factors, although October a slight decline, but the overall remains high, real estate investment and new construction accumulated 9.7%, 16.3% year on, on the other hand, Manufacturing investment continued to improve and infrastructure investment stabilized, rising to 9.1% and 3.7% in January-October, creating marginal power to improve steel demand.

Recently, the negative feedback effect of steel price has led to the slow end procurement, but if the late steel price can be stabilized, in the context of demand leveling, inventory cycle fluctuations will once again promote the release of downstream procurement efforts. Setting aside fundamental factors, *** only the point of view of configuration, China Merchants Securities stressed that the recent easing of external factors is expected to repair market sentiment. In this context, it is recommended to wait for the supply and demand fundamentals to rebalance, the plate collective dividend brought about by the investment opportunities. The agency calculates that the interest rate on mainstream steel stocks in 2018 was generally 6%-10%, and the agency believes that the future of the sector is still more attractive in the context of a sustained profit.