The hottest RMB appreciation has become a catalyst

RMB appreciation has become a catalyst for the paper industry. A new round of compensatory sentiment may erupt.

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core tip: after a year of frustration in 2018, the paper stocks finally survived at the beginning of the new year. The paper industry has set off a new round of price rise. With the continuous strengthening of the market, paper stocks have also come out of a wave of sunshine. As we all know, the paper industry is a cyclical industry. Since September 2017, the paper stocks have ended their rise for a year and a half, and have fallen out of control since then. The valuation of Nine Dragons Paper and Liwen paper, the industry leaders, has been at a historically low level and is out of its valuation center. However, to catch the rising trend of cyclical stocks, the return on share prices can usually double in a short time, so generally investing in cyclical companies is more a game. In contrast, at this time, the valuation of paper stocks is at a historical low, the RMB stabilizes and has a strengthening trend, and the market continues to strengthen. At this time, is the value Bo rate of concept stocks with both make-up and RMB strengthening high

will the rise in paper prices open a new cycle

[China Packaging News] in 2018, the export of paper makers was weak, and the price of mainland carton paper fell sharply from November to December, resulting in a large amount of inventory transferred to the upstream, thus dragging down the profit per ton of paper to 200 yuan (the same below)

however, at the beginning of 2019, mainland consumption recovered, and downstream paper makers gradually replenished, driving the profit per ton of paper to rebound to yuan from the end of December, the report said. As estimated by Macquarie, nine dragons' profit per ton in January was between yuan

why can big bank analysts accurately predict the profit per ton of paper

mainly because the data of the paper industry is relatively transparent, both the upstream waste paper, pulp and downstream product prices have public data for reference, and the paper price mainly depends on the cost side. For example, waste paper accounts for more than half of the production cost of corrugated paper

it is reported that on February 14, Shanying paper, the top five paper companies in the mainland, announced that its Fujian subsidiary would increase the average selling price of its products by 100 yuan/ton, and pointed out that since the 20th of this month, all its branches and products will increase the price by yuan/ton, reflecting that downstream customers are replenishing inventory

Citigroup believes that its main competitors will follow the price increase. Sure enough, at present, Chenming paper, Bohui paper and other major paper enterprises have raised the recycling price of waste paper, and announced that the price of base paper has been raised across the board, with a price increase of 200 yuan/ton

if sun paper and Huatai Paper issued a price increase letter, coated paper products will increase by 200 yuan/ton no later than March 1

in fact, in the environment of large overcapacity in the industry, if the industry wants to increase profits, it is nothing more than "reducing supply" and "raising prices". After the phased achievements of limiting waste and checking scattered pollution, entering 2019, the only card in hand is the "price rise"

optimistically, given that the current central bank policy meeting has changed the prudent monetary policy to abundant, according to experts, the liquidity of funds will be further enhanced at that time, and it is estimated that commodities will rise a wave at that time

but what is the most painful thing for widescreen users? Is this kind of price increase sustainable if you are not careful and will fall to the ground? Nor should 4 The better frequency of oil tank hydraulic oil is blind optimism in two years or two years. After all, the current price rise is not that supply exceeds demand, but that the profit space of the paper market is further reduced due to environmental protection and raw materials, and major paper industries can only raise prices to ensure profits

therefore, the reason behind the rise in prices of paper enterprises is that the rising costs squeeze the profit space, not the rise in demand, which cannot be regarded as a new cycle of the industry

as early as January 2019, Goldman Sachs Group released a report saying that its view on China's paper industry turned to prudence, and it was expected that the supply and demand of carton board would deteriorate significantly, and the ratings of Nine Dragons Paper and Liwen paper were downgraded

RMB appreciation may be the strongest catalyst

judging from the recent performance forecasts released by major paper enterprises, most enterprises expect their profits to decline in 2018. For example, nine dragons expects the annual performance of 2018 to decline by about 45% year-on-year, which is mainly due to the rise in raw material prices and the decline in product prices

therefore, although the paper industry has the trend of raising prices at present, with the continuous release of production capacity, the probability of significant improvement on the demand side is small. As a full-fledged RMB concept stock, the recent continuous strengthening of the RMB is the main reason for the ripples in the paper stock sector, and if the RMB continues to strengthen, the paper stock may break out further under the current undervaluation

first, most of the raw materials required by paper stocks depend on imports, so the appreciation of the RMB will make the import of pulp, waste paper and other important raw materials and machinery and equipment cheaper for domestic paper enterprises, thereby reducing enterprise costs. Secondly, the paper stocks' external debt is also heavy, and the weakening of the RMB will also gain exchange gains

at present, the offshore RMB exchange rate against the US dollar has both risen above the 6.7 level, continuing the recent relatively strong pattern as a whole

since the beginning of the year, the exchange rate of RMB against the US dollar has increased from 6.86 at the beginning of the year to 6.72 on February 23, 2019, with an appreciation of 2.1%; The dollar index rose 0.4% over the same period

according to the China foreign exchange trading center, on February 25, the central parity rate of the RMB against the US dollar was raised by 20 basis points to 6.7131 yuan

to sum up, the RMB exchange rate has rebounded across the board recently, mainly due to the correction of the US dollar index. No matter from the PMI new order index of the U.S. manufacturing industry (decreased from 63.5 in June 2018 to 51.3 in December), the retail sales data in December (mom was -1.2%, lower than the expected 0.2%), the LIBOR interest rate of the U.S. dollar (decreased from 2.9% to 2.7% since 2019), or from the U.S. bond yield data (the 10-year U.S. bond yield fell from 3.2% in November 2018 to 2.65% in February 2019), the inflection point of U.S. economic growth is obvious

in addition, the Federal Reserve issued a semi annual monetary policy report, reiterating that the FOMC will be patient in the adjustment of interest rate policy in the future, and the scale of assets and liabilities will "significantly exceed" the pre crisis level

from the perspective of RMB's own expectations, the probability of economic growth stabilizing is rising with the current active fiscal policy (tax reduction, increasing the issuance of local government special bonds) and marginal loose monetary policy. All these show that China's economy has passed the period of rapid economic decline

from the perspective of monetary policy differentiation, Guojin Securities believes that the U.S. interest rate hike cycle is coming to an end (2019 or no interest rate hike), the margin between China and the United States has widened, and the RMB has appreciated against the U.S. dollar

in summary, many business people believe that the rise of the RMB above the 6.7 level is not a short-term agitation, but a long-term inflection point of the general trend

the make-up market is worth looking forward to

at present, the PE of nine dragons, Chenming and sunshine paper, the leading paper stocks in Hong Kong, are 4.6 times, 5 times and 2.7 times respectively, while their corresponding dividend rates are 5%, 13.5% and 4.2% respectively, which roughly reflects the impact of recent earnings

in addition, at present, there is a trend of price increase in paper stocks, and the profit per ton has rebounded from the low level in the fourth quarter of last year. As long as the most important factor - the RMB continues to stabilize, the paper industry has a high probability of breaking out and coming out of a new round of make-up market