The official meeting released a positive signal The domestic chemical industry volume has risen strongly

The Political Bureau of the CPC Central Committee held a meeting on July 24 to plan economic work in the second half of the year, which affirmed the economic operation situation in the first half of the year, but also pointed out that there are "new difficulties and challenges". The meeting had new formulations on real estate policy, local government debt risk and capital market, and "housing is not speculation" was not mentioned again, indicating that the policy wind is changing. At the same time, the expansion of domestic demand has been put in a more prominent position; Emphasize "stabilizing the basic market of foreign trade and foreign investment". The positive signals released by the meeting prompted market sentiment to boil, and the A-share and commodity markets were widely red on the 25th, and the spot of chemical futures rose strongly. Industry analysis, the current bottom trend of the chemical industry cycle is obvious, and the short-term bottom valuation repair market driven by the improvement of market sentiment can continue to be expected; In the medium term, the strength and effect of the implementation of various supportive policies need urgent attention, after the traditional off-season in July and August, the chemical bulk is expected to slowly return to the upward channel, but the rhythm of specific products still needs to be further observed.

The Politburo meeting focused on new approaches to real estate and capital markets

The Political Bureau of the CPC Central Committee held a meeting on July 24 to plan economic work in the second half of the year. This meeting affirmed the economic operation trend in the first half of the year, but also pointed out that there are "new difficulties and challenges", mainly due to insufficient domestic demand, some enterprises operating difficulties, many hidden risks in key areas, and a complex and severe external environment.

The meeting had new formulations in the fields of real estate, local government debt, and capital markets. For real estate, the meeting pointed out that "to adapt to the new situation of major changes in the supply and demand relationship of China's real estate market", it is necessary to "adjust and optimize real estate policies in a timely manner" and "better meet the rigid and improved housing needs of residents". With regard to local debt, the meeting proposed to "formulate and implement a package of bonds". For the capital market, "it is necessary to activate the capital market and boost investor confidence."

At the same time, in terms of expanding domestic demand, the meeting mentioned that it is necessary to boost mass consumption such as automobiles, electronic products, and household appliances. The meeting also stressed that "multiple measures should be taken at the same time to stabilize the basic situation of foreign trade and foreign investment." "

Industry analysis, this conference "six beyond expectations". 1. The meeting was held earlier; 2. Increase the intensity of macro-policy regulation and control; 3. Activate the capital market and boost investor confidence; 4. Accelerate the issuance and use of special bonds; 5. Adjust and optimize real estate policies in a timely manner; 6. Formulate and implement a package of bonds.
A-shares and commodities soared sharply, and spot stocks in chemical futures rose strongly

As of the close of July 25, the three major A-share stock indexes rose by more than 2%, the Shanghai Stock Exchange 50 Index rose by more than 3%, the full-day turnover of Shanghai and Shenzhen was 948.1 billion yuan, nearly 4,400 stocks in the two cities rose, and northbound funds flowed into nearly 19 billion yuan; In terms of stock index futures, CSI 300 stock index futures and SSE 50 stock index futures rose by more than 3%, and CSI 500 stock index futures and CSI 1000 stock index futures rose by more than 1.5%; In the commodity futures market, the chemical sector was the top gainer, and the newly listed lithium carbonate main contract closed at the price limit; On the 26th, commodity futures opened, and the chemical sector collectively turned red.

From the perspective of chemical spot, on July 24, the domestic spot closed, according to the 131 chemicals monitored by Jinlianchuang, 25 varieties rose, 74 varieties remained stable, 32 varieties fell, the increase rate was 19.08%, and the decline rate was 24.43%. On July 25, the domestic spot closed, according to the 131 chemical products monitored by Jinlianchuang, 31 varieties rose, 86 varieties remained stable, 14 varieties fell, the rise rate rose to 23.66%, and the decline rate fell to 10.69%; From the perspective of specific industrial chains, aromatics and downstream industrial chains phenolketone, nylon, polyurethane industry chains collectively red, rubber and plastic industry chain polypropylene part of the performance is strong.

Chemical bulk: the bottom trend is obvious, short-term valuation repair, medium-term volatility is strong

Figure 1: Jinlianchuang chemical industry index trend chart from 2016 to 2023

Data source: Jinlianchuang

As shown in the figure above, according to the monitoring of the Jinlianchuang Chemical Industry Index, the chemical industry price index reached the second peak of 7224 in the past 7 years since October 2021 (the peak in the past 7 years was 7487 in October 2018), and then fluctuated downward, and after nearly 3 years of continuous decline, from June 2023 to the low of 4993, it reached the 5000 point support level in recent years, bottoming out. As of July 25, 2023, it closed at 5440, up 8.95% from the June low.

Industry analysis, the current chemical industry cycle bottom trend is obvious, and from the policy side to the fundamentals, two expectations are good: first, the introduction of national supportive policies is expected, the second is that the chemical destocking in the first half of the year is nearing the end, and the domestic replenishment cycle is expected to open expectations.

The short-term bottom valuation repair market driven by the improvement in market sentiment can continue to be expected; In the medium term, the strength and effect of the implementation of various supportive policies need urgent attention, and the overall tone of the current macro policies emphasizes precision and strength, rather than flood irrigation, and the impact of strong expectations will gradually be blunted; In view of the arrival of the peak season of gold, silver and ten, demand may improve, but the supply rigidity brought by the general overcapacity of domestic chemical products, as well as the strong and weak performance of various industrial chains, after the traditional off-season in July and August, the chemical bulk is expected to slowly return to the upward channel, but the rhythm of specific products still needs further observation. Industries and new material industries with less new capacity and nearing the end of capacity launch in 2023 and 2024 deserve special attention.

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