Original link: https://www.latepost.com/news/dj_detail?id=1770
The price of pigs has fallen continuously, the large market seeks to expand, and the small market wants to exit
According to statistics from China Business Daily, among the 22 pig companies that have issued performance forecasts, only one is expected to make a profit, and the rest are estimated to have a combined loss of more than 20 billion yuan. Among them, large-scale pig companies such as New Hope and Tianbang have lost all the money they earned during the upward pig cycle since 2019.
It is even worse for some small businesses or casual farmers. According to Jiemian News reported in May this year, a pig farmer has lost more than 300,000 yuan since 2021. He said that this round of price drop exceeded expectations.
Facing the pressure of losses, pig farms have different strategies. The relatively small-scale Shennong Group and Luo Niushan have recently announced that they will invest more than 1 billion yuan to expand their pig farms. Leading pig company Muyuan, the sales volume of hogs in the second quarter still increased year-on-year, and the number of fertile sows at the end of the quarter increased by another 6.5% from the previous quarter, continuing to hit a new high.
To sum up, large-scale pig enterprises are still expanding, while small pig farms are looking for opportunities to exit.
The industry believes that listed pig companies generally have strong financing capabilities, so they are better able to maintain stable production capacity or expand against the trend under losses. In addition, due to the large capital investment in the past, large-scale pig enterprises also need to expand production and amortize costs.
According to Wind data, in October last year, the average price of live pigs across the country rose to a high of 28 yuan per kilogram, and then fell all the way. It has fallen to around 15 yuan at the beginning of this year, and has fallen below 14 yuan since July. During the same period, the cost of raising pigs in Muyuan, the largest pig company, was about 14.6 yuan per kilogram, and the overall cost of New Hope was about 16.5 yuan per kilogram. According to Zhuo Chuang Information, the overall price of pigs in the first half of this year was lower than the cost line.
The pig industry has a “pig cycle”, and the ups and downs cycle is generally 2-4 years. To put it simply, when the price of pork rises, more people raise sows, sows give birth, piglets grow up and enter the market to increase supply, prices start to fall, production capacity starts to clear, supply decreases, and pork prices rise again.
This round of pig price decline will begin in 2021. Unlike in the past, with the price drop, the industry’s hog production has not slowed down, and the number of fertile sows, which represents hog productivity, is still at a high level. According to Wind data, nearly 200 million live pigs were slaughtered in the first quarter of this year, a slight increase from the same period last year. By the end of the quarter, the number of live pigs in the country increased by 2% year-on-year, and the number of reproductive sows increased by 3% year-on-year.
And the previous round of large-scale cycles can be connected to the 2014 round of adjustments. At that time, the country began to implement environmental protection requirements for farms, and a large number of small pig farms withdrew because the conditions of the relevant site facilities were not up to standard, and the number of breeding sows decreased by nearly a quarter to about 38 million within two years.
The influence of industry policies has not completely dissipated. African swine fever came again in 2018. According to data from the Ministry of Agriculture and Rural Affairs, the number of reproductive sows in the country fell to 19.13 million in 2019, less than half of the current level. The extreme slump in production capacity has stimulated a soaring price of pigs. The national average price of live pigs once rose to 40 yuan per kilogram, twice the previous high, and has remained at a high level of more than 20 yuan for more than 20 consecutive months.
The clearing of the industry and high prices have also brought unprecedented opportunities for expansion. With the rapid influx of capital, large-scale pig enterprises began to expand aggressively. In addition, relevant departments have also issued a series of support policies for pig farming, and local governments are also willing to cooperate with large pig companies to help solve the problems of breeding sites and funds, which has boosted this wave of upsurge.
Taking Muyuan as an example, there were about 300,000 reproductive sows at the end of 2016, and about 700,000 sows in mid-2019, and the production has now expanded to over 3.03 million. As of last year, the annual pig slaughter volume of Aonong Biology has increased by more than ten times compared with that before the swine fever, and the new hope has increased by nearly five times.
In hindsight, the epidemic prevention measures have basically permanently pushed up the industry’s breeding costs. A study by Sealand Securities last year estimated that the cost of prevention and control for leading listed companies was around 0.5 yuan per catty, and farms that could not afford this level of epidemic prevention either quit or took greater risks.
As the production capacity returned to normal, the “side effects” of the aggressive investment in the early stage also began to show. Since the middle of 2021, Muyuan, Wen’s, New Hope, Tianbang and other pig companies have suffered losses for at least four consecutive quarters, which is the longest continuous loss in the past ten years. In the second half of last year, pig companies briefly returned to profitability, and returned to losses at the beginning of this year.
The industry expects that the current national pig breeding and slaughter volume is relatively high, and there are relatively large frozen meat stocks, and there is not much room for fresh meat to be frozen. In addition, demand recovery is not as good as expected, high temperature, school holidays and other factors inhibit pork consumption, and short-term pig prices have limited room for recovery. (Lin Guangying)
Third Rebalance in Nasdaq 100 History
On July 24, the Nasdaq 100 Index will complete a “special rebalancing” in an attempt to reduce the impact of fluctuations in the share prices of a few technology companies on the index.
The Nasdaq 100 Index tracks the 100 largest non-financial listed companies on the Nasdaq Exchange. Most of them are technology companies. The larger the market value of the company, the higher the weight given to them by the index compilation company.
Before July 24, seven companies including Apple, Microsoft, Amazon, Meta, Nvidia, Google, and Tesla had an overall weight of 56%. Adjusted that number would drop to around 44%.
Funds tracking the Nasdaq 100 total nearly $300 billion globally. Since passive investors such as index funds allocate funds automatically based on weights, investment bank strategists generally expect that the reduction in weights will lead to passive selling of these companies on a scale equivalent to the previous day’s trading volume or a small half-day. Index strategists at JPMorgan estimate that the technology companies will be passively sold about $30 billion.
- The fund company invests 100 US dollars in these 100 companies. If it is an equal-weight index, then 100 companies will invest 1 US dollar each;
- If weighted by market value, the higher the market value and the higher the weight, the more investment funds will be allocated. A weight of 56% means that $56 out of $100 went to these 7 companies (not counting any other constraints).
According to Nasdaq data, if the combined weight of individual stocks with a weight of more than 4.5% exceeds 48%, a weight adjustment may be triggered. And this time will be the third rebalancing in the history of the index. The previous two occurred in 1998 and 2011 respectively, which were triggered by the too large weight of Microsoft and Apple respectively.
However, investment banks generally feel that the so-called index rebalancing will hardly change the fact that the Nasdaq 100 Index is no longer an index in the short term or in the long term, because 7 companies will also “contribute” nearly half of the index’s influence.
While large technology companies are getting stronger and stronger, a number of non-tech companies have declared bankruptcy after exhausting government subsidies or other buffer measures. According to S&P Global Market Intelligence statistics, the number of U.S. corporate bankruptcy filings in the first half of this year was the highest since 2010.
Analysts say a combination of weak demand, soaring inflation, excessive debt and a sharp rise in borrowing costs has pushed the limits of weaker borrowers. Another explanation is the unusual stagnation of corporate bankruptcy in 2020 and 2021 due to government subsidies and the relaxation of rules for companies to file for bankruptcy.
In the statistical research covered by S&P Global Market Intelligence, several developed countries outside the United States have also seen similar changes. In England and Wales, corporate insolvencies are near a 14-year high. The number of bankruptcies in Sweden is the highest in 10 years. In Germany, the number of bankruptcies reached its highest level since 2016 in June. (Gong Fangyi)
Japan formally restricts export of advanced semiconductor equipment and materials
On July 23, Japan’s new semiconductor export control regulations came into effect, involving 23 items of equipment and materials related to advanced chip manufacturing. Since China is not among the 42 “friendly countries and regions” exempted by the new regulations, the export of these 23 types of commodities to China must obtain a separate license approved by the Japanese Minister of Economy, Trade and Industry.
According to the data of the research institution CSET, in 2021, Japan’s competitiveness in the EDA, IP, design, manufacturing, packaging and testing of semiconductors will be weak, with a global share of less than 10%, but it will lead the world in the fields of equipment and materials.
“Wandian Finance” sorted out the research reports of a number of securities companies and found that Japanese companies almost monopolize the global market in multiple equipment or materials such as coating development, heat treatment, wafer cutting equipment, and photoresist—these equipment and materials are also the main categories that Japan has restricted exports this time. In addition, 63% of China’s lithography machines and 89% of etching machines (by value) were also imported from Japan last year, and these two types of equipment are also within the scope of restrictions.
Since the control measures were disclosed in March and relevant laws and regulations were promulgated in May, Chinese customers have also stockpiled goods in advance. According to Japanese customs data, in the first half of this year, Japan exported 24,431 units of semiconductor equipment to China, with a total value of 594.5 billion yen, down 31% and 1.4% year-on-year respectively. (Qiu Hao)
Japan’s machine tool orders fell by 20% in June
Machine tools are called “industrial mother machines” and “machines that make machines”. Because the manufacturing industry has a great impact on the economy, changes in machine tool orders have become a thermometer for sensing the economy.
The demand for machine tools comes from orders generated by manufacturing increments, because factories need to purchase new machine tools only when production capacity expands. Zhou Guannan, chief fixed income analyst of Huachuang Securities, mentioned that “the self-sufficiency rate of machine tools in the domestic manufacturing industry is low, and as a major importer of Japanese machine tools, its orders can be regarded as a leading indicator of investment in China’s manufacturing industry.”
According to the June machine tool orders released by the Japan Machine Tool Industry Association (referred to as the Japan Labor Union) on July 20, Japan’s total machine tool orders for the month decreased by 21% to 122 billion yen. In terms of composition, Japan’s domestic demand decreased by 30% to 40.8 billion yen; foreign export orders decreased by 16% to 81.1 billion yen.
China accounts for more than 30% of Japan’s machine tool exports all the year round, and this proportion has continued to decline since the beginning of the year. In June, China’s machine tool orders imported from Japan decreased by 45% year-on-year to 19 billion yen. The data has been lower than the same period of the previous year for six consecutive months, and it is the first time since August 2020 that it has fallen below 20 billion yen in 34 months.
The China Manufacturing Purchasing Managers Index (PMI) released by the National Bureau of Statistics in June was 49%. An increase of 0.2 percentage points from the previous month.
Faced with the continued decline in the amount of orders, Inaba, president of the Japanese Labor Union, said, “China’s machine tool orders are showing weakness. We will pay attention to when China will introduce effective economic countermeasures.”
Other major economies have also opted to scale back their expansions, driven by high inflation, tighter monetary policy and tighter financial conditions. Affected by the expectation of the Federal Reserve to raise interest rates, American small and medium-sized enterprises have slowed down their investment in machine tools. Orders from North America fell 4% year-on-year in June to 26.2 billion yen. The cumulative orders from Europe in January-June were basically flat at 117.4 billion yen. (Intern Lin Hongsheng)
IPO knew early丨Two new shares broke, both fell by more than 10%
Two companies subscribed for A shares today:
- Jinkai Biotech: a small molecule drug outsourcing service provider (CDMO), which provides customized R&D and production services for small molecule drug intermediates and a small amount of raw materials for new drug R&D projects of global original drug manufacturers. From 2020 to 2022, the company’s revenue will be 464.4 million, 549.2 million, and 716.7 million yuan, respectively. The revenue in 2022 will increase by 30.5% year-on-year; the net profit will be 58.94 million, 84.55 million, and 161.5 million yuan, respectively. The net profit in 2022 will increase by 90.96% year-on-year. It plans to raise 800 million yuan. A total of 21.5 million shares were issued at the purchase price of 56.56 yuan, and the issue price-earnings ratio was 31.73 times.
- Changhua Chemical: a manufacturer of polyether products. The company’s main product is polyether for flexible foam, which is mainly used in the production of sponge products of various densities, such as car seats, steering wheels, mattresses, sofas and other products. The company’s top ten customers are mainly in the automobile and furniture industries. From 2020 to 2022, the company will realize operating income of 1.879 billion yuan, 3.028 billion yuan, and 2.312 billion yuan respectively, with a compound annual growth rate of 15.14%; realize net profit attributable to the parent company of 73 million yuan, 88 million yuan, and 89 million yuan, with a compound annual growth rate of 25.87%. It plans to raise 300 million yuan. A total of 35.05 million shares were issued at the purchase price of 25.75 yuan, and the issue price-earnings ratio was 44.47 times.
Two A-share companies listed today:
- Boying Special Welding: a manufacturer of anti-corrosion and wear-resistant welding products, issued 33 million shares at an issue price of 47.58 yuan, actually raised 1.57 billion yuan, with a total market value of about 5.2 billion yuan, closed down 15.72%, and the turnover rate was 40.4%.
- Guangge Technology: a supplier of optical fiber sensing systems, actually raised 870 million yuan, with a total market value of 3.024 billion yuan, closing down 13.69%. (Intern Chen Yutong)
OTHER NEWS
Xinhua News Agency: The Political Bureau of the CPC Central Committee held a meeting to analyze and study the current economic situation and plan economic work in the second half of the year.
According to Xinhua News Agency, the Political Bureau of the Central Committee of the Communist Party of China held a meeting on July 24 and pointed out that “the current economic operation is facing new difficulties and challenges, mainly due to insufficient domestic demand, some enterprises have difficulties in operating, there are many hidden risks in key areas, and the external environment is complex and severe. After the epidemic prevention and control has stabilized, economic recovery will be a wave-like development and a tortuous process.”
Regarding the economic work in the second half of the year, the meeting mentioned that it is necessary to continue to implement a proactive fiscal policy and a prudent monetary policy, maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, activate the capital market, boost investor confidence, boost bulk consumption such as automobiles, electronic products, and home furnishing, promote service consumption such as sports, leisure, and cultural tourism, effectively improve the core competitiveness of state-owned enterprises, and effectively optimize the development environment for private enterprises. Among them, the real estate policy is set to “adapt to the new situation of major changes in my country’s real estate supply and demand, and adjust and optimize the real estate policy in a timely manner”; the employment is set for the first time to “raise employment stability to a strategic height and consider it as a whole.”
The National Development and Reform Commission issued a document to mobilize the enthusiasm of private investment.
The National Development and Reform Commission issued the “Notice on Further Doing a Good Job in Promoting Private Investment and Efforts to Mobilize the Enthusiasm of Private Investment”. The notice proposes to clarify a number of key segments that encourage private capital participation, build a unified platform for promoting projects to private capital, and comprehensively sort out and publish a list of projects that attract private capital. At the same time, private investment projects are encouraged to issue real estate investment trust funds (REITs) in the infrastructure sector. In addition, optimize the financing support for private investment projects. According to the idea of ”mature batches, recommend batches”, we will recommend projects in the national key private investment project database to relevant financial institutions.
The central bank has publicly solicited opinions on the new data security regulations, and intends to prohibit the provision of specific data to international or overseas financial management departments without approval.
On July 24, the People’s Bank of China issued the “People’s Bank of China Business Field Data Security Management Measures (Draft for Comment)”, requiring data processors to collect and generate data in China. If laws and administrative regulations require domestic storage, they should be stored in China; without the approval of the central bank and other relevant competent authorities, domestic storage data shall not be provided to international organizations and foreign financial management departments.
Guangzhou intends to relax the entry threshold for 7 non-central areas.
Guangzhou recently solicited opinions on policies related to differentiated household registration and settlement. It is proposed that those under the age of 28, who have a full-time undergraduate or junior college degree or have graduated from a relevant technician class, and have paid social security for one year in seven outlying urban areas such as Baiyun District, can all be settled, and their spouses and minor children can move in with them. The industry believes that this is Guangzhou’s talent-grabbing measure, and some people believe that this is equivalent to relaxing the threshold for purchase restrictions in the property market. Previously, Zhejiang announced the cancellation of the settlement restrictions in the whole area except the urban area of Hangzhou.
Six milk tea brands including Michelle Ice City may be planning to go public overseas.
According to market news today, at least six Chinese milk tea chain brands are considering an overseas IPO. According to the number of stores, they are Michelle Ice City, Guming, Shanghai Ayi, Chabaidao, Bawang Chaji and Xinshidiao. Both Michelle Ice City and Shanghai Auntie responded that they “do not comment.” Michelle Ice City has submitted a listing application to the Shenzhen Stock Exchange in September last year, but it has been put on hold until now. Shen Meng, executive director of Chanson Capital, believes that it is difficult for milk tea brands to trade profits for scale, and it is difficult to meet the profit requirements of an IPO in the A-share market, so they will shift their IPO targets to Hong Kong and the United States.
In the first half of the year, Hailun Division turned losses into profits, relying on franchising and closing stores.
According to the announcement, Helens expects revenue in the first half of the year to be 700 million to 720 million yuan, a year-on-year decrease of nearly 20%, and its net profit is expected to be 155 million to 160 million yuan, compared with a loss of nearly 100 million yuan in the same period last year. According to Sinolink Securities, as of the end of June this year, Hailun Division had 677 stores, a decrease of more than 10% compared with the end of last year, and nearly 30% of them were temporarily closed. Last year, Hailun Division closed 194 stores and restarted franchising. As of the end of last year, about 16% of the stores were franchise stores.
New Oriental said that it will start a business again, and this time it plans to sell tourism products to middle-aged and elderly people.
New Oriental recently announced that it will start a business again, this time providing “high-quality cultural and tourism services” for middle-aged and elderly people. The announcement mentioned that New Oriental teachers with strong knowledge accumulation should become tour guides who truly love sharing culture and knowledge. New Oriental was the first to do English education. Many students think that its characteristic is that the teachers are very eloquent. From K12 education, Oriental selection to cultural tourism, New Oriental’s target customers are expanding from teenagers to young people, middle-aged and elderly people.
Weilai responded by “setting restrictions on some charging piles”: it is right to give priority to serving its own users.
Recently, NIO has set restrictions on seven charging piles including Xingxingxia and Hongshankou. It stipulates that the peak period from July 20 to October 8 from 11:00 to 18:00 is exclusive to NIO car owners, and users of other brands are not allowed to charge. The move caused dissatisfaction among some netizens. Shen Fei, the vice president of Weilai Automobile, posted a response on Weibo, saying that there is nothing wrong with giving priority to serving Weilai users; he asked the team to find some more refined ways to accommodate more non-Weilai users.
India rejected BYD’s US$1 billion joint venture to build a factory.
According to media reports, India has rejected BYD’s proposal to build a US$1 billion car manufacturing plant in cooperation with local Indian companies. In the proposal, the two companies plan to produce 10,000-15,000 electric vehicles per year, with construction funds provided by local companies and BYD exporting core technologies. The report quoted an Indian official as saying, “During the discussion, we raised concerns about the security of Chinese investment in India.” Currently, BYD already has a car assembly plant in India, but core components need to be imported from overseas. It is reported that India hopes that auto manufacturers will deploy more supply chains locally, so as to promote the upstream extension of the industrial chain.
In the second quarter, SHEIN’s US lobbying expenses increased to US$600,000.
According to media reports, SHEIN has hired two well-known lobbying agencies and 10 former members of Congress to lobby for it. The lobbying expenditure in the second quarter of this year was US$600,000, US$230,000 in the previous quarter, and US$280,000 for the whole of last year. SHEIN is currently facing challenges related to supply chain compliance and has received letters from bipartisan lawmakers. Recently, it has been reported that SHEIN has launched its listing in the US. It is reported that its latest valuation is nearly 66 billion US dollars.
Temu is newly launched in South Korea, Estonia, Latvia, and Slovenia.
Since its launch in Japan in early July, Temu has entered 4 new markets, including South Korea, Estonia, Latvia, and Slovenia, and is currently available in 27 countries. According to Momentum Ventures, the South Korean e-commerce market is mature, and it is also a key market for AliExpress. Since Jiang Fan took over Alibaba’s overseas digital business sector last year, AliExpress has increased its investment in South Korea, and the average usage time per capita in South Korea even exceeds that of the local e-commerce giant Coupang.
The G20 has not reached a consensus on cutting fossil fuels.
Representatives of the major economies of the Group of Twenty ( G20 ) met in India recently. Officials were unable to agree on cutting fossil fuel use, urging developed countries to meet a goal of collectively mobilizing $100 billion a year for climate action in developing economies from 2020 to 2025, and describing the Russia-Ukraine conflict, according to people familiar with the matter. Indian Power Minister Manmohan Singh said that some countries want to use carbon capture technology rather than gradually reduce the use of fossil fuels, but did not name the specific countries.
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