2023.05.15 20,500 points to be the resistance

According to the National Bureau of Statistics of China, the CPI for April increased by 2.1% YoY, which is the highest increase since December 2020. The increase is mainly due to the impact of the continuous rise in international commodity prices. The national CPI in April increased by 0.4% MoM, and increased by 2.1% YoY. The data showed that food prices increased by 0.9% MoM, which affected the CPI to rise by about 0.17pcts. The prices of potatoes, eggs, and fresh fruits rose by 8.8%, 7.1%, and 5.2%, respectively. As the production capacity of live pigs is gradually adjusted and the government’s frozen pork reserve collection and storage work is carried out in an orderly manner, the price of pork rose by 1.5% from a decrease of 9.3% last month. The price of fresh vegetables fell by 3.5% due to the increase in the supply of fresh vegetables. The average CPI from January to April increased by 1.4% compared to the same period last year.

China’s PPI fell by 3.6% YoY in April, which is the largest decline since May 2020 and greater than the market’s expectation of 3.3%. The PPI fell by 0.5% MoM in April. The prices of petroleum, coal, and other fuel processing industries fell by 2.3% MoM, while the prices of chemical raw materials and chemical product manufacturing industries fell by 1.1% MoM, affected by fluctuations in international crude oil prices. The prices of black metal smelting and rolling processing industries fell by 1.0% MoM, and the prices of cement manufacturing fell by 0.1% MoM, despite the overall sufficient supply of steel, cement, and other industries. The prices of coal mining and washing industries fell by 4.0% MoM, and the prices of non-ferrous metal smelting and rolling processing industries rose by 0.2% MoM, with copper smelting prices rising by 0.3% MoM and aluminum smelting prices rising by 0.1% MoM. As for the Hong Kong market, since it lacks upward momentum, we expect HSI to trade between 19,500-20,500 points.

According to the National Bureau of Statistics of China, the CPI for April increased by 2.1% YoY, which is the biggest increase since December 2020. The increase is mainly due to the impact of the continuous rise in international commodity prices. The national CPI in April increased 0.4% MoM, and had increased by 2.1% YoY. The data showed that food prices increased by 0.9% MoM, which caused the CPI to rise by about 0.17pcts. The prices of potatoes, eggs, and fresh fruits rose by 8.8%, 7.1%, and 5.2%, respectively. As the production capacity of live pigs is gradually adjusted and the government’s frozen pork reserve collection and storage work is being carried out in an orderly manner, the price of pork rose by 1.5% from a decrease of 9.3% last month. The price of fresh vegetables fell by 3.5% due to the increase in the supply. The average CPI from January to April increased by 1.4% compared to the same period last year.

China’s PPI fell by 3.6% YoY in April, which is the largest decline since May 2020 and greater than the market’s expectation of 3.3%. The PPI fell by 0.5% MoM in April. The prices of petroleum, coal, and other fuel for processing industries fell by 2.3% MoM, while the prices of raw materials for chemical products and chemical industries’ product fell by 1.1% MoM, affected by fluctuations in international crude oil prices. Despite the overall sufficient supply of steel, cement, and other industries, demand has been below expectations. The product prices of black metal smelting and rolling processing industries fell by 1.0% MoM, and the prices from cement manufacturers fell by 0.1% MoM. The prices of from coal mines and washed clean coal fell by 4.0% MoM, and the prices of non-ferrous metal smelting and rolling processing industries rose by 0.2% MoM, with copper smelting prices rising by 0.3% MoM and aluminum smelting prices rising by 0.1% MoM. As for the Hong Kong market, since it lacks upward momentum, we expect HSI to trade between 19,500-20,500 points.

The market expects the automotive sector to maintain a trend of moderate recovery this year, and the growth of exports may bring opportunities for some companies. Investors should pay attention to relevant companies.

BYD Company Limited (1211.HK) reported Q1 results with revenue of Rmb120.2bn (+80% YoY) and net profit of Rmb4.1bn (+411% YoY). The strong revenue was mainly driven by a 89% YoY growth in auto sales. In Q1, BYD’s gross profit stood at Rmb19.2bn with a gross margin of 16.0%.

The company has its dominance in the China’s EV market (28% of the market in 2022). Its brand equity and scale of operation are expected to be its long-term competitive advantages in the upcoming market consolidation. Possible near-term catalysts are 1) a drop in lithium price, 2) better-than-expected volume growth, 3) increase in export sales. It is recommended to buy at HK$235.9, target at HK$274.8, and stop loss at HK$226.2.

Great Wall Motor (2333.HK) overseas sales up 182% YoY in Apr. In Apr 23, GWM’s wholesale volume reached 93k units, an increase of 73% YoY due to a low base in the previous year. A record high of 22k units were sold outside China during the month, up 182% YoY whereas domestic sales stood at 71k units, a 6-year low excluding 2022 despite a 55% YoY increment.

According to the mgt, due to more promotions in Apr, GWM managed to effectively trim its inventory. In order to meet the new emission standard, the Mgt expects to clear all of its China 6a vehicles by the end of May. GWM is catching up with its peers in rolling out more EVs. Its EV sales now account for about 16% of its total. However, its ambitious sales target is 1.6mn units in 23E and GWM has only completed 20% of this already reduced target in 4M23. Its strong and lucrative overseas sales may offset the negative effect of the price war in China. It is recommended to buy at HK$9.5, target at HK$11.1, and stop loss at HK$9.1.