U.S. Senate Passes Bill The U.S. Senate voted on Tuesday to pass a bill aimed at forcing China to appreciate the renminbi and will send it to the House of Representatives, but it is still unclear whether it will pass. A number of House leaders have criticized the bill. The US Senate passed the "2011 Currency Exchange Rate Supervision Reform Act" with 63 votes to 35 votes. The purpose of the bill is to force the renminbi to accelerate its appreciation against the US dollar to help the United States ease trade imbalances with China. Earlier, some US lawmakers claimed that the renminbi was undervalued by 40%, giving Chinese manufacturers an unfair advantage in the international market. The appreciation of the renminbi will affect which industries and listed companies, which we will analyze in detail below. The transmission path and scope of the impact of RMB appreciation on major industries are different. Generally speaking, it can be analyzed from the following perspectives: 1. The foreign exchange liability industry will obviously benefit, mainly including aviation and trade industries. These industries have more foreign exchange liabilities (especially US dollar liabilities), so the appreciation of the renminbi will bring exchange gains and losses to these industries. Especially for aviation companies, they often have huge dollar liabilities, so they will obviously benefit. 2, raw materials or parts import industry will also benefit, mainly including paper (pulp import), steel (iron ore imports), cars (part of important parts imports), petrochemical (crude oil imports), chemical fiber and plastics (raw materials Imports), aviation (aircraft equipment imports), clothing (high-end fabric imports) and other industries. Since these industries need to import relevant raw materials and components every year, the appreciation of the renminbi will cause the cost of these industries to decline to some extent. For example, the pulp cost in China's paper industry accounts for 70%, while 38% of pulp is imported. Therefore, the appreciation of the renminbi will cause the paper industry's cost to drop significantly, thus significantly improving the profitability of the paper industry. 3. The investment products industry will also be favored by certain funds, mainly including real estate with land value, park development and other industries, coal with resources value, non-ferrous metals and other industries. Due to the small appreciation, foreign funds may gain appreciation income by investing in land or property owned by companies in these industries, thereby increasing the attractiveness of funds to these investment industries, thus triggering price increases. . 4. The traditional export-oriented industries are directly affected, including textiles, clothing, home appliances, machinery and other products. The increase in the cost of the appreciation of the renminbi will cause the profit margins of these industries to decline, but we believe that only 2% of the appreciation has little effect. The cost reduction and the appropriate price transfer will make the companies in these industries, especially the leading enterprises. Have strong anti-risk ability. 5. The international pricing industry will be affected by certain factors, including non-ferrous metals with full international pricing, some petrochemical, steel, electronic components and other industries with international pricing. Since the prices of these products are affected by international prices, Therefore, the appreciation of the renminbi will cause their prices to fall in the case of renminbi denomination, resulting in a decline in profits. 6. The industry that replaces imported products will also be adversely affected, including automobiles, construction machinery, steel, and home appliances. The competition between these products and foreign imported products is fierce, and the appreciation of the renminbi will lead to a decline in the price of foreign imports in renminbi, which will result in a certain decline in the competitiveness of local products, which in turn will affect the profitability of these industries. 7. The foreign trade service industry may be indirectly damaged. Since the appreciation of the renminbi may have certain adverse effects on China's foreign trade, especially exports, it may have certain adverse effects on the port, airport and shipping industry. However, due to the appreciation, the import may also increase to a certain extent. Its impact is relatively small. The impact of RMB appreciation on various industries is more complicated and multi-faceted, often a combination of bad and bullish. The summary analysis, combined with our analysis of the changes in the profitability of key enterprises in various industries in the case of a 2% appreciation of the RMB, we believe that the appreciation of the RMB will benefit the industries such as aviation, papermaking, park development, real estate, communications operations, and communications equipment. However, apart from the aviation industry, other benefits are not high, but there is a certain negative for the steel, audio-visual equipment, oil exploration, textiles and clothing, components and other industries, but from the changes in the performance of the key companies we track, the degree is not large. The other industries are generally a more neutral situation. Real estate: The biggest appreciation of property-holding companies has a positive impact on the real estate industry. The negative impact: Negative currency impact: The continued excessive appreciation of the currency will lead to economic slowdown (because FDI declines, net exports decline), foreign investment needs to decline, thus real estate Declining demand will lead to a decline in inflation, which will lead to a decline in real estate prices. Positive impact: First, the expectation of appreciation has led to an increase in foreign investment in real estate. The expectation of currency appreciation will lead to the surging of foreign capital, and invest heavily in real estate, thereby increasing the demand for real estate investment and pushing up housing prices, which is inevitable in the process of currency appreciation. Second, the income effect and wealth effect lead to domestic real estate demand. increase. Appreciation has led to cheaper prices, increased disposable income for home purchases, and increased demand for home purchases. Negative and favorable effects overlap to form the final impact of appreciation on real estate. Therefore, the final impact of appreciation depends on the trend of macroeconomics after appreciation. If the economy can still maintain high growth, the appreciation is good for real estate, if the economy appears If there is a serious recession, real estate will also be damaged. The impact of appreciation on housing prices was the first to continue to rise, then the bubble formed, the final bubble burst, and house prices fell. The history of Korea, Japan, Taiwan, and other countries or regions is the same. The reason for this process is: In the early stage of appreciation, the economic situation is good, demand is increasing, especially the increase in foreign investment demand, leading to rising house prices; in the process of appreciation, house prices are rising, bubbles are formed, but the macro economy supporting housing prices is more The bigger the negative impact; finally, when the value of the currency rose to the highest, the house price reached its highest point, but the export was greatly affected, the foreign capital retreated, and the macro economy began to decline. This was when the bubble burst and house prices fell. The length of the whole process cycle depends on the length of the appreciation period, which is generally longer, such as 4 years in Korea, 1986-1990; 24 years in Japan, 1971-1995; 8 years in Taiwan, 1985-1992 . The appreciation of the renminbi has just begun, it is good for real estate, real estate demand is increasing, and house prices are rising. Real estate listed companies will benefit from the appreciation: First, the appreciation of holding property and reserves, second, the increase in demand to accelerate sales progress, and third, rising house prices to increase gross profit margin. The companies that benefit the most are property-holding companies that can enjoy the benefits of long-term housing prices, such as Financial Street, China Merchants Property , Commodity City , OCT, etc., followed by development companies with large land reserves. Through the appreciation of the existing reserves, the project's gross profit will benefit, and the new reserve costs will rise, thus failing to maintain long-term high gross profit. Such companies include Vanke and Jindi. However, due to the influence of the state on the regulation of the real estate industry, the appreciation will not change the decline in the growth of residential development companies. Tourism: Income effect is greater than price effect CITIC Securities At present, among the inbound tourists in China, Hong Kong compatriots account for the largest proportion, accounting for more than 60%, and foreigners only more than 10%; but in the international tourism foreign exchange income, the proportion of foreigners is close 50%, Hong Kong compatriots are close to 30%. Among the foreigners entering the country, Asia accounts for more than 60%, and Europe and the Americas are around 20% and 10% respectively. It can be seen from the structure of the top 15 major source countries that the exchange rate changes can affect the source of inbound tourists and international tourism mainly in Asian currencies: Japanese Yen, Korean Won, Ruble and US Dollar, as well as Hong Kong Dollar and Macau Pataca. The impact of exchange rate changes on inbound tourism is mainly the price effect. According to the national tourism competitiveness index compiled by the WTTC, the price competition index of China's tourism industry is very high. In 2003, the average price of hotels in China was US$98.43, ranking 120th among 212 countries and regions. Based on this, China's tourism price competitiveness index is 89, ranking 3rd out of 212 countries and regions. 2004 The average price of hotels in China is US$72.13, ranking 106th in the world. Based on this, China's tourism price competitiveness index is 80, ranking 16th. In 2004, the price competitiveness ranking was lowered, but it still ranked in the forefront. The prices of Chinese travel products and services are very cheap on a global scale. Therefore, even if the renminbi appreciates, the number of inbound tourists will not be significantly reduced by the price effect for the Chinese tourism industry, which is already very cheap. Moreover, the current inbound tourism market is highly competitive, and travel agencies and hotels can digest the price effect of a small appreciation of the renminbi. China's international tourism product structure is still in its infancy, that is, team-based tourism, and holiday products are far from mature. The characteristics of this product structure are that the price sensitivity of tourists is not high. Take 1994 as an example. When the RMB exchange rate was merged, the exchange rate of the US dollar was consolidated to 8.7 RMB/USD. Normally, the inbound tourism should have a substantial increase in the year, but the actual situation is that the growth rate of inbound tourists in the year was from 1990 to 2002. The lowest point during the 13-year period (5.2%). The appreciation of the exchange rate will have a significant impact on outbound tourism through the income effect. In recent years, the tendency of residents to travel abroad has been continuously improved, and the scale of exit has been continuously expanded. The appreciation of the renminbi will increase the ability of residents to travel abroad. Travel agencies with qualifications for outbound travel will benefit. This will also divert some of the people who originally planned to travel in China, which may affect the reception volume of domestic restaurants and scenic spots, but the number is slight and can be ignored. Overall, we still insist on the judgment at the beginning of the year and the middle of the year that the appreciation of the RMB exchange rate will have a price effect on the demand of the inbound tourism market, but the effect will not be great, and it will have a positive income effect on domestic tourism and outbound tourism. From the first half of the year, the growth rate of inbound tourism exceeded expectations, while domestic tourism growth slowed down. The appreciation of the renminbi will help promote domestic tourism, and the overall effect on the tourism market is positive. RMB Appreciation Commercial Benefits The impact of RMB exchange rate appreciation on commercial retail industry is mainly reflected in three aspects: First, the income effect. In the short run, the appreciation of the exchange rate will bring about an increase in wealth, the actual purchasing power of consumers will increase, and the growth of commodity consumption will be promoted, and the commercial retail industry will benefit from it. However, if the appreciation of the renminbi has a greater impact on the growth of the national economy, the consumer confidence index will decline, consumption growth will slow down, and retail enterprises will suffer. The second is the price effect. Mainly reflected in the decline in the price of imported goods, resulting in a superposition of income effects, stimulating consumption growth, and benefiting retail enterprises. Among the more obvious benefits are the department store companies with a large proportion of imported goods. The third is the channel effect. After the appreciation of the exchange rate, the export price competitiveness has declined. Previously, domestic export-oriented consumer goods producers will seek domestic channels as an alternative, thereby benefiting commercial retail enterprises in terms of the quantity and price of goods supplied. The bargaining power of the sales terminal to the supplier will also be significantly improved. The biggest benefit of this should be the chain of businesses with channel advantages. The appreciation of the renminbi has also had a certain impact on the entry of international commercial capital. From the positive factors, the exchange gains will promote the expansion of foreign investment. From a negative perspective, the increase in the initial capital threshold will inhibit the entry of new capital . As far as the current situation is concerned, international commercial capital is mainly purchased in China. Therefore, after the appreciation, the internal and external competition in the commercial sector will be further strengthened. In addition, the appreciation of the renminbi will also promote the increase of commercial store rents through the effect of real estate prices, so those enterprises with commercial real estate assets will also benefit. In general, the appreciation of the exchange rate will hinder the international sales channels of domestic manufacturers, and the value of domestic sales channels will be highlighted. We judge that the Ministry of Commerce has attached great importance to the domestic trade sector since last year and is also an important reason to prepare for the appreciation of the renminbi. However, we must also see that the above three effects require a certain amount of time. In addition to the existence of the procurement cycle, the steady appreciation of the RMB will not have a significant impact on the performance of commercial listed companies this year. It is recommended to pay attention to chain-type commercial enterprises with network advantages, as well as enterprises with excellent commercial real estate, such as Bailian , New World , Dashang , Hualian , and Suning . In the medium term, exchange rate appreciation will be for these companies. Performance has contributed. The advantages and disadvantages of the petroleum and petrochemical sub-sectors are different. The exchange rate of CITIC Securities is a major external factor affecting the profitability of the petrochemical industry. The petrochemical industry is highly dependent on imports and exports, especially the bulk of raw materials. Changes in exchange rates directly affect the impact on corporate profits. Due to the different dependence of different sub-sectors on import and export, the impact of RMB appreciation on different sub-sectors is also different. From the perspective of import and export, the rise in the exchange rate will inevitably lower the threshold of imports and increase the difficulty of export. For capital and technology-intensive products, China mainly imports, such as synthetic rubber and synthetic resins, while exports are mainly concentrated in basic chemical raw materials. The advantage in this respect is resources, not technology. Therefore, the appreciation of the exchange rate will inevitably strengthen the import of high value-added products, leading to an increase in the domestic market. At the same time, it will squeeze the profit margin of resource-based chemical products. The impact on the crude oil mining industry. For the crude oil mining industry, China's import dependence is relatively large. According to the 2004 data , China's crude oil import dependence is 40%. Domestic crude oil prices are based on international crude oil prices priced in US dollars. This has the exchange rate issue of the renminbi against the US dollar. In theory, if the renminbi appreciates by 1%, the price of imported crude oil will be reduced by 1% in renminbi. For the domestic crude oil mining industry, the selling price will also drop by 1%, which is unfavorable to the mining industry. The impact on the refining industry. For the refining industry, as the RMB appreciates by 1%, the cost of crude oil is equivalent to a drop of 1%. The pricing mechanism of refined oil prices is a range mechanism. The selling price is not only related to international pricing, but also related to pricing mechanism. Therefore, domestic refined oil prices and costs are not linked. If the price of refined oil falls less than the decline of crude oil, it will be good for the refining industry. Under the current pricing mechanism, the price adjustment of refined oil lags behind the changes in market prices. Therefore, since the appreciation of the renminbi will directly constitute a decline in the cost of importing crude oil, it will bring benefits to the refining industry. This positive sustainability will depend on the government. The adjustment range and frequency of refined oil prices. The impact on bulk chemicals. For midstream products represented by synthetic resins, synthetic rubber and synthetic fibers, it is currently in a pattern of imports greater than exports. Although domestic products are in short supply, if the renminbi appreciates, the lower prices of imported products will intensify competition in the domestic market and will have a repressive effect on domestic product prices. On the cost side, naphtha is affected by various factors such as exchange rate and pricing mechanism, which may result in a narrowing of the price difference between midstream products. The decline in the exchange rate will lead to a decline in the price of domestic products, and the cost depends on a number of factors. Therefore, the final effect of the exchange rate is that the decline in the price of the end product is greater than the decline in cost, which has a negative impact on bulk products. Impact on integrated petrochemical companies. For the integrated petrochemical companies, the main raw material supply comes from foreign countries, such as crude oil, and their products are mainly to meet the domestic market, so the exchange rate rise will get the benefits of cost reduction, but their own consumer market may face foreign low-cost products. Shock. For the domestic market with low self-sufficiency rate, due to the appreciation of the renminbi, the price drop caused by the leading price of imported products will be greater than the cost reduction, and the exchange rate rise will bring negative effects to these enterprises. For the terminal products, the fluctuation of the exchange rate will directly affect the profit of the product. Since the price of its upstream and its own products are affected by exchange rate fluctuations, the final result will be the effect of upstream cost transfer and its own competitive pressure from foreign countries. The comprehensive manifestation of the role. In short, the exchange rate will have different impacts on the petrochemical sub-sector through price and market competition, and the demand will partially offset the impact of price volatility and increased market competition. At the same time, although the exchange rate factor is the influencing factor, it is not the dominant influencing factor. If the RMB exchange rate fluctuates between 5% and 10%, such a magnitude does not constitute a fundamental impact on the petrochemical industry. Food and Beverage Industry: Affected Limited CITIC Securities' RMB appreciation has limited impact on the food and beverage industry and listed companies, and is slightly different for different sub-sectors. Based on the large domestic consumer market scale and the short-term marketization and internationalization time of most companies, the current consumer market for food and beverage listed companies is mainly in China. Therefore, the negative impact of RMB appreciation on product exports is not affected in the food and beverage industry. obvious. For a small number of enterprises with a large export income, such as Fengyuan Biochemical, Angel Yeast , ST Dajiang, Guotou Zhonglu , Xinzhongji, and ST Weihe have a large negative impact. From the perspective of the cost of imported raw materials, the appreciation of the renminbi is conducive to the improvement of the performance of Tsingtao Brewery and Yanjing Beer , because imported beer and wheat account for a large proportion of the production costs of the two beer companies. Considering the purchasing cycle of beer barley and the appreciation of only 2%, the performance of these two companies is very limited this year. We initially estimate between 1% and 2%, and this has not considered the appreciation of the RMB to a small amount of these two companies. Possible negative effects of exporting beer. The appreciation of the renminbi will reduce the price of imported milk powder, which will bring more power to the reduction of dairy production in domestic dairy companies, but the 2% appreciation will have little effect. In theory, the appreciation of the renminbi will reduce the price of imported food and beverage to a certain extent, thus bringing price competition pressure to domestic enterprises, especially the wine industry that investors are more concerned about, but we think this impact is very limited. Because the 2% renminbi appreciation rate is negligible compared to the sharp reduction of tariffs, and price competition will not become the strategic choice of the world food and beverage giants in China. The appreciation of the renminbi will reduce the import cost of machinery and equipment, thereby reducing the capital expenditure level of dairy listed companies and beer listed companies that currently use more imported equipment, and improving asset profitability. In terms of wealth effect, the appreciation of the renminbi will increase the value of renminbi assets of domestic residents, thereby increasing the demand for high value-added branded food and beverage products, which is generally beneficial to the better development of listed food and beverage companies. The impact on steel companies The different RMB appreciation of CITIC Securities is conducive to reducing the cost of the steel industry. For the steel industry, it is currently a net importer, of which imports of steel, iron ore and scrap in 2004 were 20.7 billion US dollars, 12.7 billion US dollars and 2.3 billion US dollars respectively, and the total import value for the whole year was 35.7 billion US dollars. In 2004, exports of steel, billets and ferroalloys were US$8.3 billion, US$2.3 billion and US$2.65 billion respectively, with a total export value of US$13.3 billion. As the total volume and proportion of imported iron ore increase year by year, the appreciation of the RMB exchange rate will help the steel industry to reduce production costs and further enhance the competitiveness of China's steel industry. Considering that the Chinese steel enterprise product market is mainly for the domestic market. At present, the market supply and demand of China's long profiles is mainly affected by domestic supply and demand. The plate, especially the thin plate market, is closely linked with the international market. However, the price of plate in the international market is significantly higher than that of the domestic market. Therefore, the change of the RMB exchange rate is generally for the steel industry. Good. Considering the exchange rate change of RMB 5~10%, there is a 10% profit change for the whole industry. The impact on specific steel companies is different. Among them, steel companies such as Baosteel Co. , Ltd. , Maanshan Iron and Steel Co. , Ltd. , Tangshan Iron and Steel Co. , Ltd. , and Wuhan Iron and Steel Co. , which mainly rely on imported ore, have benefited the most. The rise in H-share prices will further boost the rise of mainland steel A-shares. From the perspective of risk factors, after the appreciation of the renminbi, the domestic steel prices denominated in local currency may lead to a decrease in exports in the steel consumption industry and an increase in the quantity of imported steel, leading to a deterioration in the oversupply situation in the industry.Door holders keep doors open to allow people to pass through the doorway while carrying heavy loads. They can also prevent doors from slamming shut.
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