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The 7th China Commodity Industry Forum has been successfully held

Ma Wensheng, chairman of Xinhu Futures Co., Ltd., delivered a speech

The 7th China Commodity Industry Forum was ceremoniously held on April 9, 2021 at InterContinental Shanghai Puxi Hotel. The theme of the forum is "Commodity market opportunities under economic recovery and reinflation", attracting many industrial customers and institutions to attend the forum.


In 2021, with COVID-19's control to a certain extent, the global economic recovery is expected to grow. The loose liquidity environment around the world is still abundant, and the market has strong expectations for inflation. The real industry is facing the pressure of restocking under the conditions of rising consumption, slow rising raw material supply and low inventory. Including the rise of new energy, carbon neutral and other new consumption highlights, the commodity market presents the resonance of economic cycle, consumption cycle, inventory cycle, inflation cycle and even dollar cycle. However, the market is still worried about the variation of virus, monetary policy turn and asset bubble valuation. Based on this, Xinhu Futures Co., Ltd. held the "7th China Commodity Industry Forum" in Shanghai on April 9, 2021, hoping to help you have a clearer understanding of the future market structure and direction through brainstorming and professional in-depth discussion among elites in various commodity fields. The theme of this forum is "Commodity market opportunities under economic recovery and reinflation". In the morning, it is the main forum, focusing on the macro-economic interpretation. In the afternoon, it is divided into five sub forums according to industries, including non-ferrous metals, ferrous metals, energy and chemical industry, rubber and agricultural products. The industry's heavyweight guests are specially invited to carry out in-depth discussion on the focus and hot issues of each industry, which will bring you great benefits. It is a feast of industrial exchange and thought collision.




At the main forum in the morning, Li Qiang, Secretary of the board of directors and director of the Research Institute of Xinhu Futures Co., Ltd., delivered a keynote speech entitled "Crisis and opportunity of commodities in the recovery year". The following is the content of the speech:


Hello everyone. I'm Li Qiang of Xinhu Futures. I am very glad to have this opportunity to stand on this stage. It seems that I have been standing on this stage for five or six years. My topic is "Crisis and opportunity of commodities in the year of recovery". Now it is April. When I think back to April last year, the whole capital market just experienced a wave of slump, and there has been some recovery in the whole commodity. But since March and April last year, the global epidemic is actually not over, it's getting worse. From April this year, it seems to be the opposite of last year. We can see that with the continuous popularization of vaccines, the overall anti epidemic effect may gradually improve.

Because of this background, we are sure to see some structural changes in the large categories of assets and commodity assets. I gave it a subtitle, which is "Policy switching from valuation to supply and demand driven". As you know, the liquidity was released last year, and the valuation of commodities rose sharply, which is very similar to that in 2008. This year, the whole policy has changed to a certain extent. Although the liquidity stock is still there, the increase on the edge is actually slowing down, which is reflected in the long-term interest rate.

I think the whole commodity system is changing from a valuation to the supply and demand side.


I will make three points:

  • First, policy driven change in China and the United States - from monetary to fiscal. Especially in the United States.

  • Second, the "three carriages" of the US economy.

  • Third, new energy consumption and carbon neutral supply side changes.


This picture has been on display for four years. It feels very effective. It basically represents the rotation of large categories of assets. First of all, we have a qualitative analysis of which direction to drive. If we sum it up, it is actually a bit similar to The Investment Clock proposed by Merrill Lynch. I put in long-term debt, real estate, stock market and commodities. The general Investment Clock does not have real estate. Its core focus is the short-term interest rate. I put M2 earlier. In recent years, the whole M2 seems to be getting weaker and weaker, because everyone is beginning to pay attention to social financing. However, the data and length of social financing, including the caliber in recent years, have been adjusted, so I used the short-term interest rate.


It can be seen from the figure that the trend of long-term interest rate has a certain preponderance for the trend of short-term interest rate. The trend of long-term interest rate itself will be related to economy and inflation, so the response is the most advanced. With the passage of time, it will be reflected in the short-term interest rate. Finally, the change of short-term interest rate will be transmitted to the stock market, real estate, and commodities, with a certain rotation effect. Including the adjustment of the stock market seen in the early stage, there is still a great embodiment of the short-term interest rate preponderance.


In the whole process of short period rate (asset rotation), the biggest deviation occurred twice. One was the stock market in 2015, which suddenly showed a sharp upward trend. As we all know, it was leverage bull. The other was the sudden outbreak of last year's epidemic, which greatly suppressed the assets of the whole commodity. Because the price of crude oil fell to a negative level last year, which reflected that when some risky assets slowly flowed out with systemic risks, their price changes were not linear and might be reflected in a more flexible way.


If we smooth out the trend of commodity prices last year and this year, we will see this dotted line. At present, this cycle is about two quarters away from the high point of short end liquidity cycle, which seems to be a bit similar to what Huachuang Zhang Yu said just now. The regular trend we can see in the whole commodity may be within two quarters to the end of September and October, which may still be an upward view on the whole.


This is a big qualitative. In addition to this, we can also look at the inventory cycle. Why do we look at the inventory cycle? In my impression, in 2019, many sellers, including securities companies, are talking about that 2020 will be a cycle of restocking. Inventory cycle we often see two things combined, one is the price, the other is the inventory. When these two things are added up, we can see whether the inventory is active or passive. You have to look at the price and inventory, and then judge the price. I think there is still a problem. When I look at it myself, I use several wind direction indicators in PMI data. One is finished goods inventory, one is raw material inventory, and the other is order inventory. I use the average indicator of 12 months. When I see the decline of finished goods inventory, order demand is increasing. Once raw material inventory starts to go up, it must be actively accumulated Process.


Historically, the impact is obvious. However, due to the outbreak of the epidemic, the active stock accumulation has become a passive stock accumulation. During that period, the stock price fell sharply. After China's epidemic control, we can see that the entire inventory structure has begun to move towards a benign state. Now it is in a stage of active stock accumulation. We have not seen a reversal of this trend, so we are still in the process of positioning active stock accumulation.


So back to the three main lines. Recently, everyone has been focusing on the yield of ten-year U.S. Treasury bonds. I need to remind you that the short-term interest rate in the United States has been kept at a very low position, even the lowest position recently. This also reflects that the whole liquidity market is in a state of wide reality and tight expectation. If the spread of long-term and short-term interest rates is superimposed with the trend of short-term interest rates, I have just said that the 10-year interest rate can be used as a bond futures variety, reflecting the future. This kind of lead time in the United States is about two years. If you infer from this logic, you will find that the real tightening of short-term interest rates in the future will coincide with the second half of 2022 or the beginning of 2023. It is possible that the United States will really enter a tightening state. The rhythm seems to be quite similar. Recently, the pace has been greatly improved, compressed to about 2-3 quarters. From this perspective, we can see that we have not seen the turning point of commodities in 2-3 quarters.


Comparatively speaking, we have talked a lot about China's bond market. I think it has entered a new normal. Since the interest rate began to rise in April and may last year, some adjustments have been made this year, maintaining an oscillatory state. Just now, the previous guest said that we can see that the driving force of China's economy in the future is obvious, but it is not obvious. The downward correction is also very difficult. This also determines that the central change of interest rate in the future will not be particularly large. This is China.


Why is there such a difference? This may be quite different from the economic environment of China and the United States. My fixed tone for it is that in the global economic environment, China is a stock now, and the change will not be particularly great, but the United States is marginal, and the future elasticity will be relatively large. China is the supply side of the global economy, and the United States is the demand side of the global economy. We can see that the capacity utilization rate of Chinese global enterprises has returned to a very high position, which is slightly higher than that before the epidemic. That is to say, the supply side of the global economy (represented by China) and the supply side of the Chinese economy have actually returned to a normal state. However, the U.S. economy is in a different situation. The consumption of durable goods and non durable goods of the U.S. residents has returned to the pre epidemic period. However, the consumption of service-oriented consumption, which is the largest part of the U.S. personal consumption, is obviously lower than that before the epidemic period. This shows that there is still room for the self-healing of the U.S. economy. In particular, we can see that the vaccination rate in the United States has increased significantly in recent years. Whether there is a mutated virus or not, we can see that the new data in the United States and the United Kingdom are significantly better than those in the European continent. At least it shows that it has such an effect, which will bring about a healthy recovery of US consumption.


In this way, we think that the global monetary policy may be more difficult to release liquidity in a wide range. In the future, the support of the whole risk assets will enter another stage, that is, the economic recovery will drive the demand for commodities. At the same time, the global fiscal policy will also have such support.


From the perspective of China's fiscal policy, there are two points in the implementation of fiscal policy: the ability and the will. I think China's fiscal policy now has the ability, but the will is not particularly strong. Why do you say that? At the time of the worst epidemic situation in China last year, there was a lot of liquidity reserves. At that time, the market had high expectations for China's future economic infrastructure, which meant that the government would spend a lot of money. Surprisingly, exports have propped up this area, and infrastructure has not made much effort to provide fiscal reserves.


Now we can see that the fiscal savings are higher than that of the same period last year. On the whole, it will cost a lot of money to fight the epidemic. It may be a transitional period of recuperation. If we have such ability, we may not have such willingness. Comparatively speaking, the US fiscal stimulus must be a general direction.

But there is a question: where will the money for future fiscal stimulus come from? Many people say no, because there is a lot of money in U.S. fiscal deposits. When I look at the U.S. fiscal deposits, there is still $1.1 trillion in the Federal Reserve. The normal situation is about $400 billion, and there is room for $700 billion in the middle. According to the monthly expenditure of $300-400 billion in the U.S. anti epidemic campaign, I think the money is still not enough. In the future, there should be sources of funds coordination.


Second, The American economy is marginal. Where is the marginal? I think it's three carriages.


The first is infrastructure finance. Before the $1.9 trillion (mid March) stimulus plan, the United States has experienced several rounds of fiscal stimulus, which is close to $6 trillion in fact. However, this fiscal stimulus is very different from the $2.2 trillion fiscal stimulus implemented by Biden. The previous stimulus was centered on the fight against the epidemic, and the money was spent on the checks written by residents, as well as some infrastructure and local government support. But the core of the 2.2 trillion yuan is in infrastructure, manufacturing, new energy and green energy. I think the fiscal stimulus promoted by Biden government is very different from the previous fiscal stimulus. Can stimulation come to the ground? It's really difficult. There are big differences between the two parties in the United States. In the end, the budget reconciliation procedure was used. This bill can only be used for one fiscal year. The next fiscal year will start on October 1. The biggest problem now is that the Democratic Party of the two parties in the United States still has big differences on supporting tax. Because now everyone is talking about that the fiscal stimulus of $2.2 trillion may be implemented by future taxation, which I think is quite difficult. 1) Tax itself has a certain impact; 2) from the perspective of stock market profits, the huge profits of many enterprises come from the tax reduction in the trump era. If there is a rebound, it may greatly reduce the profitability of enterprises, thus reducing the valuation of Listed Companies in the stock market.


Even if we can promote the budget reconciliation process and tax collection, it is very difficult. If tax collection cannot be achieved, infrastructure financing may have to be promoted. Without the cooperation of the Federal Reserve, long-term US bonds will go up further. This is a risk I am worried about.


There are several processes in the process of each fiscal stimulus in the United States.

1. The economic downturn, fiscal stimulus, monetary easing, interest rates down, commodity prices also declined, but gradually slowed down, and bottomed out;

2. The economy began to stabilize, fiscal stimulus continued, interest rates began to rise, and commodities continued to rise;

3. Economic recovery, fiscal policy withdrawal and interest rate rise, but commodity prices continue to rise driven by the economy.


From this point of view, if we put together the commodities and creditor's rights in a large category of assets, we will find that the economic situation in this category is especially like the second stage. What is the second stage like? Commodities and bonds are going up, so are bond yields and commodities. Recently, the yield of ten-year Treasury bonds of the United States has risen sharply, and there have been some fluctuations in the price of commodities. However, this fluctuation has not really affected the price trend of commodities. It is just that some frequency bands are more volatile, and adjustment may come back. We feel that from this point of view, the second stage does not mean that if the bond yield goes up, the asset price will definitely go down.


In the same way, historically, the U.S. government investment is similar to China's infrastructure construction, and it will also play an economic role. This can only be seen from the above chart, and it has a certain effect, not completely regressed by mathematical data.


What I just talked about is the first carriage of the American economy, which is the infrastructure of the United States. Of course, can infrastructure be implemented? I think it will probably fall to the ground, but the intermediate process is rather tortuous.


The second is the self-healing of the American economy. The recovery of the service industry in the United States is far from reaching the level before the epidemic. I believe that this self-healing effort will surely exist. In fact, the recovery of the U.S. consumer industry has a strong correlation with the prices of many commodities, such as crude oil. If the service industry is very developed, the consumption of crude oil brought by flying and driving must be boosted, as shown in the figure. Our current view on the crude oil side is generally optimistic from the perspective of the demand side. In addition, the supply side of the crude oil side will continue to recover the previous production reduction in the next few months. I think the recovery of the demand side will be stronger. It's just that in terms of futures products, it's hard to deal with the chemicals we're doing now. I've selected about 89 chemicals in the futures industry for their capacity changes.


In recent years, the whole chemical industry sector has been put into production for a long time, and many varieties are put into production by 20% or 30%. This brings about a situation that the price of crude oil has some support for commodities, but the capacity of the chemical industry sector is constantly expanding. Now I communicate with the researchers in the chemical industry sector, which is also a contradiction. More is to do variety arbitrage. Our researchers also listed the arbitrage varieties that they are more concerned about, cross variety or cross period arbitrage varieties.


The third carriage is the real estate of the United States. Just now, Zhang Yu talked a lot about it. I won't talk about it here. In fact, the real estate industry in the United States is highly correlated with the credit in the United States. However, there may be some differences between the expansion of credit in the United States and that in China, it is common people who create credit from bank administrative credit. In addition to the real estate itself, there are also the pre cycle and post cycle of real estate in the United States, which leads to the credit expansion of consumption more obvious.


The first figure will find that there is a great correlation between the rhythm of real estate and credit in the United States.


Second, the inventory of real estate in the United States is declining, and it is the best state in nearly 20 years. The leverage ratio of American residents is the best among several sectors. In the future, the most leveraged sector is residents. We are also relatively optimistic about real estate. There may be some uncertainties in the middle. The heat of real estate in the United States is extremely related to the interest rate market in the United States. If the 10-year interest rate goes up, it will be transmitted to the real estate market in the future, and it will have an impact on the real estate market. We will wait and see. At present, we can still see a relatively benign situation in the real estate market in the United States What's more, this has formed the three carriages of the United States. One is the natural recovery of the service industry economy under the control of the epidemic; the second is that the future infrastructure of the United States will bring marginal growth in consumption; and the third is that the real estate market of the United States is still in a very good fundamental situation.


How to do the expansion of American finance? Just now we talked about where the money for new infrastructure projects in the United States comes from. Now the most talked about topic is taxation. It's true that there is a large space for enterprises to levy taxes and for individuals to levy taxes in the future. However, the key problem is that the intermediate process is rather tortuous. At the initial stage, I think it will only have a great effect on the source of capital construction funds. This will involve a problem. If taxation fails to provide liquidity and funds in the short term, where will the money come from? Should the US Federal Reserve further cooperate.


Historically, I have seen that when the scale of US bonds expands faster than that of individual bonds of the Federal Reserve, the market interest rate is easy to go up. From this point of view, I am a little worried that the yield of US debt will go up from the drive. If the yield drive goes up, it means that the US dollar has a certain position. There is a marginal uncertainty in the trend of the US dollar, which is that the epidemic control in the United States is better than that in Europe. If the epidemic in Europe can be controlled, it will form this year At the beginning and the end of last year, the situation between China and the United States was relatively easy for China. As soon as the epidemic situation in the United States was under control, the US dollar began to rebound sharply. If the epidemic situation in the United States is better, once the epidemic situation in Europe is under control, will there be some rebound in the euro? However, in terms of economic fundamentals and US bond yields, there may be an upward drive for the US dollar. This is because I have some worries about the valuation.


If the information of epidemic situation is put out, although the quantitative analysis of this graph does not match the correlation; but qualitatively, when the epidemic situation in resource countries is more serious than that in consumer countries, the growth rate of commodities will be better; when the epidemic situation in consumer countries is more optimized than that in resource countries, the growth rate of commodities will be weaker. We can see that the epidemic control in developed countries may be better than that in resource countries, especially in the United States and the United Kingdom. There are some fluctuations in the European continent. But we can see that in resource countries, such as South America, where the epidemic problem is relatively serious, such as Chile, a large part of the population has been frozen, and the epidemic situation is deteriorating to a high degree. This will be harmful to the development of the economy The supply of resources will have some impact in the future, which will be reflected in the price.

On the whole, we have optimistic expectations for this kind of resources.


Second, what we talk about most now is the concept of carbon neutralization. The seller's market, especially the securities companies, has talked a lot. I will not list the specific contents. One of our concerns is "carbon neutral". In fact, at the end of last year, we thought that there were not many opportunities for the black sector in 2021. However, after the concept of "carbon neutral" and "carbon peaking" came out, the concept of secondary supply side came into being, and the industry's profits were expected to be high, and this high expectation may be the reason Normalized. How much capacity do we have to do? I don't know, but there is a normalized high profit. It's very difficult to trade on black, because the biggest problem of black now is not the driving force, but the valuation, so that the price can be put in place through big premium and big discount. For example, the profit of the steel plant is more than 1000. It's difficult to decide whether to make long profit or short profit, but the driving force must be for profit.


In recent days, a lot of steel plants have seen dozens of times of profit growth, which is really frightening. In addition to steel plants, we are also concerned about high energy consumption, high emissions, electrolytic aluminum. There is no doubt that the iron and steel industry is the largest. Products like electrolytic aluminum are high energy consumption and high emission products, which will definitely be affected at the supply side. Electrolytic aluminum is less talked about now. Some policies appeared in Inner Mongolia some time ago.

The concept of carbon neutralization involves some varieties, such as photovoltaic, wind energy and new energy, because carbon neutralization involves the structure of both the upper energy end and the lower consumption end. I asked researchers to make statistics on the impact of various fields on the consumption proportion of various varieties, such as copper and aluminum, and predict the changes in the next few years. Generally speaking, it has a great impact on some industrial metals, which we will pay more attention to later. For example, there are many effects in chemical products, such as PVC (8580, 65.00, 0.76%). Although PVC does not have a great impact on such varieties, PVC raw material calcium carbide is a high energy consuming industry, which will have a certain impact. For a long time, its fundamentals are obviously better than other chemicals.


Taking copper as an example, this afternoon researchers will discuss the future energy consumption of air conditioning, household appliances, new energy vehicles, photovoltaic and power generation enterprises. Some of them may sound very hot, but there will be some short-term effects, such as wind energy. The investment in 2021 may decline, because the exit of subsidy policy in 2021 will form a high base of last year. From the perspective of the next five years, for example, the source side of new energy, their growth rate of consumption must be relatively fast, the base of each field is not large, and the future growth rate is very large. Under such a situation, we need a certain amount of time to gradually reflect the influence.

The pressure on the supply of resources, such as copper processing fees, has been reduced in a mess. For example, the smelting cost of zinc has also been reduced a lot. Under the situation of tight resource side, it will be realized for some time in the future.


In the gold area, just now president Fu Peng talked about this area. I have drawn a line, the yield of ten-year Treasury bonds. Last year, I had the impression that on August 2, we took gold as the last core configuration, August 6 as the core point, and August 9 as the general configuration. Since then, we have not taken gold as the configuration variety. Recently, we have been looking at gold as a key variety. Why? In fact, let's take a look at the top and bottom. It's not very meaningful to study the fundamentals of gold. It's really a variety with strong financial attributes. Moreover, in terms of trend, it has a strong correlation with the actual rate of return.

Some time ago, the ups and downs of gold had a great impact on the change of real yield. However, in the future, is the real rate of return or inflation? If inflation rises, it will definitely stimulate gold, but if interest rate rises, it will definitely suppress gold. We think that the logic of inflation in the future may be renewed. This is the last week when we were writing a report, we began to pay attention to gold as a concerned variety.


Why do you see inflation? For example, if we look at the data of M1 and inflation together and compare the price trend of industrial products, M1 really has the lead. If this kind of leadership is still maintained in that effect, we can see that the price rise of industrial products is not in place for a period of time in the future, and there will be a continuation. Such a continuation will bring inflation of industrial products, and we think the impact on gold will rise again. Of course, you can see the beat in this picture. It's seasonal. In January and February every year, because of the Spring Festival, there will be a beat. Recently, we put gold back in our sight as the core configuration.

Another plate, protein. We focus on two major sectors, one is gold, the other is agricultural products. This year, there is a relatively big adjustment, such as soybean meal (3415, - 27.00, - 0.78%) and rapeseed meal. What is the logic of this? We can see that the price of agricultural products has been in a very high position. The consumption of protein has been under certain pressure in the past, and there are problems at both sides of supply and demand. After the outbreak of African swine fever, the demand side will be affected. We can see that the overall inventory is a bit high, and this logic may be reversed in the future.


1. CSFV in Africa has led to a decline in stock. This will pass slowly. The past means that there is expected to be a recovery in the future.

2. The profit of oil factory is negative.


I use two charts. One is the squeeze profit of oil plants, because the price of soybean meal is most closely targeted at American Soybean (5810, 160.00, 2.83%). If we make a ratio between soybean meal and soybean with the exchange rate factor, you can find that the ratio is basically pushed to the lowest point in 2013. We think there may be a process of valuation repair.


Second, the trend of the oil sector has a downward trend. We think there is a strong opportunity for soybean meal configuration in the future.


Let me make a summary here.

1. The rise of US bond yield means that the support of liquidity valuation end of commodities and other risky assets begins to weaken. The trend of commodity prices has returned from valuation to fundamentals;

2. The infrastructure construction of the United States may have a more obvious marginal impact on the future. China is the stock guarantee of the economy and mass consumption, and the United States may be the marginal increment of the economy and mass consumption;

3. The upward trend of interest rate is accompanied by economic recovery and inflation expectation, and the commodity price trend is still the main actor at this stage;

4. In addition to the natural economic recovery, this round of economic recovery is accompanied by the demand side story of new energy and other fields and the supply side story of "carbon peak, carbon neutral". We prefer to choose such assets. Maybe the nonferrous plate will become the most concerned plate in 2021. For example, the profit of electrolytic aluminum has been 3000 or 4000 yuan, and many downstream processing enterprises have some losses. Therefore, it is a period of exchange of high profit market sentiment, and we think that the driving force will be in the future.

5. The black plate has no story, but the concept of "carbon" gives birth to the logic of industrial profits. 6. Last year, corn (2637,12.00,0.46%) and oil were the main agricultural products. This year, protein consumption recovery and valuation repair are the driving forces. Once there is a cooperation of going to the bank, there is a good opportunity for protein configuration.

7. The normalization has been revised and corrected. In the future, it may still shift from real interest rate logic to inflation logic. We focus on its allocation opportunities. We will now take gold as a more focused allocation opportunity.


This morning's talk is mainly about the idea of configuration from top to bottom. If you want to be more microcosmic, you are welcome to participate in the microcosmic discussion of each sub forum in the afternoon. Thank you!






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