GS 高盛-中国每日报告 08.07

China-Daily-Insights 08.07 8页

Today’s focus
China: Steel: Fundamental upside surprise; four mega themes in play
Simcere Pharmaceutical Group (SCR): Strong 2Q results; spectacular new drug sales; reaffirm Buy
Headline news
Asset prices may keep rising in 2nd half (China Daily)
Gasoline retailers cautioned against hoarding, profiteering (China Daily)
Fortune SGAM to offer stock incentives (Shanghai Daily)
Manufacturers add value, reap rewards (People’s Daily)
Family funds go to market (People’s Daily)
China: Steel: Fundamental upside surprise; four mega themes in play, Song Shen
• Steel price recovery accelerating: Despite the market’s concern over the potential risk of oversupply in 3Q since the imposition of an export tax on June 1, last week domestic prices saw their largest wow increase across the board (0.2%-2.4%) since the recovery started a month ago. Even the cold rolled (CR) price, which has been declining for 10 weeks, rebounded last week. Shanghai channel inventory is at one of its lowest levels ytd.
• Three mega themes that we think ensure further upside: Channel checks show that mills have cut back on exports and redirected volume to domestic markets. The subsequent rebound in prices indicates to us that the potential risk of domestic oversupply has diminished. Three supply-side trends are reducing that risk further, in our opinion. Theme #1: Sharply rising raw material costs squeezing small mills. Theme #2: The intensified government crackdown on energy-intensive sectors, causing further pressure