Daily Investment Strategy
Daily focus：CRRC（1766）
On Tuesday (4th) and Wednesday (5th), China will hold the "Two Sessions." It is worth noting the implementation of funding for the " equipment renewals and upgrades," and investors can pay attention to related concept stocks, including CRRC. Since 2018, CRRC has raised dividends every two years. With a net cash position, it has the capacity to increase dividends. In 3Q24, operating cash flow turned positive at RMB 7.62 billion, compared to a negative RMB 3.99 billion in 2023, driven by higher cash receipts. The local government debt swap program is expected to improve the account receivable collection of the infrastructure sector, supporting the company’s outlook. Railway FAI during the 14th Five-Year Plan period will be comparable to 13th period, implying that the FAI is expected to surpass RMB 900 billion in 2025, with a 13.4% YoY increase, higher than 2024's 11.2%. The China National Railway Group plans to accelerate key projects, including major routes to Tibet, Xinjiang, and coastal areas, to meet 14th Five-Year Plan goals. CRRC, a global transit equipment leader, saw its high-speed train additions doubled in the period of 2010-2014 when compared to 2007-2009. The 2010-2014 fleet is currently driving an increase in after-sales maintenance. Also, with the "old-for-new" policy boosting equipment upgrades, the pace of railway equipment replacement is set to accelerate, supporting revenue growth for CRRC.
S&P 500 falls on trade war worries
U.S. President Trump confirmed on Monday that tariffs on Mexico and Canada will take effect on Tuesday as the two countries have no room to negotiate. Trump also signed an order to impose an additional 10% surcharge on Chinese imports, which will take effect on Tuesday, bringing the Trump administration's increased tax on Chinese imports to 20%. Meanwhile, the Institute for Supply Management (ISM) manufacturing index reached 50.3% last month, down 0.6 percentage points from January and lower than market expectations of 50.7%, but still slightly above the 50-point dividing line between expansion and contraction. U.S. manufacturing activity expanded slightly for a second consecutive month, ending 26 months of contraction, and ISM survey chief Timothy Fiore said U.S. President Trump's tariffs were already having an impact on U.S. manufacturing. "Demand eased, production stabilized, and destaffing continued as panelists' companies experience the first operational shock of the new administration's tariff policy," he said.
Hong Kong Stock Connect had a net inflow of HK$9.74bn Monday of which Alibaba (9988) had the largest net inflow, reaching HK$2.81bn; followed by Tencent (700). HKEX (388) recorded the largest net outflow at $0.74bn, followed by Li Auto (2015).
Wen Kit Kenny is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.
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