Brokerage Morning Meeting Highlights | Increasing Importance of 3 Types of Capital Expenditure

Yesterday, the market fluctuated and rebounded, with the Shanghai Composite Index rising more than 1% to return above 3900 points, and the Growth Enterprise Index rising more than 2%. The trading volume of the Shanghai and Shenzhen stock markets reached 2.18 trillion. In terms of sectors, the performance of the electricity, computing power leasing, CPO, and fiber optic concepts was active. On the downside, oil and gas stocks showed weaker performance. At the close, the Shanghai Composite Index rose 1.3%, the Shenzhen Component Index rose 1.95%, and the Growth Enterprise Index rose 2.01%. At today's brokerage morning meeting, Guosheng believes that the importance of three types of capital expenditures is increasing; Guotai Haitong believes that the Chinese market will not fall into a "stagflation" narrative, and growth logic is the key breakthrough; China Securities Co.,Ltd. believes that the situation in the Middle East has profound implications, and China is facing a strategic opportunity. Guosheng: The importance of three types of capital expenditures is increasing Currently, the world is in a "great change unseen in a century", with the old order gradually disintegrating and the new order yet to be established. There are systemic changes in growth, debt, distribution, globalization, politics, and geopolitics globally. The global economy is gradually shifting from "efficiency first" to "efficiency and security coexist". The importance of three types of capital expenditures - technological capital expenditures (AI, electricity), security capital expenditures (energy, resources, industry chain, supply chain), and defense capital expenditures (military industry, arms trade) - is increasing, leading the world into a "great era of capital expenditures." Looking back, there have been periodic performances in the domestic and foreign AI industry chains, new/old energy, non-ferrous metals, rare earths/strategic metals, and military industries corresponding to the three types of capital expenditures. Looking ahead, opportunities brought by three types of capital expenditures can be grasped in the upstream, midstream, and downstream: 1) Upstream focuses on resource areas such as energy, strategic minerals, and food; 2) The midstream focuses on opportunities for the restructuring of advanced manufacturing and traditional production transportation systems; 3) The downstream focuses on the continuous expansion of the AI industry chain, including large models, computing power infrastructure, electricity and energy supporting, and AI applications. Guotai Haitong: The Chinese market will not fall into a "stagflation" narrative, and growth logic is the key breakthrough High oil prices will indeed affect normal industrial production and constitute cost shocks in the short term, but the overall impact on the economy in the medium term is limited, and there are even opportunities structurally: 1) China's energy self-sufficiency has been continuously improving in recent years, reducing its dependence on crude oil. The cost shocks are more reflected in the adjustment of profit structure rather than overall pressure; 2) Currently, the domestic cycle is in a stage of recovery rather than overheating. The increase in oil prices is expected to accelerate the normalization of the Producer Price Index (PPI). Currently, industries are generally in a state of low inventory and low production capacity, and restocking in the industrial chain is expected to promote a positive price-demand cycle. The current tight supply-demand situation and the enhanced pricing power of the middle stream; 3) External demand is still on the rise, and it is more reflected in the demand for capital goods under the stimulus of various countries' fiscal policies. Global energy transformation and the demand for production capacity security are strengthening, and high oil prices have limited negative pressure on them. Chinese export enterprises with global competitiveness have cost advantages and pricing power. 4) The current global interest rate cycle is downward, and interest rates are not at absolute lows. A comprehensive tightening or even the possibility of raising interest rates is small, and it is more reflected in the slowing pace of interest rate cuts. China Securities Co.,Ltd.: The situation in the Middle East has profound implications, and China is facing a strategic opportunity The conflict between the US and Iran has entered a stalemate, causing severe fluctuations in oil prices. China has diversified its crude oil imports, and the transformation of energy structure and strategic oil reserves will play a buffering role. However, under the disturbance of global risk appetite and the constraints of the domestic market funding, A-shares may still maintain a volatile pattern in the short term. If the US-Iran conflict prolongs, it may have three main impacts: 1) The central upward movement of oil prices would lead to a global rise in inflation, disrupting the pace of the Fed's interest rate cuts; 2) The loosening of the oil dollar system accelerates, China is expected to become a global safe haven for capital, and RMB assets may benefit; 3) It may spur China's strategic opportunities. With a dual-pillar energy base of "coal + new energy", China not only ensures its own energy security but also has the potential to become a leader in global energy transformation. Industries should focus on: coal, coal chemicals, power equipment, utilities, petroleum and petrochemicals, and AI industry chains. Themes to focus on: lithium batteries, nuclear power, energy storage, wind power, etc. This article is reproduced from "Cai Lianshe", GMTEight editor: Liu Jiayin.