Good afternoon, investors.
On March 9th, we would like to talk to you about some sectors and investment opportunities related to stable growth. Although the recent market is not good, especially the volatility is very large, but in fact, when everyone buys the fund, objectively speaking, it is a big fall, a small fall, a small buy, and when it continues to rise, you should be a little more careful, don't chase high. Therefore, although the overall market may be relatively poor, from Monday to Wednesday, everyone may not be in a good mood. But from the trend point of view, everyone sees that the power to buy when the afternoon falls very quickly is also stronger. So in the short term, at least we are not pessimistic about the theme of steady growth. In particular, we see that various policies are gradually exerting force, and it should be said that stable growth is gradually moving from expectations to reality.
If you care about bonds, you will see that in fact, there was a sharp decline in bonds on March 9, and more fixed income investors are still in the process of gradual recognition of steady growth. It's just that A-share investors may have other judgments, or other concerns, such as whether the outcome of the geopolitical conflict will affect some of China's affiliates. Whether some listed companies in China will also be restricted if they do business with Russia, just like in 2018 for ZTE and later on Huawei, which may have more concerns for investors. However, we can see that in fact, most of the sectors related to stable growth are still some sectors of domestic demand, and the overseas business related to exports is actually relatively small.
Let's get back to the topic of steady growth. First of all, let's talk about why we want to stabilize growth. To put it simply, if we interpret stable growth as a stable economic growth rate, in fact, the biggest reason for stable growth is because the downward pressure on the entire economy this year is relatively large.
As you can see, when we analyze the macro economy or analyze related investment strategies, the general method is to find leading indicators. For example, if we analyze a variable, including some situations in the stock market, we also have to find a leading indicator. Leading indicators first is that it should have a lead, if we are to find a synchronous indicator, for example, we look at the market, this is a synchronous indicator, it is meaningless, it can not guide our investment, we generally look for leading indicators.
If we say that our economy is looking for a proxy variable, say PMI. The leading indicator of PMI we generally find is social financing, that is, the year-on-year growth rate of the total stock of social financing. Social finance is often about half a year ahead of PMI, and we start from 2020, the whole epidemic has led to a lot of water in the country, or credit has entered an extremely loose state. If we measure these situations qualitatively and quantitatively, it means that the year-on-year growth rate of our social financing stock has begun to grow at a very fast rate since the epidemic in 2020. All the way to when, all the way to October 2021. So you can see that from 2020 to 2021, the market performance of the entire stock market is still good. However, in 2021, the year-on-year growth rate of the entire social financing stock has peaked and began to gradually decline. This shows that we actually controlled the epidemic in the whole country relatively well, and after the entire production returned to a normal level, we actually began to take the initiative to withdraw from some extremely loose credit policies during the epidemic.
In other words, we are actually starting to collect water proactively. When will the water be received? The year-on-year growth rate of the entire social finance stock has been falling back to October 2020, falling back to around September and October 2021, and the year-on-year growth rate of the social finance stock was about 10%, reaching a lowest point of this round of contraction, and then another round of expansion began, we should say that it is still in the cycle of social finance expansion or credit expansion.
According to this speculation, if it is the low point of social financing, that is, about October last year, and pushed back six months, a relatively low position of the entire economy this year may be about April this year. Therefore, you can see that the overall economic pressure in the first half of this year is still relatively large, including some economic synchronization indicators that we have seen in the year, starting from the second half of the year, especially last year's stricter management of the entire real estate. We have seen that since the second half of last year, the entire property, including the data on land acquisition, including construction data and completion data, has experienced a very rapid decline. Therefore, in this case, it should be said that the pressure for stable growth in the first half of this year as a whole is very large.
In this case, what are the means to stabilize growth? In fact, in terms of our total strength, the means mainly rely on real estate and infrastructure. Because the proportion of real estate-related industrial chains in the current domestic economic structure is too high. Real estate is not only real estate itself, it also involves the loan of the entire bank, the entire credit financial system. In addition, the entire real estate industry chain is very long, it includes both construction, construction may also involve some upstream and downstream, including steel, including some building materials, and may also involve some engineering teams and decoration teams. After completion, the back involves home appliances, buying electricity, and then renovating. And then to the further upstream, it involves, for example, some iron ore for steelmaking, some coal, which are actually closely related to our real estate. Including some purchases of many daily necessities, in fact, there is a great correlation with the behavior of buying a house. On the whole, it should be said that the proportion of real estate in the current economic structure is still very high, so we have always hoped that the economic structure will be transformed, to vigorously develop the manufacturing industry, and to develop some of our high-tech industries.
However, standing at our current point in time, if we want to achieve an annual economic growth rate of 5.5% like the one mentioned in the government work report, in fact, we should say that objectively speaking, the entire real estate side should be said to need to be further stabilized, or further reverse the pattern of sharp decline since the second half of last year.
In this case, in addition to real estate, there is infrastructure, because the infrastructure itself is relatively controllable, the main body of the infrastructure owner is mainly the government department, and the main body of construction is the enterprise of each central government, and the overall control is relatively strong. In addition, since the beginning of this year, it should be said that the entire funding is relatively abundant. Therefore, in this case, infrastructure construction is a key choice in the first quarter of this year, especially in the first half of the year.
We stand at the current point in time to see what kind of pressure and opportunities the entire domestic economic growth is facing in the first and second quarters of this year. First of all, if we narrowly understand stable growth as stable GDP growth, the composition of GDP is mainly the troika, our exports, consumption and investment. First of all, looking at exports, we have continued the very high growth of exports for two years since the epidemic. Including the data on exports from January to February disclosed a few days ago, it should be said that it is still maintained at a relatively strong level. But objectively speaking, the strength of our entire export in the previous two years mainly stems from several reasons.
The first is that last year, especially after the epidemic, developed countries in Europe and the United States continued their extremely loose monetary policies. And it's not just extremely loose monetary policy, it's also a continuation of very active fiscal policy. Including direct subsidies such as the United States directly issuing consumption coupons, or directly distributing cash to terminal consumers to let them consume. Driven by this positive monetary and fiscal policy, it should be said that since the epidemic came out of the epidemic in 2020, global aggregate demand has been expanding at a rapid pace.
But we see that this year, it should be said that the Fed is the representative, mainly the United States, including the United Kingdom, and the United Kingdom contracted earlier. This year, it should be said that the Fed's interest rate hike is already on the string, and the March interest rate meeting is likely to start its first interest rate hike, and it is also after the announcement in December last year that it has reduced the scale of bond purchases, and has officially entered its entire cycle of interest rate hikes. In this case, it is bound to have a negative impact on global aggregate demand.
In addition, part of the reason for our export advantages in the past two years is that the domestic epidemic situation is relatively well controlled. So especially last year, when the global epidemic broke out and the global industrial chain was negatively impacted, the domestic industrial chain was not negatively affected, so relatively speaking, we have the advantage of industrial chain security on the supply side. But back to the current point of the year, the developed countries in Europe and the United States have actually accelerated their herd immunity with the epidemic of the Olmikron strain began in December last year. Especially after the summer, it is likely that they will achieve herd immunity at a faster rate, and the advantages of the domestic industrial chain will also be negatively affected.
Especially in the current situation of geopolitical conflict, this is also objectively negative for China's exports. Therefore, in the first half of this year, our exports may barely be able to maintain a relatively high growth rate, but in the second half of the year, our exports may face relatively great pressure.
When we look at consumption, it should be said that the problems faced in the first quarter of this year are the more serious outbreaks of our epidemic. As you can see, the number of new confirmed cases in the country every day has been objectively speaking. In this case, we see that whether it is New Year's Day or Spring Festival, our entire epidemic control has actually had a negative impact on consumption.
Another point is that consumption has never been a way of economic growth that can work in the short term. Because in the normal sense, it should be said that consumption is a function of our income level, but we do not have too good public data on income in China to be a leading indicator. We can only look at the profitability of small and medium-sized enterprises through some other proxy variables, for example. After all, for consumption, in fact, its real marginal contribution is mainly in our low-income population. Because even if your income level is high, you will eat three meals a day, you will buy a wardrobe, two wardrobes of clothes, you can not say unlimited consumption. But our middle- and low-income people, if his income level increases, he can carry out consumption upgrades, and even the consumption that he did not have can be carried out, and he can try or enjoy the consumption level that his funds are not enough to support. In this case, it is bound to have a boost to consumption.
However, we have seen that since the second half of last year, the situation of small and medium-sized enterprises in the industrial added value should be said to be not optimistic. In the second half of last year, the overall change in industrial added value is OK, but from the details, more large enterprises, especially many state-owned enterprises, contribute. In fact, in the second half of last year, small and medium-sized enterprises, especially private enterprises, were relatively under pressure to operate. Last year, we faced an upward trend in commodity prices, so objectively speaking, we are not optimistic about the income. In particular, the impact of the epidemic is relatively direct, so on the whole, the pressure of consumption in the first half of this year should be said to be very large, and it is a negative pressure.
Let's look at investment, which is mainly divided into real estate investment, manufacturing investment and infrastructure investment. Manufacturing investment is also due to the sharp rise in commodity prices, it should be said that the current willingness to invest in manufacturing is insufficient. Including, you can see that since the year-on-year growth rate of social financing stock rebounded in October, loans should be said to be quite a lot. However, if you look at the entire loan structure, the medium- and long-term loans of enterprises are objectively unsatisfactory. This also shows that the current manufacturing industry should say that the willingness of the entire capital expansion investment is relatively low, because the price of commodities has risen more, the pressure on the cost side is very large, and the consumer side cannot be transmitted, so in fact, many manufacturing enterprises themselves as the midstream bear a lot of pressure on the cost rise, so manufacturing investment is objectively difficult to help, and it may even drag its legs.
Let's look at real estate investment. Real estate investment in the first half of this year is likely to continue to decline sharply. Because of the real estate at present, although we have seen a large number of policies have shifted, especially on the local government side, including some restrictions on housing loans, in the support of housing purchases, it should be said that some local governments have relaxed marginally. However, we see that the first is that the willingness of the entire resident to buy a house is not enough, including our entire credit data from December to January, and the data on the medium- and long-term loans of residents should be said to be objectively unsatisfactory. The medium- and long-term loans of residents here often correspond to housing loans, which actually shows that the willingness of residents to buy houses is actually insufficient, although our entire policy level has turned.
On the other hand, real estate developers, especially private real estate developers, the pressure on the capital chain has not been effectively alleviated. As you can see, this year, including since December last year, the data on real estate land acquisition is still not ideal. In particular, when many places get land, more state-owned enterprises and central enterprises are taking land, and many private enterprises do not want to take land anymore. Therefore, the entire real estate investment here is due to inertia, it should be said that there is still a lot of downward pressure in the first and second quarters of this year, which is an objective situation.
Therefore, at the current point in time, the manufacturing investment and real estate investment in exports, consumption, and investment have not made too good progress, especially when real estate investment has a high probability of making a relatively large negative contribution, and here in fact, it can only rely on infrastructure construction in the first quarter. This is also why we should say that we are still more optimistic about the investment opportunities in the entire infrastructure sector.
In fact, investors who understand the infrastructure sector know that in fact, the last round of big market in infrastructure was before 2015. If you look at the weekly or monthly line of the infrastructure index, it has basically fallen from the second half of 2015, until it may have a wave of rebound around 2017, and then there may be a wave of rebound around 2020. But the whole trend has been downward, objectively speaking, it has fallen for six or seven years, at least five or six years.
In this case, it has a lot to do with the peak of our infrastructure investment in 2016. After all, our entire economic structure is facing transformation, so in fact, from 2016 and 2017 onwards, the national strategy is to develop manufacturing. In fact, the marginal effect of the GDP created by the entire unit of infrastructure funds has gradually weakened, so in this case, objectively speaking, the performance of the entire infrastructure sector is relatively poor.
However, we see that this year's infrastructure construction should be said to be one of the most important driving forces for stable growth. The reason here is that I also told you at the beginning: First, its entire investment body is mainly our government, which is relatively controllable. The main body of construction is also mainly our central enterprises and many local state-owned enterprises, which is relatively easy to coordinate. In addition, overall, the synergy with the government may be stronger. So in this case, it coincides with the first quarter that most of the economic growth points may face flameout, or even drag on like real estate. In this case, stabilizing the speed of economic growth through infrastructure has become an inevitable choice.
In particular, infrastructure and real estate can solve both the problem of economic growth and the problem of employment. Especially if the small and medium-sized enterprises here are sluggish, in fact, the pressure on many migrant workers to return to their hometowns for employment this year will be relatively large, including many relatively low- and middle-income groups, including real estate in the first half of the year, if the pressure is still relatively large, the entire real estate construction industry will be relatively large.
On the one hand, infrastructure construction can effectively hedge the downward pressure on GDP; On the other hand, it can also solve a large number of jobs, especially the employment of the working population. Therefore, in this case, it should be said that the infrastructure force is a choice that has to be made in the first quarter.
We look at infrastructure in fact, we mainly look at two points: the first point is whether there is sufficient funds, and how much funds can be arranged; Second, there are not enough projects, because like last year, the capital for infrastructure is relatively good, and it is relatively abundant. However, due to the lack of sufficient projects, the investment in infrastructure last year should be said to be very weak, and it has been a relatively weak year since history, 2021.
Standing in 2022 this year, first of all, for the source of funds for infrastructure, the first is that we had about 1.4 trillion yuan of special bonds last year that can be carried over to this year. Second, this year's finance has put ahead of the pace of issuance of special bonds. So far, there have been about 1.8 trillion yuan of special bonds issued, so on the whole, it should be said that there are 1.4 trillion yuan of balance carry-over last year and more than 18,000 yuan of special bond funds issued in the front of this year, and the "bullets" of infrastructure construction in the entire first quarter of this year are objectively very sufficient.
From the perspective of the whole year, it should be said that the main source of funds for infrastructure construction is mainly a few pieces, in fact, it is mainly self-financing by local governments. In addition, there may be about ten per cent of the funds allocated within the budget. In the budget, because this year's fiscal policy is to implement a proactive fiscal policy, especially including everyone who has seen that yesterday's mention of the central bank directly transferring some of its own profits to the national treasury is equivalent to directly forming the central bank's retained profits into financially usable funds, and finally forming the physical workload of the finance.
In fact, the financial support is mainly two pieces: one is to engage in construction and direct investment; There is also a piece of tax reduction and fee reduction, through the way of tax reduction and fee reduction, it is equivalent to benefiting the people, letting benefit enterprises, allowing enterprises and residents to invest and consume, through these two forms.
This year as a whole should be said to be a two-pronged approach, including our Central Economic Work Conference also highlighted some measures that exceeded expectations for tax reduction and fee reduction. But on the other hand, our Ministry of Finance has actually said that it will implement a very active fiscal policy this year. Therefore, from the perspective of the source of infrastructure funds, the funds in this year's budget should be said to be not too much of a problem.
There is also a bank loan, which should be said to be not too much of a problem. If you have friends who work in the bank, you may understand that it should be said that the task of credit this year is relatively heavy. But now for commercial banks, in fact, the biggest problem is not that there are no credit indicators, but that assets cannot be found, so now for banks, there is actually a bit of asset shortage. Especially if the real estate is not very prosperous, many of the bank's assets or its loans and real estate correlation are relatively high, if the real estate this piece does not have a strong demand, this piece of the bank is objectively difficult to find other relatively high-quality collateral (sound) such relatively high-quality assets. Therefore, from this point of view, it should be said that the problem of bank loans in the infrastructure sector is not large, and the main problem lies in the self-financing of local governments.
Self-financing is mainly a few pieces: one is the funds of special debt arrangements, which should be said to be very abundant in the first quarter, especially in the first half of the year. In addition, there is a piece of income from government funds, which mainly comes from the income from land transfers. Therefore, many investors who are not optimistic about infrastructure in this area are more optimistic about the income from land transfer in the source of funds. Their logic is that real estate is not working now, and there will be restrictions on the total amount of funds for the entire infrastructure.
Here, we stand at the current point in time, I personally think that in fact, the main contradiction is not the total amount, not the total amount of infrastructure this year, but the rhythm of infrastructure this year is likely to be front-ended, it is likely that there will be a very fast, very large amount of infrastructure investment in the first quarter. On the one hand, this aspect benefited from the fact that the funds for infrastructure construction in the first quarter were very abundant, and the "bullets" were abundant. On the other hand, the project reserves are also very sufficient, because last year, in fact, the National Development and Reform Commission and the Ministry of Finance also learned the lesson of the slow physical workload of the entire infrastructure fund formation last year, so it should be said that the NDRC has allowed local governments to reserve this year's special debt application projects in advance since the second half of last year. Therefore, to reserve the project half a year in advance, this preparation time is also very long in history. Normally speaking, it is generally two months in advance, up to three months in advance of the reserve project, last year was a half year in advance reserve project.
On the other hand, last year, the Ministry of Finance issued a document that the project funds of special bonds can be flexibly changed in the use of funds. If there are some projects, for example, I may have my funds in place for various reasons at the moment, but my project preparation is not sufficient, there is no way to form a physical workload as soon as possible, at this time, I can transfer it into other projects through the transfer of the use of funds, so that the projects that are more well prepared can obtain funds to form a physical workload. Therefore, it should be said that this year, the entire Ministry of Finance will implement a more stringent performance appraisal in the dimension of performance appraisal, and it should be said that special debt will be implemented more strictly. Once the funds are in place, it is necessary to form a physical workload as soon as possible. On the one hand, the entire funding in the first half of the year is relatively abundant. On the other hand, the project is relatively OK. So overall, it should be said that in the first quarter, it is very likely that we will see an explosive growth in infrastructure. And our infrastructure sector has been falling for six or seven years in a row, so in this case, it is easy to have a wave of strong valuation repair market. This is our judgment on infrastructure.
Specific to the second half of the year, in fact, we should say that the entire real estate is not bearish, so we believe that the entire second half of the year is likely to be the year-on-year growth rate of real estate investment will gradually return to positive, back to the normal growth level of real estate investment. Therefore, after the income from possible land transfer in the second half of the year increases, it is also a relatively large positive contribution to the source of funds for infrastructure funds. Therefore, in terms of infrastructure construction, we think it may be that the first quarter and the second quarter will be relatively strong. The second half of the year may be to go and look, focusing on the source of funds in the second half of the year.
Real estate is just reversed, real estate objectively speaking, it should be said that the overall pressure in the first half of the year is very large, especially the pressure in the first quarter is very large. But the further back you go, the greater the likelihood of marginal improvement in real estate. Real estate actually involves a lot of subjects, and the reason why real estate is more complex than infrastructure construction is that it has many subjects in the entire conduction chain. At the very top is clearly our national policy. Now we see that rents are not speculated, including the three red lines in the field of real estate financing, which objectively speaking, are unlikely to be loosened. But in this case, in fact, the credit policy should be said to have a relatively large relaxation of real estate.
In fact, since October last year, we have seen that the mortgage of residents has actually begun to gradually relax. This relaxation is reflected in the fact that, first, throughout the third quarter of last year, if you buy a house, the problem you face is that, first, the amount of the bank mortgage may be gone; Second, the approval speed of bank mortgages is very slow. But since October last year, the whole situation has reversed. As you can see, especially at the current point in time, if you buy a house, the approval and lending speed of the entire mortgage is very fast. In a short period of time, you may even be able to get it in a week or two weeks, and it turns out that you may have to wait a month, two months or so to be able to wait for the loan, which is one thing.
On the other hand, it involves local governments, and many cities govern. This year, including everyone sees that the loan interest rate of guangzhou LPR plus point has been reduced, including Zhengzhou City, now the entire mortgage has also begun to be cancelled. Including many other cities, some are first-tier cities, some are third- and fourth-tier cities, and even first-tier cities have begun to relax some real estate-related policies. We can actually see this in 2020 and 2021. But when we see these local governments adopt some relaxed policies in 2020 and 2021, we often see that it is immediately corrected. Maybe the policy was just relaxed yesterday, and the documents were immediately retracted, such as the Housing and Construction Commission began to issue an announcement saying that there was no such thing, and it was immediately corrected. But you see this year a large number of local governments have issued a series of policies related to the relaxation of real estate, but so far there has not been a relatively large correction of the situation. Therefore, objectively speaking, this piece is indeed gradually relaxing the constraints on residents' house purchases from the perspective of local governments.
But now in fact, the main constraints on the real estate side are mainly in two areas: one is the lack of willingness of residents to buy houses. On the one hand, especially since last year, the income level of residents has been restricted. On the other hand, the entire property tax includes some negative news about real estate that began in the second half of last year, especially some large private enterprises have already defaulted on some bonds, including even some real estate projects are facing some delivery pressure. So now many buyers on the one hand do not have confidence in house prices, think that in case the real estate tax is levied in the future, the house price will not fall sharply, I will not take over the high level now. On the other hand, I am also worried about whether the property I bought will have the pressure of delivery, which affects the confidence of buyers. But historically, in fact, all the situations that stimulate real estate through policy, or through relaxation, have often been able to receive some more effective results in the end.
On the other hand, the bottom line of housing and not speculation has never been broken. Looking further back, in fact, the entire house price is likely to diverge, and it is impossible to maintain the expectation of unilateral rise. In fact, the housing is not speculated in my personal understanding mainly want to break everyone's expectations for real estate to always rise, but your normal demand for housing, as well as the normal real estate sales, this has never been said to be restricted, but there are some real estate companies with relatively high leverage may be subject to three red lines, including some constraints on other financing aspects, or the loan amount of the entire bank may almost reach the upper limit, this time you want to go to the loan, the loan can not be paid. But this year as a whole, it should be said that this piece has been relaxed.
On the other hand, this year will also use the form of affordable housing to hedge the downward pressure on real estate In the first half of the year, the downward pressure on real estate was the fastest. So this aspect is the perspective of the willingness of the entire resident to buy a house. First, it is not a quick dose, it needs to be gradually effective. Second, from a historical point of view, objectively speaking, it is generally possible to achieve results in the end, but there is a time for conduction. On the other hand, the willingness of real estate developers to obtain land objectively also needs transmission time. Because there are still some problems, that is, the supervision of the pre-sale funds of real estate developers may be too strictly regulated. Normally speaking, the supervision account of the pre-sale funds, normal you can leave sufficient construction funds, and the remaining profits can be taken away according to the reason. But now there are some places that may be after the pre-sale funds come down, and the direct account will not allow you to transfer the funds. You can think about it, if so, what is the significance of its entire pre-sale housing system? In fact, pre-sale is originally through this system to speed up the turnover of real estate developers' funds. In this case, nature will have problems with the real estate developer's capital chain. At present, many central enterprises, including state-owned enterprises, should be said to be not a big problem. In fact, last year, when the real estate pressure was the greatest, many state-owned enterprises and central enterprises with better governance actually had no pressure, and the pressure was mainly in private enterprises. However, private real estate accounts for about 75% of the total national real estate, accounting for about three-quarters, which is a very large volume.
Therefore, the first aspect here is that the merger and acquisition loans of private real estate developers in the whole state-owned enterprises, the supervision of the entire capital risk indicator, including the amount of loans, have been relaxed. It's a train of thought. Another way of thinking is the form of affordable housing. In addition, there are some, and there are rumors at present, that is, whether the supervision of pre-sale accounts is likely to be relaxed, which may also depend on the clear position of the relevant ministries and commissions. But if we look further back, the entire policy side is objectively becoming more and more friendly to real estate. Including some policies that everyone looks at the restriction of sales and purchase restrictions, including some policies of looking at loans, in fact, they are gradually reversing. Therefore, on the whole, it should be said that the time when the real estate pressure is the greatest is likely to be in the first quarter. The further back, the more the real estate should be said to be marginal improvement. The second quarter year-on-year comparison may still be not very good. However, it is very likely that in the third quarter, we will be able to see the year-on-year positive transformation of real estate, or if it is fast, we may be able to see some year-on-year positive situations related to real estate at the end of the second quarter.
Real estate here involves a lot of industrial chains. The first is the real estate itself, we think there are some companies here that may have a relatively high leverage ratio, and there may still be some negative pressure. Therefore, real estate developers should objectively say that the difficulty of stock selection is relatively large. And objectively speaking, individual companies may have the risk of stepping on thunder. Therefore, I personally feel that as a whole, I am not bearish and are more optimistic. However, as an individual, it is relatively difficult to select stocks.
We may pay more attention to the upstream and downstream industrial chain of real estate here, one here is building materials, and the building materials themselves are divided into traditional building materials and consumer building materials. Traditional building materials are mainly cement and glass. About a third of the demand downstream of cement is probably real estate, one-third infrastructure, and one-third rural-related construction. So you can see that the performance of cement as a whole in the first quarter of this year is OK, because there are infrastructure expectations here. Glass is relatively mainly real estate, about 70% of the downstream is real estate. However, cement and glass as traditional building materials, it should be said that its characteristics are relatively high concentration. For example, cement and glass are short-legged varieties, and the transportation radius of cement is about four or five hundred kilometers, so it is basically based on regional sales.
In addition, its unit price itself is very thin, on the one hand, its storage time is relatively short, if the transportation time is too long, it may not be useful after shipping. On the other hand, its own cost is very low. The price itself is very low. Therefore, if the cost of transportation here is too high, it will completely lose the cost advantage. So on the whole, it is a short-legged variety, the regional concentration is very high, and the national concentration is about 60%. If you think about it, as a regional breed, its regional concentration is actually higher.
Glass is also a short-legged variety, because it is relatively difficult to transport, and long-distance transportation is prone to relatively large losses. In addition, there are also the characteristics of relatively cheap unit price. Therefore, on the whole, glass is also a short-legged variety, and the transportation radius may be about 600 kilometers, so it is also a variety with high regional concentration. The concentration of the top five companies in the country is about 50%, which is also a highly concentrated industry. Compared with other cyclical sectors, such as coal, such as steel, the concentration of cement and glass is already very high. The advantage of high concentration is that the competition pattern is relatively good, and everyone can maintain a relatively benign competition by stopping production. Basically.
In addition, consumer building materials itself follows a logic of growth stocks. For example, like waterproof materials, the earliest waterproof materials are relatively mixed in the market, the total amount of the market is not large, it may be about tens of billions of market space, up to 100 billion market space. But the players in it don't have too many big companies, and the concentration of the top five companies is very low. In this case, in fact, in the past few years, because the real estate industry has entered the Silver Age from the Golden Age, including and even now entering the Bronze Age, developers have paid more and more attention to the quality of real estate products. Once the waterproof problem occurs, it will have a huge negative impact on the reputation of the real estate developers, so the real estate developers have gradually paid attention to waterproof materials.
However, the original waterproofing is not paid attention to, it is a mixed, fake and shoddy products in the market. In this case, many excellent products stand out and rapidly expand their market share. Therefore, this kind of consumer building materials here is more of a logic of market share improvement. In a relatively small track, but because the competition pattern is very mixed, no company has an absolute advantage. However, in this case, due to the drive of the demand side, due to the quality requirements of the real estate developer's general contracting. On the other hand, it is also due to the relevant authorities and industry associations for quality put forward some stricter requirements. In this case, it invariably promotes some of the leading companies to stand out quickly, and the share of the market is rapidly increasing, in fact, it is a logic of growth.
Overall, it should be said that the fourth quarter of last year was the darkest moment for building materials, because the problem faced by building materials in the fourth quarter of last year was the demand side, and the demand for the entire real estate was very poor. Because since the second half of last year, the investment, construction and completion of the real estate side have fallen sharply, and the demand is not good. In terms of capital flow, there are some real estate developers with cash flow problems, bonds are in default, it will be very strong for the entire upstream and downstream suppliers, and some accounts receivable of the entire building materials enterprise are facing the pressure of bad debts, which is the second kind of pressure. The third pressure, since the third quarter of last year, the price of commodities has seen a rapid upward trend.
On the one hand, many building materials here are like cement and glass, and many costs are the cost of combustion. We have seen that last year's electricity prices, including coal prices, have risen rapidly, especially coal prices have risen rapidly, and the pressure on the cost side is very large, so the fourth quarter of last year should be said to be demand, and then cash flow and accounts receivable, there are risks, cost pressure and gradually increase, is the darkest moment.
But we stand this year and the fourth quarter of last year, overall it should be said that this year's PPI downturn is already a trend, including March 9 we look at the entire disclosed PPI data, there are slightly repeated month-on-month, but there is also a sharp decline year-on-year. It should be said that on the whole, this year's PPI downturn is a high probability event, the pressure on the cost side will gradually ease, there may be no geopolitical conflict before everyone thinks that the speed of relief will be faster, but now due to the uncertainty of the war, especially the global energy prices are rising, the cost side of the downward speed may slow down, but overall the direction of the cost downward is more certain.
On the other hand, there is the demand side. It is likely that there will be positive year-on-year changes in real estate from around the end of the second quarter. The first quarter may be the darkest time of real estate, and it is possible that the negative growth rate of the entire real estate is even greater than that of the fourth quarter of last year. In the second quarter, there may be a quarter-on-quarter improvement, that is, the second quarter is slightly better than the first quarter. However, compared with the same period in the second quarter of last year, the second quarter may still not work, or negative growth. But we arrived in the third quarter, because the downturn in real estate last year began in the third quarter, so the third quarter was a low base last year. We are in the third quarter, it is very likely that some of the year-on-year data of real estate may gradually turn positive, and the data of the chain may be gradually improving month by month and quarter by quarter. Therefore, the real estate as a whole is likely to be good in the second half of the year, which for building materials, its demand side, including its capital chain, will have a great improvement.
Therefore, for some targets related to the real estate industry chain and infrastructure construction, infrastructure construction may be stronger in the first quarter, including the second quarter, but in the third and fourth quarters, we must worry about whether the total amount will be restricted by some restrictions such as the hidden debt of local governments, and whether it will be restricted by these sources of funds from the government fund income of land transfer. There may not be a large total amount throughout the year, but there will be explosive growth in the first and second quarters, which is the characteristic of the infrastructure sector.
Some of the characteristics of the real estate industry chain are that the pressure may be relatively large in the first and second quarters. From the perspective of performance, the pressure may be greater in the first and second quarters, and it may be better in the third and fourth quarters. However, in its own cyclical sector, the worst time for general performance is often the low point of the stock price, and the bottom of the stock price is often the bottom of the leading performance, which may be two quarters ahead, or one quarter ahead, which is uncertain.
Including everyone looking at building materials, in fact, the low point of building materials is probably around December last year, so in fact, since last December, it has begun to take real estate repairs, including infrastructure expectations. Inside the building materials, because its cement includes some pipes themselves and the infrastructure is highly related, it is also an infrastructure-related target. Of course, objectively speaking, there are relatively few targets of really pure infrastructure in itself, and the main target of pure infrastructure is still in the index of infrastructure. Most of the building materials still look at real estate, but the first quarter will also be stained with infrastructure light. Therefore, you will see that the building materials sector should be said to have maintained a wide range of shocks since December last year, in fact, it has not come out of a strong upward trend. But if we look back, its whole fundamentals are improved. Therefore, at the current point in time, it should be said that the building materials plate is also worth configuring.
In addition, the correlation with real estate is still relatively high is like steel, because some of the main sources of the demand side are also real estate, including infrastructure is also a demand for steel, so in fact, the steel demand side is relatively optimistic. However, because its cost side is also rising in price, the price of coal has risen quite a lot, so the steel piece is objectively relatively volatile, but overall it is still relatively optimistic, but its elasticity is not necessarily as big as the target of some other industrial chains in real estate. This is steel, which is not bad overall, and it is also a target for infrastructure and real estate-related benefits.
Another target that real estate benefits from is home appliances. Because home appliances are actually divided into consumer appliances such as sweeping robots and so on, this actually mainly benefits from consumption upgrades and increased share. In addition, there is a piece of real estate-related home appliances, including kitchen appliances, for example, kitchen appliances are actually mainly some real estate-related appliances. There are also some related to real estate, but it is also related to daily upgrading, such as white electricity, like air conditioning, etc., which is both the need for upgrading and some needs after the completion of real estate. However, on the whole, it should be said that home appliances are still a major target of the industrial chain after the real estate, and the correlation with the real estate is still relatively large.
Home appliances also faced a pressure on the demand for real estate last year, and there was also a pressure on the cost side, and the cost side rose relatively fast. In particular, we have seen that some of its material ends in the first quarter of this year, including copper, have risen sharply in price. Therefore, this piece of everyone sees that the performance of home appliances this year is very weak, but it also provides better elasticity.
As you can see, the current valuation level of the home appliance index has reached a very extreme valuation low in history. Therefore, if there is a marginal improvement in the real estate side, and the pressure on the entire cost side can be reduced, in fact, in the second half of the year, it should be said that home appliances are likely to have better configuration opportunities. So, on the whole, it's basically these plates.
If you can't do a good job of stock selection, you can also pay attention to our ETF, because the ETF itself is invested in a fixed industry theme index, the index itself is to track a basket of related stocks in the industry, you can lay out the relevant constituent stocks in a one-click manner, reduce the trouble and pressure of everyone's stock selection. On the other hand, even if one or two of the companies have the problem of thunderstorms, because it is a decentralized layout, it will not have much negative impact on the entire industry index. Overall, it should be said that it is a one-click layout tool that saves effort, time and worry for ordinary investors. In particular, it trades with one hand as the smallest unit, and the first hand is basically more than 100 yuan, and the order of magnitude of one hundred yuan is relatively close to the people, and the threshold of configuration is relatively low.
Infrastructure You can pay attention to our infrastructure ETF (159619), which tracks the CSI Infrastructure Index. We track the CSI infrastructure index and other infrastructure targets on the market has a relatively large difference, we also have some construction machinery targets, other markets in the main infrastructure index may be mainly central enterprises of building decoration companies, as well as some local state-owned enterprises of building decoration companies, there may be some infrastructure industry chain related to some steel structures, such as design of some companies, of course, the market value of these companies is relatively small, mainly central enterprises building decoration companies.
Our index includes not only the building decoration companies of the central enterprises we just mentioned, the local building decoration companies and some other building decoration companies, but also some construction machinery targets. Therefore, it should be said that objectively speaking, our index is an index that covers the entire industrial chain of infrastructure, and the scope of coverage is relatively more complete.
In addition, there are building materials, we have building materials ETF (159745), building materials ETF is about half of the traditional building materials, cement, glass, and half of the consumer building materials. Traditional building materials themselves and infrastructure are on the edge, of course, consumer building materials mainly rely on real estate. Here there are some consumer building materials in recent years also have some new driving forces, such as waterproof materials, now do some photovoltaic roofs, do some building photovoltaic integration, here for waterproof materials will have more applications. Including the quality and dosage of waterproof materials, there are more applications, so there is also a certain growth here. Therefore, if you pay attention to the building materials sector, you can also pay attention to building materials ETFs (159745). The characteristics of building materials are that the first quarterly report I personally think that the pressure may be relatively large, the second quarterly report may be slightly improved compared with the previous quarter, there is still a little pressure on the year-on-year, and the performance in the second half of the year may be better. However, cyclical stocks often lead the bottom of the stock price at the bottom of the performance, and the current point in time itself is also a time point worth allocating.
In addition, there is steel, you can also pay attention to our steel ETF (515210). Steel last year had a relatively large market, this year's elasticity may not be as large as last year, but on the whole, it should be said that the entire real estate end, including the power of infrastructure, is also beneficial to steel, and the long-term logic of steel should be said to be an increase in concentration.
The wave of cement from 2018 to 2020 that lasted for more than three years was driven by the increase in concentration. Of course, the demand for the entire property from 2018 to 2020 is not bad, so we can't make a simple analogy here. But you can look at it similarly, from 2018 to 2020, in fact, the cement sector has come out of a strong wave of market, in fact, the main logic is the increase in concentration, and the whole industry is very profitable.
The steel industry was very profitable last year, and so far this year it is still very profitable. So in fact, there is a little similar to the wave of cement market from 2018 to 2020, in fact, it is to maintain a relatively high level of profitability under the improvement of the supply and demand pattern, because the new production capacity is basically strictly restricted. Like now, coal is still adding new capacity, but the release of production capacity has a time cycle. Steel has strictly restricted new capacity, or even reduced production. So this whole supply and demand relationship will gradually get better and better in the future, this is steel.
There is also home appliances, it should be said that this year is still one of the worst performing sectors in the whole market, where there is both pressure on the real estate side and pressure on rising costs. So overall, our first quarter is already so bad, in fact, the second quarter, the third quarter, the fourth quarter, the second half of the year can be slightly optimistic. From a long-term perspective, it should be said that the current valuation level is also at a historical low, so if you are interested in the home appliance sector, you can also lay out our home appliance ETF (159996) at a low price.
On March 9th, because of the time, I talked to everyone about this. Although the A-share market was quite miserable on March 9, you can see that the entire European stock market has also risen, and the US stock index futures have also risen a little. Although there may be pressure on investment, there may be some losses in assets. But in the whole epidemic of the new crown epidemic, we must still be healthy and healthy, to ensure good health, to ensure a relaxed mood, and to be happy. Investing as a hobby, or a pastime, do not transmit the negative pressure of investment to your work, to your own family, and even affect your own health, I personally think it may be a bit of an inversion.
In fact, historically, often when the fund is the most difficult to sell, when the whole market is the most pessimistic, objectively speaking, it is very worth the layout, but at this time, who tells you that it is worth the layout, you will feel that this person is simply neurotic, because the fall has not wanted to see their own accounts. But we look back at history, in fact, when the circuit breaker was in 2015 and 2016, including a year of continuous decline in 2018, in fact, A shares have experienced many very extreme moments. Including, for example, March 9, objectively speaking, it is already a relatively extreme moment. Therefore, the relationship of March 9 time, and everyone will share here.
Here also do a risk tip, some of the fund products we mentioned belong to some fund targets with relatively high risk appetite and relatively high volatility, we must fully read the fund prospectus, fund contract on the basis of fully understanding the actual situation of the fund products we purchase and allocate, according to their own capital needs and actual needs as appropriate, fully consider the risk of fund fluctuations. Investment is risky and investment needs to be cautious.
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