Market Performance and Investor Sentiment - MSCI China rallied 32% from late January to mid-May but has since retraced 10% over the past 6 weeks, with small/mid-cap indices like CSI2000 losing around 20% year-to-date [2] - Offshore China equity reversed its losses in Q1 and became one of the best-performing equity markets globally in Q2, finishing the first half with moderate gains [2][4] - Investor expectations for additional policy easing and reform breakthroughs remain conservative, with tactical risk/reward setups for China equity appearing favorable ahead of the July policy meetings [2] - The 10% correction since mid-May aligns with historical norms for technical bull runs, with MSCI China experiencing at least a 5% pullback in 22 out of 23 historical rallies exceeding 20% [5] Policy Outlook and July Meetings - The Third Plenum of the Chinese Communist Party is scheduled for July 15-18, followed by the economically-focused Politburo meeting later in the month [6] - Policy focus is expected to be on containing left-tail risks and growing right-tail potential in the post-property era, with fiscal/tax and land reforms likely taking center stage [7] - Investors are disappointed with the policy intensity and momentum since the April Politburo meeting, with conservative expectations for additional stimulus and major reform breakthroughs [7] - The persistent weakness in the housing market may justify a shift to higher policy loosening, with untapped capacity from PSL and other fiscal/monetary facilities [11] Earnings and Valuations - MSCI China received its first monthly consensus earnings upgrade in May after 12 months of downgrades, signaling a potential end to the protracted earnings downcycle [16] - The report maintains an 8% EPS growth assumption for MSCI China in 2024, citing overly optimistic sell-side consensus forecasts of 12% and 14% for 2024 and 2025 [16] - MSCI China's forward P/E has declined from 10.6x at recent peaks to 9.2x, still above the January lows of 7.9x, with a macro-derived target/fair PE of 10.5x [19] - Earnings momentum has stabilized but remains concentrated in TMT and service-oriented sectors, with property and manufacturing sectors still facing headwinds [16] Sector and Market Strategy - The report retains a strategically positive view on A-shares, citing positive beta to domestic policy and liquidity factors, while tactically favoring H-shares for the next 3 months [24] - Allocation bias is towards non-tradable goods over tradable goods, with an Overweight stance on TMT and consumer service industries [24] - The AH rotation model suggests H-shares may outperform A-shares in the next 3 months, driven by likely Fed pivot in September and reduced valuations [25] - Infrastructure cyclicals are recommended in anticipation of re-accelerating government bond issuance in 2H24 [24] Shareholder Returns and Portfolio Construction - The theme of shareholder returns is expected to continue producing strong and stable returns, driven by policy push, low payout ratios, and record-high cash balances [25] - A China Shareholder Returns Portfolio is constructed, consisting of Stable Cash Cows, Dividend/buyback surprise candidates, and Select Central/Local SOEs [25] - The portfolio is expected to generate 3% shareholder return yields and 5% FCF yields in 2024, with a 16% cash/market cap ratio at median stock [25] - Chinese corporates have returned over RMB 2tn to shareholders annually for the past 3 years through dividends and buybacks [27]

高盛：思考7月关键会议即将来临 ...

Investment Rating - The report does not explicitly provide an investment rating for the food industry Core Insights - The food industry in China is experiencing steady growth, contributing 4.8% of the national industrial assets, 6.7% of the operating income, and 8.0% of the total profit [1] - In 2023, the added value of the food industry increased by 1.2%, with a gradual increase in growth rate throughout the year [2] - The production of key food products such as refined edible vegetable oil and fresh, refrigerated meat has shown significant growth, with increases of 5.9% and 15.3% respectively [3][4] - Consumer prices for food have remained low, with a 0.3% decrease in food prices overall, influenced by a significant drop in pork prices [4] - The profit growth rate for large-scale food enterprises has slowed, with a 2.3% increase in total profits, down 7.3 percentage points from the previous year [5] - The food import and export value reached 2 trillion yuan, with a 6.0% increase, indicating stable growth in trade [6] Summary by Sections 1. Development Status of the Food Industry - The food industry has shown moderate growth, with a 1.2% increase in added value compared to the previous year, which is lower than the overall industrial growth rate [2] - Key sectors such as food manufacturing and beverage production have experienced varying growth rates, with food manufacturing growing by 3.3% [2] 2. Economic Efficiency - The total profit of large-scale food enterprises increased by 2.3%, but the growth rate has slowed significantly compared to previous years [5] - The operating income for the food industry grew by 2.5%, but this also reflects a slowdown in growth [5][6] 3. Import and Export Trends - The food import and export value reached 2 trillion yuan, with exports growing by 5.9% and imports by 6.1% [6][7] - Major export products include aquatic products and vegetables, while key imports consist of grains and meat [7] 4. Challenges Facing the Food Industry - Rising prices of raw materials and packaging are squeezing profit margins for food companies [8] - The industry faces issues of fragmentation and lack of innovation, with many companies relying on simple manufacturing processes [9] - Traditional sales channels are declining, necessitating adaptation to new sales models [9] 5. Future Development Trends - The food industry is moving towards a health-oriented transformation, with increasing consumer demand for healthy and safe food [11] - There is a strong push for green and low-carbon transformation within the industry [12] - The rise of pre-prepared meals presents new opportunities for growth, supported by policy and consumer demand [15]