Agriculture Reform Theme Stocks Expected to Heat Up, Four Major Sectors Usher in Development Opportunities
Shenzhen Special Zone Daily (Reporter Wang Xin) The 2015 Central Document No. 1 is expected to be unveiled soon. Following the tradition that Document No. 1 has focused on agriculture for 11 consecutive years, the market estimates that this year will be no exception. Land reform, agricultural modernization, agricultural information technology, food security and other sectors related to the broader agricultural reform are expected to heat up.
Shenzhen Special Zone Daily (Reporter Wang Xin) The 2015 Central Document No. 1 is expected to be unveiled soon. Following the tradition that Document No. 1 has focused on agriculture for 11 consecutive years, the market estimates that this year will be no exception. Land reform, agricultural modernization, agricultural information technology, food security and other sectors related to the broader agricultural reform are expected to heat up.
Agricultural Reform Involves Substantive Issues
In the just-concluded 2014, Document No. 1 took “comprehensively deepening rural reform and accelerating agricultural modernization” as its theme, making a comprehensive deployment for rural reform.
Recently, agriculture-related policies have been released intensively. On January 22, the General Office of the State Council issued the “Opinions on Guiding the Orderly Transfer of Rural Land Contractual Management Rights and Developing Moderate-Scale Agricultural Operations.” Stimulated by the favorable policy, among the 37 land transfer concept stocks participating in trading, 33 rose.
Sun Yachao, proposed fund manager of the Qianhai Open Source Broad Agriculture Index Enhanced Fund, expects that this year's Document No. 1 may involve many substantive issues such as land transfer, including the agricultural management system and land property rights issues that have persisted for decades. Second, land reform involves the systematic arrangement of China's existing three-sector economic structure and is intrinsically linked to urbanization, shantytown renovation, reform of the household registration system, and reform of state-owned enterprises. Third, some business elites have already noticed the future value-enhancement opportunities in the agricultural sector and have begun to position themselves; such as Evergrande, Lenovo, NetEase, and JD.com. All of these are conducive to heating up investment in the agriculture theme.
Zhang Xiaojiao, an analyst at BOC International Securities, believes that judging from the 2013 and 2014 Document No. 1 issued after the new leadership took over, the policies not only focus on the top-level design of agricultural issues but are also more detailed and specific in concrete measures.
Capturing the “Document No. 1 Rally”
In fact, from 2010 to now, the agriculture, forestry, animal husbandry and fishery industry has shown relatively obvious excess returns in February compared with the whole market, which the market calls the “Document No. 1 Rally.”
From the performance of sub-sectors, the agriculture, forestry, animal husbandry and fishery sub-sectors with the largest gains in 2014 were grain cultivation, seeds, livestock breeding, and forestry; in 2013 there were animal vaccines, grain and oil processing, and forestry; in 2012 there were forestry, agricultural product processing, and fisheries; in 2011 there were grain cultivation, marine fishing, and seeds; in 2010 there were agricultural product processing and forestry. Zhang Xiaojiao believes that the top-gaining industries each year differ greatly, which shows that the performance of the agriculture, forestry, animal husbandry and fishery industry is greatly influenced by the direction emphasized in Document No. 1.
Since the beginning of this year, the sector has shown signs of launching: by yesterday's close, the CSI 300 Index had fallen 1.47%, but the Broad Agriculture Index had risen 7.76% against the market. Sun Yachao believes that compared with the market's earlier sharp trend, the agricultural sector has a demand for catch-up gains.
However, Jiang Xiaodong, an analyst at Industrial Securities, believes that from the perspective of the planting chain, the whole sector's response has been relatively sufficient since August, and it is expected that the publication of Document No. 1 will have a relatively small positive stimulating effect on stock prices, and related individual stocks should gradually be withdrawn in the short term. In terms of breeding, although the logic of industry reversal still holds, the short-term supply and demand situation will lead to limited upward room for pig prices in the short term. January to March is all a period for building positions in breeding stocks, and investors can buy on dips. Against the backdrop of relatively poor overall fundamentals, low-valuation varieties such as Haid Group are recommended.
Agricultural Reform Involves Substantive Issues
In the just-concluded 2014, Document No. 1 took “comprehensively deepening rural reform and accelerating agricultural modernization” as its theme, making a comprehensive deployment for rural reform.
Recently, agriculture-related policies have been released intensively. On January 22, the General Office of the State Council issued the “Opinions on Guiding the Orderly Transfer of Rural Land Contractual Management Rights and Developing Moderate-Scale Agricultural Operations.” Stimulated by the favorable policy, among the 37 land transfer concept stocks participating in trading, 33 rose.
Sun Yachao, proposed fund manager of the Qianhai Open Source Broad Agriculture Index Enhanced Fund, expects that this year's Document No. 1 may involve many substantive issues such as land transfer, including the agricultural management system and land property rights issues that have persisted for decades. Second, land reform involves the systematic arrangement of China's existing three-sector economic structure and is intrinsically linked to urbanization, shantytown renovation, reform of the household registration system, and reform of state-owned enterprises. Third, some business elites have already noticed the future value-enhancement opportunities in the agricultural sector and have begun to position themselves; such as Evergrande, Lenovo, NetEase, and JD.com. All of these are conducive to heating up investment in the agriculture theme.
Zhang Xiaojiao, an analyst at BOC International Securities, believes that judging from the 2013 and 2014 Document No. 1 issued after the new leadership took over, the policies not only focus on the top-level design of agricultural issues but are also more detailed and specific in concrete measures.
Capturing the “Document No. 1 Rally”
In fact, from 2010 to now, the agriculture, forestry, animal husbandry and fishery industry has shown relatively obvious excess returns in February compared with the whole market, which the market calls the “Document No. 1 Rally.”
From the performance of sub-sectors, the agriculture, forestry, animal husbandry and fishery sub-sectors with the largest gains in 2014 were grain cultivation, seeds, livestock breeding, and forestry; in 2013 there were animal vaccines, grain and oil processing, and forestry; in 2012 there were forestry, agricultural product processing, and fisheries; in 2011 there were grain cultivation, marine fishing, and seeds; in 2010 there were agricultural product processing and forestry. Zhang Xiaojiao believes that the top-gaining industries each year differ greatly, which shows that the performance of the agriculture, forestry, animal husbandry and fishery industry is greatly influenced by the direction emphasized in Document No. 1.
Since the beginning of this year, the sector has shown signs of launching: by yesterday's close, the CSI 300 Index had fallen 1.47%, but the Broad Agriculture Index had risen 7.76% against the market. Sun Yachao believes that compared with the market's earlier sharp trend, the agricultural sector has a demand for catch-up gains.
However, Jiang Xiaodong, an analyst at Industrial Securities, believes that from the perspective of the planting chain, the whole sector's response has been relatively sufficient since August, and it is expected that the publication of Document No. 1 will have a relatively small positive stimulating effect on stock prices, and related individual stocks should gradually be withdrawn in the short term. In terms of breeding, although the logic of industry reversal still holds, the short-term supply and demand situation will lead to limited upward room for pig prices in the short term. January to March is all a period for building positions in breeding stocks, and investors can buy on dips. Against the backdrop of relatively poor overall fundamentals, low-valuation varieties such as Haid Group are recommended.