Essence of brokerage morning meeting | Rare earth supply and demand situation improves, being both offensive and defensive in the background of the tariff war

Last Friday, the market saw a slight decline in the three major indexes due to volatile adjustments. In terms of sectors, epoxy propane, communication equipment, banking, and deep-sea technology sectors led the gains, while tourism, beauty care, dairy, and agriculture sectors led the losses. By the close of last Friday, the Shanghai Composite Index fell by 0.39%, the Shenzhen Component Index fell by 0.31%, and the Growth Enterprise Market Index fell by 0.4%. During today's morning meeting of securities firms, China Securities Co., Ltd. proposed that the rare earth supply and demand situation is improving, with both offensive and defensive capabilities under the background of the tariff war. Sinolink indicated that they are optimistic about the recovery and upward trend of domestic demand for construction machinery in the coming years. Huatai believes that defensive assets and policy hedging direction will continue to be the short-term main theme in A-shares. China Securities Co., Ltd.: Rare earth supply and demand situation improving, both offensive and defensive under the background of tariff war China Securities Co., Ltd. stated that the U.S. based rare earth company MP Materials has confirmed that due to being involved in trade conflicts, the business of exporting rare earth ore to China, which accounts for a large portion of the company's revenue, has become stagnant due to "lack of commercial viability". MP Materials hopes to build a domestic rare earth industry chain in the U.S., but the time to construct a complete rare earth industry chain overseas should not be underestimated. In the short term, it still mainly relies on China, which holds about 90% of the global rare earth refining, separation, and magnetic material production capacity. By 2024, China will import 133,000 tons of rare earths, with 77,300 tons of rare earth metal compounds mainly coming from Myanmar, Laos, and Malaysia, and 55,600 tons of rare earth metal ores, almost all from the U.S., the actual conversion to praseodymium-neodymium oxide is approximately 4,500 tons. On the supply side, it is estimated that by 2025, U.S. exports of rare earth ore to China will be stagnant, there is a possibility of tightening rare earth supply in Southeast Asia, domestic strengthening of rare earth production and export dual control, and demand side's humanoid robot & automation demand will see an increase. Under the context of the tariff war, being both offensive and defensive in rare earth is recommended to continue to be observed. Sinolink: Optimistic about the recovery and upward trend of domestic demand for construction machinery in the coming years Sinolink pointed out that domestic sales of excavators in March were up 28.5% year-on-year, with some non-earthwork sectors led by crawler cranes starting to recover. They are optimistic about the recovery and upward trend of domestic demand for construction machinery in the coming years, which is expected to drive the growth of construction machinery companies. Focus on the industrial mother machine, China International Machine Tool Exhibition (CIMT) is expected to increase the sector's attention. With recent intensification of trade frictions, it is recommended to focus on the top companies in the industrial mother machine sector. Huatai: Defensive assets and policy hedging direction still the short-term main theme in A-shares Huatai stated that the disturbance of the China-U.S. tariffs has suppressed market risk appetite, leading to relatively subdued capital trading, and the trading volume of the Shanghai and Shenzhen stock markets has fallen, indicating that A-shares may be in a period of volatile consolidation. With expectations of economic turbulence in the second quarter, investors have strengthened their expectations for policy hedging. In addition, the counter-cyclical funds continue to provide support at the bottom, there is still support at the bottom level, but the upward momentum still needs to be consolidated, and the breakthrough may lie in the subsequent policy orientation and the catalysis of the technology industry cycle. In terms of allocation, defensive assets and policy hedging direction continue to be the short-term main theme. In terms of dividend assets, transportation, insurance, and communication services sectors are expected to increase their dividend rates in 2024 and have low crowding levels. In terms of policy hedging, focus on directions such as domestic demand that show signs of improvement. In addition, the current technology adjustment is relatively sufficient, and as risk sentiment recovers, it is advisable to appropriately allocate to the oversold directions with certain industrial catalyzation. This article is a repost from "Cailian Press", GMTEight editor: Xu Wenqiang.