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2700 points, lost and regained!

this afternoon, the shanghai composite index regained 2,700 points, and the three major indexes also quickly turned positive, with big finance, lithography machines, real estate, coal and other sectors leading the gains. so, what happened?

analysts believe that first of all, the expectation of interest rate cut is getting stronger and stronger. the expectation of the fed's interest rate cut tonight has basically been fulfilled, and friday is the time window for lpr adjustment. last week, the expectation of lowering the interest rate of existing mortgage loans was also very strong.

secondly, the lithography machine (glue) index once surged by more than 3%, which may be related to the logic of domestic substitution. according to a report by the financial times on tuesday local time, the us and japanese governments are about to reach an agreement on chip export controls to china. the white house hopes to announce new export control measures before the us presidential election in november, including requiring non-us companies to obtain a license first.

come see the report!

counterattack

today, the overall performance of the a-share index was sluggish, but the two major sectors of photoresist and lithography machines rose collectively, with the sector index rising by more than 3.5% at its highest.

the rise of chip-related stocks is generally related to the logic of domestic substitution. this time, it may also be driven by this logic. according to a report by the financial times on tuesday local time, the white house hopes to announce new export control measures before the us presidential election in november, including requiring non-us companies to obtain a license first.

u.s. government officials, japan and the netherlands have been holding intensive negotiations for months, hoping to strengthen existing export control mechanisms and ensure that japanese and dutch companies will not be targeted by the u.s. "foreign direct product rules."

people familiar with the matter revealed that the negotiations between the united states and japan are about to make a breakthrough, but japanese officials warned that the negotiation situation remains "quite fragile" due to japan's concerns about trade disputes.the japanese government is particularly concerned that if it cooperates with the united states in implementing export controls, its ability to obtain key minerals, especially gallium and graphite, may be hampered. sources said the japanese government and companies have received warnings. the us export control measures are intended to plug loopholes in existing regulations. the us hopes to impose more restrictions to make it more difficult for other countries to obtain key chip manufacturing equipment. the us also hopes that japan and the netherlands will control services such as software updates and equipment maintenance.

it is worth noting that this afternoon, the sluggish a-shares suddenly exploded. stocks with chinese characters in their names bottomed out and rebounded. avic industrial finance rose to the daily limit, and china life, sinopec, china north industries group corporation, china pacific insurance, and cosco shipping holdings ranked among the top gainers. the real estate sector rebounded in shock. electronic city rose to the daily limit in the afternoon, followed by china communications construction real estate, binjiang group, woaiwojia, sdic services, and china merchants shekou. the three major a-share indexes also turned positive at one point, and 2,700 points were also recovered.

analysts believe that judging from the structure of the rise, it is mainly related to the expectation of interest rate cuts. the expectation of the fed's interest rate cut tonight has basically been met, and this friday is also the time window for lpr adjustment. many people in the industry expect that after the fed cuts interest rates, lpr will also follow suit. before the mid-autumn festival, the market also had strong expectations for a reduction in the interest rate of existing mortgage loans. the market once again went crazy with heavy information: china will cut the interest rate of existing housing loans as early as this month, aiming to stimulate consumption by reducing the borrowing costs of millions of households. however, as of now, the news has not been officially confirmed.

the opportunity has arrived?

so, how big are the subsequent market opportunities?

citic securities research believes that china's policies have entered a critical observation window period. in the short term, the sentiment of the a-share market is extremely depressed, and strong stocks have made up for the decline, which has the characteristics of a market bottom. the subsequent market turnaround still depends on the expansion of domestic demand policies, and the structure focuses on domestic demand α products. seize active investment opportunities. in the past three years, the platform economy has actively rectified and accelerated its transformation, entering a new starting point. the online growth rate has been restored first, and attention should be paid to the internet platform economy; the stage of a sharp decline in real estate sales is gradually passing, and relevant support policies can be expected; the domestic policy of expanding domestic demand through old-for-new has initially shown results, and the policy of expanding domestic demand is waiting to continue.

citic securities believes that the weak trend of macro price signals continues, and the response of internal policies still needs to be observed, while external signal disturbances are not enough to affect domestic policies; since september, the inflow of supporting funds has decreased, and the stock price has accelerated to fully reflect market expectations. the bottoming process is expected to be shortened, and short-term capital games are expected to still dominate the market before the introduction of incremental policies; in terms of allocation, it is recommended to continue the bottom position of dividends and overseas expansion, and wait patiently for the turning point signal.

how much room is there for domestic substitution?

on the other hand, how much room is there for domestic substitution?

in response to the netherlands' recent announcement that it will expand the scope of export controls on lithography machines, the spokesperson of the ministry of commerce responded on the 8th that china has noticed the relevant situation. recently, china and the netherlands have conducted multi-level and multi-frequency communication and consultation on the issue of semiconductor export controls. on the basis of the 2023 semiconductor export control measures, the netherlands has further expanded the scope of control on lithography machines, and china is dissatisfied with this.

from the perspective of the global market, japanese companies dominate the photoresist market and monopolize the photomask market. according to news from september 11, the nihon keizai shimbun conducted a 2023 "major goods and services market share survey" on 71 categories of important final products and services in world economic activities. the results showed that japanese companies ranked first in 10 categories, an increase of 4 from the previous survey; in the five categories of "semiconductor materials" newly surveyed, japanese companies ranked first in three categories.

in the field of photoresists, tokyo ohka industry ranks first in the world with a share of 22.8%. traditional products for automobiles perform well, and semiconductor "extreme ultraviolet (euv) photoresists" used in the latest smartphones have also made contributions. in february 2024, tokyo ohka raised its sales target for fiscal 2030 (ending december 2030) to 350 billion yen, 1.75 times the original plan. except for dupont of the united states, which ranks fourth with a share of 13.2%, the rest of the share is monopolized by japanese companies, and the combined share of the top japanese companies reaches 75.9%.

shin-etsu chemical ranks first in the world with a 24.7% share of "silicon wafers", which are the basic materials of semiconductors. only shin-etsu and the second-ranked sumco (with a 19.9% ​​share) can produce the most advanced products. in the category of "photomask substrates" used to transfer semiconductor circuits in the upstream production process of semiconductors, three japanese companies monopolize the global market share.

it is worth noting that, because china is conducting independent development, the data of china is not included in the statistics except for taiwan. this may be the space for domestic substitution. judging from the semi-annual report, the performance of most semiconductor material companies has shown an upward trend year-on-year.

zheshang securities predicts that in the second half of this year, with the continued demand for domestic wafer fabs and the increase in the domestic penetration rate of semiconductor materials, domestic semiconductor materials are expected to maintain a high demand. shenwan hongyuan even said that the importance of domestic substitution has significantly increased, and it is expected that the future trade of lithography machines and domestic technological progress will be more optimistic. the pace of expansion of advanced process production of domestic wafer fabs is expected to exceed market expectations in the next few years.