Investment Analysis: Textile Demand Rises, Prices Continue To Rise

In the first 8 months,

Main points of investment:

The export volume of textile products in 1-8 months showed a large increase under the impetus of rising demand and price increase, which is still in line with our expectations.

In the first 8 months, China's textile and apparel exports totaled 129 billion 804 million US dollars, up 23.75% over the same period last year.

Among them, the total exports of textiles amounted to 49 billion 515 million US dollars, and clothing exports totaled 80 billion 289 million US dollars, with a growth rate of 32.29% and 19.02% respectively.

The export volume continued to maintain a large increase, which is consistent with our judgement of the three quarter's continued growth in exports.

The impetus for the growth of export volume of textile and clothing still comes from two factors: first, the increase of export orders in the two quarter; and the two increase in the prices of export products.

The growth rate of textile exports has slowed down or indicates that the fourth quarter export growth will slow down.

In the first 7 months of 2010, the global textile industry was in a recovery trend. Textile export growth continued for 10 months faster than the growth rate of clothing, and textile exports in the first 7 months of 2010 reached US $42 billion 800 million, a 10.59% increase over the same period in the 08 years.

From the August export data, textile exports amounted to US $6 billion 678 million, up by 29.38% over the same period last year, down 12.86 percentage points from the July growth rate.

This shows that the boom in global textile and garment production has declined, due to the shrinking demand in Europe and the United States, which will affect the overall growth of domestic textile and garment exports in the coming months.

Due to the large increase in the first half of the year, the export volume of textile and clothing is expected to grow by 16% over the whole year.

Although the EU's EU orders have declined, the production orders for textile and garment export enterprises have already been in the three quarter, so the export growth of domestic textile and garment in the three quarter will still be guaranteed, and the reduction of orders will affect the export volume of the four quarter.

Even if export growth slows down in the fourth quarter, but for the whole year, as the growth rate in the first half of this year is large, we believe that the growth of textile and garment exports will be around 16% this year.

Pay attention to the "bottleneck" sub industry in the process of industry recovery, printing and dyeing, accessories industry.

Printing and dyeing industry is a national restricted industry since 2008 due to serious pollution.

Due to the limitation of national policies, there are few new printing and dyeing enterprises in the near future.

It is expected that the existing enterprises in the printing and dyeing industry can gain greater benefits in the gradual recovery of the textile industry.

At present, the listed companies which mainly focus on printing and dyeing are: Civil Aviation shares, public shares and shares.

Concerned about the industry revival process of the upper travel industry - yarn, grey cloth leading enterprises.

In 2010, due to the sharp rise in yarn and grey cloth prices, the profitability of manufacturing enterprises was greatly enhanced.

Although the price of the product has not been rising, the price of yarn and grey cloth will be at a high level, and the annual performance of domestic yarn and grey fabric listed companies will increase significantly.

China's listed companies which mainly use yarn and grey cloth are Huamao shares, Huafu color spinning and so on.

Risk warning: in the future, the excessive appreciation of RMB will engulf enterprises' order profits. The direction of the global economy (especially the European Union) will directly affect the order quantity of enterprises.