October Caixin Manufacturing PMI Lower than Expected

   Today, the machine tool sector opened slightly higher and underwent a volatile consolidation. The machine tool ETF (159663) holding stocks, China Tungsten High tech, rose by over 9%, while Huarui Precision and Oukeyi ranked among the top performers.

   Following yesterday's official PMI decline, Caixin's PMI was also lower than expected today. Affected by this news, the machine tool sector opened slightly higher and fluctuated and reorganized today. The machine tool ETF (159663) holding stocks, Zhongtung High tech, rose more than 9%, while Huarui Precision and Oukeyi rose the top, while Taijia Shares, Eston, and Collier fell the most. As of 10:22, the machine tool ETF (159663) rose slightly by 0.22%.

   On the news, the Caixin China Manufacturing Purchasing Managers' Index (PMI) recorded 49.5 (expected 50.8) in October 2023, a decrease of 1.1 percentage points from September and a return to the contraction range. From the sub index perspective, the manufacturing industry's demand slowly expanded and supply contracted in October. The manufacturing new order index has been in the expansion range for the third consecutive month, but the growth rate has slowed down, indicating a slowdown in demand expansion speed. The index of new export orders is still below the boom and bust line, and companies generally say that the global economic weakness combined with high prices has led to sales setbacks in overseas markets. Manufacturing enterprises have correspondingly reduced supply, and the production index has dropped below the boom and bust line.

   With the continuous development of domestic machine tool enterprises in China, the business scale has significantly expanded compared to a few years ago, and the market share of local CNC machine tool enterprises continues to increase, accelerating the increase in market concentration.

   According to the analysis of the Forward Looking Industry Research Institute, according to China's policy planning and the development situation of the CNC machine tool industry, the future development of CNC machine tools in China will exhibit characteristics such as strong demand for high-end CNC machine tools, increasing popularity of complete sets of equipment, and the continuous rise of domestic brands. Overall, China's CNC machine tool market has a large space and considerable potential for future development.

   The CSI Machine Tool Index tracked by the Machine Tool ETF (159663) includes Huagong Technology, Han's Laser, AVIC High Tech, Aston, Green Harmonic, Huichuan Technology, Xiamen Tungsten Industry, etc. The top ten components have equity weights of over 53%, and the leaders are relatively concentrated. Currently, the price to book ratio (PB) of the tracked index is 3.76 times, lower than the index's 98.65% or more in the past 10 years, indicating a significant valuation advantage. In the recent market adjustment phase, it is possible to consider a bargain hunting layout and an over-the-counter linked fund (017573/017574).