The incident entered September, the domestic cotton prices rose as high as 15%, the 328-level cotton index rose from 18002 yuan on September 1 to the current 20644 yuan, setting the second highest point in history (the first high from the cotton price Crazy 96 years). In the same period, the foreign cotlook index was also rocketed, up 15% from 94.1 cents / lb to 108.5 cents / lb (Exhibit 1 and 2). Although we also expect the price of cotton to rise, so the price rise far exceeded our expectations. Comments The so-called global cotton supply and demand is expected to change the key reasons for the soaring cotton prices: Due to weather conditions in the country, cotton picking delayed about 2 weeks, the quality has declined; international once India temporarily suspended cotton exports, Pakistan's cotton hit these Factors leading to the market believe that the global cotton supply and demand in the next year to re-invent to reduce the direction of stock prices, but the market seems to be interested in ignoring the 19% increase in the United States planted positive factors, and now China's cotton has not yet fully picked, the output is still very large Certainty, the current so-called global cotton supply and demand is expected to change, and then the price of crude oil from 100 US dollars / barrel rose to 147 US dollars / barrel when somewhat similar, deja vu. Cotton has some financial attributes already; we think capital is the key reason leading to the recent skyrocketing. The key reason why the domestic cotton has been soaring and plunging in the past is that the processing and circulation sectors and the cotton spinning enterprises are always looking for low-cost cotton so that they can make profits Rapid changes in social stocks, the formation of a surge in cotton prices plummeted. The latest boom and plunge took place in 2003-04, with cotton prices rising to 18,000 yuan from 12,000 in the first half of the year and dropping again to 10,000 yuan in six months. One of the results is the loss of billions of yuan in the cotton storage company just established. This year, not only did the funds involved in cotton speculation remain the same in previous years, but with the additional funds involved, the most obvious thing was that it turned a blind eye to the national policies and the funds were fully rewarded for profiteering in the two cotton futures markets in China and the United States through extensive stocking in the spot market. In the market so-called expectations and funding involved, soaring cotton prices become inevitable; domestic and foreign demand for cotton products this year, the more prosperous, which is pushing up the main reason for the cotton price: 1-8 months, exports of 125.2 billion US dollars of textile and Apparel, an increase of 23.8% From January to July, the total wholesale and retail sales of domestic textile and apparel increased by 23.8% over the same period of previous year, basically reaching the pre-crisis level. The rapid recovery in demand is also the main reason for the rise in the cotton price. The rise in the prices of global agricultural products supports the rising price of cotton: the global prices of agricultural products have been rising this year. Among them, cotton takes the lead and the foreign dependence on Chinese cotton is about one third. Price boost domestic cotton prices, but also makes the cotton price is difficult to get rid of the impact of the global agricultural prices; soaring cotton prices there is no harm: because a large number of new cotton has not yet listed, and cotton prices have soared, even if the future high cotton prices, Also, cotton spinning enterprises are unable to reserve a large amount of cotton at a low price like the end of last year or early this year, thus gaining higher profits in their operations in the first half of this year. Soaring cotton prices, will soon be transmitted to the downstream apparel, consumers will pay the world, the continuing rise in apparel prices can not be avoided, but in the global economy has not yet recovered, the entire textile and apparel industry will suffer; if the cotton prices fall, It is not impossible to reproduce the tragic situation in 2004. Before the cotton price stabilizes, the profitability of cotton spinning enterprises will still drop. If the cotton price is flat, the possibility is too small because this has never been seen in the cotton history and the country and the enterprises have always dreamed of it. Cotton price is expected to significantly increase the difficulty: cotton already has some financial properties, a huge financial role, it is expected to increase the difficulty of cotton prices, which is also our raw material prices this year, repeatedly stressed in the weekly report. Considering that the global economic crisis is not over yet, the cotton supply has maintained a rapid growth. We can only say that the current cotton price is in the top area. A large number of new cotton products are expected to go through the mid-to-late October. Big. Investment advice We have been cautious before the prospects of textile and apparel production and export-oriented enterprises that their gross profit margin will be adversely affected by rising costs, appreciation. We maintain the rating of "overweight" in the industry mainly because we are always optimistic about the high quality textile and apparel retailers. Since these enterprises are all brand enterprises, they can maintain the growth performance through the adverse effects of product design, marketing and brand impact on rising digestion costs. As cotton producers, such as Nongnong, Xinsai and Dunhuang, the seed cotton has also risen sharply, bringing the costs of the enterprises up concurrently and bringing uncertainties to the growth of performance. We think they have trading opportunities. Cotton prices led directly to the viscose raw material prices of cotton linters, the cost increase in order to promote viscose prices, viscose staple fiber in the high-speed release period, we believe that price increases have a limited effect on the improvement of business efficiency, including Shandong Hailong, Macao Yang Technology, Sanyou Chemical (asset restructuring injection of viscose staple fiber production capacity of the program has been approved by shareholders) and Xinxiang Chemical Fiber, including the adhesive business opportunities.
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