The current general manufacturing industry is gradually picking up and is expected to recover fully in the fourth quarter

The recovery process of this cycle is relatively slow, but it has now emerged, and the overall automation plate will officially pick up at the end of 2023. According to MIR forecast, China’s overall automation market size will continue to bottom out in 2023, is expected to decline by 2%, or will rebound in 2024. From the perspective of the quarter, MIR believes that 2023Q1 orders are insufficient and the decline is obvious, Q2 continues to decline in the case of a low base, it is expected that Q3 will bottom out, and Q4 will officially pick up. MIR takes into account the recovery progress of the main downstream application areas of automotive and electronics. At present, we believe that the export growth rate of the automotive field is relatively prosperous, and the electronics industry is expected to bottom out with the release of new products by Apple and Huawei. According to the tracking of inventory levels, we believe that the year-on-year growth rate of the general automation sector will rebound in the fourth quarter of 2023. The manufacturing PMI published by the National Bureau of Statistics has continued to rise since May 2023, and recorded 49.7 in August 2023, close to the line of growth and contraction, of which new orders and factory prices are above the line of growth and contraction, and the recovery of the general manufacturing industry is gradually verified.

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The general manufacturing sector continues to rally, and the excess gains are expected to continue into early next year

Through M2 growth rate and its forecast, we can estimate the expected change of the market performance of the general manufacturing sector. From a historical point of view, Wind’s consistently expected M2 growth rate fits the actual value well. According to Wind consensus expectations, the actual value of M2 year-on-year growth in 2023 and the predicted value show a combined trend, from the current published M2 data and Wind consensus expectations, the cycle high point of this round of M2 growth may have appeared in February 2023. Different from the fundamental data, the change amplitude of M2 year-on-year and the change amplitude of market performance are quite different, but the high and low points are obvious. Therefore, comparing the lead-lag relationship between the extreme point of M2 year-on-year growth rate and the extreme point of excess return of general equipment since 2008, it is found that M2 growth rate is basically 7-15 months ahead. The average is 11 months. Therefore, if you refer to historical experience, the current round of general manufacturing sector excess return high point or will appear in January 2024, is currently in the general manufacturing sector excess return of the upward stage.