Securities Industry Cuts Costs and Staff Amid Regulatory Shifts

Event: On September 10th, the General Administration of Customs released the import and export data for August, with exports increasing by 8.7% year-on-year, compared to the expected 7.0%, the previous value of 7.0%, and a month-on-month increase of 2.7%; imports increased by 0.5% year-on-year, compared to the expected 3.5%, the previous value of 7.2%, and a month-on-month increase of 0.9%.

Core Viewpoint: The improvement in exports reflects more changes on the supply side, including weather, manufacturing competitiveness, and the front-loading of exports.

The improvement in exports in August may not be due to an improvement in external demand. Exports from South Korea and Vietnam have generally declined, and the global manufacturing PMI continues to contract. The month-on-month increase in exports for August (2.7%) was slightly stronger than the seasonal norm (1.4%). However, during the same period, the export growth rates for South Korea (year-on-year, -5.6 percentage points to 14.5%) and Vietnam (-2.5 percentage points to 11.4%) both showed a significant decline. At the same time, the global manufacturing PMI also fell by 0.2 percentage points to 49.5%, with the United States showing a noticeable decline, the Eurozone remaining at a low level, and Vietnam, Thailand, and India all experiencing不同程度的下滑.

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In terms of short-term factors, the marginal easing of typhoon disturbances has led to some trade that was deferred in July to be concentrated and released in August, which has driven the improvement in exports for the month of August. However, looking at the combined performance of July and August, it is still relatively weak. After a significant decline in port freight volume in July, it has rebounded since August. But excluding the impact of weather, the average month-on-month increase in exports for July-August is 0.2%, still weaker than the seasonal norm (1.4%).

In terms of medium-term factors, the competitive advantage of manufacturing prices has become more apparent, contributing to strong exports. The rebound in export goods in August was mainly in the equipment manufacturing industry, where the price advantage is more evident, especially in exports to Europe, mainly in automobiles and ships. These industries are also areas that have accelerated investment and industrial upgrading in recent years. Although investment expansion suppresses the Producer Price Index (PPI), the price advantage relative to overseas is highlighted. The export price of ships and vehicles year-on-year (-7%) has been significantly lower than the import price year-on-year (9.3%) since the second half of the year.

In terms of event-driven disturbances, the "front-loading of exports" in response to tariffs is also providing moderate support for China's exports. The "front-loading of exports" cannot be simply observed by looking at the overall performance of exports to the United States; it needs to be considered from the perspective of commodity structure (only highly dependent and supply chain commodities will front-load exports, not all tariff-imposed commodities). As one of the commodities with the highest dependence on China by the United States, the export growth rate of mobile phones improved significantly in August. However, the export decline in South Korea and Vietnam has continued to appear in recent two months, which may indicate that the "front-loading of exports" is gradually taking place.

Reiterating the viewpoint: The strong exports driven by industrial transformation will also face external resistance. In addition to the weakening of external demand, the fading of weather disturbances, and the increase in the export base, the export growth rate may tend to decline after September. The competitive advantage of manufacturing prices brought about by industrial transformation is the underlying logic of exports, but it is also attracting "anti-dumping" and other sanctions from some countries. Coupled with the marginal decline in the United States' prosperity, the replenishment process may be coming to an end, and the export base is increasing, the export growth rate may tend to decline after September. Looking at leading indicators, the pace of recovery in port foreign trade throughput in September has slowed down, and the import of processing trade in August has also weakened significantly, which will drag on September's exports.

Routine tracking: Non-US exports and equipment manufacturing exports rebound, while imports have declined significantly.

Exported goods: There is a clear improvement in capital goods such as automobiles and ships, and a slight rebound in the export of textiles, clothing, bags, and real estate chain products. In August, the export growth rate of textiles, clothing, and bags slightly rebounded (+0.9 percentage points to -2.1%), and the overall automobile machinery and high-end manufacturing (+3.5 percentage points to 17.0%) also rebounded, while energy and resource products (-15.1 percentage points to -15.5%) continued to show a downward trend.

Export countries: In terms of developed countries, exports to the United States performed weakly, but exports to non-US developed countries performed well, and exports to emerging countries and regions generally rebounded. The growth rate of exports to the United States (year-on-year, -3.2 percentage points to 5.3%) has declined, while the growth rate to the European Union (+5.4 percentage points to 13.8%) continues to improve, and there has also been an improvement in exports to Japan and the United Kingdom. In addition, the export growth rate to Russia (+13.2 percentage points to 10.8%), to Africa (+12.4 percentage points to 4.8%), and to Latin America has rebounded, with only the export growth rate to ASEAN declining.Imports: In August, the growth rate of imports was lower than expected, with a significant slowdown in the import growth rates of both mechanical and electrical products and bulk commodities. In August, imports (in US dollar terms) fell by 6.7 percentage points year-on-year to 0.5%, dragged down by the dual impact of imports of mechanical and electrical products and bulk commodities. Looking at the structure, the growth rate of mechanical and electrical product imports fell from a high level (-6.6 percentage points to 8.6%). Among them, the imports of integrated circuits, automatic data processing equipment, automobiles, and spare parts all showed a decline. In addition, the import of bulk industrial products also showed a significant decline. Iron ore (-20.1 percentage points to 9.4%), copper (-15.4 percentage points to 11.5%), and crude oil all experienced a noticeable year-on-year decline, reflecting the corresponding impact of the weakening domestic investment.