With the decision on the comprehensive deepening the reform of the Third Plenum of the full text of announcement, the market reacted positively to the reform vision. State Council executive meeting, however, decided that the establishment of integrated unified real estate registration system; at the same time in November, HSBC China Manufacturing PMI value of 50.4 percent announced last month the final value fell 0.5 percentage points, the market began to worry about the pressure of short-term economic growth. So this week, the market presents Xianyanghouyi CSI 300 index rose 2.0 percent, machinery sector performed better than the broader market, which, shipbuilding, marine engineering, military sector performance is outstanding.

 

Industry view: Due to the upward trend in economic growth is not obvious, the stock market at different time scales of expectations and reality shock, for machinery industry, demand is still moderate recovery, we maintain the machinery industry, "hold" rating, with reform potential, while the upstream areas of the economy, such as industry, state-owned enterprise restructuring, marine vessels and other noteworthy investment opportunities exist whereby the benefit of listed companies.

 

Mechanical combination: (1) marine vessels construction industry to benefit from maritime power, while the upstream phase in the economy, continue to give CNOOC Engineering, CIMC Buy rating, but based on the new boat prices and group integration expectations, we believe through capacity contraction, the shipbuilding industry has been profitable bottom uplift, China Shipping, Guangzhou Shipyard International trend of investment opportunities exists for the shipbuilding sector allocation. (2) Hammer Technology tire mold business orders full, the overseas market share is still large room for improvement, the rapid development of a sustainable future, to give buy rating. (3) good growth in the New Territories Pump, South Pump, star technology, order full, growth is expected to further increase, BUY; wherein inflation gradually from the background, the New Territories Pump as a leading enterprise of agricultural pumps It deserves more attention. (4) increase of EMU in 2014 is clear, at the same time, high-speed railway reform and a large export potential, the industry is expected to usher performance, resonance valuation, continue to favor China CNR, China South Locomotive, concerned about the new building shares. (5) For construction machinery, we continue to favor long-term benefit from the logistics development, and recent sales maintained a rapid growth of Anhui Heli year. (6) Evergreen shares chew cooperation with Taiwan to enter the "cloud printing" is expected to realize the benefits of combining industry model innovation, to give buy rating. (7) The current price of coal has fallen to near the cost line industries, such as coal will drive investment to stabilize the expected improvement. Coal Technology remained stable world order, Wangpo Coal production complex to promote significant improvement in profit next year, giving cautious overweight recommendation.

 

Military portfolio: China established the East China Sea Air Defense Identification Zone of the incident is yet another catalyst for the military since the Third Plenary Session of the industry. May involve monitoring equipment products, including anti-aircraft radar, a secondary air traffic control radar products; patrols, detection, early warning aircraft, fighter; wireless communications products; air defense weapon systems. Remains concerned about the long-term technical upgrading weaponry, military reform and follow-up industrial policy, we recommend combination Aviation electronics, China's satellite, air power, and four electronic record.

 

Risk Warning: Macroeconomic changes result in mechanical fluctuations in product demand; raw material price increases to suppress mechanical profitability; changes in exchange rates led to higher exports accounted for corporate earnings fluctuations.