There has been a lot of good news about infrastructure investment since the start of the year in 2019. According to the announcement of the China Bond Information Network on January 15, the Xinjiang Uygur Autonomous region has taken the lead in disclosing the first issue of local government general bonds in 2019. The total amount of bonds issued in this issue is 10 billion yuan, all of which are new bonds with a maturity of 10 years, and will be invited for tender on January 21.

As we all know, infrastructure investment has a significant pulling effect on iron and steel, cement and other industries. According to industry insiders, according to calculations in recent years, every 100 million yuan in railway capital construction investment will boost steel demand by about 3330 tons. Specific to the proportion per kilometer, rail accounts for about 10%, threaded steel accounts for about 40%, steel plate accounts for about 30%.

SMM analysis shows that local bonds are found to have significant seasonal characteristics, and most of them are issued after the two meetings (the second and third quarters are the peak season and the first and fourth quarters are the off season), and the issuance time is significantly earlier this year. From the December PMI, import and export and other economic data, the current economic downward pressure is greater, early issuance of bonds will help to stimulate investment, hedge risk. After the beginning of this year, the steel market shows the phenomenon of weak supply and demand, steel prices are mainly weak, with the gradual landing of infrastructure projects, the steel market in the second quarter of 2019 is worth looking forward to.

Break the rules! Accelerated issuance of local bonds available in the first half of the year

Recently, the standing Committee of the National people's Congress formally authorized the State Council to issue ahead of schedule a total of 1.39 trillion yuan in new debt limits for local governments in 2019. Industry insiders revealed to the media a few days ago that local governments will start issuing local government bonds in late January, ahead of previous years, and the supply of local bonds will increase throughout the year. Local debt lending provides a source of funding for infrastructure, which has led to a rebound in the growth rate of infrastructure investment, which is expected to support economic growth in 2019.

Experts believe that the main reason for the late issuance of bonds at the beginning of the year is that the local government debt limit had to wait until March when it was authorized to launch the issue. In recent years, most localities have adjusted their budgets around May, which is also the reason for the slow progress of local government bond issuance, so it is often available in the first half of the year and concentrated in the second half of the year. At the end of 2018, the standing Committee of the National people's Congress authorized some limits in advance, which was conducive to the early issuance of local government bonds, the implementation of fiscal policies to improve efficiency, and the hedge against the risk of macroeconomic pullback.

Liu Qiao, dean of the Guanghua School of Management at Peking University, believes that the quota of local government bonds will continue to increase, and the progress of issuing bonds will be accelerated. Driven by the easing of financial pressure from local governments, infrastructure investment is also expected to grow steadily. Infrastructure investment grew 19 per cent year-on-year in 2017, but the cumulative year-on-year growth rate slowed to 3.7 per cent in November 2018. Given the rebound in growth in the last two months and the low base in 2018, infrastructure investment growth is expected to return to 2016-2017 in 2019. Based on the average growth rate from 2015 to 2017, the Guanghua research group at Peking University expects new infrastructure investment to increase by more than 3 trillion yuan in 2019 over 2018.

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