Mechanical Industry: Continue with bullish machine tools and construction machinery
Release Date:
2018-12-28
Caterpillar is going against the trend to go long on the Chinese market. At the same time, based on the attractiveness of the Chinese market, Taiwan's machine tool industry is highly sought after by Japanese capital.
Orient Securities' research report on January 9 pointed out the overseas market: The average P/E ratio of industrial machinery on the Hong Kong Stock Exchange in 2010 was 16.72, with a weekly decline of 5.12%; the average P/E ratio of industrial machinery on the Japan Exchange in 2010 was 35.11, with a weekly decline of 0.54%; the average P/E ratio of industrial machinery on the German Exchange in 2010 was 43.88, with a weekly increase of 2.96%; the average P/E ratio of industrial machinery on the UK Exchange in 2010 was 17.29, with a weekly increase of 0.93%; the average P/E ratio of industrial machinery on the US Exchange in 2010 was 22.79, with a weekly increase of 3.4%.
Market hotspots and investment advice: Caterpillar is going against the trend to go long on the Chinese market. Caterpillar Group President Richard Lavin said, "We are optimistic and confident about China's future." Lavin stated that the construction equipment industry is expected to grow about 10% in 2012 based on 2011. Caterpillar is one of the heavy equipment manufacturers seeking rapid growth in China and has invested in a range of projects, from residential to infrastructure development. However, Lavin warned last November that the Chinese construction equipment market might face overcapacity in the next two years, which would put price pressure on Caterpillar. Caterpillar expects China's GDP to grow 8.5-9% in 2012, with industrial growth expected to be consistent with GDP growth. Caterpillar's forecast aligns with that of the Chinese Academy of Social Sciences, which expects China's GDP growth to slow from 9.2% in 2011 to 8.9% in 2012. Caterpillar also sees opportunities in China's mining market. Last November, the company bid $885 million to acquire Era Mining Machinery, headquartered in Hong Kong, to strengthen its mining business.
Based on the attractiveness of the Chinese market, Taiwan's machine tool industry is highly sought after by Japanese capital. In 2010, after Taiwan and Mainland China signed the ECFA, some machine tool projects exported to the mainland enjoyed zero tariff treatment, sparking investment enthusiasm from major Japanese machine tool manufacturers in Taiwan. Kurashiki Machinery decided last November to establish its first overseas production base in the Houli Park of the third phase of Taiwan's Central Taiwan Science Park, with an investment amount of only NT$264 million, but further investment is not ruled out. Officials from the Ministry of Economic Affairs stated that Kurashiki Machinery is very optimistic about the mainland Chinese market and hopes to use Taiwan as a production base. Influenced by the March 11 earthquake in Japan and the surge in the yen, Japanese companies are seeking overseas backup bases to diversify risks. Especially with the completion of the ECFA between Taiwan and the mainland, Taiwan has more development advantages than other regions. It is expected that Taiwan's machine tool export value will exceed $4 billion in 2011, potentially surpassing Italy for the first time to become one of the top three global machine tool export regions, second only to Japan and Germany.
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