Although the recent A-share market has seen a trend of shrinking volume, the tire segment has seen a trend of continuous increase in volume. The B&I holographic financial game model shows that such individual stocks have a continuous net inflow of capital, for example, the Sailing Group shares. This is true for such products as Qingdao Double Star, Nguyen Tire and Aeolus, which reflect the relatively optimistic trend of the stock price of tire shares in the future. So, how do you view the trend of the tire stocks?

Cost reduction

The main raw materials for tires are natural rubber, synthetic rubber, and steel cords. Raw materials account for about 70% of the cost, especially natural rubber. With the renewed wave of debt crisis in Europe, natural rubber and other global commodities fell into a trend of drastically lower. In April, the average price of natural rubber in Hainan was 28,906 yuan per ton, which was 24.9% lower than the same period of last year. In May, further decline, the future adjustment trend is difficult to change, which means that the profitability of the tire industry is expected to recover.

In addition, from 2005 to 2008, Southeast Asian countries were heavily influenced by the rise of natural rubber and planted natural rubber in large quantities, with an area of ​​1.06 million hectares. From 2012 to 2014, these new natural rubbers will enter the cut-off period one after another. At the same time, since the price of crude oil as a raw material for synthetic rubber, which is a natural rubber substitute, continues to fall, the monthly average price of synthetic rubber has dropped by 7% year-on-year. Thus, at present, both natural rubber and synthetic rubber are facing a long period of price fall, which undoubtedly gives the hot money more adequate speculation time cycle. Moreover, these long-term price drop cycles will also cause the listed companies' quarterly results to show a rebound from the previous quarter, which will also help the attention of medium and long-term funds.

Downstream demand is strong

More importantly, in the process of falling prices of natural rubber, downstream demand remains strong. According to industry insiders, the domestic automobile production in 2012 is estimated to be 20.72 million vehicles, an increase of 8% year-on-year. Moreover, growing car ownership will stimulate demand for replacement tires to remain around 19%. At the same time, the demand in overseas markets has also become more optimistic. Due to the rapid export momentum of China's automotive tires. Therefore, under the background of a rebound in the global automobile industry, the sales growth momentum of automotive tires is expected to be optimistic.

From this point of view, the tire industry is currently facing the positive impact of the cost reduction brought about by the price drop of natural rubber. On the other hand, it faces relatively strong downstream demand. Therefore, the tire industry is expected to change its income for many years without increasing profits. The pattern, that is, the double-increasing pattern that is expected to increase income and increase profits, may also be the reason why the funds continue to flow into the tire sector in the near future.

Focus on leading varieties

Therefore, the writer tends to think that the recent activity of the tire sector is most likely caused by the layout of institutional funds. In this case, the tire stocks are still expected to attract further funds to participate, which is expected to form a trend of shifting the stock price center of gravity.

In this context, it is recommended that investors focus on leading varieties. At present, this is the case for Race Wheels, Aeolus, Qingdao Double Star, Yan Tire, and Double Money. In particular, Fengshen’s shares are highly sensitive to natural rubber, and the Saiwan shares can also be tracked due to the anticipated production of new projects fundraising. Of course, species with the expected theme can also be tracked.

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