As the global economy gradually emerges from the turmoil of past years, signs of renewed external demand are becoming apparent, particularly through recent data indicating an uptick in export chains and inflation expectations in the United States, often referred to as "secondary inflation." These developments suggest a promising outlook for certain sectors, especially those poised to deliver robust profits in the wake of shifting market dynamics.

In light of the unexpected economic data released for the months of January and February, coupled with a surprising rebound in the March Purchasing Managers' Index (PMI), market expectations are on the riseThe Shanghai Composite Index, for instance, has recovered from its lows in early February, now trading above the 3000-point levelThis signals a potential shift in investor sentiment, fostering a more optimistic environment heading into April.

April has historically been a pivotal month for the market as investment trends solidify for the rest of the year

If the earlier gains were mainly driven by speculative recovery of expectations, the post-April phase will likely focus on concrete performance metrics, favoring industries backed by tangible resultsThe forthcoming financial reports from listed companies, along with comprehensive macroeconomic data from the National Bureau of Statistics, will shed light on the strength of the recoveryKey questions about which sectors display brighter prospects and higher certainty will start to arise, offering clarity to market participants.

The real estate sector, however, continues to pose a drag on the economy as it navigates ongoing adjustments, showcasing clear structural challenges in the recovery processAmid the global manufacturing renaissance and resilience in the U.Seconomy, the revival of export chains appears promisingWhile "secondary inflation" in the U.S

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may not materialize, the kickstart of inventory replenishment cycles could signal price increases in commodities, driven in part by domestic policies aimed at stabilizing and promoting price levelsThis structural logic surrounding price increases uniquely benefits certain industries, enhancing profit forecasts.

Data on industrial profits, viewed through a top-down analysis, indicate that specific sectors exhibit superior growth potentialAn emerging bottom-up analysis reveals that sectors experiencing positive earnings surprises in their annual and quarterly reports are likely to enjoy enhanced profit outlooksThese industries represent confirmed investment lines likely to attract future funding.

The revival of external demand acts as a significant conduit for exports, as seen through customs data which reveals a 7.1% year-over-year increase in exports during the first two months of 2024. This improvement is not merely a coincidence; it's backed by intentional market movements and demand shifts, overcoming earlier low baselines skewed by seasonal factors such as the Lunar New Year

The growth trajectory of exports finds validation in the resurgence of economies in regions like South Korea and Vietnam, where exports surged 20% and over 10%, respectively, indicating a broader upward trend.

By examining the regional dynamics, it's evident that China's export rates are rebounding against major destinations, with notable increases in shipments to ASEAN countries, Latin America, and Africa—a trend that aligns with the Belt and Road Initiative's economic frameworksFor instance, exports to these regions accounted for substantial growth of 9% and 13.5% in the recent months, highlighting the integral role of international trade in the economic recovery narrative.

Moreover, leading domestic indicators illustrated by the March manufacturing PMI reveal a significant rise, marking a shift into the expansion territory

Notably, new export orders advanced dramatically, signalling heightened confidence in future market conditionsOn the global front, international manufacturing PMIs have also demonstrated improvement, suggesting an overarching recovery trend consistent across different economies.

The resilience of the U.Seconomy against high-interest rates has become a point of interest among analystsThe GDP growth rate of 3.4% in the fourth quarter of 2023 exemplifies this strength, leading to upward adjustments of economic forecasts by the Federal ReserveWith predicted GDP growth exceeding 2% in the early 2024 quarter, consumer spending supported by rising household incomes plays a vital role in sustaining this economic momentum.

Interestingly, the housing market in the U.Sis witnessing signs of recovery despite the backdrop of high-interest rates, fostering an environment conducive to rebound in related manufacturing and service sectors

The NAHB/Wells Fargo Housing Market Index has increased significantly, and home sales saw an impressive rise of 9.5%, defying earlier declining trendsThese indicators reflect a potential renaissance in housing demand, buoyed by demographic shifts, heightened immigration, and ongoing wealth accumulation.

As external demand strengthens, attention turns to which sectors will benefit most decisivelyThe export markets have shown considerable growth across various categories, particularly in the semiconductor and machinery sectors—both destined for upward trajectories as global manufacturing reboundsThe data reflects resilient increases, particularly in integrated circuits and general machinery exports, showcasing the interconnectedness of global supply chains and local industry strengths.

On the flip side of profitability lies the logic of price increases which are crucial to sustaining economic health

Economic performance in 2023, including the 5.2% real GDP growth, did not translate into strong market indicators primarily due to flattening price levelsWith CPI and PPI witnessing downward trends, the absence of price growth negated many positive economic signalsHowever, increased attention by policymakers towards stabilizing prices has emerged, marked by the Central Bank's statements signalling that maintaining price stability is a key focus for monetary policy.

Recent upticks in commodity prices could catalyze reforms in industrial pricing frameworks, reviving consumer prices and enabling PPI reboundsGlobal conditions have shifted, and while a broad price inflation environment may not yet be ripe, structured price hikes are likely to provide tangible opportunities for savvy investors.

Furthermore, historical patterns of agricultural supply cycles, particularly within the pork industry, emphasize the cyclicality of commodity pricing; the so-called "hog cycle" tends to reflect broad supply-demand dynamics

Subdued pork prices since late 2021 might suggest a potential turning point as industry losses prompt a gradual limit to supply, setting the stage for price recoveryThe readiness of producers to expand output in response to recovering prices signals potential volatility on the horizon.

Finally, the outlook for both commodity prices and tailored industry-driven pricing movements promises to establish a more stable economic environment conducive to sustainable profitsEmerging data suggests that as inventory cycles advance, valuable insights can be gleaned from upswings led by critical sectors including industrial metals, basic chemicals, and consumer goods, paving the way for an increasingly optimistic economic landscape.

In summary, the crossroad of external demands and structural adjustments reflects a vibrant economic potential waiting to unfold