Under the current circumstances, our overall investment strategy for the textile and garment sector is that the leading companies with low valuation and growth certainty are mainly defensive: affected by the deep callback of the current round of market, the textile and garment sector has also experienced a sharp decline.

For the textile and garment sector, the deep callback will further enhance its defensiveness when the fundamentals are in good operation; especially for individual stocks.

This week, in the case of market stabilization, textile and garment retail rebounded higher, highlighting defensive.

At present, the seven wolf's 11 year dynamic valuation is only 23 times, Weixing's share is 16 times, Meng Jie's home textile is 28 times, and fuanna 30 times, its operation is good in its fundamentals, its performance is determined and maintained.

The core recommendation portfolio is: Weixing, seven wolves, fuanna, Meng Jie, Luo Lai, Semir.

Week's industry highlights

Recent industry sensitive points: the CBRC's new deal encourages banks to finance SMEs.

Commented: small and medium enterprises in the textile industry are numerous, financial support has not been enough. For many years, the policy has been only thunder and rain, and it is difficult to carry out substantive operations.

A week's review

Yantai spandex (002254.SZ) and Jiangsu Broadway (002516.SZ): the 2010 equity allocation scheme will be implemented.

Kaiser shares (002425.SZ): restricted stock (the number of shares available for circulation is 1 million 600 thousand shares) is available for circulation in June 8, 2011.

Next week's industry highlights

The Customs announced the May textile and clothing export data: 10 Customs announced the industrial export data in May.

We believe that high priced raw materials have begun to curb foreign demand. The growth of exports in April mainly comes from price rather than quantity. It is estimated that the growth rate of exports in the future will drop month by month.

The May data will test our judgement.

If the data in May are as expected, the over worry of the market for Weixing may come to an end.

Price fluctuation of raw materials

Cotton price: in June, cotton prices showed signs of stabilization. The cotton price index of 328 rebounded this week. The price rose 0.30% this weekend. Cotlook A (FE) rebounded significantly, and the price rose 2.18% this weekend.

Cotton prices plummeted earlier. We expect to see a steady decline in the future. Temporary stabilization or rebound is normal. Everything needs to be decided after the 4 quarter of the new cotton market.

Chemical fiber: in the decline of cotton prices, chemical fiber prices continued to slump: viscose staple fiber prices continued to fall this week, Zhou Pingjun price fell 1.71%, fell to 20740 yuan; spandex 40D continued to decline this week, the average weekly price of 48100 yuan, or 2.43%.