China Excavator Sales Growth Slowed in July, Likely Temporarily: Morgan Stanley
A Morgan Stanley report said China’s total excavator sales rose 14% year over year in July 2026, while sales for the first seven months increased 25%.
A Morgan Stanley report said China’s total excavator sales rose 14% year over year in July 2026, while sales for the first seven months increased 25%. Domestic sales rose just 4% in July and 19% cumulatively through July, indicating a slowdown from the year-to-date trend.
The report attributed the weakness in domestic sales to extreme weather, including high temperatures and heavy rainfall that disrupted construction in some regions, as well as a slower pace of local-government special-purpose bond issuance. Monthly issuance averaged about RMB 68 billion in April and May, below the first-quarter monthly average of RMB 87 billion, but rebounded to RMB 72 billion in June.
Morgan Stanley said the July data should not be extrapolated into a second-half trend of weakening. The slowdown may be temporary and seasonal, although weak market confidence could weigh on near-term sentiment.
The report mentioned Sany Heavy Industry (600031.SS) and applied a valuation of 23 times its expected 2026 earnings per share.
The report characterized the July slowdown in domestic excavator sales, at 4% year over year, as more likely a temporary disruption caused by weather and the pace of special-purpose bond issuance than a signal of a trend deterioration in the second half. It said near-term sentiment for the construction machinery sector, including Sany Heavy Industry, could be negative, but cautioned against extrapolating the monthly data. Foreign-exchange losses were described as a short-term impact that the market has largely priced in.
Potential catalysts identified in the report include the rebound in local-government special-purpose bond issuance to RMB 72 billion in June; approximately RMB 2 trillion in remaining special-purpose bond budget quota to be issued in the second half; and the fact that July and August are traditionally slow seasons, which could limit the impact on the full year.
The report attributed the weakness in domestic sales to extreme weather, including high temperatures and heavy rainfall that disrupted construction in some regions, as well as a slower pace of local-government special-purpose bond issuance. Monthly issuance averaged about RMB 68 billion in April and May, below the first-quarter monthly average of RMB 87 billion, but rebounded to RMB 72 billion in June.
Morgan Stanley said the July data should not be extrapolated into a second-half trend of weakening. The slowdown may be temporary and seasonal, although weak market confidence could weigh on near-term sentiment.
The report mentioned Sany Heavy Industry (600031.SS) and applied a valuation of 23 times its expected 2026 earnings per share.
The report characterized the July slowdown in domestic excavator sales, at 4% year over year, as more likely a temporary disruption caused by weather and the pace of special-purpose bond issuance than a signal of a trend deterioration in the second half. It said near-term sentiment for the construction machinery sector, including Sany Heavy Industry, could be negative, but cautioned against extrapolating the monthly data. Foreign-exchange losses were described as a short-term impact that the market has largely priced in.
Potential catalysts identified in the report include the rebound in local-government special-purpose bond issuance to RMB 72 billion in June; approximately RMB 2 trillion in remaining special-purpose bond budget quota to be issued in the second half; and the fact that July and August are traditionally slow seasons, which could limit the impact on the full year.