Morning Express Focus of the Day China Macro

Morning Express
16 October 2014
Focus of the Day
Indices
China Macro
Interest rate liberalization changes the implication of “interest rate cuts”
Miaoxian LI
[email protected]
Economics
China’s Sept CPI rose 1.6% YoY, hitting a record low in the year. CPI is unlikely to rise
significantly ahead as the government has refused to implement strong stimulus amid
economic slowdown. Therefore, we trim our 2014 CPI estimate from 2.5% to 2.2%. Lower
inflation may not necessarily trigger a cut in the savings and lending benchmark rates as
expected by the market, as the central bank may prefer to regulate the money market
rate following the promotion of interest rate liberalization. The implication of “interest
rate cuts” is changing.
Close
HSI
23,140
H Shares
10,285
SH A
2,485
SH B
264
SZ A
1,412
SZ B
968
DJIA
16,142
S&P 500
1,862
Nasdaq
4,215
FTSE
6,212
CAC
3,940
DAX
8,572
Source: Bloomberg
1d %
0.40
0.29
0.60
0.64
0.40
1.04
-1.06
-0.81
-0.28
-2.83
-3.63
-2.87
Ytd %
-0.71
-4.91
12.22
3.91
27.89
11.54
-2.62
0.76
0.93
-7.96
-8.29
-10.26
Close
83.34
1,241.24
17.47
6,641.00
105.88
1.60
1.28
3m %
-21.27
-4.46
-15.87
-6.86
-3.98
-6.65
-5.13
Ytd %
-24.78
2.95
-10.25
-9.77
-0.54
-3.38
-6.64
bps change
HIBOR
0.38
US 10 yield
2.14
Source: Bloomberg
3m
-0.01
-0.45
6m
0.00
-0.55
Indicators
Luk Fook Holdings (590.HK)
Neutral
Eased 2Q SSS pressure; China’s Golden Week sales
better than expected
Phoebe WONG
Last Closing: HK$22.75
[email protected]
Upside: 5%
LT
BUY
BUY
SELL
Stock
Target Price: HK$24
LF reported a 21% SSS decline in 2Q15 (in line), considerably easing from -54% in 1Q15,
mainly due to the lessened high base effect due to last year’s gold rush, with HK & Macau
-20% (vs. 1Q -54%) and China -30% (vs. 1Q -52%). Both gold and gem-set jewelry sales
saw sequential improvement, with gold products’ SSS decline narrowing to 27% (1Q
-65%) in HK & Macau and to 38% (1Q -59%) in China, while HK & Macau gem-set jewelry
decline narrowed to 7% from 20% in 1Q and China growth accelerated to 14% from 5% in
1Q. For the Golden Week, the SSS results were better than our expectation, with HK &
Macau +3% notwithstanding the protests. We attribute it partly to the fact that Luk
Fook’s store network skews more towards the non-tourist areas than peers. China was
more encouraging, +28%, with both gold products and gem-set jewelry selling well,
+29%/+28%. Looking into 2H, despite easier comps, we believe the sustained sluggish HK
consumer environment will continue to be the key overhang on the stock. The prolonged
protests which have dampened Chinese tourist arrivals and local consumer sentiment are
set to cloud the market’s near-term earnings visibility, though LF’s rising China market
contribution on its ongoing store expansion through the asset-light licensed store
business model helps to partly offset the impact. Maintain Neutral and target price of
HK$24 (based on 9x FY15E PE, a 10% discount to peers).
Download our reports from Bloomberg: BOCM〈enter〉
Brent
Gold
Silver
Copper
JPY
GBP
EURO
HSI Technical
HSI
50 d MA
200 d MA
14 d RSI
Short Sell (HK$m)
Source: Bloomberg
23,140
24,334
23,148
38
6,037
BOCOM Int'l Corporate Access
17 Oct
21 Oct
Fudan Zhangjiang (1349.HK)
Tasly Pharma Group (600535 CH)
Morning Express
16 October 2014
Chow Tai Fook (1929.HK)
Neutral
Narrowed 2Q sales decline, but catalyst remains
absent
Phoebe WONG
Last Closing: HK$10.44
BUY
SELL
[email protected]
Upside: 1%
LT
BUY
Stock
Target Price: HK$10.50→
Chow Tai Fook (CTF) reported a 10% revenue decline in 2Q15 (in line), narrowing
considerably from -32% in 1Q as the high base effect due to last year’s gold rush
diminished. The decline was mainly led by 20% SSS decline (partly offset by 12% new
store growth). HK & Macau revenue decreased 20% (1Q -43%) with SSS -29% (1Q15 -50%),
while the China market continued to fare better with revenue decline narrowing to 2%
(1Q -24%) and SSS -12% (1Q15 -28%). That said, the sales mix improvement pace turned
stagnant sequentially, with SSS of gem-set jewelry at flat (vs. 2% growth in 1Q) and gold
products dropping 33% (1Q -56%). Gem-set jewelry sales contribution remained stable at
28% of the group’s revenue (same as 1Q) and that of gold products dropped 1ppt to 49%
of revenue from 50% in 1Q. Looking into 2H, we believe the prolonged HK protests which
have dampened Chinese tourist arrivals and local consumer sentiment will post
near-term uncertainty to its HK earnings visibility, though its ongoing expansion of the
better growing China market helps to mitigate the adverse impact. With the stock trading
at PE of 13.8x/12.4x Mar-FY15E/16E (vs. sector average of 11.9x/9.4x), CTF’s valuation
premium is fairly priced in, in our view. Reiterate Neutral and TP of HK$10.5 (based on
13.9x FY15E PE, continuing at a 10% premium to the major consumer discretionary
peers).
SITC International Holdings Co Ltd (1308.HK)
Neutral
Company update – 3Q14 could be affected by lower
freight rate
Geoffrey CHENG, CFA
Last Closing: HK$3.96
BUY
SELL
[email protected]
Upside: 1.8%
LT
BUY
Stock
Target Price: HK$4.03
While the margin performance would improve in 3Q14 due to cost reduction as a result
of yen depreciation, we are concerned that the freight rate during the period could likely
be flat compared with 1H14. We maintain our view of a single-digit growth in container
shipping volume this year. The two new ships received in 4Q14 as well as the eight new
deliveries next year will underpin faster container volume growth next year, in our
view. We downgrade our rating to NEUTRAL due to valuation and limited upside to our
target price. The 3Q14 results will be released on 29th October. We downgrade our
rating to NEUTRAL due to valuation and limited upside to our target price. The 3Q14
result will be released on 29th October.
Energy Sector
Bocom Energy Weekly
Fei WU
[email protected]
UP
MP
OP
This week in the energy world, Brent dropped to its lowest level since 2010 and
PetroChina received Rmb1.421bn in government subsidies in 1H14.
Download our reports from Bloomberg: BOCM〈enter〉
16 October 2014
Last Closing: HK$22.75
Upside: +5%
Target Price: HK$24.00→
Consumer Discretionary Sector
Luk Fook Holdings (590.HK)
UP
MP
OP
Eased 2Q SSS pressure; China’s Golden Week sales better than
expected
Financial Highlights
Y/E March
FY12
Revenue (HK$m)
11,907
Revenue growth (%)
47
Net profit (HK$m)
1,334
EPS (HK$)
2.43
vs Consensus (+/-%)
N/A
Net profit growth (%)
54
PER (x)
9.4
DPS (HK$)
0.96
Yield (%)
4.2
Source: Company, BOCOM Int’l estimates
FY13
13,412
13
1,243
2.11
N/A
-7
10.8
0.86
3.8
FY14
19,215
43
1,865
3.17
N/A
50
7.2
1.27
5.6
FY15E
17,351
-10
1,573
2.67
-3
-16
8.5
1.07
4.7
FY16E
19,928
15
1,856
3.15
3
18
7.2
1.26
5.5
LF reported a 21% SSS decline in 2Q15 (in line), considerably easing from -54% in 1Q15,
mainly due to the lessened high base effect due to last year’s gold rush, with HK &
Macau -20% (vs. 1Q -54%) and China -30% (vs. 1Q -52%). Both gold and gem-set jewelry
sales saw sequential improvement, with gold products’ SSS decline narrowing to
27% (1Q -65%) in HK & Macau and to 38% (1Q -59%) in China, while HK & Macau
gem-set jewelry decline narrowed to 7% from 20% in 1Q and China growth accelerated
to 14% from 5% in 1Q. For the Golden Week, the SSS results were better than our
expectation, with HK & Macau +3% notwithstanding the protests. We attribute it partly
to the fact that Luk Fook’s store network skews more towards the non-tourist areas
than peers. China was more encouraging, +28%, with both gold products and gem-set
jewelry selling well, +29%/+28%. Looking into 2H, despite easier comps, we believe the
sustained sluggish HK consumer environment will continue to be the key overhang on
the stock. The prolonged protests which have dampened Chinese tourist arrivals and
local consumer sentiment are set to cloud the market’s near-term earnings visibility,
though LF’s rising China market contribution on its ongoing store expansion through
the asset-light licensed store business model helps to partly offset the impact. Maintain
Neutral and target price of HK$24 (based on 9x FY15E PE, a 10% discount to peers).
Store expansion largely on track. 65 new stores (net) were opened in 1H15
(including 64 in China and 1 in HK), bringing the group’s total number of stores to
1,333, largely in line with our expectation (representing 38% of our full-year FY15E
estimate). 64 net new stores were added in China (franchised +65, self operated -1),
bringing the total number of China stores to 1,272, including 1,190 licensed stores
and 82 self-operated stores. For HK, 1 was net added (to 46), while Macau and
overseas stores remained unchanged at 10 and 5, respectively. We maintain our
new store forecast of 173/175 in FY14/15E, representing 14%/12% YOY growth.
Figure 1: SSS growth trend by market
120
100
80
60
40
20
0
-20
China
(%)
(%)
140
41
29
13
46
1
25
0
-40
-60
-2
14
Stock
Stock data
52w High
52w Low
Market cap (HK$m)
Issued shares (m)
Avg daily vol (m)
1-mth change (%)
YTD change (%)
50d MA
200d MA
14-day RSI
Source: Company data, Bloomberg
34.00
19.26
13,402
589
1.0
-3.8
-22.9
23.87
24.24
43.50
1 Year Performance chart
40%
HSI
590.HK
30%
20%
10%
0%
-10%
-20%
-30%
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Source: Company data, Bloomberg
Phoebe Wong
[email protected]
Tel: (852) 2977 9391
Gold & platinum
Gem-set jewellery
134
110
66
86
BUY
SELL
Figure 2: Group’s SSS growth trend by product
HK & Macau
115
66
LT
BUY
Neutral
80
36
33
50
58
23
19
20
1
-20
6
-12
-52
-54
-30
-10
11
-40
Download our reports from Bloomberg: BOCM〈enter〉
-19
-6
-28
-15
-65
-70
1Q14
2Q14
1H11 1H12 1H13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
Source: Company data
-4
-2
Source: Company data
3Q14
4Q14
1Q15
2Q15
16 October 2014
Last Closing: HK$10.44
Upside: +1%
Target Price: HK$10.50→
Consumer Discretionary Sector
Chow Tai Fook (1929.HK)
UP
MP
OP
Narrowed 2Q sales decline, but catalyst remains absent
Financial Highlights
March yr ended
FY12
FY13
FY14
FY15E
FY16E
Revenue (HK$m)
56,571
Revenue growth (%)
61
Net profit (HK$m)
6,341
EPS (HK$)
0.685
vs Consensus (+/-%)
n/a
EPS growth (%)
n/a
PER (x)
15.2
DPS (HK$)
0.100
Yield (%)
1.0
Source: Company data, BOCOM Int’l estimates
57,434
2
5,505
0.551
n/a
(20)
19.0
0.220
2.1
77,407
35
7,272
0.727
n/a
32
14.4
0.360
3.4
80,324
4
7,545
0.754
1
4
13.8
0.373
3.6
89,748
12
8,413
0.841
(4)
12
12.4
0.416
4.0
Neutral
LT
BUY
BUY
SELL
Stock
Chow Tai Fook (CTF) reported a 10% revenue decline in 2Q15 (in line), narrowing
considerably from -32% in 1Q as the high base effect due to last year’s gold rush
diminished. The decline was mainly led by 20% SSS decline (partly offset by 12% new
store growth). HK & Macau revenue decreased 20% (1Q -43%) with SSS -29% (1Q15
-50%), while the China market continued to fare better with revenue decline narrowing
to 2% (1Q -24%) and SSS -12% (1Q15 -28%). That said, the sales mix improvement pace
turned stagnant sequentially, with SSS of gem-set jewelry at flat (vs. 2% growth in 1Q)
and gold products dropping 33% (1Q -56%). Gem-set jewelry sales contribution
remained stable at 28% of the group’s revenue (same as 1Q) and that of gold products
dropped 1ppt to 49% of revenue from 50% in 1Q. Looking into 2H, we believe
the prolonged HK protests which have dampened Chinese tourist arrivals and local
consumer sentiment will post near-term uncertainty to its HK earnings visibility, though
its ongoing expansion of the better growing China market helps to mitigate the adverse
impact. With the stock trading at PE of 13.8x/12.4x Mar-FY15E/16E (vs. sector average
of 11.9x/9.4x), CTF’s valuation premium is fairly priced in, in our view. Reiterate
Neutral and TP of HK$10.5 (based on 13.9x FY15E PE, continuing at a 10% premium to
the major consumer discretionary peers).
Stock data
52w High
14.48
52w Low
9.50
Market cap (HK$m)
104,400
Issued shares (m)
10,000
Avg daily vol (m)
5.43
1-mth change（%）
-5.8
YTD change（%）
-9.7
50d MA
10.95
200d MA
11.54
14-day RSI
40.20
Source: Company data, Bloomberg
Performance chart
HSI
30%
1929.HK
20%
10%
0%
-10%
Store expansion on track. CTF added 104 net new stores in 1H15, including 97 in
China; and 7 in HK, Macau & other Asian markets, bringing the total number of
stores to 2,181 (+12% YOY), in line with our expectation (52% of our full-year
estimate). We maintain our FY14E/15E new store forecast of 200/180 (+10%/+8%).
-20%
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Source: Company data, Bloomberg
Phoebe Wong
[email protected]
Tel: (852) 2977 9391
Figure 1: Group’s SSS growth
Figure 2: SSS growth by market
48%
80%
50%
67%
60%
30%
18%
40%
11%
26%
14%
4%
10%
20%
-10%
-20%
12%
0%
7%
-20%
-9%
-40%
-30%
15%
31%
-28%
-40%
-50%
-60%
-50%
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
Source: Company data
Download our reports from Bloomberg: BOCM〈enter〉
1Q14
2Q14
Source: Company data
3Q14
4Q14
1Q15
-12%
China
HK, Macau &
-29% other Asian
markets
2Q15
16 October 2014
Last Closing: HK$3.96
Upside: 1.8%
Target Price: HK$4.03→
SITC (1308.HK)
Container Shipping Sector
UP
MP
OP
Company update – 3Q14 could be affected by lower freight rate
Financial Highlights
Y/E 31 Dec
Revenue (US$m)
YoY growth
Net profit (US$m)
YoY growth
EPS (US$)
BVPS (US$)
PER (x)
PBR (x)
Source: Company, BOCOM Int’l estimates
2012
2013
2014E
2015E
2016E
1,212
11.51
83.9
(10.3)
0.032
0.269
15.7
1.89
1,267
4.53
112.4
33.95
0.043
0.287
11. 7
1.77
1,352
6.66
127.8
13.65
0.049
0.318
10.3
1.60
1,511
11.74
165.4
29.49
0.064
0.360
7.9
1.41
1,638
8.44
195.3
18.07
0.076
0.407
6.71
1.25
Yen depreciation and competition could drag 3Q earnings. Management of SITC
said that the freight rate and margin performance in 3Q14 was stable when
compared with 1H14. In respect of the revenue performance of its container
shipping segment in 3Q14, management said the freight rate stabilized in September
with mild recovery while the weak yen in August and September offset the recovery
to a certain extent. Yet, the yen depreciation could benefit SITC in terms of margin
performance as expenses denominated in yen would report slower growth. We
believe volume handled in 3Q14 could have grown by a single-digit rate, as SITC did
not receive any new vessel during the 9-month period.
We maintain our view of faster earnings growth next year. SITC will receive two
new vessels in 4Q14, while another eight vessels will be delivered next year.
Management said the new vessels will accrue cost benefits to SITC, mainly due to
savings in charterhire expenses. We forecast a 10% YoY increase in container
volume handled by SITC next year, higher than our forecast 7.0% YoY growth this
year. Meanwhile, SITC continues to expand its shipping network for cargo
canvassing, with new calling ports added in Thailand and the Philippines, as well as
increased frequencies to Singapore.
Logistics network expansion for improved door-to-door services. SITC said that
there is no plan to enter express delivery-type logistics services (effectively
e-fulfillment logistics) at the moment though the company continues to expand its
door-to-door service capacity around the region. For example, the company
acquired two warehouses at Qingdao (Shandong province) and Tianjin in 1H14.
SITC is seeking similar facilities in South East Asia, such as Thailand and Vietnam.
We downgrade to NEUTRAL recommendation. We have made minor revisions to
our earnings forecast, which we outline in Figure 1. SITC has outperformed the
benchmark in the past month. With limited upside to our target price, we
downgrade the counter to NEUTRAL and wait for more information from 3Q14
th
results to be released on 29 October.
Neutral
LT
BUY
BUY
SELL
Stock
While the margin performance would
improve in 3Q14 due to cost reduction as
a result of yen depreciation, we are
concerned that the freight rate during the
period could likely be flat compared with
1H14. We maintain our view of a
single-digit growth in container shipping
volume this year.
The two new ships received in 4Q14 as
well as the eight new deliveries next year
will underpin faster container volume
growth next year, in our view.
We downgrade our rating to NEUTRAL
due to valuation and limited upside to our
target price. The 3Q14 results will be
released on 29th October.
Stock data
52w High (HK$)
52w Low (HK$)
Market cap (HK$m)
Issued shares (m)
Avg daily vol (m)
1-mth change（%）
YTD change（%）
50d MA (HK$)
200d MA (HK$)
14-day RSI
Source: Company data, Bloomberg
1 Year Performance chart
(HK$)
4.2
3.8
3.4
3.0
2.6
2.2
1.8
Oct-13
SITC (LHS)
Rel to MSCI CN (RHS)
150
130
110
90
Jan-14
Apr-14
Jul-14
Source: Company data, Bloomberg
Geoffrey Cheng, CFA
[email protected]
Tel: (852) 2977 9380
Download our reports from Bloomberg: BOCM〈enter〉
4.19
2.72
10,243.6
2586.8
1.89
3.7
16.1
3.684
3.507
55.4
Oct-14
16 October 2014
Energy Weekly
Energy Sector
Bocom Energy Weekly
MP
UP
OP
Sector news around the block
PetroChina gained Rmb1.421bn government subsidies in 1H 2014. Xinhua news agency This week’s energy updates:
released a report saying 60% of government subsidies in 1H 2014 went to state-owned
PetroChina received Rmb1.421bn in
enterprises. Among all, PetroChina listed on top with Rmb1.421bn. PetroChina said the
government subsidies in 1H14.
government grants included the refund of import value-added tax relating to the import
of natural gas in the interim report.
Brent dropped to the lowest level
since 2010.
Brent crude price dropped to the lowest since 2010. Brent has dropped more than 20%
in 2H this year and reached the lowest since 2010 on Monday after key OPEC member
Saudi signaled they would keep high output. Also, Kuwait's oil minister said OPEC is
unlikely to cut production to support prices and Iran has changed course and said it can
live with lower prices.
China’s 13th five-year energy plan
meeting
China’s 13th Five-year energy plan to focus on cleanliness and efficiency. Most
provinces in China are working on their 13th five-year plans under guidance from the
central government, and the targets for the next five years focus more on ecology. By
2020, total coal consumption in the primary energy mix may be set to drop under 62%
and the capacity of natural gas transmission is expected to reach 480bn cubic meters. In
the meantime, China’s new coal tax policy will be implemented on Dec 1, setting coal Brent Crude Price
USD/bbl
resource tax between 2% and 10%. Also, the government will raise tax rate for natural
gas and crude oil from 5% to 6%.
120
Brent
115
110
105
100
Share price performance & commodities
Performance
O&G
PetroChina
Sinopec
CNOOC
Gas Utility
Hong Kong China Gas
ENN Energy
China Resource Gas
Last Price
1-yr
YTD
chg（%） chg（%）
90
85
80
Oct-13
857 HK Equity
386 HK Equity
883 HK Equity
9.50
6.65
12.52
-0.7
-0.3
-3.1
-5.8
-1.8
-7.4
-9.9
-15.7
-12.4
-4.9
-7.8
-6.3
15.2
16.7
-3.5
6.6
7.3
-21.0
11.8
5.1
-13.2
3 HK Equity
2688 HK Equity
1193 HK Equity
17.88
53.95
23.10
0.9
2.1
2.0
5.4
1.4
1.1
0.9
-3.7
3.1
5.7
-2.9
-2.1
-4.6
-2.9
-9.6
7.4
18.6
10.5
10.6
-5.9
-14.4
9.20
-2.4
-1.1
2.2
-3.7
25.7
29.8
25.0
2.52
-1.6
-8.4
-7.0
8.6
-3.1
26.0
13.0
19.06
3.26
-1.1
0.3
-8.8
-6.9
-11.1
-16.2
-5.2
-24.7
-22.5
-42.0
-7.5
-32.6
-20.7
-50.9
88.0
85.7
0.2
-0.1
-3.3
-5.1
-8.7
-7.1
-17.2
-15.0
1.1
13.1
-20.6
-16.0
-20.6
-12.9
88.1
85.5
3.9
0.5
-1.4
0.4
-3.2
-5.6
-0.3
-8.9
-10.2
1.8
-16.4
-18.4
-5.2
-2.4
0.4
3.5
-18.7
-23.2
4.0
-18.3
-22.1
-10.9
23048
2359
1875
-0.4
-0.3
-1.6
Tianlun Gas
1600 HK Equity
Chem
Shanghai Petrochemical338 HK Equity
Oil Services
COSL
2883 HK Equity
Hilong
1623 HK Equity
Comm odities
Brent
EUCRBREN Index
WTI
USCRWTIC Index
Dubai
Cinta
Henry hub
Index
HSI
Shanghai
S&P 500
95
1-D
1-Week
1-mth
3-mth
1H 2014
chg（%） chg（ %） chg（% ） chg（%） chg (%)
PGCRDUBA Index
APCRCNTA Index
NGUSHHUB Index
HSI Index
SHCOMP Index
SPX Index
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Source: Company data, Bloomberg
WTI Crude Price
USD/bbl
WTI
120
115
110
105
100
95
90
85
80
-1.6
-0.2
-4.6
-6.3
1.2
-5.6
-1.3
14.2
-5.2
-0.5
-3.2
10.9
-0.7
5.4
9.6
-1.1
11.5
1.4
Oct-13
Dec-13
Feb-14
Apr-14
Fei Wu
[email protected]
Tel: (852) 2977 9392
Source: BOCOM Int’l, Bloomberg
Tony Liu
[email protected]
Tel: (852) 2977 9390
Download our reports from Bloomberg: BOCM〈enter〉
Jun-14
Aug-14
Source: Company data, Bloomberg
Morning Express
16 October 2014
Market Review
Hang Seng Index (1 year)
26,000
Hong Kong stocks rose on Wednesday. The Hang Seng Index gained 92.08 points, or
0.40%, to 23,140.05. Lenovo (992.HK) rose 3.16% as the best blue-chip performer,
followed by New World Development (17.HK) which finished up 2.92% after the
developer won the Tai Wai site. Casino operators rallied. Sands China (1928.HK) added
2.2% while Galaxy Entertainment (27.HK) increased 2.6%. Central China Securities
(1375.HK) jumped 21.72% after receiving approval to conduct SH-HK Stock Connect
business. Peer Haitong Securities (6837.HK) also rose 1.7%. Airlines rose amid recent oil
price decline and expectation of policies to bolster the sector. CSA (1055.HK) rose 5.49%.
CEA (670.HK) jumped 6.2%.
US stocks saw heavy intra-day losses on Wednesday but managed to pare declines at
close. The S&P 500 fell 9.8% at one point but closed down 15.21 points, or 0.8%, to
1,862.49. The DJIA fell as much as 460 points but finished down 173.45 points, or 1.1%, at
16,141.74. European stocks plummeted on Wednesday. The Stoxx Europe 600 fell 3.2%
to 311.36.
25,000
24,000
23,000
22,000
21,000
Source: Company data, Bloomberg
HS China Enterprise Index (1 year)
13,000
12,000
11,000
10,000
9,000
8,000
News Reaction
Trust investment of insurance funds account for small share of total assets with
mounting potential risks, CIRC says. The overall size of the trust investment of insurance
funds has accounted for a small percentage of the total assets in the industry, and the
risks are manageable as the investment is mainly comprised of the high credit rating
AAA-grade products, but the potential risks are mounting, China Insurance Regulatory
Commission (CIRC) said on Wednesday.
Source: Company data, Bloomberg
Shanghai A-shares (1 year)
2,600
2,400
2,200
2,000
1,800
Brokers have to pass three-year capital replenishment plan by 2014, Zhang says. Zhang
Yujun, assistant to CSRC chairman, stressed that securities companies must fully
understand the importance of capital replenishment mechanism. According to the
relevant requirements, brokers have to pass the three-year capital replenishment plan
approved by the board of directors in the year. They have to replenish the capital at least
once within three years and establish the capital replenishment and management
mechanism.
China and EU resolves telecom trade dispute. China and the EU have found the way to
end the long-standing dispute over Chinese telecom equipment exports, resolving one of
the biggest disputes between the two major trading partners, EU Trade Commissioner
Karel de Gucht said on Tuesday.
PetroChina and CNOOC said to jointly invest in Shenzhen LNG project. CNOOC, which
plans to establish a RMB10bn LNG project in Shenzhen, has proposed joint investment
with PetroChina and other shareholders in Shenzhen LNG Phase II Project to achieve
mixed ownership, Guangdong’s insiders said.
GCL-Poly (3800.HK) to announce capacity expansion plan soon. GCL-Poly will announce
capacity expansion plan in the short term, including the cost-saving new “silane
fluidized-bed technology”, GCL-Poly’s CFO Yang Wenzhong said before the shareholders’
meeting. The new technology is expected to add 25,000-tonne capacity each year and
the company targets to complete the capacity expansion plan in one year.
Download our reports from Bloomberg: BOCM〈enter〉
Source: Company data, Bloomberg
Shenzhen A-shares (1 year)
1,500
1,400
1,300
1,200
1,100
1,000
900
800
Source: Company data, Bloomberg
Morning Express
16 October 2014
Economic releases for this week - USA
Date Time
15-Oct
15-Oct
15-Oct
16-Oct
16-Oct
17-Oct
17-Oct
Source: Bloomberg
Event
MBA mortgage applications
PPI(MoM)
PPI ex food & energy (MoM)
Initial jobless claims (k)
Industrial Production
Housing Starts(k)
U of Michigan confidence
Economic releases for this week - China
Survey
0.1%
0.1%
0.4%
1,002.0
84.2
Prior
3.8%
0.0%
0.1%
287.0
-0.1%
956.0
84.6
Date Time
13-Oct
15-Oct
15-Oct
Event
Trade balance (US$ bn)
CPI (YoY)
PPI (YoY)
Survey
41.1
-14.0%
-1.5%
Source: Bloomberg
BOCOM Research Latest Reports
Data
14 Oct 2014
14 Oct 2014
14 Oct 2014
14 Oct 2014
14 Oct 2014
13 Oct 2014
13 Oct 2014
13 Oct 2014
10 Oct 2014
10 Oct 2014
09 Oct 2014
09 Oct 2014
08 Oct 2014
07 Oct 2014
07 Oct 2014
06 Oct 2014
06 Oct 2014
06 Oct 2014
30 Sep 2014
30 Sep 2014
Report
Brokerage Sector - Raising mainland brokers’ estimates ahead of anticipated strong 3Q
Telecom & Small/Mid-Cap Sector - Eyeing on the opportunities arising from valuation recovery of the
high-quality small/mid-caps
China Property Sector - Contracted sales rebounded, but valuation remains constrained
Container Shipping Sector - Weekly container shipping commentary
Anta (2020 HK) - Another good set of SSS and trade fair results; TP upped
China Market Strategy - The Dollar in Question
Agile Property (3383.HK) - Downgrade to “Sell” on heightened company-specific risks
Auto Sector - SH-HK Stock Connect - Eligible stocks are mainly mid-caps favored by investors
Transportation Sector - Weekly transportation news wrap
SH-HK Stock Connect - Technology - High-quality HK-listed industry leaders will likely be favored
SH-HK Stock Connect - Internet - A-share Internet stocks to gradually become more reasonably valued
Intime (1833.HK) - 3Q14 SSS largely in-line; Maintain Buy
SH-HK Stock Connect - Property - Going for the sector leaders
Consumer Discretionary Sector - Protests' impact on HK retailers
SH-HK Stock Connect - Transportation & Logistics - E-commerce logistics in the spotlight
Strategy – Hong Kong Chasm
SH-HK Stock Connect - China Steel - More eligible stocks to trade in sector; industry leaders to benefit
China Property Sector - Mortgage easing and sales recovery produce short-term catalysts
Container Shipping Sector - Weekly container shipping commentary
SH-HK Stock Connect - China Consumer Staples - Dive for scarcity value
Source: Company data, BOCOM International
Download our reports from Bloomberg: BOCM〈enter〉
Analyst
Jerry Li
Zhiwu Li
Toni Ho, CFA, FRM, Alfred Lau, CFA, FRM
Geoffrey Cheng
Phoebe Wong
Hao Hong, CFA
Toni Ho, CFA, FRM, Alfred Lau, CFA, FRM
Wei Yao
Ian Feng, Geoffrey Cheng, CFA
Miles Xie
Yuan MA, PhD, Connie GU, CPA
Anita Chu
Alfred Lau CFA, FRM, Toni Ho CFA, FRM
Phoebe Wong
Geoffrey Cheng, CFA, Yinan Feng
Hao Hong, CFA
Jovi Li
Toni Ho, CFA, FRM, Alfred Lau, CFA, FRM
Geoffrey Cheng
Summer Wang, Shawn Wu
Prior
49.8
-14.0%
-1.2%
Morning Express
16 October 2014
Hang Seng Index Constituents
Company
name
Cheung Kong
Hang Lung Proper
Hengan Intl
China Shenhua-H
Hang Seng Bk
China Res Land
Cosco Pac Ltd
Henderson Land D
Aia Group Ltd
Hutchison Whampo
Kunlun Energy Co
Ind & Comm Bk-H
China Merchant
Want Want China
Sun Hung Kai Pro
New World Dev
Belle Internatio
China Coal Ene-H
Swire Pacific-A
Sands China Ltd
Clp Hldgs Ltd
Bank East Asia
Ping An Insura-H
Boc Hong Kong Ho
China Life Ins-H
Citic Pacific
China Res Enterp
Cathay Pac Air
Hong Kg China Gs
Tingyi Hldg Co
Esprit Hldgs
Bank Of Commun-H
China Petroleu-H
Hong Kong Exchng
Bank Of China-H
Wharf Hldg
Li & Fung Ltd
Hsbc Hldgs Plc
Power Assets Hol
Mtr Corp
China Overseas
Tencent Holdings
China Unicom Hon
Sino Land Co
China Res Power
Petrochina Co-H
Cnooc Ltd
China Const Ba-H
China Mobile
Lenovo Group Ltd
Hang Seng Index
BBG
code
1 HK
101 HK
1044 HK
1088 HK
11 HK
1109 HK
1199 HK
12 HK
1299 HK
13 HK
135 HK
1398 HK
144 HK
151 HK
16 HK
17 HK
1880 HK
1898 HK
19 HK
1928 HK
2 HK
23 HK
2318 HK
2388 HK
2628 HK
267 HK
291 HK
293 HK
3 HK
322 HK
330 HK
3328 HK
386 HK
388 HK
3988 HK
4 HK
494 HK
5 HK
6 HK
66 HK
688 HK
700 HK
762 HK
83 HK
836 HK
857 HK
883 HK
939 HK
941 HK
992 HK
Share
price
(HK$)
131.70
23.35
78.40
21.00
128.40
17.94
10.40
52.30
41.80
95.70
10.24
4.93
24.20
9.72
115.00
9.53
8.74
4.73
100.30
42.25
65.20
31.50
58.45
24.95
21.50
13.18
18.70
13.98
17.94
18.42
10.34
5.48
6.63
172.50
3.53
55.25
9.14
78.60
72.45
30.75
21.30
114.40
11.58
12.40
20.95
9.32
12.26
5.56
92.55
11.10
Mkt
cap
(HK$m)
305,039
104,731
96,181
388,201
245,481
104,612
30,563
156,897
503,486
408,005
82,661
1,600,519
61,638
128,265
313,813
82,578
73,715
74,444
147,739
340,806
164,725
73,926
433,428
263,791
566,906
328,226
45,135
54,995
188,651
103,206
20,087
401,999
769,908
201,483
957,223
167,415
76,414
1,508,161
154,627
178,964
174,106
1,071,468
276,903
74,594
100,490
1,784,879
547,378
1,386,017
1,886,125
117,544
5d
chg
(%)
0.8
2.0
2.1
-2.8
0.8
5.4
0.6
1.9
1.6
-2.1
-7.9
0.0
3.4
-1.5
3.6
2.4
-0.3
4.0
0.6
0.2
2.0
0.2
-1.1
2.0
-1.6
-2.1
-1.8
-3.9
5.7
-11.2
-2.3
-0.2
-1.5
-0.5
0.9
-1.6
2.5
-0.7
3.6
-1.0
1.9
-3.5
1.6
0.8
-0.7
-5.7
-8.1
1.3
0.7
-6.9
Ytd
chg
(%)
13.5
-4.7
-14.4
-14.1
2.1
-6.7
-2.3
30.0
7.5
-2.9
-25.0
-5.9
-14.5
-13.2
16.9
3.4
-2.6
8.5
10.3
-32.4
6.4
-4.1
-15.8
0.4
-11.3
11.1
-27.4
-14.8
11.0
-17.8
-30.8
0.2
4.7
33.4
-1.1
-6.8
11.4
-6.6
17.5
4.8
-2.3
15.6
-0.2
17.0
14.0
9.6
-15.0
-5.0
15.1
17.7
23,140.1 14,128,492
-0.5
-0.7
Source: Bloomberg
Download our reports from Bloomberg: BOCM〈enter〉
–––– 52-week ––––
Hi
Lo
(HK$)
(HK$)
152.00
105.95
27.00
19.80
99.70
74.05
27.00
19.12
133.00
117.60
23.50
13.62
11.92
9.40
56.40
36.46
44.20
34.65
108.50
86.88
14.82
10.12
5.66
4.33
29.80
22.75
13.10
9.32
120.20
90.35
10.62
7.15
11.82
7.25
5.26
3.72
108.00
80.55
68.00
38.70
67.80
56.00
35.00
28.50
76.50
55.60
26.65
21.50
25.80
19.52
16.88
9.35
27.90
18.14
17.26
13.90
18.40
13.91
24.00
17.82
17.42
9.98
5.98
4.53
8.23
5.73
185.00
112.80
3.79
3.03
70.20
46.35
10.70
7.72
87.35
75.75
75.85
57.85
32.30
26.55
24.80
17.52
134.00
77.56
14.22
9.03
14.16
9.83
24.90
17.10
11.70
7.31
16.12
11.42
6.37
4.89
102.20
63.65
12.70
7.62
25,363.0
21,137.6
–––––––––– PE –––––––––––
2013A
2014E
2015E
(X)
(X)
(X)
7.1
8.6
8.9
13.7
17.7
16.7
26.5
25.2
20.9
7.7
8.2
8.1
14.7
14.2
13.2
6.8
9.1
7.7
13.4
12.0
10.6
8.8
16.5
16.6
26.4
20.4
17.8
8.7
12.1
11.2
13.0
12.6
11.2
5.1
5.0
4.7
14.0
14.4
13.1
23.7
23.2
20.2
9.2
15.0
14.0
7.1
11.0
10.6
13.0
13.2
12.6
35.9
34.0
22.2
11.5
14.3
13.4
16.6
15.5
13.7
18.3
15.6
15.3
10.6
11.3
10.7
11.6
10.4
9.0
11.4
10.8
9.7
17.9
14.7
12.5
9.3
9.0
7.7
24.6
34.2
27.6
18.7
16.5
11.2
27.1
25.1
23.2
21.1
26.1
21.4
94.6
32.7
21.1
5.0
4.9
4.7
9.1
8.8
8.3
43.6
38.4
29.4
4.7
4.7
4.4
7.0
14.1
12.3
11.7
17.9
15.5
12.9
11.1
10.2
2.5
17.8
17.9
12.1
17.3
15.8
7.0
7.5
6.6
41.4
35.0
26.3
18.4
16.8
14.4
8.3
13.9
13.8
8.6
8.2
7.5
10.2
9.8
9.2
7.8
7.6
7.2
4.9
4.7
4.5
12.7
13.3
13.3
17.3
17.7
14.3
10.1
10.6
9.8
Yield
P/B
(%)
2.7
3.2
2.4
5.5
4.3
2.5
2.9
1.9
1.1
2.5
2.2
N/A
3.2
2.8
2.9
4.3
1.2
2.2
3.6
4.1
4.0
3.5
1.5
4.0
1.8
2.0
1.3
1.9
1.8
1.5
0.7
N/A
4.6
2.1
7.0
3.2
5.2
4.8
3.5
3.0
2.3
0.2
1.7
4.0
3.6
4.3
4.7
N/A
3.4
2.2
(X)
0.8
0.8
5.8
1.2
2.2
1.2
0.8
0.6
2.3
1.0
1.6
1.0
1.0
8.7
0.8
0.5
2.3
0.6
0.7
8.4
1.8
1.1
1.8
1.6
2.0
0.5
0.9
0.9
3.7
4.7
1.2
0.7
1.0
9.1
0.8
0.6
2.1
1.0
1.3
1.1
1.5
12.1
1.0
0.7
1.5
1.1
1.2
1.0
1.8
4.6
3.7
1.3
Morning Express
16 October 2014
China Ent Index Constituents
Company
name
Shandong Weig-H
China Shenhua-H
Sinopharm-H
China Shipping-H
Zoomlion Heavy-H
Yanzhou Coal-H
Agricultural-H
New China Life-H
Ind & Comm Bk-H
Tsingtao Brew-H
China Com Cons-H
China Coal Ene-H
China Minsheng-H
Guangzhou Auto-H
Ping An Insura-H
Picc Property &
Great Wall Mot-H
Weichai Power-H
Aluminum Corp-H
China Pacific-H
China Life Ins-H
China Oilfield-H
Zijin Mining-H
China Natl Bdg-H
Bank Of Commun-H
Jiangxi Copper-H
China Petroleu-H
China Rail Gr-H
China Merch Bk-H
Bank Of China-H
Dongfeng Motor-H
Citic Securiti-H
Haitong Securi-H
China Telecom-H
Air China Ltd-H
Petrochina Co-H
Huaneng Power-H
Anhui Conch-H
China Longyuan-H
China Const Ba-H
China Citic Bk-H
Hang Seng China Ent Indx
BBG
code
1066 HK
1088 HK
1099 HK
1138 HK
1157 HK
1171 HK
1288 HK
1336 HK
1398 HK
168 HK
1800 HK
1898 HK
1988 HK
2238 HK
2318 HK
2328 HK
2333 HK
2338 HK
2600 HK
2601 HK
2628 HK
2883 HK
2899 HK
3323 HK
3328 HK
358 HK
386 HK
390 HK
3968 HK
3988 HK
489 HK
6030 HK
6837 HK
728 HK
753 HK
857 HK
902 HK
914 HK
916 HK
939 HK
998 HK
Share
price
(HK$)
Mkt
cap
(HK$m)
5d
chg
(%)
Ytd
chg
(%)
7.50
21.00
28.05
4.58
3.98
6.33
3.46
27.10
4.93
54.85
5.50
4.73
7.31
7.30
58.45
14.06
31.45
27.75
3.16
27.40
21.50
18.86
1.93
7.04
5.48
13.04
6.63
4.11
13.42
3.53
12.30
18.24
12.20
4.69
4.89
9.32
8.76
24.75
7.35
5.56
4.76
33,572.79
388,201.07
72,040.63
20,853.48
44,374.00
46,637.61
1,025,606.33
92,135.34
1,600,518.80
70,254.19
93,485.99
74,444.10
265,442.11
59,970.89
433,427.95
191,274.17
111,605.12
52,251.54
59,752.07
229,129.23
566,905.52
105,348.23
62,479.80
38,009.14
401,999.46
54,890.04
769,908.48
84,570.50
333,662.20
957,223.42
105,978.28
187,602.77
123,391.51
379,572.81
68,906.21
1,784,879.27
112,607.61
118,981.05
59,067.46
1,386,017.01
257,395.71
0.1
-2.8
2.4
-4.8
-11.8
0.2
-0.6
-0.9
0.0
-2.7
-0.9
4.0
0.1
-3.2
-1.1
-4.1
3.6
-1.6
-4.2
-1.3
-1.6
-6.6
1.6
-2.4
-0.2
1.6
-1.5
-1.4
-0.3
0.9
-2.4
-2.6
-0.7
0.2
-2.6
-5.7
-0.6
-0.4
-3.3
1.3
-1.0
-28.3
-14.1
26.1
-23.9
-45.0
-10.6
-9.2
4.2
-5.9
-16.3
-12.0
8.5
1.9
-13.9
-15.8
22.3
-26.5
-11.2
17.0
-9.9
-11.3
-21.6
16.3
-15.6
0.2
-6.9
4.7
2.8
-18.8
-1.1
1.3
-13.8
-9.6
19.6
-15.5
9.6
25.0
-13.9
-26.4
-5.0
13.1
11.2
27.0
30.0
6.3
8.0
8.7
4.1
29.6
5.7
68.3
6.7
5.3
8.2
10.9
76.5
15.0
51.9
35.5
3.9
33.5
25.8
26.0
2.2
9.1
6.0
15.4
8.2
4.7
17.6
3.8
15.2
21.7
14.5
5.2
6.3
11.7
9.7
35.7
10.3
6.4
5.3
6.8
19.1
19.7
4.0
4.0
4.9
3.0
20.6
4.3
53.5
4.9
3.7
5.9
6.7
55.6
9.8
26.1
25.8
2.5
23.6
19.5
17.2
1.6
6.7
4.5
11.6
5.7
3.0
12.1
3.0
9.6
13.7
9.5
3.1
4.2
7.3
6.1
24.2
7.2
4.9
3.6
61.5
7.7
22.2
N/A
13.1
6.7
5.0
11.2
5.1
29.5
5.5
35.9
4.4
11.8
11.6
14.1
9.3
8.4
N/A
18.3
17.9
8.7
15.5
4.8
5.0
10.0
9.1
7.0
4.6
4.7
6.2
21.8
21.9
16.1
18.1
10.2
8.4
8.5
23.9
4.9
4.3
25.0
8.2
20.1
38.9
10.2
19.6
4.8
10.9
5.0
28.6
5.3
34.0
4.1
9.1
10.4
12.3
8.7
9.3
N/A
16.8
14.7
8.6
15.0
5.1
4.9
13.6
8.8
6.6
4.7
4.7
6.3
21.4
17.5
15.9
14.9
9.8
7.9
8.8
16.1
4.7
4.2
10,285
4,109,947
-1.1
-4.9
11,638.3
9,159.8
7.2
7.0
Source: Bloomberg
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–––– 52-week ––––
Hi
Lo
(HK$)
(HK$)
––––––––––– PE –––––––––––
2013A
2014E
2015E
(X)
(X)
(X)
Yield
P/B
(%)
(X)
20.6
8.1
16.8
13.9
8.7
16.0
4.4
9.5
4.7
24.7
4.9
22.2
3.8
7.1
9.0
11.0
7.0
9.1
N/A
14.4
12.5
8.0
15.0
4.8
4.7
13.2
8.3
6.0
4.2
4.4
5.9
18.5
14.8
14.6
11.6
9.2
7.9
8.0
12.8
4.5
3.9
1.0
5.5
1.2
0.0
4.8
0.4
N/A
0.7
N/A
N/A
4.3
2.2
2.7
3.1
1.5
2.0
3.3
1.1
N/A
1.8
1.8
2.9
N/A
2.9
N/A
4.9
4.6
2.0
5.8
7.0
1.9
N/A
1.2
2.6
1.2
4.3
5.5
1.8
0.8
N/A
N/A
2.8
1.2
2.6
0.6
0.6
0.6
1.0
1.5
1.0
4.0
0.7
0.6
0.9
1.1
1.8
2.4
2.6
1.4
0.8
1.8
2.0
1.6
1.2
0.8
0.7
0.8
1.0
0.8
0.9
0.8
1.2
1.8
1.5
1.1
0.9
1.1
1.5
1.7
1.5
1.0
0.7
6.4
4.6
1.1
Morning Express
16 October 2014
BOCOM International
11/F, Man Yee Building, 68 Des Voeux Road, Central, Hong Kong
Main: + 852 3710 3328
Fax: + 852 3798 0133
Rating System
Company Rating
www.bocomgroup.com
Sector Rating
Buy: Expect more than 20% upside in 12 months
LT Buy: Expect more than 20% upside but longer than 12 months
Neutral: Expect low volatility
Sell: Expect more than 20% downside in 12 months
Outperform (“OP”): Expect more than 10% upside in 12 months
Market perform (“MP”): Expect low volatility
Underperform (“UP”): Expect more than 10% downside in 12 months
Research Team
Head of Research
@bocomgroup.com
(852) 2977 9393
raymond.cheng
(852) 2977 9384
hao.hong
(852) 2977 9212
yangqingli
Shanshan LI, CFA
(86) 10 8800 9788 - 8058
lishanshan
Li WAN, CFA
(86) 10 8800 9788 - 8051
Wanli
Raymond CHENG, CFA, CPA, CA
Strategy
Economics
Hao HONG, CFA
Banks
Consumer Discretionary
miaoxian.li
Fei WU
(852) 2977 9392
fei.wu
Tony LIU
(852) 2977 9390
xutong.liu
Alfred LAU, CFA, FRM
(852) 2977 9235
alfred.lau
Toni HO, CFA, FRM
(852) 2977 9220
toni.ho
Luella GUO
(852) 2977 9211
luella.guo
(86) 21 6065 3606
louis.sun
(852) 2977 9209
lizhiwu
(852) 2977 9216
miles.xie
Geoffrey CHENG, CFA
(852) 2977 9380
geoffrey.cheng
Ian FENG
(852) 2977 9381
Yinan.feng
(86) 21 6065 3675
wei.yao
Property
Phoebe WONG
(852) 2977 9391
phoebe.wong
Anita CHU
(852) 2977 9205
anita.chu
Consumer Staples
Renewable Energy
Summer WANG
(852) 2977 9221
summer.wang
Shawn WU
(852) 2977 9386
shawn.wu
Johnson SUN
(852) 2977 9203
johnson.sun
Milo LIU
(852) 2977 9387
milo.liu
(852) 2977 9389
liwenbing
Healthcare
Louis SUN
Telecom & Small/ Mid-Caps
Insurance
Zhiwu LI
Technology
Internet
Miles XIE
Transportation & Industrial
Yuan MA
(86) 10 8800 9788 - 8039
yuan.ma
Connie GU, CPA
(86) 10 8800 9788 - 8045
conniegu
(852) 2977 9243
jovi.li
Metals & Mining
Jovi LI
(86) 10 8800 9788 - 8043
Miaoxian LI
Oil & Gas/ Gas Utilities
Qingli YANG
Jerry LI
@bocomgroup.com
Automobile
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Wei YAO
Morning Express
16 October 2014
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Jintian Pharmaceutical Group Limited, Logan Property Holdings Company Limited, Nanjing Sinolife United Company Limited, Magnum
Entertainment Group Holdings Limited, Bank of Communications, Harbin Bank Co., Ltd., Azure Orbit International Finance Limited, Hanhua
Financial Holding Co., Ltd., Central China Securities Company Limited, China New City Commercial Development Limited, China Shengmu Organic
Milk Limited, Broad Greenstate International Company Limited, China National Culture Group Limited and Sichuan Development Holding Co. Ltd.
within the preceding 12 months.
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