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报告摘要

Daily Insight Summary: The Chinese View on China (July 8, 2013)

Core Content Overview

This report provides a comprehensive analysis of the Chinese market from multiple sectors, including the banking, property, healthcare, and cement industries, with a focus on policy changes, market sentiment, and investment strategies. It also includes macroeconomic insights and market updates from the US, highlighting the implications for global markets and Chinese equities.

Main Points and Key Information

1. Macro Outlook – US Employment Data and Market Implications

US Employment Report (June 2013):
- Added 195,000 non-farm payroll jobs, exceeding market expectations.
- Revised May data to 195,000 from 175,000, and April to 199,000 from 149,000.
- Unemployment rate remained at 7.6%.
Market Reaction:
- Dow Jones rose by 0.98%.
- Gold price fell by 2.36%.
- 10-year US Treasury yield increased by 22bps to 2.73%.
Implications:
- Strong employment data reinforced expectations of Fed tapering.
- Investor sentiment turned more rational, with stocks driven by fundamentals rather than liquidity.
- Panic selling in the stock market has subsided.

2. Hong Kong Market Outlook

The biggest overhang on the Hong Kong market over the past two months has been lifted.
Investors are shifting back to fundamentals as liquidity concerns ease.
High-end developers like Sunac (1918 HK), Longfor (960 HK), and Sino-Ocean (3377 HK) are recommended for investment due to lower policy risk and less sensitivity to mortgage rate hikes.
Fragile sentiment may persist, so pair trading is recommended to hedge against market volatility.
Fragile developers like R&F (2777 HK), Evergrande (3333 HK), and Agile (3383 HK) are expected to face further de-rating due to high leverage and slow sales progress.

3. Banking Sector Analysis

Key Policy Points:
- Stable monetary policy: No shift to easing or tightening, only fine-tuning.
- Increased support for SMEs and rural areas: Policies include special bonds, relaxed loan-to-deposit ratios, and targets for loan growth.
- Continued shadow banking regulation: Focus on systemic risks, especially in LFGVs, real estate, and WMPs.
Investment Recommendation:
- Agricultural Bank of China (1288 HK) is maintained as the top pick, due to less exposure to regulatory arbitrage and strong support for rural sectors.

4. Real Estate Sector Analysis

Sales Trends:
- 8 major cities saw a 17% drop in first-week sales compared to the previous week, but still 8% higher than June's average.
- Chengdu was the main driver of the rebound.
Policy Shifts:
- Support for first-time home buyers reiterated in the State Council guidance.
- A-share property financing may be reopened, indicating a softening stance on property regulation.
Valuation and Risk:
- 50% discount to NAV in the sector reflects overly pessimistic expectations of price corrections.
- R&F (2777 HK) is still the top sell due to strong YTD share performance.

5. Healthcare Industry Analysis

Guangdong EDL Supplementary Catalog:
- Includes 147 chemical and biopharma drugs and 131 TCM drugs.
- These drugs are subject to 100% medical insurance reimbursement.
Top Picks:
- Hua Han (587 HK): 15x 13P/E, 0.4x PEG, short-term growth from exclusive NMIC drugs, long-term from biopharma drugs.
- Sino Biopharm (1177 HK): 23x 13P/E, 0.8x PEG, short-term growth from blockbuster drugs, long-term from strong drug pipeline and promotion capabilities.
- CMS (867 HK): 19x 13P/E, 0.7x PEG, short-term growth from blockbuster drugs, long-term from product selection and promotion.
Investment Rating:
- Overweight for the healthcare sector, due to attractive valuations and defensive nature of the industry.

6. Cement Industry Analysis

Price Trends:
- Average cement price rose by 0.57% week-on-week to RMB319.5/t.
- Regional variations:
  - North: Prices stable, but downstream demand weak.
  - Northeast: Prices increased by RMB30/t, with P.O.42.5 reaching RMB490/t.
  - East: Prices decreased by RMB10-20/t.
  - South: Prices increased again, driven by Guangdong's investment.
  - Southwest: Mixed price movements due to weather and demand.
Investment View:
- Anhui Conch-H (914 HK) is seen as undervalued at HK$19-23, implying a replacement cost of RMB400/t.
- Past patterns suggest cyclical stocks may rally when Conch-H reaches this level.
- Current probability of a sustainable rebound is low due to lack of consistent catalysts.

7. Zijin Mining Group (902 HK)

Profit Warning:
- Estimated 1H13 net profit to decline by 45%-55% YoY.
- Reasons: declining gold and copper prices, inventory revaluation losses, increased mining costs, and lower production.
Gold Price Outlook:
- Short-term gold prices are expected to remain under pressure due to QE tapering.
- Next catalyst is the FOMC meeting minutes and Bernanke's speech.
Investment Rating:
- Underperform rating maintained, with a target price of HKD 1.12.
- Valuation is currently at 9.3x 13P/E, suggesting further downside potential.

8. Coal and IPP Sector

Market Concerns:
- Some clients believe IPP margin expansion has ended due to coal price near bottom.
- However, margin expansion could continue in 2H13 with coal price decline.
On-Grid Tariff:
- Tariff cuts are unlikely due to government focus on structural reforms and energy-intensive industries.
Investment Recommendation:
- HPI (902 HK) is the top pick due to diversified coal procurement and no involvement in vertical integration.

Investment Rating Definitions

Security Investment Rating:
- Buy: More than 20% better than market.
- Outperform: 5%-20% better than market.
- Neutral: Less than 5% better or worse than market.
- Underperform: More than 5% worse than market.
Industry Investment Rating:
- Overweight: Industry performs better than the whole market.
- Neutral: Industry performs about the same as the whole market.
- Underweight: Industry performs worse than the whole market.

Disclaimer and Disclosure

The report is intended solely for SWS Research clients.
The company does not hold equities or derivatives of the listed companies discussed, except for affiliates which may hold more than 1% of issued shares.
The report is based on public information and not guaranteed for accuracy or completeness.
The views reflect the analyst's personal opinions.
The company does not provide investment advice and does not share gains or losses with clients.
Clients are advised to consult independent investment consultants and read the full report before making decisions.