20141210-农银国际证券-2015_Global_Economic_Outlook_and_Strategies__A_Bird_s_Eye_view_79页_1mb_1mb

2015 Economic Outlook and Investment Strategy Summary

Core Content Overview

This document provides an economic outlook and investment strategy for 2015, focusing on the U.S., Eurozone, Japan, and Emerging Asia, with particular emphasis on China and Hong Kong. It outlines key economic indicators, policy directions, and investment recommendations for various sectors.

Global Economic Outlook for 2015

Key Themes

• A slow-motion recovery is expected globally, with uneven growth across regions.
• The U.S. is seen as the most resilient, with a forecasted 3.2% YoY growth in 2015F.
• The Eurozone faces structural issues and is expected to grow at 1.2% YoY for 2015F.
• Japan is expected to grow at 1.0% YoY, but challenges remain due to the consumption tax hike and deflationary pressures.
• Emerging Asia will focus on structural reforms, leading to below-trend growth.

Investment Highlights

• China Banks is rated Overweight with picks: ICBC (1398 HK) and CCB (939 HK)
• Brokerage is rated Overweight with pick: CGS (6881 HK)
• Coal is rated Neutral with picks: China Shenhua (1088 HK) and Yitai Coal (3948 HK)
• Property is rated Overweight with picks: CSC (1668 HK), CIFI (884 HK), and Kaisa (1638 HK)
• Railway Sector is rated Overweight with picks: CRCC (1186 HK), CRG (390 HK), CSR (1766 HK), and ZCSR (3898 HK)
• Telecom, Media and Technology is rated Overweight with pick: Tencent (700 HK)
• Internet Finance and Mobile Game are both rated Overweight with pick: Tencent (700 HK)

China and Hong Kong Economic Outlook

China

• The economy will focus on structural reforms to enhance investment efficiency and support growth.
• Monetary policy will remain "moderately loose" with further interest rate and RRR cuts.
• Fiscal policy will deepen reforms to boost growth.
• RMB appreciation is expected to be steady, and internationalization will accelerate.
• GDP growth is forecasted to be 7.2% YoY for 2015F.

Hong Kong

• Economic growth is expected to improve mildly, with a forecast of 2.4% YoY for 2015F.
• Key challenges include weakening retail sales, slowdown in property market, and residual impact of the civil campaign.
• The Shanghai-Hong Kong Stock Market Connect is highlighted as an important step for capital market liberalization.

Investment Strategy for 2015

• HSI and HSCEI are expected to reach 26,568 and 13,152 by end-2015F, respectively.
• The strategy emphasizes capital market reform, liquidity management, and structural reforms to drive investment opportunities.

Sector Outlook for 2015

China Banks Sector

• High adaptability amid changes.
• Expected to benefit from monetary easing and structural reforms.

Brokerage Sector

• Capital market reform is expected to spur growth.
• Focus on improving market efficiency and regulatory changes.

Clean Energy Sector

• Clean energy is expected to displace fossil fuels.
• Strong growth potential due to increasing preference for renewable energy.

Coal Sector

• Favor the leader amid uncertainties.
• Continued focus on efficiency and environmental compliance.

Dairy Sector

• Looming challenges due to global market conditions and domestic demand.

Insurance Sector

• Sector fundamentals are expected to improve.
• Growth supported by regulatory reforms and increased consumer confidence.

Property Sector

• The worst has been over, with relaxation of property policy and rate cuts in sight.

Railway Sector

• Growth propelled by the "New Silk Road" initiative.
• Expected to benefit from infrastructure investment and international trade.

Telecom, Media and Technology

• O2O applications are expected to be a major growth driver.
• Innovation and digital transformation are key themes.

Internet Finance Sector

• High growth potential due to technological advancements and regulatory support.

Mobile Game Sector

• Heading for healthy growth with increasing consumer engagement and investment.

Key Information and Main Points

• The U.S. is expected to lead the global recovery with 3.2% YoY growth in 2015F.
• The Eurozone is in a fragile recovery with 1.2% YoY growth for 2015F, driven by QE and TLTRO.
• Japan faces deflationary pressures and structural challenges, with a 1.0% YoY growth forecast for 2015F.
• Emerging Asia will focus on structural reforms and organic growth, leading to below-trend growth.
• China will continue to prioritize structural reforms, with a 7.2% YoY growth forecast.
• Hong Kong is expected to see a mild economic recovery due to rebound in external trade and consumption.
• Investment strategy highlights Overweight sectors such as China Banks, Brokerage, Property, Railway, and Telecom, Media and Technology.
• Tencent (700 HK) is a key stock pick across multiple sectors due to its strong position in the digital economy.

Summary of Key Forecasts

Region	2014F Growth	2015F Growth
U.S.	2.2%	3.2%
Eurozone	0.7%	1.2%
Japan	0.8%	1.0%
Mainland China	7.4%	7.2%
Hong Kong SAR	2.2%	2.4%

Contributors

• Banny Lam – Co-Head of Research
• Philip Chan – Co-Head of Research
• Johannes Au – Analyst (China Banks)
• Kenneth Tung – Analyst (China Property)
• Pandora Leung – Analyst (China Financials)
• Mark Chen – Analyst (China Coal / Internet & Media)
• Paul Pan – Analyst (Dairy)
• Steve Wong – Analyst (China Railway)