20150609-招商证券_香港_-Morning_Express_11页_1mb

A-share Research Highlights Summary (June 9, 2015)

Core Content

The China Merchants Securities (CMS) Research Center published an interim A-share market strategy report on June 9, 2015, highlighting the current state of the market as a structural bubble. The report emphasizes the Resale Option Theory of Bubbles, which provides a framework for understanding the relationship between price and volume during bubble formation. Key insights include the intuitive link between uncertainty and investment opportunities, and the potential for high volatility and price rallies without immediate rupture.

The report suggests that the opening of the capital market could contribute to the formation of structural bubbles due to the low free floatation of growth stocks. It also identifies volume shrinkage and price rallies as a critical alert signal for bubble formation. To alleviate the bubble, the report recommends increasing transparency and raising the cost of illegal disclosures to control investor expectations.

Main Themes

The report identifies several key themes that will continue to drive the bull market:

1. Internet+: Focused on Internet healthcare, which is seen as a recent and significant area of interest.
2. Made in China 2025: Concerns are centered around changes in production modes, including equipment, processes, products, and follow-up services.
3. State-Owned Enterprises (SOEs): The report is particularly interested in local SOE reforms, suggesting a focus on this sector.

Sector Recommendations

The report provides detailed sector-specific insights for the second half of 2015:

1. Financial and Cyclical Industries

• Property:

  • China Resources Land (1109 HK): BUY, with a 12-month target price of HK$27.7 and a 9% upside.
  • KWG Property (1813 HK): BUY, with a 12-month target price of HK$7.5 and a -3% upside.
  • Agile Property (3383 HK): BUY, with a 12-month target price of HK$7.1 and a 19% upside.
  • Greentown China (3900 HK): BUY, with a 12-month target price of HK$12.0 and an 11% upside.
  • China Overseas Land (688 HK): BUY, with a 12-month target price of HK$33.5 and a 16% upside.
  • Shimao Property (813 HK): BUY, with a 12-month target price of HK$21.2 and a 26% upside.

• Auto & Auto Parts:

  • BAIC Motor (1958 HK): BUY, with a 12-month target price of HK$13.25 and a 33% upside.
  • Fuyao Glass (3606 HK): BUY, with a 12-month target price of HK$22.7 and a 5% upside.

2. New Growth Stories

• The report notes that new growth stories are largely concentrated in lagging industries such as property, along with food & beverage, textile & apparel, and retail trade & consumer industries.
• China Mengniu Dairy (2319 HK): BUY, with a 12-month target price of HK$42.4 and a 4% upside.
• Tingyi (322 HK): BUY, with a 12-month target price of HK$18.1 and a -11% upside.
• Vitasoy (345 HK): NEUTRAL, with a 12-month target price of HK$12.4 and an -8% upside.

3. High Earnings Growth Expectation

• The report recommends focusing on industries with relatively low deviation in earnings growth expectations, including:
  • Aviation airports
  • Securities
  • Chinese medicine production
  • Textile manufacturing
  • Computer software
  • Power transmission equipment
  • Electronics equipment
  • Media

Key Companies and Analysts

The report includes research coverage for several companies, with insights from analysts:

• Auto & Auto Parts: BAIC Motor, Fuyao Glass
• Property: China Resources Land, KWG Property, Agile Property, Greentown China, China Overseas Land, Shimao Property
• Technology, Media & Telecom: China Telecom, China Unicom, China Mobile, Wisdom, Kingdee, Chinasoft, Kingsoft, Boyaa Interactive, SinoMedia, Car Inc
• Banking: ABC, ICBC, Minsheng, Shengjing Bank, BOC, China Construction Bank, CITIC Bank
• Healthcare: China Medical System
• Gaming: Wynn Macau, Paradise Ent, Sands China, MGM China, Melco Crown, SJM
• Environmental Protection: Technovator, CT Environmental, Canvest, Everbright International, BJ Ent Water, Dongjiang Env, Sound Global
• Construction: China Rail Cons, CCCCC, CMEC, China State Construction, CRG
• Retail: Sinomax, Chow Tai Fook, Cosmo Lady, Gome Electrical
• Textile & Garment: China Lilang, Xstep International, Trinity, I.T, Hengan Int'l
• Food & Beverage: Jiashili Group, Want Want China, China Mengniu Dairy, Tingyi, Vitasoy

Key Analysts

• Jeff HAO: Covers Technology, Media & Telecom, Gaming, and Retail.
• Eugene MAK: Covers Textile & Garment, Food & Beverage, and Retail.
• Ling HUA: Covers Food & Beverage, Retail, and Textile & Garment.
• Alex NG: Covers Technology, Media & Telecom, and Hardware Technology.
• John So: Covers Property and Auto & Auto Parts.
• Milo Liu: Covers Healthcare.
• Yiding ZHAO: Covers Construction and Industrial Goods.

Economic Data Overview

The report also provides a summary of economic data and company events for June 9, 2015:

Economic Data

• China:
  • PPI YY: -4.6% (Prior) to -4.5% (Forecast)
  • CPI YY: 1.5% (Prior) to 1.3% (Forecast)
  • M2 Money Supply YY: 10.1% (Prior) to 10.5% (Forecast)
  • New Yuan Loans: CNY707.9bn (Prior) to CNY900bn (Forecast)
  • Outstanding Loan Growth: 14.1% (Prior) to 13.9% (Forecast)
  • Industrial Output YY: 5.9% (Prior) to 6% (Forecast)
  • Retail Sales YY: 10% (Prior) to 10.1% (Forecast)
• Euro zone:
  • Industrial Production MM: -0.3% (Prior) to 0.4% (Forecast)
• U.S.:
  • Import Prices MM: -0.3% (Prior) to 0.7% (Forecast)
  • Export Prices MM: -0.7% (Prior) to -- (Forecast)
  • Initial Jobless Claims: 276k (Prior) to -- (Forecast)
  • Retail Sales MM: -- (Prior) to 0.9% (Forecast)
  • PPI Final Demand MM: -0.4% (Prior) to 0.4% (Forecast)
  • Core PPI Final Demand MM: -0.2% (Prior) to 0.1% (Forecast)
  • U Mich Sentiment: 88.6 (Prior) to 92 (Forecast)

Company Events

• LEE KEE (637 HK): Annual results and dividend on June 9, 2015.

Recent Reports

• CIFI Holdings (884 HK): Published on June 8, 2015, by John So.
• Chow Tai Fook (1929 HK): Published on June 8, 2015, by Eugene MAK, Lewis WONG.
• China Banks: Published on June 4, 2015, by Donger WANG, Sean CHENG.
• China Property Sector: Published on June 4, 2015, by John So.
• Cheetah Mobile (CMCM US): Published on June 4, 2015, by Jeff HAO.
• CMEC (1829 HK): Published on June 4, 2015, by Yiding ZHAO.
• China Medical System (867 HK): Published on June 4, 2015, by Milo Liu.
• Macau Gaming - May review: Published on June 2, 2015, by Angela HAN LEE.
• Tingyi (322 HK): Published on June 1, 2015, by Ling HUA.
• Cowell (1415 HK): Published on June 1, 2015, by Alex Ng, Marley Ngan.
• Paradise Entertainment (1180 HK): Published on June 1, 2015, by Angela HAN LEE.
• Agile Property (3383 HK): Published on June 1, 2015, by John So.
• Crunch time for Greece: Published on May 29, 2015, by Lynn SONG, Cliff ZHAO, David XIE.
• Galaxy Ent (27 HK): Published on May 29, 2015, by Angela HAN LEE.