20150108-高盛-AsiaPac_2015__10_questions_for_equity_investors_17页_1019kb

AsiaPac 2015: Summary for Equity Investors

Core Content

This document provides an in-depth analysis of the Asia Pacific equity markets for 2015, focusing on return prospects, allocation strategies, key macroeconomic drivers, and specific investment opportunities.

Main Return Prospects and Allocation

• Expected Returns: We anticipate an 11% price upside and 14% total USD return for the MXAPJ index in 2015.
• Key Drivers: Earnings growth is expected to be 6% for 2015 and 11% for 2016, with valuations remaining fair to fully valued.
• Index Target: The MXAPJ end-2015 target is 515, a 1% decrease from the previous target of 520, due to oil-related adjustments.
• Country Allocation:
  • Overweight: China, India, Indonesia, Taiwan
  • Underweight: Australia, Malaysia, Singapore
• Sector Preferences: Sectors with solid/improving EPS growth and reform beneficiaries are favored. These include:
  • Stable Growth (GSSZSTGW): Focus on consistent earnings and revenue growth, high ROE, and moderate valuation.
  • High Dividend Yield (GSSZDIV2): Attractive due to low interest rates, with a 6.6% yield and 9.0x forward P/E.
  • US vs. EU Exposed Stocks (GSSZAPUS vs. GSSZAPEU): Reflects the US recovery and weaker euro.
  • Reform Beneficiaries: Particularly in China, India, and Indonesia, with focus on SOE, financial market, and anti-pollution reforms.

Key Macro Drivers

• Global Growth: Expected to improve from 3.2% in 2014 to 3.6% in 2015.
• Monetary Policy: Easy monetary policy, including ECB and Japan's QE, and a potential US rate hike cycle.
• Commodity Price Deflation: Oil prices fell 50% from mid-2014, impacting energy and materials sectors.
• USD Strength: Expected to persist, affecting regional returns.
• Political Policy Calendar: Active in 2015/16, especially in China, India, and Indonesia, influencing market themes.

Country and Sector Opportunities

• Appealing Sectors:
  • TW Tech, IN Software, CH Internet, CH Insurance, CH Utilities, IN Banks
  • Emerging Themes: India internet, Taiwan IoT
• Potential Entry Points: Monitor Macau gaming and Korea megacaps for possible entry later in 2015 if earnings improvement is confirmed.

Winners and Laggards from 2014

• Streak Winners (Top 20th percentile):
  • TSMC, SBI, HKEx, CCCC, China Medical System, Haitong Securities
• Turnaround Laggards (Bottom 20th percentile):
  • GLP, China Cinda Asset Mgmt, GCL-Poly Energy

China: A or H Shares?

• Preference Shift: We now favor H shares over A shares for near-term tactical positioning.
• Rationale:
  • A shares have outperformed H shares by 19pp since 4Q 2014.
  • H shares have better risk/reward, with 40% valuation premium in A shares.
• Index Targets:
  • MXCN: 77 (10X PE) from 74
  • CSI300: 3,800 (12X PE) from 3,000
• Earnings Growth:
  • 2015: 14% for H shares, 7% for A shares.

India: Is the Rally Over?

• Strategic Overweight: We remain overweight India, viewing the current consolidation as an entry opportunity.
• Positive Outlook:
  • GDP growth expected to rise to 6.3% in 2015.
  • 17% CAGR in EPS growth over 2015/16, the highest in Asia.
  • Valuations have returned to mid-range (15.8x P/E).
• Investor Demand: Global funds and domestic investors are likely to increase demand as recovery gains momentum.

Korea: Potential for Positive Surprise?

• Current Stance: Marketweight, with a wait for clearer signs of earnings improvement.
• Earnings Revisions: Positive profit outlook for 91% of Korean companies based on AEGiS data.
• Earnings Cycle: We expect a turnaround in earnings sentiment but remain cautious.

Impact of Oil Price Collapse on Earnings

• EPS Adjustments:
  • 2015 MXAPJ index EPS growth lowered by 2ppt to 6%.
  • 2016 EPS growth raised by 1ppt to 11%.
• Sector Impact:
  • Energy and materials sectors, which account for 15% of index earnings, are underweight.
  • Lower oil prices may benefit other sectors with a lag.

Investment Ideas and Themes

• Stable Growth: GSSZSTGW basket up 6% vs. MXAPJ since Sep 30, 2014.
• High Dividend Yield: GSSZDIV2 basket with 6.6% yield and 9.0x forward P/E.
• US vs. EU Exposure: GSSZAPUS outperformed GSSZAPEU by 8.9% since Sep 19, 2014.
• Reform Beneficiaries: Focus on SOE, financial market, and anti-pollution reforms in China; PSU, power, and banking reforms in India; and infrastructure spending in Indonesia.

Conclusion

The Asia Pacific equity markets in 2015 are expected to offer moderate returns with high dispersion. This creates alpha opportunities for investors focusing on specific sectors and countries with strong EPS growth and reform benefits. The political and policy environment will be a key driver, especially in China, India, and Indonesia. H shares are favored over A shares for near-term positioning due to valuation and risk/reward considerations. India remains a strategic overweight, while Korea is underweight but has potential for positive surprise. The oil price collapse has negatively impacted energy and materials but may benefit other sectors over time. Investors should focus on diversified, stable growth and reform-oriented strategies for better returns.