20151020-大华继显-Regional_Morning_Notes_37页_2mb

Regional Morning Notes Summary

Core Content Overview

This summary provides a detailed analysis of economic activity and sector performance in China, Malaysia, Singapore, and Thailand for the period ending 20 October 2015. It includes insights on GDP growth, sector-specific updates, key indices, market recommendations, and corporate events.

China Economic Activity

GDP Growth

• China's GDP growth in 3Q15 was 6.9% yoy, slightly below the government's annual growth target of 7.0% yoy but above market expectations of 6.8% yoy.
• The services sector showed a stronger performance, contributing to the overall growth.
• Industrial production and Fixed Asset Investment (FAI) continued to weaken in September 2015, with FAI at 10.3% yoy (down from 10.9% yoy in 8M15).
• Retail sales increased slightly to 10.9% yoy, driven by building and decorative materials and furniture sales.

Fiscal and Monetary Policy

• The government is expected to introduce more stabilisation policies in 4Q15 to support the economy.
• Monetary easing, including potential RRR cuts, is anticipated to offset the contraction in base money supply due to capital outflows.
• However, the transmission of policy effects remains weak, especially for private sector investment.

GDP Forecast

• UOBKH forecasts 2015F GDP growth at 6.5% yoy, 2016F at 6.5% yoy, suggesting an L-shaped recovery in 2016.
• The trade balance is expected to improve, with export growth at 1.2% yoy and import growth at 0.3% yoy.

China Sector Updates

Banking Sector

• Earnings growth for Chinese banks is expected to decelerate to 0.9% yoy in 9M15, with some disappointment in quarterly results.
• Net Interest Margin (NIM) is likely to narrow further due to low interest rates and increased credit costs.
• Asset quality remains a concern, with BoCom and Minsheng facing downside risks due to rising NPLs and overdue loans.
• ICBC and CCB are preferred for their better business mix and near-trough valuations.

Cement Sector

• Property new starts showed a moderate pick-up, but cement prices and production did not follow suit, with a slower-than-expected rebound.
• Cement demand is not yet showing significant improvement, and major players are expected to report a 30-60% earnings decline in 2015.
• The sector is maintained as UNDERWEIGHT, with BBMG recommended as a BUY due to its potential for outperformance.

Malaysia and Singapore Sector Updates

Malaysia

• Guinness Anchor is expected to report >10% yoy earnings growth in 1QFY16, and is fairly valued with a target price of RM15.00.

Singapore

• M1 is recommended as BUY with a target price of S$3.26.
• Keppel REIT and Mapletree Logistics Trust reported results in line with expectations.

Thailand Sector Updates

Siam Commercial Bank (SCB)

• Net profit fell 32% yoy due to massive provisioning.
• Thanachart Capital (TCAP) reported weak core operating results, but asset quality improved.
• TMB Bank reported 25% yoy earnings growth, above expectations, due to lower credit costs. Upgraded to HOLD.

Key Indices

Top Picks

Corporate Events

Key Assumptions

Conclusion

The report highlights the slowdown in China's economic growth, with the GDP likely to fall short of the annual target. Banking and cement sectors face challenges, with banking earnings expected to disappoint and cement prices rebounding slowly. In Malaysia and Singapore, some positive signals are noted, particularly in the telecommunications and REITs sectors. Thailand's banking sector shows mixed results, with TMB Bank outperforming others. Policy easing is expected to continue, but the effectiveness remains questionable. The market outlook is cautiously optimistic, with a focus on select stocks and sector-specific opportunities.