20161025-大华继显-Regional_Morning_Notes_31页_1mb

Regional Morning Notes Summary

Core Content Overview

This document provides a market analysis and investment outlook for several Asian countries, focusing on China, Indonesia, Malaysia, Singapore, and Thailand, as well as key indices and corporate events. It outlines the potential impact of U.S. trade policies, especially under the context of the 2016 U.S. Presidential Election, and evaluates the performance of various sectors and companies.

Main Points and Key Information

U.S.-China Relations

• China-U.S. Tensions: Despite the election outcome, China is expected to face increasingly difficult relations with the U.S. due to the rise of economic populism from both candidates.
• Trade Policies: Both candidates are likely to take a tough stance on China, with Trump more vocal. However, Trump's proposed tariffs are illegal under WTO rules, which may allow China to retaliate.
• Military Implications: Clinton's "Pivot to Asia" and potential nuclear stance may increase regional militarism, benefiting China's military industrial complex.

China's Power Sector

• Earnings Outlook: 3Q16 earnings are expected to deteriorate by 60–69% YoY due to a surge in coal prices. The sector is forecast to break even in 4Q16.
• Coal Price Impact: Coal prices rose significantly in 3Q16, with QHD coal price at Rmb480/tonne and thermal coal index at Rmb383/tonne. If prices continue to rise, the sector could face losses.
• Sector Downgrade: The power sector is downgraded to UNDERWEIGHT due to the negative impact of coal price increases.

Stock Impact

• Negative Impact: Exporters such as Li & Fung (494.HK), Man Wah (1999.HK), Kingmaker (1170.HK), and Yue Yuen (581.HK) are likely to be negatively impacted.
• Positive Impact: Domestic reflation sectors like FAI, household consumption, and military industrial complex may benefit from government policies and increased domestic demand.

Key Companies and Sectors

• Ciputra Development (CTRA IJ): Expected to be the second-largest property developer in Indonesia. The merger with CTRS and CTRP is expected to increase liquidity, reduce discount to NAV, and raise valuation. Target price raised to Rp1,800.
• Axis REIT (AXRB MK): Earnings in line with forecasts but below consensus. Management plans to dispose of Axis Eureka, which limits future rental growth.
• British American Tobacco (ROTH MK): EBIT declined 30% YoY, but net profit fell only 18.8% due to a lower effective tax rate.
• Krung Thai Bank (KTB TB): Net profit surged 61% YoY due to moderate top-line growth and strong other income.
• GFPT (GFPT TB): Downgraded to SELL due to expected peak earnings for the year.

Key Indices

• DJIA, S&P 500, FTSE 100, AS30, CSI 300, FSSTI, HSI, JCI, KLCI, KOSPI, SET, TWSE, BDI, CPO, Brent Crude: The table shows the previous close, daily, weekly, monthly, and year-to-date percentage changes.

Top Picks

• BUY: Air China (753 HK), Ping An Insurance (2318 HK), Ciputra Property (CTRP LJ), Indosat (ISAT LJ), Genting Bhd (GENT MK), City Dev (CIT SP), and China Power International (2380 HK).
• SELL: HART MK (Hartalega), GFPT TB, and others listed in the table.

Key Assumptions

• GDP Growth: Forecasts for various countries and the average Brent crude price and CPO price.
• Trade Policies: Both Trump and Clinton are expected to implement policies that negatively impact China's exports.

Corporate Events

Earnings and Target Price Revisions

• CR Power: Revised net profit from Rmb9,866m to Rmb7,597m (–23.0% YoY), target price from HK$14.0 to HK$12.0 (–14.3%).
• Huaneng: Revised net profit from Rmb11,765m to Rmb8,121m (–31.0% YoY), target price from HK$5.0 to HK$4.2 (–14.0%).
• Datang: Revised net profit from Rmb3,159m to Rmb2,733m (–13.5% YoY), target price from HK$1.9 to HK$1.8 (–5.3%).
• Huadian: Revised net profit from Rmb6,719m to Rmb3,495m (–48.0% YoY), target price from HK$3.5 to HK$2.8 (–20.0%).
• China Power International: Revised net profit from Rmb3,226m to Rmb2,878m (–10.8% YoY), target price from HK$5.0 to HK$4.0 (–20.0%).

Analysts

• Mun Hon Tham
  Email: munhon.tham@uobkayhian.com.hk
  Phone: +852 2236 6799

• Yan Shi
  Email: yan.shi@uobkayhian.com
  Phone: +8621 5404 7225 ext. 804