20161213-中国银河国际证券-A-share_Investment_Strategy_2017__Seeking_Structural_Opportunities_Amid_Tight_Liquidity_in_2017_27页_816kb

A-Share Investment Strategy 2017 Summary

Core Content

This document outlines the A-share investment strategy for 2017, emphasizing structural opportunities amid tighter liquidity conditions. It includes macroeconomic outlook, key investment themes, and sector-specific recommendations.

Main Views

• Tighter Liquidity in 2017: The A-share market is expected to face tighter liquidity due to global and domestic factors, including US rate hikes, inflationary pressures, and RMB depreciation.
• No Full-Fledged Rally: The market is anticipated to be volatile, with economic growth slowing down. Investors should focus on structural opportunities rather than expecting a broad market rally.
• Two Investment Directions:
  1. Policy-related opportunities: Supply-side reforms and public-private partnerships (PPP) are highlighted as key themes.
  2. Quality companies for long-term investment: Sectors such as healthcare, brand consumption, technical services, and intelligent manufacturing are recommended.

Key Sectors and Opportunities

1. Healthcare

• Reforms: Accelerated reforms in tendering, two-invoice system, public hospitals, drug evaluation, distribution system, and medical insurance catalog adjustments.
• Valuation: Current valuation is significantly lower than in 2014 and 2015.
• Recommendations:
  • Industry leaders with low valuations
  • Blood products
  • Pharmaceutical distribution
• Key Stocks:
  • ST Zhenxing Biopharmaceutical and Chemical (000403 CH)
  • Hualan Biological Engineering (002007 CH)
  • Tasly Pharmaceutical Group (600535 CH)
  • Walvax Biotechnology (300142 CH)
  • Yifan Pharmaceutical (002019 CH)
  • Jointown Pharmaceutical Group (600998 CH)
  • Aier Eye Hospital Group (300015 CH)
  • Tonghua Dongbao Pharmaceutical (600867 CH)
  • Changchun High & New Technology Industries (000661 CH)
  • Hybio Pharmaceutical (300199 CH)
  • Porton Fine Chemicals (300363 CH)
  • Boai NKY Pharmaceuticals (300109 CH)
  • Shandong Sinobioway Biomedicine (002581 CH)

2. Petrochemicals

• Crude Oil Market: Expected to reach equilibrium by H2 2017, depending on OPEC's production cut decision.
• Private LNG Companies: Highlighted as growth opportunities due to policy support and natural gas demand growth.
• Polyester Filament: Industry cycle is reversing, with production capacity growth slowing. Tongkun Group is recommended as a value play.
• Butadiene: Expected to outperform natural rubber due to declining supply and rising demand.
• Natural Rubber: Prices are likely to rise, boosting butadiene prices.
• Agricultural Chemicals: Show signs of initial recovery, especially in dicamba and glyphosate.
• Key Stocks:
  • Changqing Agrochemical (002391 CH)
  • Hubei Xingfa Chemicals (600141 CH)
  • Zibo Qixiang Tengda Chemical (002408 CH)
  • North Huajin Chemical Industries (000059 CH)
  • Sinopec Shanghai Petrochemical (600688 CH)
  • Sinochem International Corporation (600500 CH)
  • Hainan Rubber Industry (601118 CH)

3. Military & Defence

• SOE Reforms: Expected to accelerate in 2017, improving corporate governance and efficiency.
• Civil-Military Integration: Seen as a trend that will enhance the military sector's R&D and production capabilities.
• Key Stocks:
  • AVIC Electromechanical Systems (002013 CH)
  • Beifang Chuangye (600967 CH)
  • China Avionics Systems (600372 CH)
  • Chengfa Aero Scinc & Tech (600391 CH)
  • Aerospace Power Hi-Tech Co (600343 CH)
  • Sun-Create Electronics (600990 CH)
  • Glarun Technology (600562 CH)
  • Ctrowell Technology (300455 CH)
  • Baosheng Science and Technology Innovation (600973 CH)
  • Lucky Film (600135 CH)
  • Jiuyuan Yinhai Software (002777 CH)
  • Taisheng Wind Power Equipment (300129 CH)
  • Uroica (300099 CH)
  • Quaxin Cable Technology (300447 CH)
  • Highlander Digital Technology (300065 CH)
  • Leike Defense Technology (002413 CH)

4. Light Industry

• Paper Production: Remains stable, but downstream demand growth may slow.
• Packaging Industry: Expected to benefit from M&A activity.
• Key Stocks:
  • Geo-Jade Petroleum (600759 CH)
  • Shandong Xinchao Energy (600777 CH)
  • MeiDu Energy (600175 CH)
  • Changchun Sinoenergy (600856 CH)
  • ENN Ecological Holdings (600803 CH)
  • Guanghui Energy (600256 CH)

5. Electronics

• Wet Electronic Chemicals: Seen as a key sector with underestimated value.
• Key Stock:
  • Hubei Xingfa Chemicals (600141 CH)

6. Small & Mid Caps

• Opportunities: Expected to benefit from supply-side reforms and structural changes.
• Key Stocks:
  • Tongkun Group (601233 CH)
  • North Huajin Chemical Industries (000059 CH)
  • Sinochem International Corporation (600500 CH)
  • Changqing Agrochemical (002391 CH)

Conclusion

The A-share market is expected to remain volatile in 2017 due to tighter liquidity and slowing economic growth. Investors should focus on structural opportunities, particularly in healthcare, petrochemicals, military & defence, and quality companies. The document emphasizes long-term investment in sectors that are supported by policy reforms and have strong fundamentals.