20130815-京华山一-Market_Express_China_Hong_Kong_12页_720kb

Summary of Document Content

Core Market Overview

The Hong Kong market showed a strong upward trend, with the Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) both closing near their intraday highs. The HSI gained 269 points or 1.21%, closing at 22,541.13, while the HSCEI surged 257 points or 2.59%, closing at 10,185.55. The market turnover increased significantly to HK$72.86bn, indicating improved investor confidence. The property and finance sub-indexes performed well, while the utilities sub-index was dragged down due to outflows from defensive stocks. The major banks, ICBC, CCB, and BOC, contributed to the HSI's gains.

Technical Analysis of Hong Kong Market

• HSI broke through key technical resistances, including the 100-day and 250-day moving averages, showing strong bullish sentiment.
• The HSI formed two "Light Candles" in the previous two trading days, indicating a strong rebound.
• The market is expected to be capped by the upper bound of its uptrend, but the main resistance remains at the upper bound of the downtrend started from 23,944 in February.
• Technical indicators such as RSI (70.59/65.92) and MACD (222.90) suggest continued upward momentum, though the market is in the overbought region.

Tactical Trading Calls

The stocks are expected to continue their upward trend based on technical analysis, with specific targets and cut loss levels provided.

Sector and Stock Commentary

• Tencent (700 HK): 1H13 net profit increased by only 28%, missing estimates. The main reason for the shortfall was a 102% YoY increase in marketing expenses due to WeChat international promotion. The strong share price performance has already priced in optimistic growth expectations, so any earnings shortfall may lead to significant profit-taking.
• China Auto Sector: Negative outlook due to news of an anti-trust investigation. This may affect foreign brand automakers and their dealers, particularly luxury car makers. HK-listed auto companies such as Brilliance China Auto (1114 HK), DCH Hldg (1828 HK), and others are most exposed.
• Brilliance China Auto (1114 HK): Strong 1H13 earnings from the BMW JV, with NPAT up 52.4% YoY. The company plans to launch new models and expand production capacity. However, the minibus business is under pressure due to the lack of new product upgrades.

Global Market Performance

• China Market: CSI 300 closed at 2,349.08 with a -0.42% change, while the Shanghai Composite Index closed at 2,100.14 with a -0.29% change.
• US Market: DJIA and S&P 500 both closed in negative territory, with DJIA down 0.73% and S&P 500 down 0.52%. The market retreated due to concerns about potential Fed stimulus cuts.
• Other Global Indices: Euro Stoxx 50 rose 0.37%, NIKKEI 225 increased 1.32%, and TWSE fell 0.44%.

Key Economic Data Releases

• China (8/9 Aug):
  • CPI YoY: 2.70%
  • PPI YoY: -2.30%
  • Industrial Production YoY: 9.70%
  • Fixed Assets Ex Rural YTD YoY: 20.10%
  • Retail Sales YoY: 13.20%
• China (8/16 Aug):
  • New Yuan Loans: 640.0B
  • Money Supply M2 YoY: 14.50%
  • Aggregate Financing RMB: 808.8B
• US (8/15 Aug):
  • Initial Jobless Claims: 335K
  • Continuing Claims: 3000K
  • Nonfarm Productivity: 0.60%
  • Unit Labor Costs: 1.20%
  • Housing Starts: 900K
  • Building Permits: 945K

REPO Information

• CPY REPO is a short-term investment product that offers returns higher than deposits, using bonds with a rating above BBB.
• Interest Rates:
  • 7 days: 1.000%
  • 14 days: 1.125%
  • 1 month: 1.500%

Other Market Indicators

• 1Y HK$ Fwd (pt): -67.50
• DXY: 81.71
• CNY/USD: 6.12
• USD/EUR: 1.33
• JPY/USD: 97.96
• 10Y US T Bond (%): 2.71
• Gold (US$/oz): 1,339.09
• Brent (US$/bbl): 110.08

Summary of Key Financials for Brilliance China Auto (1114 HK)

• 1H13 NPAT: RMB2,030mn or RMB0.40/share, up 52.4% YoY.
• Revenue: RMB3,984mn in FY12, RMB6,103mn in FY13F, RMB8,137mn in FY14F, RMB9,580mn in FY15F.
• EPS: RMB0.36 in FY12, RMB0.47 in FY13F, RMB0.64 in FY14F, RMB0.73 in FY15F.
• P/E Ratio: 19.1x in FY12, 14.5x in FY13F, 10.7x in FY14F, 9.4x in FY15F.
• P/B Ratio: 3.6x in FY12, 2.9x in FY13F, 2.5x in FY14F, 2.1x in FY15F.

Summary of Key Financials for Sunny Optical (2382 HK)

• 1H13 Revenue: RMB2,785mn, up 57.4% YoY.
• 1H13 Net Profit: RMB197mn, up 25.7% YoY.
• ASP and Shipment: Both increased by 25% and 57% YoY, supporting top-line growth.
• GPM: Dropped to 12.1% due to price competition on 5MP HCM.
• Valuation: New target price of HK$8.54, downgrade to HOLD.

Disclaimer

This report is for informational purposes only and is not an offer to buy or sell securities. The accuracy and completeness of the report are not guaranteed. The report may be updated or changed without notice. The authors are licensed representatives of the Securities and Futures Commission and their views reflect their personal opinions. Core Pacific-Yamaichi International (H.K.) Limited and its affiliates may have opinions and may be involved in transactions in securities, including those listed on the NYSE.