20161215-大华继显-Regional_Morning_Notes_17页_395kb

Regional Morning Notes Summary

Core Content Overview

This document provides a comprehensive summary of regional economic and market updates for key markets including China, Indonesia, Malaysia, Singapore, and Thailand, along with insights on specific companies and sector performances. It includes economic indicators, corporate events, company-specific updates, and investment recommendations.

Main Points by Region

China

• Monetary Policy:
  • Loan issuance and Total Social Financing (TSF) exceeded expectations in November 2016.
  • The People's Bank of China (PBOC) may shift to a neutral monetary policy due to pressure on the renminbi and focus on financial risk control.
  • The PBOC is unlikely to cut interest rates or RRR in 2017 and may use targeted tools like MLF and PSL for liquidity management.
• Paper Sector:
  • Renminbi depreciation affects paper manufacturers through higher input costs and foreign debt.
  • Despite this, the positive view on the sector remains due to strong bargaining power and potential export demand.
  • Recommendation: Maintain BUY on Nine Dragons Paper (2689 HK) and Lee & Man Paper (2314 HK).
  • Forex Impact: A 5% depreciation could lead to a 10% and 3% drop in net profits for Nine Dragons Paper and Lee & Man Paper, respectively.
• Key Financials:
  • M1 and M2 growth rates converged, suggesting fiscal stimulus funds are flowing into the private sector.
  • MLT loans to non-financial enterprises increased significantly, driven by infrastructure investment and PPP projects.

Indonesia

• Bank Jabar (BJBR IJ):
  • Downgraded to SELL due to expensive valuation at +2SD and potential under-provisioning in Syariah business.
  • Target price set at Rp1,600, with a downside of -26.9% from current price (Rp2,190).
  • Valuation is considered aggressive, and the stock's price rally may not be sustainable without positive news.

Malaysia

• Plantation Sector:
  • CPO (Crude Palm Oil) inventory was lower than expected in November 2016.
  • CPO production is expected to remain weak in December 2016, supporting CPO prices.

Singapore

• Telecommunications Sector:
  • TPG emerged as a winner in the sector.

Thailand

• Total Access Communication (DTAC):
  • Maintained HOLD rating with a target price of Bt34.25.
  • No new catalysts are expected, and investors are advised to wait for further developments.

Key Indices

Top Picks

Key Assumptions

Corporate Events

Risks

• Renminbi Depreciation: If depreciation exceeds 5%, both Nine Dragons Paper and Lee & Man Paper could see lower-than-forecasted earnings.
• BJBR Valuation: The stock is now trading above its historical average, with valuation metrics considered aggressive.
• BJBR Provisions: The bank's provisions may not be sufficient, and one or two major loans turning into NPL could weaken its position.

Valuation Summary

Peer Comparison

Analysts

• China: Chaoping Zhu (+8621 5404 7225 ext. 822, chaoping@uobkayhian.com) and Ye Xu (+8621 5404 7225 ext. 820, xuye@uobkayhian.com)
• Indonesia: Alexander Margaronis (+6221 2993 3876, alexandermargaronis@uobkayhian.com)

Summary of Key Insights

• China's Monetary Policy is shifting from accommodative to neutral, with potential for reduced rate cuts and more use of targeted instruments.
• Paper sector remains a top pick due to strong pricing power and export demand, despite forex risks.
• Indonesia's BJBR is downgraded due to valuation concerns and potential under-provisioning.
• Malaysia's CPO prices are supported by weak production and low inventory.
• Singapore's TPG is highlighted as a winner in the telecommunications sector.
• Thailand's DTAC is held with a target price, and investors are advised to wait for new catalysts.
• Valuation of key stocks is a concern, especially for BJBR and paper companies, with forex risks playing a significant role in earnings forecasts.