Regional Morning Notes Summary
Core Content
This document provides a detailed overview of the regional financial markets, with a focus on Indonesia, China, Malaysia, Singapore, and Thailand. It includes updates on the biodiesel sector in Indonesia, the power sector in China, and performance summaries for key companies in the region. The document also outlines market indices, top picks, key assumptions, corporate events, and risks affecting the sector.
Main Points
Indonesia - Biodiesel Sector
- Indonesia is expected to blend 1.6 million tonnes of biodiesel under the PSO programme from Nov 15 to Apr 16.
- The monthly volume is 268,074 tonnes, exceeding market expectations of 200,000 tonnes/month.
- The biodiesel procurement volume is set to rise to 5.3 million tonnes in 2016, driven by both PSO and non-PSO segments.
- Wilmar International and First Resources are major suppliers, securing contracts under this programme.
- The procurement has boosted sentiments in the palm oil market, despite current CPO price downtrends.
- Key factors for selecting top picks include estate location, young prime areas, and management quality.
- The forward curve for CPO prices is rising due to higher biodiesel demand and potential tighter supply in 2016 and 1H17.
China - Power Sector
- A tariff cut for coal-fired IPPs is expected to be sooner and higher than previously anticipated, at 3 Rmb cents/kWh.
- Despite the tariff cut, earnings are expected to remain stable in the near term due to lower coal prices and improved profitability.
- Parent asset injections are a key growth driver for IPPs, with Huaneng and Huadian already completing their first round.
- CPI is highlighted as a top pick due to its potential for asset injection and higher exposure to hydro power.
- Long-term risks include power market reform and potential price bidding, which may lead to lower realised power tariffs.
China Vanke (2202 HK)
- Contracted sales for 10M15 exceeded Rmb200b, rising 19.3% yoy.
- The company expects to achieve Rmb250b in contracted sales for 2015.
- Vanke has acquired 19 land plots with a total attributable GFA of 2.6m sqm and land premium of Rmb13.4b in 10M15.
- Self-user buyers dominate, with 96% of sales targeting end-users and upgraders.
- The company remains a BUY with a target price of HK$22.06, reflecting a 17% upside.
Key Information
Market Indices
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
17867.6 |
(0.3) |
0.5 |
8.5 |
0.2 |
| S&P 500 |
2102.3 |
(0.4) |
0.6 |
7.7 |
2.1 |
| FTSE 100 |
6412.9 |
0.5 |
(0.4) |
4.6 |
(2.3) |
| AS30 |
5294.8 |
0.1 |
(1.5) |
2.1 |
(1.7) |
| CSI 300 |
3628.5 |
4.7 |
2.9 |
13.3 |
2.7 |
| FSSTI |
3040.5 |
1.4 |
(0.0) |
6.6 |
(9.6) |
| HSI |
23053.6 |
2.1 |
0.4 |
5.5 |
(2.3) |
| KLCI |
1685.6 |
0.5 |
(0.1) |
2.3 |
(4.3) |
| KOSPI |
2052.8 |
0.2 |
0.5 |
3.8 |
7.2 |
| Nikkei 225 |
18926.9 |
1.3 |
0.8 |
5.1 |
8.5 |
| SET |
1423.4 |
0.8 |
1.0 |
4.4 |
(5.0) |
| TWSE |
8857.0 |
1.7 |
2.2 |
6.0 |
(4.8) |
| BDI |
657 |
(3.4) |
(10.7) |
(26.1) |
(16.0) |
| CPO (RM/mt) |
2120 |
(1.7) |
(0.9) |
(8.0) |
(7.7) |
| Brent Crude (US$/bbl) |
49 |
(3.3) |
(0.3) |
1.6 |
(14.7) |
Top Picks
| Company |
Ticker |
Price (Icy) |
Target Price (Icy) |
Potential Upside (%) |
| Beijing Capital |
694 HK |
8.67 |
11.40 |
31.5 |
| ICBC |
1398 HK |
4.98 |
7.60 |
52.6 |
| Bank BJB |
BJBRI |
785.00 |
980.00 |
24.8 |
| CapitaLand |
CAPL SP |
3.21 |
4.08 |
27.1 |
| DBS |
DBS SP |
17.87 |
22.34 |
25.0 |
| Kasikornbank |
KBANK TB |
177.50 |
210.00 |
18.3 |
| PTT |
PTT TB |
299.00 |
340.00 |
13.7 |
| Wilmar Int'l |
WIL SP |
3.10 (Rp) |
3.60 (Rp) |
16.1 |
| First Resources |
FR SP |
1.97 |
2.40 |
21.4 |
| Bumitama Agri |
BAL SP |
0.83 |
1.10 |
31.5 |
| Sampoerna Agro |
SGRO IJ |
1.315 |
2.540 |
93.2 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Malaysia & Indonesia Strategy, Indonesia Consumer and Regional Gaming |
London |
04 Nov |
06 Nov |
| China City Railway Transportation Technology Roadshow |
Shanghai |
09 Nov |
10 Nov |
| Venture Corporation Corporate Roadshow |
Singapore |
11 Nov |
11 Nov |
| Bumitama Agri Luncheon |
Singapore |
12 Nov |
12 Nov |
| China Economics |
Taipei |
16 Nov |
17 Nov |
| Analyst Presentation |
Hong Kong |
18 Nov |
18 Nov |
| Valutronics Tea Session |
Singapore |
17 Dec |
17 Dec |
| Regional 1H16 Strategy Forum |
Kuala Lumpur |
02 Dec |
02 Dec |
Sector Recommendations
| Country |
Recommendation |
| Regional |
MARKET WEIGHT |
| Malaysia |
MARKET WEIGHT |
| Singapore |
OVERWEIGHT |
| Indonesia |
MARKET WEIGHT |
Risks
- Backtracking of biodiesel mandates in Indonesia and Malaysia.
- Weakening crude oil prices, which could negatively affect biodiesel demand.
Key Assumptions
| Metric |
2014 |
2015F |
2016F |
| GDP (% yoy) |
2.4 |
2.5 |
2.5 |
| Euro Zone |
0.9 |
1.5 |
1.7 |
| Japan |
-0.1 |
0.5 |
1.5 |
| Singapore |
2.9 |
2.5 |
2.9 |
| Malaysia |
6.0 |
4.8 |
4.8 |
| Thailand |
0.9 |
2.7 |
4.0 |
| Indonesia |
5.0 |
4.8 |
5.4 |
| Hong Kong |
2.5 |
1.8 |
1.5 |
| China |
7.3 |
6.5 |
6.7 |
| Brent (Average) |
- |
99.45 |
56 |
| CPO |
- |
722 |
765 |
Sector Catalysts
- Lower soybean supply may ease oversupply concerns.
- Higher crude oil prices could stimulate biodiesel demand.
Conclusion
The document highlights the positive outlook for the biodiesel sector in Indonesia, with increased procurement volumes and potential for higher CPO prices. In China, the power sector is expected to maintain stable earnings due to lower coal prices and parent asset injections, though long-term reform poses risks. China Vanke shows strong performance with exceeding sales targets, and is recommended as a BUY. The market indices show mixed performance, with some indices trending upward and others declining. Overall, the sector recommendations remain at MARKET WEIGHT, with Singapore being the only OVERWEIGHT.
