20140901-申万宏源研究_香港_-2014年9月海外股票市场投资策略_牛市方兴未艾_46页_1mb

Strategy Research Summary

Core Content

This report outlines the investment strategy for overseas stock market participation in September 2014, with a focus on the global economic cycle and its implications for emerging markets, particularly the Hong Kong market. It highlights the transition of the global economy from a recovery phase to an overheating phase, suggesting that this shift will benefit emerging market stocks, especially those in Hong Kong.

Main Points

• Global Economic Cycle: The global economy is transitioning from a recovery to an overheating phase, which is expected to boost emerging market performance.
• Inflation and Liquidity: Global inflation is expected to rise after reaching a trough in Q1 2014, with the global GDP growth projected to increase to 3.1% in 2015. The global liquidity is anticipated to improve from Q3 2014 onwards due to monetary policies by the ECB and BoJ.
• Investment Clock Theory: According to the investment clock theory, emerging markets tend to outperform during the overheating phase. This theory is used to justify the recommendation of overweighting certain sectors.
• Market Valuation: The MSCI World Index is currently trading at a 39% valuation premium to the MSCI Emerging Markets Index, much higher than the historical average of 21%. Hong Kong is considered the cheapest among emerging markets, with a PB valuation of 1.1x relative to its ROE of 17.5%.
• Hong Kong's Attractiveness: Hong Kong listed Chinese stocks are seen as highly attractive due to their strong fundamentals, lower valuations, and the potential for capital inflows driven by the global hot money flow and the expected improvement in China's macroeconomic environment.
• Catalysts in October: The report identifies two key catalysts for the Hong Kong market in October 2014: the successful holding of the 18th CPC Central Committee's Fourth Plenary Session, which is expected to enhance investor confidence in China's reform, and the launch of the Shanghai-Hong Kong Stock Connect, which may lead to a rerating of Hong Kong-listed blue chips.

Key Information

Investment Recommendations

• Overweight: Banks, insurance, diversified financials, metals & mining, and real estate.
• Underweight: Independent power producers (IPPs), energy equipment & services, transportation, and machinery.

Economic Indicators

• Global GDP Growth: Expected to increase to 3.1% in 2015.
• Inflation Trends: Global inflation bottomed at 1.9% in Q1 2014 and is projected to rise to 2.4% by Q3 2015.
• China's Macroeconomic Stability: China's GDP growth has been resilient, with industry value add increasing from 8.8% YoY in May to 9.0% YoY in July. Export growth also improved, reaching 14.5% YoY in July.
• Liquidity Improvement: The global liquidity is expected to improve due to ECB's TLTROs and BoJ's continued asset purchases.

Market Valuation

• MSCI World vs MSCI EM: The MSCI World Index is at a 39% premium, while the MSCI Emerging Markets Index is at its historical average.
• Hong Kong Valuation: Hong Kong is the cheapest emerging market, with a PB valuation of 1.1x and a 1-year forward PE of 7.8x, offering good value compared to its ROE.

Fund Flows

• Global Fund Inflows: Emerging markets, especially Hong Kong, are expected to see significant capital inflows.
• BRICS Fund Flows: Since April 2014, BRICS markets have seen a reversal in fund flows, with total inflows of around US$10bn.

Risk Appetite

• Risk Appetite Return: The report suggests that risk appetite is returning as the global economy improves, and investors are likely to seek higher-yield assets in emerging markets.

Conclusion

The report concludes that the global economy is entering an overheating phase, which is favorable for emerging markets. Hong Kong, in particular, is highlighted as a key market due to its attractive valuation, strong fundamentals, and the potential for capital inflows. The report recommends overweighting certain sectors and highlights the importance of the upcoming catalysts in October 2014.