Morning Express Summary
Core Content
This report from China Merchants Securities (HK) provides an overview of market developments and research highlights for various sectors in Hong Kong and global markets. It includes analysis on stock price movements, index inclusion, economic data, and company-specific updates. The report also explores the feasibility of quantitative easing (QE) expansion by the European Central Bank (ECB) and outlines key watch items for upcoming economic data releases.
Main Points
Xtep International (1368 HK)
- Index Inclusion: Xtep has been added to the Hang Seng Family of Indexes, effective 14 September 2015, including the Hang Seng Global Composite Index and Hang Seng Composite Index Series.
- Research View: The inclusion is viewed as positive for the share price, with a "BUY" rating and a target price (TP) of HK$4.12.
- Performance: Xtep has seen a 33% increase in share price since being named a top pick on 4 May 2015, outperforming the Hang Seng Index (HSI) and the retail sector.
- Valuation and Dividend: Attractive valuation (11x/10x FY15/FY16 P/E) and a high dividend yield of 6%.
- Outlook: The stock is expected to continue outperforming due to improving sportswear sector and earnings turnaround.
I.T Limited (999 HK)
- Market Outlook: HK retail conditions remain weak, with declining sales and visitor numbers, leading to a "NEUTRAL" rating.
- CFO Resignation: The CFO resigned, but the impact on operations is expected to be minimal as the CEO will take over.
- New Target Price (TP): The TP is set at HK$2.31, based on a 11x FY16E P/E, reflecting higher uncertainty in the market outlook.
- Earnings: FY15E-17E EPS are 26%/15% below consensus, with a forex loss expected to have a noncash impact.
QE Expansion Feasibility for the ECB
- Market Speculation: There is increased speculation about the ECB expanding QE due to global growth and inflation concerns.
- Challenges: Limited eligible assets for purchase and logistical/legal hurdles make a large-scale QE expansion unlikely.
- Likely Option: Extension of QE rather than large-scale asset purchases is more feasible.
- Impact on Markets: The ECB may prefer stabilizing effects through communication rather than actual monetary stimulus.
- Currency Outlook: The report slightly adjusts the 2015 EURUSD forecast to 1.05 and DXY forecast to 102, reflecting a delayed US rate hike cycle.
Key Information
Market Indices
| Index |
Close |
1-daychg |
%chg |
| Hang Seng Index |
21562.5 |
-568.81 |
-2.57 |
| Hang Seng Finance Index |
29804.72 |
-760.82 |
-2.49 |
| Hang Seng Utilities Index |
51419.53 |
-864.95 |
-1.65 |
| Hang Seng Property Index |
29481.24 |
-575.69 |
-1.92 |
| Hang Seng Industrial Index |
12418.54 |
-379.34 |
-2.96 |
| HSCEI |
9780.16 |
-195.37 |
-1.96 |
| CSI 300 |
3357.56 |
-41.75 |
-1.23 |
| Shanghai Composite Index |
3197.89 |
-45.2 |
-1.39 |
| TWSE |
8268.68 |
-18.24 |
-0.22 |
Global Commodities and Currencies
| Asset |
Last Price |
Chg |
%chg |
| Brent Oil |
49.69 |
+1.3 |
+2.69 |
| COMEX Gold |
1109.6 |
+7.6 |
+0.69 |
| COMEX Copper |
245.15 |
+1.5 |
+0.62 |
| LME Aluminum |
1634.0 |
+4.0 |
+0.25 |
| LME Copper |
5392.0 |
+27.0 |
+0.5 |
| BDI |
830.0 |
-25.0 |
-2.92 |
| USD/RMB |
6.38 |
-0.0 |
-0.01 |
| USD/HKD |
7.75 |
-0.0 |
-0.01 |
| EUR/USD |
1.13 |
+0.01 |
+0.6 |
| 1Y RMB NDF |
6.57 |
-0.08 |
-1.22 |
| 3M Libor |
0.33 |
+0.0 |
+0.3 |
| 3M Shibor |
3.09 |
+0.0 |
+0.03 |
| 10Y US T-Note Yield |
2.21 |
+0.01 |
+0.45 |
Economic Data Watch
| Country |
Date |
Event |
Prior |
Forecast |
| Germany |
2015/09/11 |
CPI Final YY |
0.2% |
0.2% |
| Germany |
2015/09/11 |
HICP Final YY |
0.1% |
0.1% |
| U.S. |
- |
PPI Final Demand YY |
-0.8% |
-0.8% |
| U.S. |
- |
Core PPI Final Demand YY |
0.6% |
0.8% |
| U.S. |
- |
U Mich Sentiment |
92.9 |
91.1 |
| China |
2015/09/13 |
Urban investment (ytd)yy |
11.2% |
11.1% |
| China |
- |
Industrial Output YY |
6% |
6.4% |
| China |
- |
Retail Sales YY |
10.5% |
10.5% |
Company Events
| Date |
Ticker |
Company |
Event |
| 2015/09/11 |
8021 HK |
WLS Holdings Ltd. |
QUARTER RES/INT DIV |
| 2015/09/11 |
8158 HK |
China Regenerative Medicine |
1ST QUARTER RES/DIV |
Research Coverage Highlights
| Sector |
Company |
Ticker |
Rating |
TP |
% Upside |
Market Cap (US$mn) |
EPS 2014 |
EPS 2015E |
EPS 2016E |
P/E 2014 |
P/E 2015E |
P/E 2016E |
| Auto & Auto Parts |
Brilliance China |
1114 HK |
BUY |
HK$12.5 |
34 |
6,072 |
1.07 |
0.86 |
0.99 |
6.9 |
8.7 |
7.6 |
| Auto & Auto Parts |
China ZhengTong Auto |
1728 HK |
BUY |
HK$5.48 |
82 |
858 |
0.36 |
0.42 |
0.51 |
6.6 |
5.7 |
4.8 |
| Auto & Auto Parts |
Geely Automobile |
175 HK |
BUY |
HK$4.0 |
24 |
3,668 |
0.16 |
0.24 |
0.31 |
16.0 |
10.8 |
8.4 |
| Auto & Auto Parts |
BAIC Motor |
1958 HK |
BUY |
HK$12.81 |
92 |
6,470 |
0.70 |
0.81 |
1.07 |
7.6 |
6.6 |
5.0 |
| Auto & Auto Parts |
Great Wall Motor |
2333 HK |
NEUTRAL |
HK$28.5 |
21 |
3,132 |
2.64 |
3.10 |
3.40 |
7.1 |
6.1 |
5.6 |
| Auto & Auto Parts |
Fuyao Glass |
3606 HK |
BUY |
HK$22.7 |
52 |
4,848 |
1.11 |
1.10 |
1.22 |
10.7 |
10.9 |
9.9 |
| Auto & Auto Parts |
China Harmony Auto |
3836 HK |
NEUTRAL |
HK$6.7 |
94 |
703 |
0.50 |
0.42 |
0.45 |
5.5 |
6.6 |
6.2 |
| Auto & Auto Parts |
Zhongsheng Group |
881 HK |
NEUTRAL |
HK$4.75 |
59 |
828 |
0.35 |
0.39 |
0.48 |
6.8 |
6.1 |
5.0 |
Conclusion
The report highlights the inclusion of Xtep International in key indices, which is expected to positively impact its share price due to increased institutional interest and index tracking demand. I.T Limited, however, remains cautious due to weak HK retail conditions and a revised target price. The ECB's QE expansion is unlikely to be large-scale due to limited eligible assets and logistical challenges, with a focus on extension rather than expansion. The report also provides insights into market indices, global commodities, and upcoming economic data, emphasizing the need for continued monitoring of geopolitical and economic risks.
