20180507-川财证券-Chuancai_Securities_Research_Highlights_Weekly__China_Market_Weekly_Outlook_11页_473kb

Market Overview Summary

Core Content

• Market Performance:

  • The Shanghai Composite gained 0.29% to close at 3091.03 points.
  • The Shenzhen Component increased by 0.99% to 10426.19 points.
  • ChiNext closed at 1814.85 points with a 0.47% increase.
  • The CSI 300 rose by 0.47% to 3774.60 points.
  • The leisure services sector outperformed with a 2.60% gain, surpassing the CSI300 by 2.13%.

• Policy Development:

  • The China Securities Regulatory Commission (CSRC) released draft regulations for the listing and trading of Chinese Depository Receipts (CDRs) for public comment.
  • These regulations focus on investor protection, legal responsibilities, and the listing and trading of CDRs.
  • The acceleration of CDR development indicates strong policy support for new economy sectors in the medium to long term.

• Monetary Policy:

  • The People's Bank of China (PBOC) continued with large-scale net return of money, improving liquidity and easing interest rates.
  • Short-term rates have seen a major decline, while long-term rates have remained relatively stable, leading to an expanded term spread.
  • The real economy remains resilient, with limited probability of a significant drop in long-term rates based on the latest PMI index.

Main Viewpoints

• CDR Policy:

  • The CSRC's draft CDR regulations signal a supportive environment for new economy sectors, encouraging investment in growth industries.
  • The policy development is likely to boost market confidence and support long-term growth in the technology and innovation sectors.

• Market Volatility:

  • Short-term concerns over Sino-U.S. trade tensions have been somewhat alleviated by the conclusion of trade negotiations and positive statements from both sides.
  • Despite this, the market remains volatile, with some sectors showing strong performance while others lag.

• Liquidity and Rates:

  • Improved liquidity and downward trend in interest rates are expected to support market activity and reduce borrowing costs.
  • The PBOC's actions are consistent with previous practices, suggesting no major policy changes in the near future.

Key Information

• Industry Highlights:

  • Leisure services and pharmaceutical sectors showed strong performance.
  • The petrochemical sector also gained, influenced by geopolitical factors and oil price trends.
  • The power industry saw a slight increase due to electricity price reductions and nuclear power developments.
  • The automobile industry benefited from tax rate reductions, which could stimulate demand and improve earnings.

• Investment Opportunities:

  • Duty-free and tourism sectors are recommended due to improved industrial prosperity and undervaluation.
  • Pharmaceutical companies with quality generic medicines and strong earnings growth are highlighted.
  • Consumer electronics, especially with the launch of new products like the iPhone X, are seen as growth areas.
  • E-commerce is identified as a key resource for the cosmetics and facial mask markets.

Risk Reminder

• Macro Policy Changes: Potential shifts in major macroeconomic policies could impact market performance.
• Systematic Risk: Market-wide risks, including geopolitical tensions and trade wars, should be monitored.
• Data Delay: There is a risk of delayed data affecting investment decisions.

Equity Research Report Summary

Report Details

• Department: Global Research
• Category: Weekly Report
• Date: May 7, 2018
• Analysts:
  • Li CHEN (SAC Reg. No: S1100517060001)
  • Peng WANG (SAC Reg. No: S1100516120001)

Investment Recommendations

• Leisure Services:

  • Focus on duty-free and tourism segments.
  • Companies like CITS (601888.SH), BTG HOTELS (600258.SH), SONGCHENG (300144.SZ), and JINJIANG SHARES (600754.SH) are recommended.

• Pharmaceutical:

  • Pay attention to CROs and pharmaceutical retail segments.
  • Companies like LEPU MEDICAL (300003.SZ), Jointown (600998.SH), and LZYY (63368.SH) are highlighted.

• Electronics:

  • The consumer electronics market is expected to grow due to rising ASP and new product launches.
  • Companies like LXJM (002475.SZ) and O-FILM (002456.SZ) are suggested for investment.

• Petrochemical:

  • The sector is influenced by geopolitical developments, especially the Iran nuclear agreement.
  • Companies like PetroChina (601857.SH), BEIKEN (002828.SZ), YEIC (002053.SZ), and SINOPEC CORP. (600028.SH) are recommended.

• Military & Defense:

  • The sector is volatile, with the shipbuilding and aviation segments outperforming others.
  • Despite short-term risks, the sector fundamentals are robust due to military reform and budget increases.
  • Companies like HAI (600038.SH), AVIC AIRCRAFT (000768.SZ), and AVICEM (002013.SZ) are noted.

• Power Industry:

  • Electricity price reductions for general industry and commerce are expected to boost downstream demand.
  • Companies like DEC (600875.SH), SHANGHAI ELECTRIC (601727.SH), and THNC (002366.SZ) are recommended.

Analyst Certification

• The report is issued independently and objectively by Li CHEN and Peng WANG.
• The analysts have registered as securities consultants and are certified by the Securities Association of China.
• The report uses only legitimate and reliable information, and the opinions expressed reflect the analysts' personal views.

Important Disclaimer

• This document is for the information of Chuancai Securities' clients only.
• It is not a recommendation to buy or sell securities.
• The report may be subject to change without notice.
• Investors are advised to consult with their tax, accounting, or legal advisers before making any investment decisions.
• Unauthorized distribution, reproduction, or publication is prohibited without written permission.

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