Regional Morning Notes Summary - 12 September 2017
Core Content Overview
This document provides a summary of market updates and analysis for various regions, with a focus on China's automobile and commodities sectors, along with highlights from Indonesia, Malaysia, and Singapore. It also includes key indices, top picks, and analyst insights.
Main Points
China - Automobile Sector
- Passenger Vehicle Sales Recovery:
- Passenger vehicle sales continued to recover in August, with wholesale shipment up 4.7% yoy and 11.6% mom, and retail sales up 5.8% yoy and 11.7% mom.
- Inventory levels were drawn down to below 1.5 months in August, below the alert threshold.
- SUV Segment Performance:
- SUV sales growth rebounded to over 20% yoy in August.
- Geely and GAC showed strong sales growth due to new SUV models, while Great Wall Motor (GWM) saw flat sales due to losing market share.
- OEM Performance:
- BAIC and Brilliance are highlighted as top picks with strong mom growth.
- GWM is recommended to be sold due to margin pressures and cannibalisation from new models.
- Market Outlook:
- Underweight on the automobile sector due to weak earnings and competition.
- Top Picks: Brilliance, Geely, BAIC, Yongda, and others with positive outlooks.
China - Commodities Sector
- Metals Prices Rise:
- Metals prices have surged due to improved global supply-demand dynamics and weak US dollar.
- Aluminium, Copper, and Zinc are preferred due to strong fundamentals.
- Iron Ore is cautious due to oversupply.
- Demand Drivers:
- Continued growth in China and a recovery in Europe have supported demand.
- China's infrastructure and property investment remained robust, contributing to demand.
- Supply Constraints:
- China's supply-side reforms have led to capacity elimination in the metals sector.
- Aluminium is the key focus of reforms, with potential for further price increases.
- Market Outlook:
- Overweight on the commodities sector due to strong fundamentals and supply constraints.
- Iron Ore is expected to face price declines due to oversupply.
Indonesia
- Matahari Department Store:
- The store is trading at -3SD to 5-year historical PE, indicating it is too cheap for a bearish stance.
- LPPF is recommended for investment.
Malaysia
- Plantation Sector:
- Inventory increased to 1.94m tonnes in August, but still below market expectations due to strong exports.
- Inventory increase is expected to be slow moving forward.
Singapore
- Small/Mid Cap Highlights:
- Bayan Tree Holdings (BTH) is recommended with a BUY rating.
- The company is expected to benefit from a sunny turnaround and is priced at S$0.64, with a target of S$0.93.
Key Indices
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
22057.4 |
1.2 |
0.3 |
0.9 |
11.6 |
| S&P 500 |
2488.1 |
1.1 |
0.5 |
1.9 |
11.1 |
| FTSE 100 |
7413.6 |
0.5 |
0.0 |
1.4 |
3.8 |
| AS30 |
5775.1 |
0.6 |
0.2 |
0.5 |
1.0 |
| CSI 300 |
3825.6 |
0.0 |
-0.5 |
4.9 |
15.6 |
| FSSTI |
3228.5 |
0.0 |
-0.1 |
-1.6 |
12.1 |
| HSCEI |
11221.1 |
0.6 |
0.3 |
6.1 |
19.4 |
| HSI |
27955.1 |
1.0 |
0.8 |
4.0 |
27.1 |
| JCI |
5871.9 |
0.3 |
1.0 |
1.8 |
10.9 |
| KLCI |
1782.7 |
0.2 |
0.5 |
0.9 |
8.6 |
| KOSPI |
2359.1 |
0.7 |
1.3 |
1.7 |
16.4 |
| Nikkei 225 |
19545.8 |
1.4 |
0.2 |
-0.9 |
2.3 |
| SET |
1637.5 |
0.1 |
1.1 |
4.9 |
6.1 |
| TWSE |
10572.2 |
-0.4 |
0.0 |
2.3 |
14.3 |
| BDI |
1332 |
2.8 |
12.2 |
17.0 |
38.6 |
| CPO (RM/ml) |
2761 |
1.0 |
3.0 |
6.1 |
-13.7 |
| Brent Crude |
54 |
0.1 |
2.9 |
3.3 |
-5.2 |
Top Picks (BUY)
| Company |
Ticker |
Price (HK$) |
Target Price (HK$) |
Pot. +/- (%) |
| Brilliance |
1114 HK |
19.80 |
28.00 |
24.3 |
| Geely |
1785 HK |
19.52 |
22.00 |
10.3 |
| BAIC |
1958 HK |
6.94 |
11.50 |
22.1 |
| Yongda |
3669 HK |
10.96 |
15.00 |
24.3 |
| Waskita Karya |
WSKT IJ |
1,300.00 |
3,000.00 |
40.8 |
| Ekovest |
EKO MK |
1.13 |
1.45 |
28.3 |
| OCBC |
OCBC SP |
10.92 |
13.38 |
22.5 |
| Ace Hardware |
ACES IJ |
1,065.00 |
1,300.00 |
22.1 |
Top Picks (SELL)
| Company |
Ticker |
Price (HK$) |
Target Price (HK$) |
Pot. +/- (%) |
| Great Wall Motor |
2333 HK |
9.92 |
5.50 |
-44.6 |
| UMW Holdings |
UMWH MK |
5.44 |
4.80 |
-11.8 |
Key Assumptions (2017F)
| Country |
GDP Growth (%) |
| US |
2.5 |
| Euro Zone |
1.8 |
| Japan |
0.9 |
| Singapore |
2.4 |
| Malaysia |
5.0 |
| Thailand |
3.3 |
| Indonesia |
5.2 |
| Hong Kong |
2.0 |
| China |
6.6 |
Key Metals Fundamentals
- Aluminium: Positive outlook due to capacity elimination and supply-side reforms.
- Copper: Potential for price support due to supply risks and slower property demand.
- Zinc: Prices supported by persistent supply shortages and demand from China and Europe.
- Iron Ore: Weak fundamentals due to oversupply, leading to price declines.
Analysts
Corporate Events
- Analyst Marketing on Indonesia Construction Sector (Kuala Lumpur & Singapore, 11–12 Sep)
- Roadshow with Globetronics Technology (Hong Kong, 12 Sep)
- Tea Session with Cityeon Holdings (Singapore, 12 Sep)
- Conference Call with Thai Union Group (Bangkok, 13 Sep)
- Conference Call with Kasikornbank (Bangkok, 15 Sep)
- Roadshow with Cahya Mata Sarawak (Hong Kong, 18 Sep)
- Analyst Marketing on Singapore Telcos and Banking Sectors (Kuala Lumpur, 18–19 Sep)
- Roadshow with China Yongda Automobiles Services Holdings (Canada/US, 25–29 Sep)
- Roadshow with BBI Life Science Corp (Hong Kong, 28 Sep)
- Asian Gems Conference 2017 (Singapore, 10–11 Oct)
- UOB Kay Hian Annual Regional Strategy Conference (Kuala Lumpur, 13 Nov)
Sector Outlook
- Automobile: Underweight due to weak earnings and competition.
- Commodities: Overweight due to strong fundamentals and supply constraints.
Summary
- The China automobile sector shows continued recovery in August, with SUVs leading the growth.
- Geely, GAC, and BAIC are highlighted as top performers, with GWM being a sell recommendation.
- Metals prices are rising due to improved supply-demand dynamics and US dollar weakness, with aluminium, copper, and zinc preferred over iron ore.
- Indonesia and Malaysia show positive market updates, with Matahari Department Store being undervalued.
- The commodities sector is overweight due to strong fundamentals and supply-side constraints.
- Analysts Ken Lee and Sophie Yu are key contributors to the report, providing detailed insights on both sectors.
