Regional Morning Notes Summary - 13 October 2014
Core Content Overview
This document provides an analysis of the regional financial and market conditions across several key markets, focusing on plantation and property sectors, with additional insights into stock performance, corporate events, and key assumptions. The information is sourced from Bloomberg, UOB ETR, and UOB Kay Hian, offering a comprehensive view of the current market landscape.
Main Sectors and Key Insights
Plantation Sector (Malaysia)
- Inventory: Increased marginally to 2.09m tonnes in September 2014, driven by higher palm oil imports (38,491 tonnes), despite improved exports and reduced CPO production.
- CPO Production: Declined 6.6% month-on-month in September 2014, mainly due to the low production season and the lagged impact of dry weather in Q1 2014.
- Export Growth: Exports rose 13.3% mom, especially to India (+22.5% mom), EU (+5.7% mom), and China (+5.1% mom), due to the zero export tax policy.
- Market Outlook: Maintain MARKET WEIGHT for the sector. First Resources is highlighted as the top pick.
- Price Outlook: CPO prices are under pressure due to anticipated strong US soybean crops and weak biodiesel demand from Indonesia. Support is expected in 4Q14.
China Property Sector
- Market Trends: Policy loosening is expected to drive a sales recovery, and property stocks are emerging from the bottom of the credit cycle.
- Top Picks: COLI, Vanke, and SUNAC are the top recommendations. CIFI is highlighted as a high-growth pick.
- Key Players:
- SUNAC China (1918 HK): Maintained as a BUY, with a target price of HK$8.45. The company is expected to see 30% YoY growth in saleable resources in 2015.
- CIFI Holdings (884 HK): BUY, with a target price of HK$1.93. Expected to achieve Rmb22.0b in sales this year, up 43.8% YoY.
- Risks: Some developers, such as R&F and Agile, may miss their full-year sales targets. Agile is also flagged for its poor sales progress and strict cash flow management.
- Corporate Events: Notable events include the Asia Gems Conference and discussions on policy changes and market dynamics.
Key Assumptions
| Country |
GDP (% YoY) |
Brent (US$/bbl) |
CPO (US$/mt) |
BDI |
| 2013 |
- |
110 |
736 |
1219 |
| 2014F |
- |
105 |
788 |
1500 |
| 2015F |
- |
105 |
848 |
1800 |
Top Picks and Target Prices
| Company |
Ticker |
Recommendation |
Share Price (Local) |
Target Price (Local) |
Potential Upside/Downside (%) |
| First Resources |
FR SP |
BUY |
1.90 |
2.65 |
+39.7 |
| SUNAC China |
1918 HK |
BUY |
6.47 |
8.45 |
+30.6 |
| China Vanke |
2202 HK |
BUY |
14.32 |
18.94 |
+32.3 |
| COLI |
688 HK |
BUY |
21.05 |
26.80 |
+27.3 |
| CIFI |
884 HK |
BUY |
1.51 |
1.93 |
+27.5 |
| Kaisa |
1638 HK |
BUY |
3.14 |
3.69 |
+17.5 |
| Longfor |
960 HK |
BUY |
9.34 |
12.36 |
+32.3 |
Corporate Events
- "Tea Tasting" Session with Chatime: Petaling Jaya, 17 Oct
- TICON Industrial Connection Corporate Roadshow: Kuala Lumpur, 17 Oct
- ASEAN Plantation Sector Analyst Presentation: Taipei, 20-21 Oct
- Amtek Engineering Luncheon: Singapore, 23 Oct
Market Indices Performance
| Index |
Previous Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
16544.1 |
-0.7 |
-2.7 |
-2.6 |
-0.2 |
| S&P 500 |
1906.1 |
-1.1 |
-3.1 |
-4.0 |
3.1 |
| FTSE 100 |
6340.0 |
-1.4 |
-2.9 |
-6.9 |
-6.1 |
| AS30 |
5185.7 |
-2.0 |
-2.1 |
-6.3 |
-3.1 |
| CSI 300 |
2466.8 |
-0.6 |
1.2 |
1.2 |
5.9 |
| FSSTI |
3223.9 |
-1.1 |
-0.1 |
-3.6 |
1.8 |
| HSI |
23088.5 |
-1.9 |
0.1 |
-6.1 |
-0.9 |
| KLCI |
1808.9 |
-1.1 |
-1.6 |
-2.5 |
-3.1 |
| KOSPI |
1940.9 |
-1.2 |
-2.5 |
-4.9 |
-3.5 |
| Nikkei 225 |
15300.6 |
-1.2 |
-2.6 |
-4.1 |
-6.1 |
| SET |
1552.7 |
-0.5 |
-1.1 |
-1.8 |
-19.6 |
| TWSE |
8966.4 |
0.1 |
-0.1 |
-4.2 |
-4.1 |
| BDI |
963 |
-1.1 |
-7.1 |
-18.5 |
-57.7 |
| CPO (RM/mt) |
2204 |
-0.1 |
0.2 |
8.0 |
-14.3 |
Key Risks and Catalysts
Risks
- Soybean glut: May persist until mid-2015.
- Crude oil price weakness: Could reduce bioenergy demand, impacting CPO usage.
Catalysts
- Mortgage easing measures: Expected to be more evident in the coming months.
- Sales recovery in 4Q14: Anticipated to be strong due to improved market conditions and policy support.
Summary of MPOB Data
| Metric |
Jul 14 |
Aug 14 |
Sept 14 |
| CPO Production |
1.67m |
2.03m |
1.90m |
| Palm Oil Stocks |
1.68m |
2.05m |
2.09m |
| Palm Oil Exports |
1.45m |
1.44m |
1.63m |
| CPO Price (RM/ton) |
2400 |
2176 |
2056 |
Analyst Contact
Conclusion
The report highlights the mixed performance of the plantation and property sectors across the region, with a focus on Malaysia and China. While plantation inventory increased slightly, export growth and policy changes (e.g., zero export tax) are expected to support demand. In the property sector, policy easing and sales recovery are key drivers, with a strong emphasis on large-cap and high-growth stocks. Key risks include the potential for a soybean glut and weak crude oil prices, which could impact bioenergy demand and overall sector performance.
