Bank credit growth stabilises, but M2 and TSF growth slows further. In June 2018, new bank loans and TSF were significantly higher than the previous month, reaching Rmb1.2t and Rmb1.8t respectively. However, M2 and TSF growth fell to 8.0% and 9.8% yoy, while bank credit growth stabilised at 12.7% yoy.
M0 and M1 money supply growth rose to 3.9% and 6.6% yoy, respectively, surpassing the previous month's figures and Bloomberg estimates.
Shadow banking shrinkage continues to affect asset quality, with a decline in entrusted loans and bank acceptances.
Targeted monetary accommodation is expected to continue, with potential RRR cuts and increased SLF/MLF lending, which could help improve M2 and TSF growth by late-3Q18.
Economics - Trade
Trade surplus with the US reached a record high of US$29.0b in June 2018, despite ongoing trade tensions.
Chinese exports grew 11.3% yoy, slightly below Bloomberg estimates, while imports grew 14.1% yoy, well below May's 26.0% yoy.
Export growth to the US and EU remained strong at 12.6% and 10.4% yoy, respectively, but exports to Japan and Hong Kong slowed.
Manufacturing and Wholesale & Retail sectors are expected to be impacted by trade tensions and potential slowdown in the export sector.
Sector - Banking
Trade friction exerts stress on asset quality, particularly in the Manufacturing and Wholesale & Retail sectors.
Asset quality deterioration is expected to be similar to the 2015-16 credit cycle due to supply-side reforms and investment-grade refinancing.
NPL formation and credit costs are expected to remain elevated, but banks are increasing write-offs to stabilise the NPL ratio.
Top BUY recommendations: CCB (Target: HK$9.02) and ICBC (Target: HK$7.68) due to their strong deposit franchise, extensive branch networks, and mobile presence.
Earnings revisions for major SOE banks: ICBC, CCB, and ABC have had downward revisions for 2018 and 2019 due to increased credit costs.
Sector - Property (Hong Kong)
Minimal impact from recent policy announcement, with the CCL Index rising 0.48% and the HSP Index rising 0.90% wow.
Primary market activity rebounded with three new project launches, including SHKP's Victoria Harbour and St Martin, and Far East's The Garrison.
Secondary market sales volume increased by 167% wow, indicating strong buyer interest despite new policies.
High subscription rates were observed, with some projects seeing up to 21 times subscription.
Maintain MARKET WEIGHT; the primary market is expected to remain strong due to affordability measures and high demand for new units.
Top BUY recommendations: New World Development (NWD) and Sun Hung Kai Properties (SHKP) due to their strong fundamentals and growth potential.
Indonesia
Automobile
Avanza regained the position as the number one selling car in Indonesia, indicating strong consumer demand and market leadership.
