20150914-大华继显-Regional_Morning_Notes_17页_1mb

Regional Morning Notes Summary

Core Content Overview

This document provides a comprehensive analysis of economic and market activities across several Asian regions, with a focus on China, Indonesia, Malaysia, and Singapore. It includes economic data, sector updates, investment recommendations, and market valuations for key stocks. The report also highlights corporate events and strategic developments, such as infrastructure progress and SOE reforms.

Main Points and Key Information

China

• Economic Activity: Chinese economic activities slowed in August 2015. Industrial production growth rebounded slightly to 6.1% yoy, but this was attributed to a low base effect. Fixed Asset Investment (FAI) growth was weaker than expected, with ytd FAI growth at 10.9% yoy.
• Retail Sales: Retail sales growth increased to 10.8% yoy, driven by higher inflation, but real growth remained at 10.4% yoy.
• Cement Sector:
  • Cement production declined by 4.2% yoy in August 2015.
  • National cement prices fell to a historical low of Rmb272/tonne, with a 14% decline ytd.
  • Property new starts growth was slower than expected, which offset the seasonal rebound in cement production.
  • The sector is currently trading at an undemanding valuation of 0.9x FY15F P/B.
  • Sector View: Maintain UNDERWEIGHT due to lack of long-term growth drivers. However, BBMG is recommended as a top pick due to its exposure to the property market and the implementation of the Beijing-Tianjin-Hebei plan.
  • Catalysts: Expected ramp-up in infrastructure spending, and mixed-ownership reforms for key companies.
  • Risks: Weakness in infrastructure investment and cement prices, and slow progress in SOE reforms.

Indonesia

• Infrastructure Progress: The market is overly pessimistic about infrastructure development. Despite this, progress is being made in toll road and power plant projects.
• Toll Road Development:
  • The remaining half of the Trans Java toll road project has secured over 80% of the land required.
  • About 36% of non-Trans Java toll road projects have reached a 70% land acquisition completion rate.
• Power Development:
  • 10,067 MW of power has been commissioned, with 4,700 MW still under development.
  • The current 35,000 MW power generation plan includes 13.2% of projects in the construction phase and 38% in the procurement phase.
• Market Valuation: Indonesia is rated at -2SD P/B, suggesting the market has priced in a pessimistic view. The report reiterates a BUY rating for the country.
• Top Buys: JSMR, WSKT, PTPP, and ADRO are recommended for their exposure to the toll road and power plant development programs.

Malaysia

• Maxis: Amid expectations of flattish sector earnings in 2015, Maxis is focusing on improving operational efficiency and savings to protect EBITDA. The stock is rated as HOLD with a target price of RM7.00.

Singapore

• Elections: The People's Action Party (PAP) won with a higher-than-expected share of popular votes, indicating market positivity toward its policies.

Key Indices (as of 14 September 2015)

Top Picks

Key Assumptions

Corporate Events

Analysts

• China: Chaoping Zhu
• Indonesia: Stevanus Juanda
• Malaysia: Johnson Hu
• Singapore: Stevanus Juanda

Conclusion

The report suggests that while economic activity in China remains weak, there is potential for further stimulus and reform to support long-term growth. The cement sector is underperforming due to weak property construction and land purchase activity, but BBMG is highlighted as a top pick. In Indonesia, the market is overly pessimistic, but progress in infrastructure development is ongoing, with key companies like JSMR and PTPP benefiting. Malaysia's Maxis is expected to focus on operational efficiency, and Singapore's election results are seen as mildly positive for the market.