20171121-广发证券_香港_-Dim_Sum_Express_6页_506kb

Dim Sum Express Summary

Core Content

This document provides an investment summary for the Hong Kong and A-Share markets, focusing on the impact of new asset management regulations, market outlook for 2018, sector-specific analysis, and stock recommendations. It also includes key financial metrics, upcoming events, and rating definitions for investors.

Key Financial Metrics

The following table summarizes the key index performance and Hong Kong ADRs:

Upcoming Events

• 21 Nov: Non-bank Finance conf call
• 22 Nov: Logan & Aoyuan Property visit (Shenzhen), China Water Affairs NDR (Shanghai), Kou Zi Jiao visit (Huaibei)
• 23 Nov: Kou Zi Jiao & Gu Jing survey (Hefei), Tech-bank Food visit (Ma'anshan), Wisdom Education results NDR (Hong Kong)
• 22-25 Nov: GFS H-Share Research conf calls

Investment Strategy Overview

A-Share Market

• The new asset management regulation is expected to impact market liquidity expectations.
• A transition period and differentiation between pre- and post-regulation activities will limit short-term market impact.
• Mid/long-term effects include unified regulation, product defaults, and deleveraging, which will promote healthy financial development.
• Small- to medium-sized banks will face increased risk reserve pressure, potentially affecting asset expansion.
• Trust companies will be more significantly impacted due to stricter regulations on leverage and risk reserves.

Hong Kong Market

• The Hong Kong market is expected to outperform in 2018 due to steady economic growth, pent-up consumer demand, and structural reforms.
• We forecast a 16% upside for the HSI to 34,000 next year, driven by 10% earnings growth and 6% valuation increase.
• Key investment themes include:
  1. Technology upgrades: Growth in internet-related services and smartphone functionality.
  2. Living quality upgrades: High-end auto, quality education, and tourism.
  3. Health quality upgrades: Government initiatives for "beautiful China" and "healthy China".

Sector Recommendations

Auto Sector

• The auto sector is expected to remain strong in 2018 due to economic recovery and NEV development.
• Companies with improved product portfolios and proactive NEV strategies are recommended.
• Top Picks:
  • Geely Auto (175 HK, Buy): Expected to add five new models in 2018, with increased sales and ASP growth.
  • Brilliance China (1114 HK, Buy): Strong growth from BMW JV models, with a forecasted 43% earnings CAGR from 2016-2019.

Other Sectors

• Tech, Internet, Insurance, Banks, Financial Intermediaries, Healthcare, Environmental Protection, and Education are recommended as they are expected to benefit from consumption upgrades and policy support.

Key Risks

• Auto Sector: Sales growth weakening due to market conditions or economic slowdown.
• Financial Sector: Changes in macroeconomic environment, stricter policy execution, weaker financial business conditions, or lower-than-expected earnings.
• CRCC High-Tech Equipment (1786 HK, Hold): Reliance on China Railway Corporation procurement, lower-than-expected rail line operating length, and dependency on major suppliers.

Rating Definitions

Sector Ratings

Disclaimer

This report is for informational purposes only and does not constitute an offer to buy or sell securities. It is not a recommendation for investment and should not be used as a substitute for professional advice. GF Securities (Hong Kong) accepts no liability for any loss arising from the use of the materials. Investors are advised to be aware of the risks associated with securities trading.