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Daiwa Investment Conference Summary - Hong Kong, 19-22 November 2013

Core Content

The Daiwa Investment Conference in Hong Kong, held from 19 to 22 November 2013, covered macroeconomic research, sector-specific analysis, and investment recommendations across various markets in Asia and beyond. The conference provided insights into regional economic conditions, financial market trends, and company-specific updates.

Main Views

• Asia Economic Express:

  • Money flows in Asia-9 (comprising India, Hong Kong, Taiwan, Korea, Singapore, Malaysia, Thailand, the Philippines, and Indonesia) stabilized but did not significantly improve.
  • FX reserves in Asia-9 rose by USD24bn in September, but compared to the end of 2012, they were down USD33bn.
  • Hong Kong experienced a modest drop in FX reserves, possibly due to increased lending to China.
  • The Fed's inaction in September helped stabilize money outflows in the region.
  • The Japanese stock market showed mixed signals, with TOPIX falling below key support lines and the Higgs boson-related stocks potentially facing a rally end.

• FOMC Minutes:

  • The Fed maintained its asset purchase program, with the June tapering schedule still in place.
  • Officials were cautious about the pace of tapering due to concerns about economic progress and fiscal uncertainty.
  • Some members of the committee suggested a gradual reduction in purchases, with a focus on Treasury securities rather than MBS.

• Euro Area & UK Overview:

  • German industrial production data suggested a steady, albeit modest, recovery.
  • The UK's industrial production data was disappointing, with a 1.5% monthly decline.
  • Despite some positive trends in the long term, the UK's export performance remained subdued, with export volumes still below pre-2008 levels.

Key Information

Regional Indices (October 2013)

Company Analysis

CNOOC (883 HK)

• Rating: Buy (1)
• Target Price: HKD19.70
• Upside: 25.2%
• Current Price (9 Oct): HKD15.74
• Key Points:
  • Production growth at Bohai Bay is expected to improve due to technological innovations like Cyclic Steam and Gas Stimulation (CSGS).
  • The company's 2014E PER is seen as inexpensive compared to its five-year average.
  • Risks include lower oil and gas prices, operational risks, and sovereign risk.

China Minsheng Banking Corp (1988 HK)

• Rating: Outperform
• Key Points:
  • The main concern is capital availability.
  • The company's performance is expected to be influenced by the broader economic environment.

China Citic Bank (998 HK)

• Rating: Underperform
• Key Points:
  • The bank faces multiple challenges, including regulatory and economic pressures.

TCL Communication Technology (2618 HK)

• Rating: Not Rated
• Key Points:
  • The company is adopting a fast time-to-market strategy for smartphones.
  • No specific rating was assigned, indicating uncertainty in its outlook.

Nexon (3659 JP)

• Rating: Buy
• Key Points:
  • The company is expected to continue delivering strong performance.

Gravity (GRVY US)

• Rating: Not Rated
• Key Points:
  • The company is moving along the mobile wave, but its outlook remains uncertain.

Axiata Group Bhd (AXIATA MK)

• Rating: Hold
• Key Points:
  • The company's performance is expected to remain stable.

Events & Visits

• Company Roadshows:

  • Hang Lung Properties (101 HK): 7-10 Oct, US
  • Far Eastone (4904 TT): 14-17 Oct, US
  • Texhong Textile Group (2678 HK): 14-18 Oct, EU
  • Ju Teng (3336 HK): 17 Oct, HK and SG
  • New World China Land (917 HK): 17-18 Oct, Tokyo
  • Zheng Tong Auto (1728 HK): 18 Oct, HK and SG
  • CapitalCommercial Trust (CCT SP): 18 Oct, SG
  • China Financial Service (605 HK): 21 Oct, HK

• Daiwa Asian Events:

  • 10-Oct: Daiwa ASEAN Conference - Philippines Corporate Day 2013, SG
  • 16-Oct: KOSDAQ Global Investors Conference 2013, HK
  • 18-Oct: KOSDAQ Global Investors Conference 2013, SG
  • 21-22 Oct: Daiwa ASEAN Conference - Best of Indonesia 2013, Tokyo
  • 23-Oct: Daiwa ASEAN Conference - Best of Indonesia 2013, Toronto
  • 19-22 Nov: Daiwa Investment Conference Hong Kong 2013, HK

Memo - Quick Updates

• China Marine Sector:

  • Top 8 ports recorded a 3% YoY increase in throughput in September, but the base effect is expected to diminish in 4Q13.
  • Hong Kong's FX reserves dropped USD402m in September, possibly due to increased lending to China.

• Chailease (5871 TT):

  • Announced September revenue figures, indicating continued performance.

Analysts & Contact Info

• Kevin Lai: (852) 2848 4926, kevin.lai@hk.daiwacm.com
• Eiji Kinouchi: (81) 35555-7230, eiji.kinouchi@daiwa.co.jp
• Michael Moran: 212-612-6392, mike.moran@us.daiwacm.com
• Adrian Loh: (65) 6499 6548, adrian.loh@sg.daiwacm.com
• Benjamin Lim: (65) 6321 3086, benjamin.lim@sg.daiwacm.com
• Jerry Yang: (65) 6321 3086, jerry.yang@sg.daiwacm.com
• Leon Qi: (852) 2848 4482, leon.qi@hk.daiwacm.com
• Thomas Y. Kwon: (852) 2848 4482, thomas.kwon@hk.daiwacm.com
• Ramakrishna: (852) 2848 4482, ramakrishna@hk.daiwacm.com
• Sarachada: (852) 2848 4482, sarachada@hk.daiwacm.com
• Maruvada: (852) 2848 4482, maruvada@hk.daiwacm.com
• Hikaru Sato: (81) 35555-7330, hikaru.sato@daiwa.co.jp

Investment Outlook

• CNOOC (883 HK):

  • Reaffirmed Buy rating and target price of HKD19.70.
  • Expected strong organic production growth from 2014 onwards.
  • Risks include lower oil and gas prices, operational risks, and sovereign risk.

• Other Companies:

  • Ratings and outlooks varied, with some companies receiving Buy, Outperform, or Underperform ratings based on their respective challenges and opportunities.

Economic Calendar & Other Research

• Economic Calendar - October 2013:

  • Key events include the release of industrial production data from France and Italy on Thursday.
  • The ECB's Monthly Report is also due.

• Rating and Target-Price Information:

  • Provided detailed ratings and target prices for various companies.

• Recently Published Reports:

  • Covered multiple companies and their performance, including CNOOC and others.

Conclusion

The conference highlighted the mixed economic conditions in Asia and the broader global markets, with a focus on the impact of the Fed's inaction on money flows and the potential for recovery in certain sectors. Company-specific analysis emphasized technological advancements and their implications for production and investment. Analysts provided insights into market trends, earnings outlooks, and investment strategies, with a particular emphasis on the importance of the Higgs boson-related stocks and the continued challenges faced by some companies.