20181022-招商证券_香港_-Strategy_report_25页_2mb

报告摘要

Summary of China Merchants Securities (HK) Strategy Report: Going through Trough III

Core Content

This report from China Merchants Securities (HK) provides an analysis of the Hong Kong stock market and global economic outlook in October 2018. It highlights the market sell-off, the government's easing policies, and the investment outlook for the fourth quarter (Q4) and beyond. The report also outlines key economic indicators and sector performance.

Main Points

Market Performance

HK market sell-off intensified in October with the Hang Seng Index (HSI) and MSCI China Index falling by 8.0% and 10.3% respectively by 19 October 2018.
The HSI and MSCI China Index traded at forward P/E of 10.6x and 11.1x, which are 8-9% below 5-year median levels, making them compelling compared to global major markets.
Hong Kong market saw small net inflow from southbound in September and October, while EM markets continued to experience net outflow.

Sector Performance

Defensive sectors such as telecom, utilities, staples, and energy were best performers YTD.
Financials and healthcare have seen rising interest in recent months.
Cyclical sectors are expected to remain under pressure in Q4.

Earnings and Valuations

Earnings revision for MSCI China index saw a 2% cut in EPS since August, with more downward revisions expected.
Valuations are discounted to historical median levels, suggesting potential for recovery.

Key Risks

Tighter than expected policy.
Higher than expected USD strengthening.
Escalating US/China trade war.
Spread of currency crisis from EM countries.
Pullback of US market.

Key Catalysts

China's easing policy.
Bilateral solution between US and China.
Weakening of USD.

Policy Measures

Monetary Policy

RRR cut of 1% on 7 October 2018, releasing RMB1.2tr in liquidity, with RMB750bn net liquidity entering the banking system.
This was the fourth RRR cut in 2018, following cuts in January, April, and July.

Fiscal Policy

Import tariff reduction on 1,585 items by 2ppt, effective from 1 November 2018, lowering the average rate from 9.8% to 7.5%.
Second round of increase in export tax rebate announced on 8 October 2018.
Tax and administration fee reduction of RMB1.3tr for 2018, RMB200bn above initial target.
Personal tax deduction for expenses on healthcare, education, mortgage interest/rent, and supporting parents, effective 1 January 2019.

Local Government Support

Local governments such as Shenzhen, Beijing, and Hangzhou provided liquidity support to listed companies and eased share-pledging pressure.

Economic Outlook

Global Economy

IMF revised down global growth for both 2018 and 2019 by 0.2ppt, to 3.7%.
Downside risks have increased, including rising trade barriers and reversal of capital flows to EM economies.
US economic momentum remains strong, but trade tensions and tariffs have revised down the 2019 growth forecast.
Euro Area and UK growth forecasts have been marked down due to economic surprises.
Emerging market and developing economies have mixed growth outlooks, with some countries like Argentina, Brazil, Iran, and Turkey seeing revisions down due to country-specific issues and tightening financial conditions.

China Economy

Q3 GDP growth slowed to 6.5%, the lowest since 2009.
Net export contributed negatively to growth in the first three quarters of 2018.
IMF projected weaker growth for China in 2019 due to trade measures and external uncertainties.

Key Economic Indicators

US macro data remains robust, but concerns about late-cycle expansion and potential market correction are growing.
US treasury yields surged, raising concerns about asset reallocation.
CPI and PPI data shows moderate inflation and price stability.
PMI dipped further, indicating weakening economic activity.
Retail sales remained sluggish, with slow growth.
Infrastructure and property investment weakened, while manufacturing investment remained resilient.
Imports surged, while exports remained robust, showing strong trade activity.

Investment Outlook

A mild rebound in Q4 is expected.
Defensive sectors such as telecom, utilities, insurance, and consumer staples are likely to remain favorites.
If a clearer signal of rebound is seen, investors should shift to banks, property, and materials.

Conclusion

The report outlines a mixed economic and market environment with external pressures from the US-China trade war and tightening global financial conditions, but government easing policies are expected to stabilize the market and boost investor confidence. The Hong Kong stock market is undervalued, and a mild rebound is anticipated in the coming months.