20180409-川财证券-Chuancai_Securities_Research_Highlights_Weekly__China_Market_Weekly_Outlook_10页_468kb

Market Overview Summary

Core Content

• The escalation of Sino-U.S. trade tensions has raised concerns and created opportunities in the Chinese equity market.
• Major indices experienced declines last week: Shanghai Composite (-1.19%), Shenzhen Component (-1.69%), ChiNext (-3.35%), and CSI 300 (-1.12%).
• The market shows subtle volatility, with continued differentiation among individual stocks.
• Policy support at the national level has helped maintain domestic market risk appetite.
• The improved liquidity since 1Q2018 has been a key factor in the capital market, particularly in the bond market.
• The central bank is maintaining a liquidity tightening stance, with the potential for historical tax peaks in Q2 affecting liquidity further.

Main Points

• Short-term Outlook: The stock market is expected to maintain subdued volatility, with a focus on growth stocks.
• Policy Impact: Accelerated CDR (China Depository Receipts) and de-listing mechanisms are positive signals for growth sectors.
• Systematic Risk: The trade war and related macro-policy changes pose significant risks to the market.
• Liquidity Trends: The central bank's liquidity management continues to influence market dynamics, and the link between interest rates and liquidity is strengthening.

Key Information

• The A-share market experienced overall declines, with the leisure services sector showing the best performance (+0.23%).
• Import substitution is a key theme, especially in the mechanical equipment sector, where companies producing core components like robotics, semiconductor equipment, and high-end pump valves may benefit from reduced U.S. imports.
• Home appliance sector saw mixed performance, with washing machines benefiting from sustained consumption upgrades, while other segments like air conditioners and dishwashers faced pressure due to U.S. tariffs.
• Retail and commerce showed signs of revival, with the cosmetics segment leading the growth.
• Pharmaceutical sector had a mixed week, but generic medicine companies and pharmaceutical retailers are highlighted as potential investment opportunities.
• Transportation sector saw a decline, but long-term prospects remain positive due to supply-side reforms and improved punctuality rates.
• Construction materials experienced a de-stocking phase, with cement and glass industries showing varied performance.
• Petrochemical sector was impacted by trade tensions, with crude oil prices falling due to concerns over U.S.-China trade war effects.

Industry Highlights

Mechanical Equipment

• Performance: -1.01% (outperformed SHCOMP by 0.19%).
• Opportunities: Companies involved in domestic substitution and import-dependent core components (e.g., robotics, semiconductor equipment, high-end pump valves, internal combustion engines).
• Recommendations: Focus on growth stocks in this sector due to favorable policies and reduced U.S. imports.

Leisure Services

• Performance: +0.23% (outperformed CSI 300 by 1.35%).
• Opportunities: Hainan Province benefits from the Boao Forum and its tax-free policies, which are expected to enhance consumption.
• Recommendations: Pay attention to CITS (601888.SH), SANTE CABLEWAYS (002159.SH), and BTG HOTELS (600258.SH).

Risk Reminder

• Major macro-policy changes could impact market trends.
• Systematic risk remains a concern.
• Data delay may affect the accuracy of market analysis.

Equity Research Report Summary

• Department: Global Research
• Category: Weekly Report
• Date: April 9, 2018
• Analysts: Li CHEN, Peng WANG
• Contact: Wenyi ZHOU
• Research Division Locations: Beijing, Shanghai, Shenzhen, Chengdu

Key Indices Performance

Market Strength and Activity

Fundamentals

• Interest Rate: 10-year treasury bond yield at 3.74% (-1.07bp), overnight Shibor at 2.47% (-10.50bp), 7-day reverse repurchase at 2.70% (-7.01bp).
• Asset Prices:
  • U.S. Dollar: 89.17 (-0.01%)
  • Crude Oil: 63.28 (-0.36%)
  • Copper: 6781.5 (-0.21%)
  • Rebar: 3318 (-1.13%)

Industry Review Highlights

Mechanical Equipment

• Performance: -1.01% (outperformed SHCOMP by 0.19%).
• Opportunities: Domestic substitution and policy support are key for import-dependent manufacturers.
• Related Listings: Robotics, semiconductor equipment, high-end pump valves, internal combustion engines.

Home Appliance

• Performance: Outperformed the broader market.
• Opportunities: Washing machines saw strong demand due to consumption upgrades.
• Challenges: U.S. tariffs on refrigeration compressors, air conditioners, and dishwashers could impact certain segments.
• Related Listings: Companies with certainty in the sector.

Retail and Commerce

• Performance: -0.61%.
• Opportunities: Cosmetics segment showed strong growth (up 12.5% YoY).
• Related Listings: PROYA (603605.SH), YUJIAHUI (300740.SZ), ZLC (600818.SH).

Pharmaceutical

• Performance: -0.39% (ranked 5th among 28 sectors).
• Opportunities: Generic medicine companies and pharmaceutical retailers with good valuation-performance match.
• Related Listings: Dezhan Healthcare (000813.SZ), LEPU MEDICAL (300003.SZ), JOINTOWN (600998.SH), LZYY (603368.SH).

Transportation

• Performance: -1.22%.
• Opportunities: Long-term growth due to supply-side reforms and improved punctuality.
• Related Listings: Air China (601111.SH), China South Air (600029.SH), CEA (600115.SH).

Construction Materials

• Performance: Mixed, with cement industry showing potential for growth.
• Opportunities: Improved de-stocking and supply-side concentration.
• Related Listings: PRCO (002225.SH), BJLE (002392.SH), ACC (600585.SH), LYEM (002088.SH), WANNIANQING (000789.SH).

Petrochemical

• Performance: Prices of compound fertilizers, styrene, ethylene glycol, toluene, and methanol rose by 2.67%, 2.64%, 1.80%, 1.68%, and 1.54%, respectively.
• Opportunities: Potential for long-term growth despite short-term trade war concerns.
• Related Listings: Not explicitly mentioned, but sector-wide analysis is provided.

Analyst Certification

• Li CHEN and Peng WANG are certified securities analysts.
• The report is issued independently and objectively based on due diligence and professional research methods.
• Opinions expressed reflect personal views and are not influenced by external compensation.

Ratings Explanation

• Stock Ratings:
  • "BUY": 30% or more return expected over 6 months.
  • "Increase": 15%–30% return expected.
  • "Neutral": -15% to +15% return expected.
  • "SELL": -15% or less return expected.
• Sector Ratings:
  • "OVERWEIGHT": 30% or more outperformance expected.
  • "Increase": 15%–30% outperformance.
  • "Neutral": -15% to +15% outperformance.
  • "UNDERWEIGHT": 15% or more underperformance.

Important Disclaimer

• The report is for informational purposes only and not a recommendation.
• Chuancai Securities Limited is not liable for any content from external links.
• Unauthorized distribution, reproduction, or publication is prohibited.
• Investors are advised to consult their financial advisors before making investment decisions.

About Chuancai Securities Limited

• Established in 1988, it is a fully licensed securities company.
• Jointly owned by major Chinese enterprises including China Huadian Capital Holdings Co., Ltd. and Sichuan State-owned Assets Operation and Management Administrator Co., Ltd.

Chuancai Research Division

• Offers comprehensive research and analysis across macro, industry, equity, and global markets.
• Provides integrated solutions for policymakers, institutional investors, and enterprises.

Global Market Research Department

• Focuses on providing global investors with insights on China's capital market.
• Includes analysis of world's top investment institutions and international views on China's economy and financial markets.