Regional Morning Notes Summary - 06 March 2017
Core Content Overview
This document provides a detailed analysis of economic and sector developments across several Asian countries, including China, Indonesia, Malaysia, Singapore, and Thailand. It outlines policy directions, market performance, and investment recommendations for the financial markets.
China: Economic Policy & Sector Update
Economic Policy Highlights
- Lower GDP Growth Target: China's GDP growth target for 2017 was set at 6.5% yoy, a decrease from 2016.
- Fiscal and Monetary Policy:
- A proactive fiscal policy will support growth, with a 3% GDP deficit expected through tax cuts and infrastructure investment.
- A prudent monetary policy is in place, with no clear guidance on interest rates. The focus is on supporting the real economy and maintaining the RMB's stable position globally.
- Reforms and Investment Themes:
- Supply-side reforms continue, targeting overcapacity elimination in sectors like steel, coal, and thermal power.
- SOE reforms are accelerating, with mixed-ownership in sectors such as energy, telecom, and defense.
- OBOR and PPP are highlighted as key investment themes for 2017.
Property Sector Update
- 2016 Performance: Developers are expected to report 20.5% revenue growth and 14.7% core net profit growth yoy. Most companies are anticipated to have bottomed out gross margins, with ASP rebound and cost control as key drivers.
- Key Companies:
- COLI, CRL, Longfor, and KWG are expected to report core net profit margins above 14%.
- Core net profit growth is expected to be 15% yoy on average, with SUNAC, Poly Property, and Agile likely to report weaker performance.
- Recommendations:
- BUY: COLI, CRL, Longfor, KWG
- SELL: SUNAC, Agile, Poly Property
- HOLD: Vanke, CIFI, Poly Real Estate, Sino-Ocean Land
Market Outlook
- Underweight Recommendation: Maintained due to tightening policies, higher leverage, and a more challenging 2017 environment.
- 2017 Contracted Sales Target: Expected to grow 12% yoy, with companies like Evergrande and COLI likely to outperform due to strong saleable resources.
Indonesia
- PP London Sumatra Indonesia (LSIP IJ):
- BUY recommendation with a target of Rp1,780.
- Sustainable growth is expected due to improving production growth.
Malaysia
- PPB Group (PEP MK):
- HOLD recommendation with a target of RM15.55.
- Positive long-term prospects due to a solid business model.
- 2017 earnings growth is expected from grains and agribusiness, consumer products, and cinema operations.
Singapore
- Alpha Picks:
- Sunningdale added to the list with a BUY recommendation.
- Bumitama and Duty Free removed.
- SMM added as a candidate for topslice/short due to a recent price surge.
- Market Strategy: Focus on solid cash flow, M&A potential, and undemanding valuation for Sunningdale.
Thailand
- Home Product Center (HMPRO TB):
- BUY recommendation with a target of Bt11.60.
- Store expansion and resilient margins are expected to support strong earnings momentum.
- Samart Corp (SAMART TB):
- BUY recommendation with a target of Bt16.50.
- Transitioning to SAMART 4.0 as a key strategic move.
Key Indices (as of 06 March 2017)
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
21005.7 |
0.0 |
0.9 |
4.8 |
6.3 |
| S&P 500 |
2383.1 |
0.1 |
0.7 |
4.0 |
6.4 |
| FTSE 100 |
7374.3 |
-0.1 |
1.8 |
2.8 |
3.2 |
| AS30 |
5775.4 |
-0.8 |
-0.2 |
1.9 |
1.0 |
| CSI 300 |
3427.9 |
-0.2 |
-1.3 |
1.6 |
3.6 |
| FSSTI |
3122.3 |
-0.5 |
0.2 |
2.1 |
8.4 |
| HSCEI |
10144.5 |
-1.0 |
-2.6 |
3.1 |
8.0 |
| HSI |
23552.7 |
-0.7 |
-1.7 |
0.9 |
7.1 |
| JCI |
5391.2 |
-0.3 |
0.1 |
-0.1 |
1.8 |
| KLCI |
1708.4 |
-0.4 |
0.6 |
1.0 |
4.1 |
| KOSPI |
2078.8 |
-1.1 |
-1.4 |
0.1 |
2.6 |
| Nikkei 225 |
19469.2 |
-0.5 |
1.0 |
2.6 |
1.9 |
| SET |
1566.2 |
-0.2 |
0.1 |
-1.4 |
1.5 |
| TWSE |
9648.2 |
-0.4 |
-1.3 |
1.2 |
4.3 |
| BDI |
939 |
3.9 |
7.3 |
27.8 |
-2.3 |
| CPO (RM/mt) |
2977 |
1.2 |
-0.4 |
-9.7 |
-6.9 |
| Brent Crude (US$/bbl) |
56 |
1.5 |
-0.2 |
-1.6 |
-1.6 |
Top Picks (BUY)
| Company |
Ticker |
Current Price (HK$) |
Target Price (HK$) |
Upside (%) |
| Ping An |
2318 HK |
41.20 |
47.00 |
14.1 |
| Bank Negara |
BBNI J |
6,350.00 |
7,100.00 |
11.8 |
| Indosat |
ISAT J |
7,075.00 |
8,015.00 |
13.3 |
| Tiga Pilar |
AISA J |
2,190.00 |
2,550.00 |
16.4 |
| Genting Bhd |
GENT MK |
9.16 |
10.45 |
14.1 |
| OCBC |
OCBC SP |
9.49 |
10.75 |
13.3 |
| Venture Corp |
VMS SP |
10.98 |
12.40 |
12.9 |
Key Assumptions
| Country |
GDP (yoy) |
2015 |
2016F |
2017F |
| US |
2.6 |
2.6 |
1.7 |
2.7 |
| Euro Zone |
2.0 |
2.0 |
1.6 |
1.1 |
| Japan |
1.2 |
1.2 |
0.8 |
0.9 |
| Singapore |
2.0 |
2.0 |
1.4 |
1.8 |
| Malaysia |
5.0 |
5.0 |
4.2 |
4.5 |
| Thailand |
2.8 |
2.8 |
3.2 |
3.3 |
| Indonesia |
4.8 |
4.8 |
5.0 |
5.2 |
| Hong Kong |
2.4 |
2.4 |
2.1 |
1.8 |
| China |
6.9 |
6.9 |
6.5 |
6.2 |
| Indicator |
2016 |
2017F |
2018F |
| Brent (Average) |
45 |
56 |
61 |
| CPO (RM/mt) |
2,653 |
2,600 |
2,500 |
Corporate Events
| Event |
Venue |
Begin |
Close |
| Greater China Strategy Analyst Marketing |
UK/Europe |
1 Mar |
8 Mar |
| Annual Plantation Outlook Seminar |
Malaysia |
6 Mar |
6 Mar |
| Roadshow with Guotai Junan |
Singapore |
7 Mar |
8 Mar |
| Roadshow with China Gas Holdings |
Hong Kong |
15 Mar |
15 Mar |
| Roadshow with Globetronics Technology |
Singapore |
23 Mar |
23 Mar |
| Roadshow with Singtel |
Canada |
26 May |
26 May |
Analysts
Conclusion
The report outlines a cautious outlook for China's property sector, with underweight maintained due to tighter credit controls and policy shifts. While the 2016 results were largely in line with expectations, 2017 growth is expected to be more moderate. Investment in OBOR and PPP is anticipated to drive growth, and SOE reforms are highlighted as a potential theme. Other markets like Indonesia, Malaysia, and Singapore show positive signals with BUY recommendations. The economic policy in China is marked by lower growth targets and fiscal expansion, with a focus on structural reforms and infrastructure investment.
