20160726-瑞士信贷_香港_-APAC_Equity_Strategy_14页_1mb

APAC Equity Strategy Summary

Core Content

This report discusses the performance of cyclical sectors in the APAC region, particularly focusing on the lagging sectors and their potential for investment. The analysis highlights the relative performance of different sectors and the impact of EPS revisions on their valuation and outlook.

Main Points

• Sector Performance:

  • Energy, Materials, and Tech have shown strong performance, rising by 32%, 27%, and 25% respectively from the lows.
  • Consumer Discretionary and Industrials have lagged behind, with increases of 16% and 13% respectively.
  • The broader MSCI Asia ex-Japan index has rallied by 21% from the lows, which both lagging sectors have underperformed.

• EPS Revisions:

  • Energy, Materials, and Tech have seen positive EPS revisions in July (3.3%, 3%, and 1% respectively).
  • Consumer Discretionary and Industrials have experienced EPS downgrades of 0.9% and 0.7% respectively.
  • There is a slowing rate of EPS downgrades for Industrials, from -2.5% in May to -0.7% in July.
  • Consumer Cyclicals have shown a similar rate of EPS downgrades, with no clear easing observed.

• Investment Recommendations:

  • The analysts recommend Overweighting cyclical sectors, especially Tech, Materials, and Energy.
  • They are Underweighting Industrials and Consumer Discretionary.
  • Top Picks:
    • For Consumer Cyclicals: Hyundai Motors with the second-lowest absolute P/B ratio.
    • For Industrials: Samsung Heavy and Hyundai Heavy with low P/B and positive EPS revisions.

Key Information

• Performance Comparison:

  • Energy: +32%
  • Materials: +27%
  • Tech: +25%
  • Consumer Discretionary: +16%
  • Industrials: +13%
  • MSCI Asia ex-Japan: +21%

• EPS Revisions (July 2016E):

  • Energy: +3.3%
  • Materials: +3%
  • Tech: +1%
  • Consumer Discretionary: -0.9%
  • Industrials: -0.7%

• Risks:

  • Profit-taking in leading cyclical sectors due to their strong performance.
  • EPS upgrades may not be sustained.
  • Dollar strength and a potential China hard landing could affect the market.

Figures and Tables

• Figure 1-4: Show the performance of different sectors from the lows, highlighting the relative underperformance of Consumer Discretionary and Industrials.
• Figure 5-7: Illustrate EPS revisions across sectors, emphasizing the difference between leading and lagging cyclical sectors.
• Figure 8: Sorts the CS APAC Consumer Discretionary Universe by absolute price-to-book, with Hyundai Motors as a top pick.
• Figure 9: Sorts the CS APAC Consumer Discretionary Universe by three-month EPS revisions, with GAC Group having the strongest revisions.
• Figure 10: Sorts the CS APAC Industrials Universe by absolute price-to-book, highlighting Samsung Heavy and Hyundai Heavy.
• Figure 11: Sorts the CS APAC Industrials Universe by one-month EPS revisions, showing Samsung Heavy and Hyundai Heavy as top picks.

Conclusion

The report suggests that while some cyclical sectors have outperformed, others like Consumer Discretionary and Industrials have lagged. The analysts continue to recommend Overweighting Tech, Materials, and Energy, while being Underweight on the lagging sectors. The top picks are based on low P/B ratios and positive EPS revisions, indicating potential for value and growth. Investors are advised to consider these recommendations alongside other factors and to be cautious of potential risks.