1Q17 Economic Data: Strong economic performance with GDP growth of 6.9% yoy, surpassing market expectations. This growth was driven by the secondary industry, particularly mining and manufacturing.
Growth Momentum: Despite strong performance, the growth momentum is expected to weaken for the rest of the year, with a forecasted annual GDP growth of 6.3% yoy.
Key Indicators:
Industrial Production (IP) increased to 7.6% yoy in March 17, up from 6.3% in 2M17.
Fixed Asset Investment (FAI) reached 9.2% yoy in 3M17, with significant contributions from infrastructure and property development sectors.
Retail sales rebounded to 10.9% yoy in March 17, supported by property-related consumption and auto sales recovery.
Monetary Policy: The PBOC is likely to use a combination of higher interest rates and targeted loosening to manage asset bubbles and support key sectors like agriculture and environment.
Healthcare Sector (China)
NRDL Negotiation List: The Ministry of Human Resources and Social Security (MHRSS) released a list of 44 patent drugs for inclusion in the National Reimbursement Drug List (NRDL), focusing on oncology and cardiovascular treatments.
Price Cuts and Sales Growth: Expect 40-50% price cuts on these drugs, but significant sales volume growth due to increased affordability and medical insurance coverage.
Key Oncology Drugs:
Apatinib, Bevacizumab, and Bortezomib are among the drugs included, which will enhance the accessibility of targeted cancer therapies.
Domestic innovative oncology drugs like Anlotib face increased competition, especially with the inclusion of more first/second-line drugs into the NRDL.
Market Implications:
Maintain OVERWEIGHT on the healthcare sector due to potential sales volume expansion in 4Q17.
Top picks include CSPC (1093 HK), China TCM (570 HK), and Jacobson (2633 HK) with a BUY recommendation.
Company Updates
Alibaba Group (BABA US)
4QFY17 Preview: Strong e-commerce growth with online retail sales increasing 37% yoy in 1Q17, beating expectations.
Ecosystem Expansion: Revenue forecasted to rise 59% yoy to Rmb39b, with non-GAAP net profit expected to grow 72% yoy to Rmb13b.
Cloud Business: Cloud revenue is projected to grow 99%, 119%, and 105% yoy in 4QFY17, FY17, and FY18 respectively, supported by AI and big data initiatives.
Digital Entertainment: Revenue from YouTu is expected to grow 284% yoy in FY17, driven by content synergy and ecosystem integration.
Target Price: Maintained at US$130.00.
Beijing Capital Int'l Airport (694 HK)
Duty-Free Tender Renewal: Raised target price to HK$11.60, with an updated earnings forecast due to the upcoming tender renewal.
Gudang Garam (GGRM IJ)
Downgrade to HOLD: "Dead money" for the next six months, with a target price of Rp68,000.
Bermaz Auto (BAUTO MK)
Hold Recommendation: Expected to make a comeback in FY18, driven by the new CX-5 model and increased exports to ASEAN.
Singapore Airlines (SIA SP)
Hold Recommendation: Surprises with the highest March load factor to Europe in seven years, indicating improved performance.
TMB Bank (TMB TB)
Hold Recommendation: Earnings remained flat yoy in 1Q17 due to higher provisions, but asset quality stabilized.
Key Indices
Index
Previous Close
1D %
1W %
1M %
YTD %
DJIA
20636.9
0.9
-0.1
-1.3
4.4
S&P 500
2349.0
0.9
-0.3
-1.2
4.9
FTSE 100
7327.6
-0.3
0.3
-0.4
2.6
AS30
5925.9
-0.7
0.5
2.2
3.6
CSI 300
3479.8
-0.2
-0.7
1.0
5.1
FSSTI
3138.3
-1.0
-1.2
-1.0
8.9
HSCEI
10204.3
-0.0
-0.7
-1.1
8.6
HSI
24261.7
-0.2
-0.0
1.8
10.3
JCI
5577.5
-0.7
-1.3
0.7
5.3
KLCI
1733.9
0.2
-0.3
-0.6
5.6
KOSPI
2145.8
0.5
0.6
-0.9
5.9
Nikkei 225
18355.3
0.1
-2.4
-6.0
-4.0
SET
1575.9
-0.9
-0.4
1.0
2.1
TWSE
9716.4
-0.2
-1.7
-1.9
5.0
BDI
1296
1.1
6.7
16.5
34.9
CPO (RM/mt)
2691
-2.2
-6.5
-8.6
-15.9
Brent Crude
55
-0.9
0.2
7.0
-2.6
Top Picks
Company
Ticker
Current Price
Target Price
Potential Gain (%)
Alibaba Group
BABA US
$110.21
$130.00
16.3
Beijing Ent. Water
371 HK
HK$6.29
HK$7.60
20.8
Indosat
ISAT IJ
Rp64,600
Rp68,000
10.9
Tiga Pilar
AISA IJ
RM2.11
RM2.05
12.8
V.S. Industry
VSI MK
RM1.87
RM2.20
17.6
OCBC
OCBC SP
S$9.59
S$10.75
12.1
SingTel
ST SP
S$3.75
S$4.48
19.5
Bangkok Dusit
BDMS TB
Bt2.48
Bt2.40
33.0
Key Assumptions
Indicator
2016
2017F
2018F
China GDP (yoy)
6.7
6.3
6.3
Brent Crude
45
55
60
CPO (RM/mt)
2,653
2,600
2,500
Corporate Events
Analyst Presentation on China Economics: April 17-18, Taiwan
Roadshow with China SCE: April 18, Shanghai
Group Luncheon with U-Mobile: April 19, Kuala Lumpur
Roadshow with Meidong Auto Holdings: April 19-21, Beijing and Shanghai; May 4-5, UK
Group Luncheon with Singamas Container Holdings: April 20, Hong Kong
Analyst Presentation on Malaysia Outlook and Strategy: April 20-21, Singapore
Tea Session with KSH Holdings: April 24, Singapore
Group Luncheon with ZTE Corp: April 25, Hong Kong
Analyst Presentation on Indonesia Strategy: April 24-28, Thailand, Singapore, and Kuala Lumpur
Group Luncheon with CAT Telecom: April 28, Thailand
Luncheon with Khonburi Sugar & Sappe: April 2, Thailand
Roadshow with Singtel: May 26, Canada
Roadshow with PT Siloam Int'l Hospital: June 5-16, Canada
Luncheon with United Overseas Bank: July 3, Singapore
Roadshow with Top Glove Corporation: September 5-12, US/Canada
