申万宏源研究(香港)#周期谨慎乐观：韩国路演要点分享

申万宏源研究(香港)#周期谨慎乐观：韩国路演要点分享

1 August 2018

Pro-cycle with caution

Strategy: South Korea Roadshow Takeaways Analyst

Haitao Wang

A0230511040070

ARG386

Research associate

Eric Dong

A0230117090004

BMR369

dongyi@http://doc.guandang.net Related Reports “Limited rebound: HK strategy comment” 16 Jul, 2018

“Looking forward to fa ll: HK strategy 2H18 outlook” 26 Jun, 2018

“Comment on full circulation of H-shares: HK strategy outlook” 2 Jan, 2018Last week, we visited more than 10 institutional clients in South Korea, noting concerns among Korean investors over Chinese economic conditions and the domestic currency due to a combination of the government’s efforts to reduce leverage and trade frictions with major trading partner the US. Given our expectation of strong interim results and low current valuation, we view pro-cyclical sectors, especially infrastructure and building materials industries, as likely to outperform defensive sectors in August. However, absent a significant improvement in the central bank’s measure of credit in the economy, total social financing (TSF), we see rebound potential as likely to remain constrained. Fiscal policy will be more proactive in 2H18. Fiscal income growth increased from 9.8% in 1H17 to 10.6% YoY in 1H18, while fiscal spending growth decreased from 15.8% in 1H17 to 7.8% YoY in 1H18. On this basis, a number of investors are anticipating greater use of fiscal policy to bolster economic growth in 2H18. However, given the central government’s efforts to force local governments to deleverage and suspend public-private partnership (PPP) projects, market concerns over the government’s ability to increase spending have intensified. The Ministry of Finance (MoF) plans to issue Rmb1.4tn in debt specifically linked to fiscal projects in 2018, but in 1H18 it issued just Rmb367.3bn. We note that MoF has announced plans to accelerate its issues of project-linked bonds in 2H18, which may help alleviate investors’ concern s in coming months. In addition, we note that the People’s Bank of China (PBoC), in new asset management guidelines, permits financial institutions to issue old products to support major national projects and funding demand from small- to medium-sized enterprises (SMEs) up to end-2020, and the regulator also guided commercial banks to buy low-rated industrial bonds. We expect the new regulation to make infrastructure financing easier to attain, benefiting primarily major infrastructure and poverty alleviation projects. However, given tight industrial policy, increasing mortgage rates and strict messaging from official media, we see less likelihood of the property industry being allowed to benefit again from a recovery in liquidity.

Weak renminbi and liquidity constraints. In our 2H18 outlook, we argued that overseas funds were the main driver of the Hong Kong market in 1H18. However, as the renminbi depreciated rapidly since mid-June, overseas funds have recorded a net outflow over the past month. We expect the domestic currency to remain weak in the near-term, given different monetary policy goals between China and the US, and narrowing interest spreads. In term of southbound flow, we note that current policies have not yet succeeded in improving southbound inflow significantly. Therefore, we exptect liquidity in Hong Kong to remain tight in August, which will constrain the market rebound. In addition, the share price of Hong Kong-listed Chinese utilities and high-dividend yield names will likely also be affected by the weak renminbi, as domestic firms denominate cash flows and dividends in renminbi, reducing their value in Hong Kong dollars.

Valuation recovery of pro-cyclical sector. In our report Limited rebound, published two weeks ago, we mentioned that valuations in heavyweight pro-cyclical sectors, such as financials, property, energy and materials, had decreased amid pessimistic expectations over the macroeconomy and tight industrial policies. However, earnings forecasts for these sectors remain strong in the medium-term. By contrast, earnings forecasts among names in defensive sectors have decreased but valuations have soared in recent months. We believe pro-cyclical sectors will outperform defensive sectors in the near-term due to this mismatch. Given recent policy changes and our expectations of strong 1H18 results, we expect rising economic confidence will drive up pro-cyclical sectors in the coming month. Meanwhile, due to the tight liquidity environment, defensive sectors will fact profit-taking pressure. However, we believe the sustainability of the cyclical sector rebound will determined by whether macroeconomic and financial data will show a sustained rebound in the following month amid policy stimulation.

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申万宏源研究(香港)#周期谨慎乐观：韩国路演要点分享

周期谨慎乐观

韩国路演要点分享

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得到一定程度的改善。由于 …… 此处隐藏：15982字，全部文档内容请下载后查看。喜欢就下载吧 ……