October 2008
The Hunt for
Black
October
October 2008 P.12
Table of Contents
Huaqiao in the Middle Kingdom
Huaqiao’s 4th Anniversary Contest Results.............. 3
The Hunt for Black October ....................................12
China Economy......................................................21
Hong Kong Economy............................................. 36
Anthony C.H. LOK
(852) 2905 2108
[email protected]
Automotive........................................................... 39
Chemicals............................................................. 40
Consumer — Beer & Liquor.....................................41
Consumer — Dairy ................................................ 42
Consumer — Retail ................................................ 43
Consumer Services — Gaming & Hotels ................. 44
Energy .................................................................. 45
Financials — Banks (China) .................................... 46
Financials — Banks (Hong Kong).............................47
Financials — Insurance .......................................... 48
Media ................................................................... 49
Metals & Mining.................................................... 50
Pharmaceuticals.....................................................51
Property (China).................................................... 52
Property (Hong Kong) ........................................... 53
Small Caps............................................................ 54
Technology ........................................................... 55
Telecoms (China) .................................................. 56
Telecoms (Hong Kong) ...........................................57
Transport — Aviation............................................. 58
Transport — Land.................................................. 59
Transport — Marine............................................... 60
Utilities (China) ......................................................61
Utilities (Hong Kong)............................................. 62
CHENG Manjiang
(8610) 6622 9128
[email protected]
Key Market Indices
HSI
HSCEI
HSCCI
MSCI HK
MSCI China
FTSE-Xinhua A50
Shanghai A
Shenzhen A
HSI
HSCEI
HSCEI ex oil
MSCI HK
MSCI China
FTSE-XinhuaA50
Value
18,934
9,765
3,626
8,597
49
8,204
2,413
638
1M
(10.3)
(13.8)
(14.7)
(13.3)
(15.1)
(9.0)
(4.8)
(9.6)
YTD
(31.9)
(39.4)
(40.7)
(38.6)
(42.9)
(59.9)
(56.3)
(58.0)
P/E (x)
EPS (chg %)
08E 09E 08E 09E
11.2 10.9 1.0
3.1
10.9
9.3 12.3 17.1
11.0
9.4 16.1 15.9
11.2 12.3 (15.4) (8.6)
10.8 10.9 13.8 13.8
12.1 11.4 22.0 5.8
Sources: Bloomberg, BOCI Research
1M % chg.
China
China
HK
-HK
-A
Agriculture (0,0,1)
- (19)
Automotive (8,0,17)
(10) 1
Chemicals (2,0,18)
(18) (9)
Consumer - F & B (10,0,17)
(11)
(7)
Consumer - Durables (2,0,12) (2)
(5)
Consumer - Textiles (3,11,1)
(3) (19) (0)
Consumer Services (7,11,8)
(5) (26) (1)
Energy (10,0,12)
(15) (0)
Financials (12,15,19)
(8)
0 (11)
Industrial (15,14,39)
(22) (6) (3)
Media (3,7,6)
(12) (16) 3
Metals & Mining (11,0,19)
(17) (2)
Pharmaceuticals (4,0,16)
(5)
(2)
Property (11,14,16)
(22) (14) (10)
Technology (10,4,6)
(16) (17) (10)
Telecoms (4,4,1)
(16) (21) 7
Transport - Aviation (5,2,9)
(3) (4) (0)
Transport - Land (6,2,11)
(3) (4) (0)
Transport - Marine (7,2,8)
(4) (4) (0)
Utilities (10,3,16)
(3) (5)
9
Sector Data
„
China-HK recommended stocks: In – China Resources Enterprise, Xinyu Hengdeli.
Out – Gome Electrical Appliances, Lenovo Group.
„
HK-HK recommended stocks: In – VTech Holdings, Esprit Holdings.
Out – Sa Sa International, GZI REIT.
„
China-A recommended stocks: In – SDIC Zhonglu, COFCO Tunhe.
Out – Qingdao Haier, Shanghai Jinjiang Development.
YTD % chg.
2008E P/E (x)
Rating
Top Recommendations
China
China China
China China
China
China
China
HK
HK
HK
HK
-HK
-A
-HK
-A
-HK
-A
-HK
-A
(70)
5
China Green
–
None
(50)
(64)
6
9
MP
MP
Denway
–
King Long
(53)
(32)
11
9
MP
MP
Sinofert
–
Y. Wanhua
(29)
(28)
7
12
MP
OP Xiwang Sugar
–
Swellfun
(6)
(20)
1
9
MP
OP
Haier
–
Haier
(9) (6) (2)
2
12
1
U
MP
Ports Design
Lifestyle
None
(26) (50) (43)
8
11 37
U
MP OP
Hengan
Stella
Beijing Tour
(40)
(51)
11
19
OP
OP
Fushan
–
Pingdingshan
(20) (13) (56)
15 11 14
MP MP MP
ICBC
Hang Seng
ICBC
(39) (27) (47)
15
8
17
OP OP
Lonking
VTech
Sany
(41) (24) (56)
11 12 16
U
MP U
None
Next Media
None
(54)
(58)
14
8
OP
OP
Zijin
–
Shandong Gold
(12)
(28)
1
15
OP
OP
TRT
–
Yabao
(51) (40) (62)
9
10 10
MP MP MP
COLI
MTRC
Vanke
(18) (37) (40)
3
9
15
OP
U OP
Lenovo
ASM Pacific Shengyi Sci
(41) (30) (55)
12 15 22
MP OP MP China Mobile
PCCW
China Unicom
(11) (11) (16)
2
2
4
MP
MP
Air China
–
SIA
(13) (11) (20)
3
2
5
OP MP OP Shenzhen Exp
None
Daqin Railway
(15) (11) (14)
3
2
3
MP
U MP COSCO Pac Pacific Basin
CSD
(33) 4 (54)
39 16 58
OP MP OP Beijing Ent HK & C Gas SDIC Huajing
BOCI Stock Universe .............................................. 63
Calendar of Events................................................ 73
Recently Published Research ................................. 77
BOCI Research Team ............................................. 78
(-,-,-) represents the number of stocks under China-HK, Hong Kong and China-A respectively. Sector share price movement weighted by free float market capitalisation.
NB: Outperform (OP) = ≥+10% compared with the relevant benchmark index over a 6-month period; Underperform (U) = ≤-10% compared with the relevant benchmark index over a 6-month period;
Marketperform (MP) = ≤+10% and ≥-10% compared with the relevant benchmark index over a 6-month period; Not Rated (NR); arrows indicate change in rating; bold red is a change in top recommendations
BOCI research is available electronically on Bloomberg (BOCR <go>), firstcall.com, multex.com and at www.bociresearch.com.
Any views expressed in this report reflect the current personal views of the analyst and do not necessarily represent the views of BOC International or any of its affiliates.
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2
Huaqiao in the Middle Kingdom
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October 2008
October 2008 Huaqiao’s 4th Anniversary Contest Results
America is more communist than China
1)
Most gold medals in 2008:
Answer: a) China with 51 golds, beating second-placed USA with 36 golds.
2)
Most total medals in 2008:
Answer: b) USA with 110 medals, beating second-placed China with 100 medals.
3)
Most golds in one Olympics (country):
Answer: b) USA with 83 gold at the 1984 Los Angeles Games, as the Soviet Union
and most of the Eastern Bloc boycotted the Games. The Soviet Union won 80 golds in
the 1980 Moscow Olympics as most of the West boycotted the Games.
“This bright new system, this practice in the United States, this practice in
the United Kingdom and elsewhere, has broken down. Growth in the
economy in this decade will be the slowest of any decade since the Great
Depression, right in the middle of all of this financial innovation… It is the
most complicated financial crisis I have ever experienced, and I have
experienced a few… Changes are going to have to be made…” — Former
Federal Reserve Chairman Paul Volcker, 5 September 2008
4)
Most golds in one Olympics (male):
Answer: c) Eight as American Michael Phelps made history in Beijing 2008 by
beating countryman Mark Spitz’s previous record set in Munich in 1972.
5)
Most golds in one Olympics (female):
Answer: a) Six in a controversial success by East German Kristin Otto in Seoul 1988
amidst allegations of widespread use of performance-enhancing drugs.
6)
Most career total Olympic golds (male):
Answer: c) Fourteen also by Michael Phelps, as the record eight golds he won at
Beijing 2008 were added to the six he won at Athens 2004.
7)
Most career total Olympic golds (female):
Answer: b) Nine by Russian gymnast Larisa Latynina between 1956 and 1964.
8)
Most career total Olympic medals (male):
Answer: c) Sixteen, if you have not guessed it by now, once again by Michael
Phelps, as, on top of his 14 golds, he won two bronzes at Athens 2004.
9)
Most career total Olympic medals (female):
Answer: d) Eighteen also by Russian gymnast Larisa Latynina between 1956 and
1964.
10) China Joined the Olympic Games in:
Answer: c) 1984 Los Angeles as China also boycotted the 1980 Moscow Games.
Contest Results
Distribution of Contest Results
Congratulations to the winners of our Fourth
Anniversary Contest. Each of our 10 winners
has been sent a set of the commemorative
Bank of China HK$20 Olympic banknotes.
Just a friendly reminder to clients that there is still time to register for our 2H07 investors’
conference on 9-10 October in Guiyang,
Guizhou. Please contact your BOCI sales
representative for more details
Note: Staff of BOCI group companies are not eligible 80%
70%
60%
50%
40%
30%
20%
10%
0%
10
9
8
7
Source: BOCI Research Huaqiao in the Middle Kingdom
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3
“America is more communist than China right now… You can at least have
a free market in housing and a lot of other things in China… You can see
that this is welfare of the rich, it is socialism for the rich… it’s bailing out
financial institutions… This is madness, this is insanity, they have more
than doubled the American national debt in one weekend for a bunch of
crooks and incompetents. I’m not quite sure why I or anybody else should
be paying for this.” — Jim Rogers, 8 September 2008
The American financial system is in chaos and on the verge of systemic collapse. Three of the five remaining independent investment banks have gone bust or been taken over in the past six months. The remaining two are turning into bank holding companies and, thus, in one form or another, will look more like Citigroup, Bank of America and JP Morgan in the future. The last time I was in the US in March, Bear Stearns went bankrupt. This time, Lehman Brothers, Merrill Lynch and AIG have respectively gone bust, been taken over, or received a government bailout. Some clients asked me not to go back to the States too soon lest my “Typhoid Mary” touch take out the remaining bulge‐bracket banks. I can only dream that my ability to influence markets is so powerful. However, after spending two weeks in the US, I am ready to publish my shortened version of the Charles Dickens classic American Notes, where the famous English author wrote about his impressions of his visit to the “New World”. First, let me preface by stating that this is not just an American financial crisis; it is a global phenomenon – albeit one triggered and led by the US. I have, in the past, talked about how the Asian financial crisis gives me a bit more insight into what is happening now; but such comparisons can only go so far as the depth and breadth of this crisis are likely to be magnitudes larger than those a decade ago. The last time around, Asia had a strong US economy to export its way out of its problems; this time, America itself is on the rocks. Thus, while China and Asia may, in general, be better off than during the 1997‐98 crisis, it will still be a challenge to keep Asian economies buoyant as the US economy founders. 4
Huaqiao in the Middle Kingdom
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Octoeber 2008
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way…” While Charles Dickens did not write this in American Notes, but in a Tale of Two Cities, the comments can hardly be more fitting for America today. While century‐old Wall Street icons are being sucked into the abyss of the market maelstrom, there is no dark feeling of fin de siecle despair on the streets of New York. From the packed restaurants in Midtown to the crowded bars in the meat‐packing district Downtown, only the cancellation of a few Broadway shows gave any indication that things were not going well. Construction cranes still dot the skylines of Las Vegas, building the next mega‐monstrosity in America’s playground, despite gaming revenue having fallen some 20‐30%. Tourists and locals alike continue to sip Chardonnay with the day’s catch at Fisherman’s Wharf in San Francisco. Thus, the complete sense of denial on Main Street is in full swing and is in stark contrast to the malaise on Wall Street. While it is now vogue to say that this is the worst financial crisis in the US since the Great Depression (with some saying it is the start of a new Great Depression), the man on the street still seems more preoccupied with his job, mortgage payments and who will win the presidential election next month. Likely he will change his tune over the next 12 months as the impact of the financial and credit collapse work their way through the economy. About the only person who made any sense was the US Customs officer at Calgary airport. I must add that, from an Asian point of view, the current financial crisis is not the worst since the Great Depression. It is not even worse that the 1997‐98 Asian financial crisis and, for most of Asia, the economic problems today are still, and will likely remain, far more benign than those just over a decade ago. This is not to say that there is no impact on Asia, only that it is not a financial crisis and, thus, the steep declines in markets around the region so far this year are likely overdone. While America’s financial bailout is now legendary, the country is in good company on the other side of the Atlantic with HBOS being bought by Lloyds TSB, Bradford & Bingley being nationalised, Fortis and Dexia being bailed out by the Benelux and French governments and Hypo Real Estate being bailed out by the German government. However, where is the equivalent financial crisis in China and Hong Kong? Other than a short‐lived bank run on Bank of East Asia – there is none. While there have been some losses on investments in toxic US assets and financial instruments, their magnitude and, thus, “contagion” for Chinese and Hong Kong financial institutions is remarkably small. This is not because Chinese banks are smarter than European ones. It is just that they are new on the scene and have been severely limited from expanding their global capital market activity due to their closed capital account. Likewise, even large Hong Kong banks, including industry giant HSBC, have tended to be more conservative. If the US had been able to keep the bubble going for five more years and the Chinese had liberalised the renminbi, I have no doubt that the Chinese banks would be chock full of collaterised debt obligations (CDOs) and other toxic Wall Street products. However, luckily, the Chinese banks have not been on the global scene long enough to be sucked into the game. Does this mean that there are no problems and that Asia has successfully decoupled? No. The idea that the world is black or white, decoupled or coupled is a dubious construct of lazy economists trying to over‐simplify things. Thus, Charles Dickens is right, it can be the best of times and the worst of times both at once. While the problems in the US are huge, it is also quite probable that China and Asia are generally still relatively better off. While there are clearly major direct and indirect effects of the US financial crisis and economic recession on China’s economic growth (most notably through weaker exports and trade, in general), conditions are certainly not as bad as they were during the 1997‐98 Asian financial crisis. Put it another way, two years ago, the Chinese Government was desperately trying to slow down its runaway economy back to single‐digit growth and now that it is slowing, everyone thinks it is a disaster. That makes hardly any sense at all. A new international Monetary Fund (IMF) working paper puts the US financial crisis into perspective: US Customs officer: Why are you going to San Francisco sir? Huaqiao: To visit clients. US Customs officer: What kind of business are you in? Huaqiao: Investment banking. US Customs officer: Oh, how is that going? Huaqiao: Crappy, half of Wall Street went bankrupt last week. US Customs officer: Yeah, I know. What should I do? Huaqiao: Swap your US dollars into Canadian as soon as you can. US Customs officer: I already started buying silver coins two years ago. Huaqiao: That’s probably smart, but why not gold? US Customs officer: Don’t have that kind of money. Silver’s all I can afford. Huaqiao: Hmmm. OK, is there anything else? US Customs officer: Nah, good luck… you’re gonna need it. Huaqiao in the Middle Kingdom
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October 2008 5
6
Huaqiao in the Middle Kingdom
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Octoeber 2008
Selected Global Financial Crises
Country
Argentina
Argentina
Argentina
Argentina
China, P.R.
Finland
Indonesia
Japan
Korea
Malaysia
Mexico
Philippines
Russia
Sweden
Thailand
Turkey
United States
Systemic banking crisis Share of NPLs
(starting date)
at peak (%)
1980
9.0
1989
27.0
1995
17.0
2001
20.1
1998
20.0
1991
13.0
1997
32.5
1997
35.0
1997
35.0
1997
30.0
1994
18.9
1997
20.0
1998
40.0
1991
13.0
1997
33.0
2000
27.6
1988
4.1
Gross fiscal cost
(% of GDP)
55.1
6.0
2.0
9.6
18.0
12.8
56.8
24.0
31.2
16.4
19.3
13.2
6.0
3.6
43.8
32.0
3.7
Output loss
(% of GDP)
10.8
10.7
7.1
42.7
36.8
59.1
67.9
17.6
50.1
50.0
4.2
0.0
0.0
0.0
97.7
5.4
4.1
Minimum real GDP
growth rate (%)
(5.7)
(7.0)
(2.8)
(10.9)
7.6
(6.2)
(13.1)
(2.0)
(6.9)
(7.4)
(6.2)
(0.6)
(5.3)
0.7
(10.5)
(5.7)
(0.2)
October 2008 That is why the American financial crisis is so hard to get a grip on as the systemic contagion is so widespread. While the root cause of the crisis (loose and cheap credit and a collapsing property bubble) is the same as that seen in other places historically, the fallout is not so clear. Nobody knows who ends up with the losses from the credit contraction and collapsing property and stock markets so counterparty risks remain high and fear of the unknown rules the day. While Wall Street was busy trying to outsource risk by writing credit default swaps (CDS), who was on other side of the trade? We have a partial answer now… AIG, but who else ends up holding the bag? On the positive side, the current American financial crisis is clearly only a banking one and there are no real signs of a currency or sovereign debt crisis… yet. I suppose being the world’s de‐facto reserve currency has its benefits and even though the US dollar deserves to collapse an the government probably is broke, as long as the rest of us in the world are willing to turn a blind eye and continue to finance the debt and buy the dollar, America will probably only have to deal with the problems in its financial system. Financial Weapons of Mass Destruction
$200bn for Fannie and Freddie Mac
$300bn for the Federal Housing Administration
$4bn in grants to repair abandoned houses
$85bn loan to AIG
$87bn in repayments to JP Morgan for financing of
trades of failed Lehman Brothers
$29bn to JP Morgan for Bear Sterns takeover
$200bn in Fed Term Auction Facility loans
Source: IMF The IMF authors like to break down financial crises into three types, namely banking crises, currency crises and sovereign debt crises. Those of us working in emerging markets have known all along that Argentina is the poster boy for financial crises having endured four in the past three decades and tends to experience all three types at the same time. My experiences in both the Scandinavian banking crisis (I studied at the Stockholm School of Economics in 1993‐94) and the Asian financial crisis tells me that the primary trigger to each crises is some form of excess cheap credit that creates real estate and stock bubbles, which eventually collapse. In the cases of Latin America, Asia and Scandinavia, the cheap credit was principally came from the banking system and when property bubbles eventually collapsed, the losses ended up with the banks. So, all we had to do was calculate the total number of bad loans and figure out how much they had to write‐off after selling off the underlying property collateral to determine if banks’ balance sheets were still solvent. If not, then the government would have to nationalise the bank and pony up the capital or create some form of vehicle to take the bad loans of the banks such as the Korean Asset Management Co, the four AMCs that the Chinese Government created, Securum in Sweden or Resolution Trust Corporation (RTC) for the S&L crisis. However, the US is far more sophisticated. The use of derivatives and complex financial instruments with acronyms like CDO, SIVs, CDS, have spread the risks so far and wide, its hard to see who ends up with the bill. Huaqiao in the Middle Kingdom
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7
US$900bn to date… and rising
Source: U.S. Global Investors Source: Reuters I do not know if it is the right way to calculate it, but Reuters ran a story after the bailout of AIG saying that the US Government had spent about US$900bn so far in bailouts and liquidity facilities to keep the financial system from imploding on itself. US Treasury Secretary Henry Paulson’s Troubled Asset Relief Programme (TARP) calls for a further US$700bn to fund the purchase of financial sector assets, which is in addition to the fact that the government has already effectively nationalised half of the mortgage stock in its bailouts of Fannie Mae and Freddie Mac, which had total on balance sheet mortgages of around US$1.5trn and total mortgage liabilities of around US$5trn. Moreover, none of this solves the underlying problem of further declines in housing prices and defaults on mortgages. To put this into perspective, RTC, set up in 1989 during the S&L crisis, bailed out 717 thrifts with US$394bn in assets, but today’s problems are much bigger. 8
Huaqiao in the Middle Kingdom
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Octoeber 2008
What will the eventual bill for the American financial crisis be? Only history will tell, but if the RTC represented 3.7% of GDP, one can expect the eventual bill this time to be much greater, maybe even 10% of GDP, which is still much smaller, percentage wise, than the major financial crises that hit Asia and Latin America in the past. Korea, for example, had to spend 19.3% of GDP on its recapitalisation programme during the Asian financial crisis. This means that the final bill to the US taxpayer will probably be between US$1trn and US$2trn and this is on top of the current fiscal deficit of over US$400bn (which is likely to get bigger, in any case) means a whole lot of new pieces of paper with dead presidents on them being printed over the next few years. How a flood of cash like this is can be squared with a strong currency is beyond my poor imagination to fathom. I am still bearish on the dollar and bullish on commodities for the medium term. All this doom and gloom is naturally very depressing but talk of a new Great Depression is probably exaggerated. I have had this discussion with some fund managers who say that this is a “Modern Depression”, with which I can kind of agree, as the definition is vague enough as to limit argument. However, to compare it to the dirty 30s is going one step too far. If we are indeed in another Great Depression, we have to assume that the economy will contract 37%, unemployment will reach over 25%, while real wages and prices will have to decline some 25‐50%. Moreover, we will need another six‐year drought that causes the Great Plains to shrivel up into a Dust Bowl, affecting millions of hectares of farmland and leaving an area in the millions of hectares barren and 2.5m farmers to move out of the Great Plains states. The US Government will also have to declare holding gold illegal and order you to surrender it to the authorities as Roosevelt did in 1933. As bad as things are, I am loathed to call the current financial crisis a new Great Depression. Great Depression 1930s Dust Bowl
Great Depression 1930s Unemployment
October 2008 This is the story of Mr Jones, my neighbour in Calgary. When I was a boy, Mr Jones was already retired; he will be 95 in November. On a quick weekend layover back home, there I was on a fine autumn Saturday morning in my parents’ backyard having a cigar and coffee and Mr Jones was already puttering about in his garden. At first, he mistook me for my older brother, which is not surprising since I am not in Canada much these days and, on realising his mistake, he quickly reverted to his new nick‐name for me; “Mr Moneybags from Hong Kong”. Mr Jones was 16 when the Great Depression started in 1930 and fought in Italy during the Second World War. He is probably the last of the generation in North America that actually knew of real physical deprivation. Today, we are more worried about whether or not our children’s self‐esteem is being nurtured enough rather than if they have food in their bellies. At 95, he still walks a mile every day to the local swimming pool for his swim and, rather than having a grass covered playground, his backyard has always been devoted to agriculture. Despite his advanced age, Mr Jones’ mind is still as sharp as a knife; I can only hope and pray that my twilight years are as active and full as his. What kind of different values do we have? While I worry about over‐leveraged financial institutions, the impact of off‐balance‐sheet derivatives and system collapse, Mr Jones is showing off his admittedly quite large potatoes to me that he has just dug up. Other than potatoes, he grows zucchini, tomatoes, carrots, spinach and raspberries in his garden. Like us, he has never had much luck in growing corn, although it grows like weeds just 100km south of the city. Such are the vagaries of farming. I ask him why he bothers with low‐cost potatoes, instead of growing more “value‐added” crops and buying the potatoes at the supermarket. He looks at me like I am an idiot and emphasises that potatoes cost five cents a pound. He then tells me of the Great Depression, but first needs to remind me of how soft and cushy my overpaid banker job is before going on to describe how real men used to earn their keep and living. How the prairies had suffered from years of drought and you needed to work if you wanted to eat because there were no government handouts. And work itself was not a given. It was hard to find work in those days and, most of the time, you had to know somebody to put in a good word with the foreman. Those of us in the media and financial circles now writing pithy articles about the New Great Depression should spend an afternoon with the likes of Mr Jones. In China, I think those who survived through the tumultuous 1950‐70s probably are very much like Mr Jones. They are true survivors. Source: National Oceanic and Atmospheric Association Source: BusinessWeek Huaqiao in the Middle Kingdom
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9
10
Huaqiao in the Middle Kingdom
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Octoeber 2008
So are we in a bear market? Not only are we in a bear market, we are in a “polar bear market”. Despite common misconception, it is not the Kodiak, Grizzly, Black, Brown nor cute Panda that is the world’s biggest bear; it is the polar bear with the largest recorded adult male reaching 1,000kg. Not only that, the polar bear’s habitat is the frozen, desolate and barren arctic wasteland, which is pretty much what global markets look like today. Welcome to the polar bear market. Huaqiao in the Middle Kingdom
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11
I debated about whether or not to use this month’s cover photo, as the collapse of US financial markets in September would seem to have made this prediction pointless. However, being lazy and having spent so much time to find the graphics (you will not believe how hard it is to find a high‐resolution picture of a Russian Typhoon‐Class submarine) and then photoshopping it, I decided to use it anyway. Readers will remember an article I published in July 2007 entitled, The Curse of Seven, saying that the Hong Kong market collapsed in every year ending with the number seven (1987 and 1997). While it looks like the “Curse of Seven” remains intact as markets did collapse 2007, I neglected to add that, for some reason, these collapses almost always happened in October (to be fair, the collapse last year only mostly started in November). As for the US, the most infamous stock crashes, namely 1929 and 1987, occurred in October. Dow Jones (October 1929)
Dow Jones (October 1987)
400
2,700
2,500
350
2,300
300
2,100
250
Source: Bloomberg 29/10/87
27/10/87
25/10/87
23/10/87
21/10/87
19/10/87
17/10/87
15/10/87
13/10/87
11/10/87
09/10/87
07/10/87
05/10/87
03/10/87
1,700
01/10/87
31/10/29
29/10/29
27/10/29
25/10/29
23/10/29
21/10/29
19/10/29
17/10/29
15/10/29
13/10/29
11/10/29
09/10/29
200
1,900
07/10/29
However, this is what another overpaid and well‐known market strategist said last month; “we are not in a bear market”. I think the crux of his argument was that, in a bear market, corporate earnings fall and since corporate earnings are still rising, we cannot be in a bear market. Whatever this guy is smoking, I wish he would share with the rest of the class. Hello! A market down more than 50% is a bear market no matter how earnings are going. Its comments like these that make me question the term “smart money” that financial reporters and investment professionals like to use. I think the term “smart money” is like the joke that made the rounds after the 7 May 1999 bombing of the Chinese Embassy in Belgrade. “How could the US with all its ultra‐high technology equipment like ‘smart bombs’ make such a mistake? The bombs may be smart, but the pilots are still dumb.” Similarly, we could make the same case for smart money, the problem is dumb investment advisors. “We’ve looked at a number of companies throughout the sector and we
actually think BYD is at the cutting edge of battery technology… This is a
technology that can really be a game changer if we’re serious about
reducing [carbon dioxide emissions]… As worldwide discussions over
global climate change and environmental well-being continue, the
technologies being developed by BYD will be an integral part of the
future.” — MidAmerican Chairman, David Sokol
05/10/29
Sometimes, I am amazed that there is such a job as market strategist. As far as I can tell, I get paid for drinking coffee, reading the newspaper, writing the occasional monthly strategy piece and flying around the world to meet with clients to repeat what I wrote in my monthly piece. For stock picking, you will do better hiring a blind monkey to throw darts at the stock listings in the local paper. The monkey is cheaper too (although he may not smell as good). However, the monkey is not nearly as entertaining as I can be. Unlike the monkey, I can make sarcastic comments about what is going on in the world, the economy and the markets. The Hunt for Black October
03/10/29
The game of investing and wealth accumulation is, by definition, a relative one. In absolute terms, the standard of living in China is light years better than it was 20 years ago, when owning your own house and car seemed like an impossible dream. But are people satisfied? No, simply because human beings are selfish and greedy with voracious and insatiable appetites for more. Studies confirm over and over again that material satisfaction is not a function of how much you have in absolute terms, but how much more or better you have than the guy next door. Buy a new Porsche and you are happy for 10 minutes until someone drives by in his even flashier new Ferrari. We compare ourselves to the guy next to us and, if he is too poor, we go out of the way to find someone richer just to make us feel bad. October 2008 01/10/29
Source: Bloomberg What is it about October that seems to cause markets to crash and does this mean I think that we will have another one this month? I really do not know and I think no one else does. Maybe, all the October crashes were merely coincidental. Maybe, everyone finishes up the third quarter and decides it is best to wait out the rest of the year and sell first. However, given that markets are already down so much and the US government is intent on bailing out the financial system at any cost, I am not sure this October will be that bad. 12
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
Personally, I think that the bottom for the markets has been set and we are unlikely to breach the intra‐day lows of 18 September. Nonetheless, October is unlikely to be a good month in any case for China investors as we expect little domestic policy announcements until after the CPC finishes its meeting starting mid‐October. However, I will be a strong buyer on dips, if the Hang Seng Index tries to test around its previous low of 16,284, the HSCEI dips to 7,789 or Shanghai Composite falls to 1,802. And, occasionally, by luck, I get things write. Last month, I wrote about two companies that I thought represented good value. One was VTech and the other BYD. This is what I wrote, “While BYD Electronics technically comes on our radar screen for value, I do not really like the concept of OEM cell‐phone manufacturing. However, parent BYD, while not as cheap, offers greater potential due to its core business of battery manufacturing, although the auto side may be under stress. Interestingly, while Japanese battery manufacturer stocks have soared this year, BYD has plunged. While BYD does not just make only batteries anymore, the disparity in performance is striking.” BYD F6DM
BYD E6
Source: BYD Source: BYD Then Warren Buffett came and invested HK$1.8bn (US$231m) for a minority stake of just under 10% in BYD via Berkshire Hathaway subsidiary MidAmerican. The stock promptly doubled. Is BYD a good investment still? I do not know. Certainly, it is not cheap anymore and investors really have to have faith that the company will become a global leader in electric cars. BYD has already launched a hybrid F6DM (DM for dual‐mode gasoline and electricity) and showcased its new all‐electric battery powered car, the E6, at this year’s Beijing Auto Show. The E6 is supposed to be launched in the US by 2010, before GM’s much hyped all‐electric car, the Volt. However, unlike the Volt which is only supposed to get 40 miles on one charge, the E6 is touted to go as far as 185 miles on a single charge. Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
13
October 2008 Before I finish off this month’s psychotic ramblings, I want to discuss briefly retail sales in China. As readers know, I have been expecting retail sales to grow faster this year as inflation raises the nominal prices of everything sold. Fortunately, the more than 23% YoY growth in Chinese retail sales seen so far this year is not all just about inflation, there is also an increase in volume. A clever New York hedge fund manager asked me that, if nominal wage growth was 10‐15%, how sustainable was 23% growth. The complicated answer is that, as the US managed to grow consumption much faster than wages for about 20 years, the two numbers are not directly comparable. An expansion of consumer credit financed the US consumer miracle, but a Chinese one will more likely be funded through a decline in the savings rate. However, this misses the bigger point, which is that we should be concentrating on disposable income rather than headline wages. The doubling of the basic tax exemption last year from Rmb800/month to Rmb1,600/month has had the effect of substantially increasing the disposable incomes of the low end of the working urban population. As I expect further tax cuts and incentives, I venture to guess that consumption remains relatively strong. Still, not all consumption is created equal. For the US, being the reigning king of consumption, we split the consumer sector into numerous sub‐categories; a habit we are not so accustomed to yet in China. I was looking for firm definitions of these categories and discovered that there were none. So, I had to make some up myself. As best as I can tell, consumption has two major categories, consumer cyclicals (also known as consumer discretionary) and consumer non‐cyclicals (or consumer staples or fast‐moving consumer goods). Consumer cyclicals can be further sub‐divided into durables and non‐durables. As the name suggests, consumer cyclicals are items sensitive to the economic cycle and sales of which tend to decline if the economy is bad. Consumer durables include things like automobiles, appliances, home furnishings and consumer electronics. Non‐durable discretionary items include things like hotels, restaurants, movies & entertainment, textiles & apparel, and retailing in general. Consumer staples include things like food & beverages, tobacco, pharmaceuticals, toiletries, soaps & detergents, light bulbs, batteries, paper & plastic products, which are used on a daily basis and are unlikely to be cut down during a recession. For China, it is clear that the durables sector faces a rough 12 months ahead and this is already showing up in the breakdown of retail sales (see table below). This is not terribly surprising given the weakness in the property sector and stock market crash. However, that 23% YoY retail sales growth has to be coming from somewhere, right? Yes, it is the non‐durable discretionary and consumer staples sectors that continue to be robust. 14
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
China Retail Sales Breakdown by Sector
(YoY %)
2002
Above designated size enterprise: Total
17.9
Food, beverage, tobacco & liquor (FB)
14.1
FB: Grain & oil
FB: Meat, poultry & eggs
13.4
FB: Beverage
18.0
FB: Tobacco & liquor
14.7
Clothing, shoes, hats & textiles (CT)
9.2
CT: Garments
10.1
CT: Footwear & headgear
10.1
CT: Knitwear & textiles
5.2
Cosmetics
14.0
Gold, silver & jewellery
0.5
Daily-use goods
9.4
Daily-use goods: Washing
22.5
Daily-use goods: Toys
18.6
Hardware & electric materials
(6.8)
Sport & recreational goods
11.0
Book, newspaper & magazine
9.5
Electronic publication & video product
(2.4)
Household electric & video appliance
14.5
Chinese & western medicine (CM)
12.0
Cm: western medicine
14.3
Cm: Chinese herbal & traditional medicine
7.9
Cultural & office goods
16.9
Furniture
15.6
Communication appliances
70.1
Coal & related products
(18.4)
Wood & wooden products
(20.1)
Petroleum & related products
21.7
Raw chemical materials*
(14.0)
Metal materials
42.1
Construction & decoration materials
37.1
Mechanical & electric products & equipment**
66.5
Automobiles
74.8
Octoeber 2008
October 2008 Retail Sales Breakdown (2001)
2003
24.8
20.3
2004
21.6
18.4
2005
38.1
24.1
15.2
22.4
13.4
13.6
14.3
14.6
10.1
18.0
11.4
13.9
28.4
12.4
8.9
26.2
13.9
18.1
18.3
10.2
10.7
8.7
17.3
28.4
68.8
18.5
50.0
38.4
26.1
21.0
31.6
61.9
67.7
21.3
15.3
16.3
19.2
20.2
17.0
18.2
26.2
28.9
11.5
14.5
18.1
17.0
15.5
10.0
3.9
15.0
5.4
8.5
1.1
24.0
23.4
43.5
(12.1)
44.4
47.3
6.1
31.7
28.0
24.0
25.8
18.1
12.7
17.2
26.6
32.4
25.8
5.7
26.0
20.9
19.1
15.1
14.7
24.3
30.7
14.7
54.2
21.9
18.0
20.2
5.8
63.8
23.3
47.2
134.3
49.8
62.1
108.0
176.7
22.8
(91.8)
69.6
2006
25.7
16.8
22.3
12.2
16.3
18.9
21.0
21.8
25.0
12.0
17.5
28.6
19.0
18.3
16.3
21.7
18.3
11.9
13.0
21.7
8.5
7.0
5.3
24.8
35.6
27.2
25.6
(25.3)
46.1
10.7
(4.5)
26.7
11.9
32.7
2007
26.3
26.0
38.4
40.9
25.9
25.7
25.6
28.7
23.1
12.9
26.3
41.7
26.7
20.9
23.1
26.0
25.2
9.1
22.8
23.4
25.1
31.4
14.1
22.6
43.1
9.4
64.9
71.9
20.5
27.6
10.8
43.6
25.7
37.1
7M08
28.2
24.6
30.9
27.3
21.6
27.4
25.4
25.8
27.0
21.0
22.5
44.0
19.3
20.5
25.0
(4.9)
20.4
1.8
2.6
18.4
15.4
11.7
22.7
24.6
31.0
3.8
61.9
3.2
46.1
21.1
27.9
(2.2)
9.7
32.6
* Including chemical fertilizer **Including agricultural machinery Source: NBS However, this is not necessarily good news as growth in automobile purchases and usage has, to a certain extent, driven the increase in retail sales. Eight years ago, cars only made up a small portion of total retail sales, but they now account for 20% of them. Petroleum and related products, which we must guess is mostly petrol to run those cars, account for a further 20%. Like the US, which often breaks out retail sales excluding autos, China is increasingly dependent on this sector to drive its consumer economy. Moreover, although auto sales have held up reasonably well so far, there are preliminary signs of weakness, including a build‐up of inventory, which suggests that retail sales growth, on aggregate, will slow later this year and into 2009. Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
15
Food &
Beverage
20%
Others
26%
Source: NBS Pharmaceuticals
10%
Food &
Beverage
15%
Others
19%
Clothing &
Apparal
15%
Automobile
7%
Petroleum
10%
Retail Sales Breakdown (7M08)
Household
Electric
8%
Automobile
22%
Household
Electric
12%
Clothing &
Apparal
11%
Petroleum
20%
Pharmaceuticals
5%
Source: NBS Thus, for those interested in playing the retail space in China over the next 12 months, I suggest staying clear of the auto sector in general (there may be some exceptions) and everything to do with housing, including refrigerators, air conditioners, TVs, among other items. While TV and appliance makers like TCL, Konka, Skyworth, Midea and Haier have not been market favourites, in any case, consumer electronic retailers like Gome and Sunning may also to face pressure. For the retail sector, department stores like Parksons, Golden Eagle, and Wangfujing are likely to hold up reasonable well. So are supermarkets like WuMart and Lianhua. I also venture to guess that apparel, footwear and sportswear companies like Li Ning, Stella, Ports, and Anta will do reasonably well. For the food and beverage sector, I think that beer and liquor companies, such as Tsingtao Brewery, Moutai and Wuliangye, will also prove to be defensive in this downturn. Tingyi, Want Want, Uni‐President, SDIC Zhonglu, and Andre Juice are likely to post steady growth. The big exception is, of course, the dairy industry which is undergoing its own mini‐crisis due to the melamine‐tainted milk scandal. China’s dairy industry problems are vaguely reminiscent of the 2000 scandal with Japan’s Snow Brand Milk Products where over 15,000 fell ill from drinking contaminated milk. Like the Chinese scandal, the company was slow to react, tried to deny responsibility and was roasted in the media as a result. The company was hit again in 2002 with a “mad cow” scandal and, to a certain extent, has never fully recovered. This is what a MallenBaker case study on the Snow Brand scandal had to say: “The features that made Snow Brandʹs initial response to the crisis a failure was that they responded too slowly, failing to move quickly towards a full product recall and to communicate with the public. When it did communicate, it dwelt much more on the impact on financial performance, and not so much on the suffering of the people who had consumed its product. 16
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
First, Snow Brand did not move quickly enough; it should have acted faster to assemble the facts and act on them, both in the form of moving toward a product recall and in terms of communicating with the media and the public. Three days passed before either of these happened, following numerous reports and inquiries from public‐health centres. October 2008 China – HK
Strategy
„ We add China Resources Enterprise because the
Performance Comparison
% Change Since
1M YTD Incept*
264
BOCI recommended (11) (48)
230
(13) (44)
MSCI China
(11) (41)
238
HSMLCI
312
(10) (41)
HSCEI
Second, Snow Brand had no structure in place to accurately respond to a crisis, including no method of getting information to top management. Therefore, management was unprepared when it finally did speak to the media and was not armed with all the facts. „
„
* Inception May 2003 Sources: Bloomberg, BOCI Research They also made the huge mistake of seeking to cover up the bad news. Once such a situation has arisen, all the facts will eventually be revealed, and early and voluntary disclosure by the company is the only way to move forward. Snowʹs reluctance in this area meant that not only did customers fear that the products would be unsafe, they also did not trust the company to seek to ensure that it would be otherwise.” Relative Performance
From an investor’s point of view, Snow Brand profits took five years to recover, while its share price has, to this date, still not seen the pre‐scandal highs. I recommend investors avoid Chinese dairy stocks for the time being. BOCI recommended
MSCI China
HSCEI
HSMLCI
Source: BOCI Research 08/08
02/08
09/07
03/07
10/06
04/06
10/05
05/05
11/04
05/04
„
11/03
900
800
700
600
500
400
300
200
100
05/03
market has largely discounted its poor results for
2008 and we anticipate earnings recovery of over
20% in 2009 and 2010. We believe the beverage
business will resume faster growth and the food
distribution in Hong Kong will stabilise in 2009.
We add Xinyu Hengdeli due to its attractive valuation
and the long-term growth potential of the luxury
watch retailing business in China. Although demand
for luxury watches may slow in the short term, at
6.8x 2008E P/E, the downside for the stock is low.
We remove Gome Electrical Appliances because the
imminent economic slowdown will put pressure on
replacement demand for household appliances. The
gloomy outlook on residential property market also
cuts back the demand for them.
We remove Lenovo as the slim operating margin of
its US business segment leads to concerns for the
coming quarters as IT spending of corporations in
US is not expected to pick up any time soon.
Lenovo's move into the consumer market will also
lead to uncertainties due to intensifying competition
and lower profitability in the segment.
BOCI China-HK Recommended Stocks
Snow Brand Milk Products Price Chart
1,400
Snow Brand Milk Products Net Profits
(m yen)
RIC 20,000
1,200
10,000
0
1,000
800
(10,000)
(20,000)
600
(30,000)
400
(40,000)
(50,000)
Source: Bloomberg 2008
2007
2006
2005
2004
2003
2002
2001
(80,000)
2000
01/08
01/07
01/06
01/05
01/04
01/03
01/02
01/01
01/00
01/99
0
1999
(60,000)
(70,000)
200
Source: Bloomberg China Resources Ent.
Hengdeli
Chinese Insurance
Hengan International
Fushan Energy
Datang Power
Maanshan Iron & Steel
China Mobile
China Coal
Wumart Stores
China Green
ICBC
CNOOC
Anta Sports Products
Shanghai Jinjiang Hotel
Xiwang Sugar
Sino-Ocean Land
Beijing Enterprise
Tong Ren Tang Tech
CR Power
Cash (incl. dividends)
Total
Gome Elec Appliances
Lenovo
0291.HK
3389.HK
0966.HK
1044.HK
0639.HK
0991.HK
0323.HK
0941.HK
1898.HK
8277.HK
0904.HK
1398.HK
0883.HK
2020.HK
2006.HK
2088.HK
3377.HK
0392.HK
8069.HK
0836.HK
Last 3M avg. Free float
P/E
price daily T/O mkt cap
(x)
(HK$) (HK$ m) (HK$ m) FY07 FY08E FY09E
18.52
91
20,767 21
20
16
1.75
7
1,273 9
7
5
13.88
37
7,634 13
20
15
21.8
71
9,948 24
20
15
2.76
35
3,969 (77) 15
3
4.6
189
23,967 12
21
10
2.59
98
4,653 7
5
5
77.8
3,277 408,280 16
12
11
9.4
649
39,459 16
10
7
6.4
9
4,249 23
17
14
6.25
13
2,354 13
11
8
4.74
2,312 390,802 17
10
9
9.47
1,570 124,624 12
7
7
4.5
31
3,207 16
12
8
1.03
5
1,684 15
10
8
2
1
701 4
3
3
2.49
92
99,774 5
9
8
29.4
48
13,391 17
13
10
6.7
0
559 6
5
4
17.62
142
48,200 22
30
16
Yield
(%)
FY08E FY09E
3.2
2.7
5.4
6.8
0.4
0.6
3.4
4.5
0.0 13.3
1.9
4.1
7.7
7.7
3.7
4.1
2.0
2.8
3.6
3.6
2.8
3.0
5.4
5.8
4.9
5.2
4.0
5.9
4.3
5.3
9.2 10.7
3.3
3.3
3.2
4.1
7.4
8.9
0.6
1.2
1M
(12)
(37)
(16)
(19)
(24)
(3)
(11)
(2)
(17)
(16)
(10)
(8)
(7)
(16)
(19)
(8)
(25)
2
(18)
(5)
% Chg.
YTD Since rec.
(40)
0
(61)
0
(32)
(15)
(34)
(17)
(46)
(51)
(40)
(3)
(51)
(40)
(44)
(32)
(67)
(37)
(3)
7
(27)
(26)
(22)
(7)
(36)
(20)
(57)
(60)
(70)
(72)
(42)
(35)
(70)
(83)
(18)
18
(54)
(56)
(42)
386
Stocks Removed or Reduced from the BOCI China-HK Recommended List
0493.HK 2.15
100
3,909 13
10
8
3.2
4.2 (30) (58)
156
19,076 28
10
10
4.2
4.4 (17) (51)
0992.HK 3.57
(52)
(39)
Date
Wgt
rec.
(%)
26-Sep-08 2
26-Sep-08 2
05-Sep-08 5
05-Sep-08 4
1-Aug-08 3
1-Aug-08 5
4-July-08 5
29-May-08 5
03-Apr-08 3
07-Mar-08 6
07-Mar-08 4
07-Mar-08 11
01-Feb-08 3
04-Jan-08 4
04-Jan-08 4
07-Dec-07 5
02-Nov-07 2
01-Jun-07 4
30-Apr-07 3
7-Jan-04 12
7
100
03-Apr-08
29-May-08
2
3
Note: Bolded stocks are new additions to the recommended list. Sources: Bloomberg, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
17
18
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
„ We add VTech as we believe its undemanding
„ We add Esprit because the stock trades at the low
end of its historical range, which will have largely
discounted the economic slowdown in the EU, its
major market. With ample cash on hand, we expect
that Esprit to maintain its high dividend payout with
the stock trading at 8% dividend yield.
„ We remove Sa Sa as its expansion in China has not
BOCI recommended
MSCI HK
HSHKCI
HSI
Source: BOCI Research 08/08
03/08
09/07
04/07
10/06
04/06
11/05
05/05
11/04
05/04
11/03
V-tech
Esprit
Oriental Press
CLP
Hang Seng Bank
Yue Yuen
PCCW
Luk Fook
Stella International
Lifestyle
Clear Media
Ports Design
MTR Corporation
Next media
Standard Chartered Bank
HK& China Gas
Cash (incl. dividends)
Total
Sa Sa International
GZI REIT
303.HK
330.HK
18.HK
2.HK
11.HK
551.HK
8.HK
0590.HK
1836.HK
1212.HK
0100.HK
0589.HK
0066.HK
0282.HK
2888.HK
0003.HK
Last 3M avg. Free float
P/E
Yield
price daily T/O mkt cap
(x)
(%)
(HK$) (HK$ m) (HK$ m) FY07 FY08E FY09E FY07E FY08E
46.00
22
6,875 7.9
6.7
6.4 10.6 10.9
51.40
454
54,421 12.3 9.9
9.2
8.1
8.1
0.89
3
909 11.7 11.1
6.8
61.55
310 106,637 14.0 15.1 17.3 3.7
3.6
148.20
524 106,005 15.3 16.0 16.1 4.3
4.5
20.25
51
12,718 12.0 10.4 9.2
4.3
4.9
3.46
76
12,665 14.3 10.5 8.9
6.3
7.8
2.66
4
738 7.4
5.8
5.0
8.8 10.2
8.60
9
2,089 7.5
6.8
5.9 10.0 11.8
8.21
26
4,412 13.5 11.0 10.4 3.5
3.8
4.00
1
1,044 14.4 8.9 11.6 0.0
0.0
14.50
34
5,099 18.2 15.4 12.2 3.8
4.6
23.30
147
30,641 8.7 12.4 14.1 2.0
2.1
1.97
1
1,143 13.0 8.6
7.8 13.1 8.7
207.40
63 290,514 13.3 11.7 10.8 3.7
4.0
17.32
156
57,420 10.4 20.0 18.5 2.0
2.0
1M
(8)
(36)
(8)
(6)
(2)
(3)
(28)
(21)
(25)
(15)
(20)
(21)
(7)
(19)
5
(1)
(26)
(21)
4-Jul-08
5-Oct-07
09/08
near-term high-end hotels operation will probably
face a slight oversupply in Shanghai, while Wuhan
Jinjiang Hotel remains in the red.
BOCI China-A Recommended Stocks
RIC
3
10
SDIC Zhonglu
COFCO Tunhe
Huadong Medicine
Beijing Capital Tourism
SDIC Huajing Power
China Life
Yabao Pharmaceutical
Shuanghuan Sci & Tech
Fujian Dongbai
Chengdu People's
Department Store
Qinghai Salt Lake Potash
Yantai Wanhua
Sichuan Swellfun
Long Yuan Construction
Wangfujing Dep’t Store
Shandong Gold Mining
Pingdingshan Tian'an Coal
ICBC
Kweichow Moutai
Cash (incl. dividends)
Total
Qingdao Haier
Shanghai Jinjiang Dev.
600962.SS
600737.SS
000963.SS
600258.SS
600886.SS
601628.SS
600351.SS
000707.SS
600693.SS
600828.SS
Last 3M avg. Free float
price daily T/O mkt cap
(Rmb) (Rmb m) (Rmb m)
9.66
38
1,159
10.87
92
4,053
9.53
12
2,145
12.56
127
1,397
8.98
63
5,919
25.26
462 37,890
9.84
19
1,177
7.11
130
2,416
10.33
14
2,111
11.52
7
814
FY07
19.0
48.0
23.9
25.4
13.8
25.6
28.9
35.0
44.4
24.7
P/E
(x)
FY08E
14.6
28.0
20.7
30.6
11.7
26.0
17.2
9.1
23.7
17.5
000792.SS
600309.SS
600779.SS
600491.SS
600859.SS
600547.SS
601666.SS
601398.SS
600519.SS
88.12
12.73
14.92
5.93
27.48
37.78
17.71
4.35
131.89
68.3
14.4
35.4
12.0
38.4
63.7
17.5
18.2
43.1
29.7
10.8
18.2
9.2
24.0
14.3
10.2
10.7
28.3
Yield
(%)
FY09E FY07E FY08E
13.2 2.7
3.0
19.0 1.5
2.5
12.1 2.4
4.1
28.0 2.1
2.2
10.9 2.4
2.9
19.9 1.4
1.8
12.3 0.0
2.4
7.3
1.4
4.2
17.6 0.9
1.7
13.7 1.7
2.2
% Chg.
Wgt.
1M
(32)
(12)
7
19
11
7
5
(6)
1
(13)
YTD Since rec. Date rec. (%)
(56)
0
26-Sep-08 6
(43)
0
26-Sep-08 6
(42)
7
5-Sep-08 2
(74)
11
5-Sep-08 3
(46)
20
1-Aug-08 5
(56)
(4)
1-Aug-08 4
(42) (31) 29-May-08 3
(48) (50) 29-May-08 2
(31) (35)
9-May-08 8
(46) (45)
3-Apr-08 4
0
(9)
(14)
(1)
1
28
10
(3)
(2)
n.a.
(67)
(47)
(57)
(46)
(55)
(62)
(46)
(43)
6
(68)
(47)
(47)
(39)
(78)
(50)
(9)
805
Stocks Removed or Reduced from the BOCI China-A Recommended List
600690.SS 9.11
79 10,069 30.6 17.6 14.4 1.7
2.1
5 (59)
32
2,583 27.0 25.9 23.3 2.9
3.0
6 (42)
600754.SS 11.70
104
(45)
89
92
63
24
48
219
227
499
141
34,447
8,219
4,266
1,430
5,187
5,988
7,951
58,387
52,674
24.5
8.8
13.8
7.0
17.2
13.7
6.6
9.7
21.4
1.5
3.9
0.5
1.7
1.1
3.8
4.4
5.0
1.2
1.6
4.7
0.6
2.1
1.5
4.0
6.7
5.5
1.8
3-Apr-08 8
7-Mar-08 4
4-Jan-08 9
02-Dec-07 5
02-Dec-07 2
02-Nov-07 3
07-Sep-07 7
9-Feb-07 3
20-Jun-03 11
5
100
8-Sep-06
4-Jan-08
6
5
Note: Bolded stocks are new additions to the recommended list. Sources: Bloomberg, BOCI Research Note: Bolded stocks are new additions to the recommended list. Sources: Bloomberg, BOCI Research Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
FTSE-XinhuaA50
Shenzhen A
Source: BOCI Research % Chg.
Wgt
YTD Since rec. Date rec. (%)
(18)
0
26-Sep-08
7
(60)
0
26-Sep-08
7
(37)
(9)
5-Sep-08
4
20
(6)
5-Sep-08
4
(23)
(7)
1-Aug-08
7
(26)
(1)
1-Aug-08
8
(35)
(28)
4-Jul-08
3
(67)
(49)
9-May-08
6
(54)
(28)
9-May-08
4
(61)
(58)
1-Feb-08
2
(53)
(38)
1-Feb-08
4
(49)
(49)
4-Jan-08
4
(21)
(27)
4-Jan-08
5
(35)
(26)
29-Jun-07
6
(34)
(4)
9-Mar-07
8
(18)
74
23-May-03
6
14
100
Stocks Removed or Reduced from the BOCI HK-HK Recommended List
178.HK
2.42
7
1,048 16.4 12.3 9.1
8.5 11.0 (16) (23)
0405.HK
2.50
4
1,718 11.3 11.9 10.4 8.4
9.6 (2) (19)
„ We remove Jinjiang Development mainly because its
BOCI recommended
Shanghai A
BOCI HK-HK Recommended Stocks
RIC tomato-processing allowance and seen the price of
ketchup rise from 2007.The export price now stands
at US$1,300 per ton, up about 60-70%, and Tunhe’s
sales volume has risen about 30%.
white electronics to slow in tandem with the
weakening domestic real estate market. In addition,
concerns over the global economy lead us to believe
that the company will face a tougher export market.
04/08
economic
activities
in
China
and
stiffer
consolidation of the residential property market will
overshadow the outlook for commercial properties
(both office and retail) in Guangzhou. This will cap
the upside of the stock although the high yield of the
REIT will also limit its downside in the near term.
10/07
„ We remove GZI REIT as an expected easing in
05/03
475
425
375
325
275
225
175
125
75
800
700
600
500
400
300
200
100
0
05/07
Relative Performance
„ We add COFCO Tunhe as the EU has cancelled
„ We remove Qingdao Haier as we expect demand for
Relative Performance
gone smoothly and retail business in Hong Kong has
eased. Due to the impact of natural disasters and the
Beijing Olympics, the number of mainland travellers
to Hong Kong declined.
11/06
concentrate capacity of nearly 0.20m tonnes,
ranking it No 4 in the industry. The export price of
apple juice is now down at US$1,100-1,200 per ton,
while the price of apple is down at Rmb400-450 per
ton, leading to a wider gross margin.
* Inception May 2003 Sources: Bloomberg, BOCI Research 05/06
* Inception May 2003. Sources: Bloomberg, BOCI Research % Change Since
1M YTD Incept. *
BOCI recommended 1 (56) 209
Shanghai A
4 (56)
50
Shenzhen A
1 (58)
45
FTSE-XinhuaA50
(0) (60)
45
12/05
% Change Since
1M YTD Incept*
BOCI recommended (8) (32)
177
MSCI HK
(12) (39)
80
HSHKCI
(6) (30)
64
HSI
(6) (33)
101
„ We add SDIC Zhonglu, which has apple juice
Performance Comparison
06/05
Performance Comparison
12/04
China – A
Strategy
valuation, decent yield plus debt-free position
makes the company a defensive play. Leveraging on
competitive cost structure and price points, we
expect VTech to gain further market share amid the
economic slowdown.
06/04
Hong Kong
Strategy
October 2008 12/03
19
20
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
October 2008 12.8% YoY and 11.5% YoY in August from 14.7% YoY and 14.0% YoY in
July, respectively. In fact, on the back of the statistics, the PBOC cut the
one-year benchmark lending rate by 27bps on 15 September 2008 IN
the first monetary easing in more than six years. The August statistics
and the PBOC’S response suggest that worries over an economic
slowdown are deepening.
China Economy
„ The chaos in the US financial markets has intensified fears among local
investors about a slowdown in China’s economic growth with the stock
markets on the mainland in turmoil last month. China had a national
holiday on 15 September for the Mid-Autumn Festival, but it was also
the day that US investment banking giant Lehman Brothers filed for
bankruptcy. The Shanghai composite index fell 4.5% to 1,986.64 points
on 16 September, after the People’s Bank of China (PBOC) announced an
interest rate cut, as well as a reduction of the required reserve ratio
(RRR) of commercial banks. Banking stocks fall steeply in response to
the global financial crisis, while the asymmetric rate cut drove down the
Shanghai composite index to a 22-month low of 1,896 points on 18
September. It was down 68.9% from the market peak of 6,092 points in
October 2007.
„ On 18 September, the Ministry of Finance announced the scrapping of
stamp duty on stock purchases and that government money would be
used to buy shares to support the market. According to the
announcement, Central Huijin Investment, a subsidy of China
Investment Corp (CIC), would buy into listed companies, including
state-owned Industrial and Commercial Bank of China, Bank of China
and China Construction Bank. Other state-owned entities were also told
to repurchase their own stocks in the market. This saw the Shanghai
composite index surge more than 9% on 19 September.
„ Even though China’s economic growth will remain much higher than
that of the rest of the world and its financial system has relatively less
exposure to the global financial crisis, mainland stock markets have
suffered more than those in Europe and the US. We believe this reflects
that the market believes that the China economy is now highly
correlated to the US economy and points to failure in its planned
strategic transition. Furthermore, amid the anticipated deceleration of
economic growth, the markets are worried that the unbalanced
economic growth model is quite vulnerable.
„ The slump in the China stock markets in September is also directly due
to obvious signs of a slowdown in economic growth. The growths of the
leading indicators of economic performance, VAIO and M1, slowed to
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
21
„ Although the recent renminbi lending rate cut points to a switch in the
PBOC’s stance of a “tight monetary policy”, it still faces a “triangle
dilemma” in macro control. China saw its trade surplus shrink slightly in
8M08, but its foreign exchange reserves surged 35.7% YoY to
US$280.6bn in 1H08. Such a situation suggests that the liquidity
management remains an important task under the existing currency
system. In the face of the anticipated global recession, China definitely
has some room to cut its benchmark rate further. However, the positive
one-year deposit rates must, in our view, remain the policy target,
implying that the rate cut are likely to be mild in the run-up to the end of
the year. At the same time, although the US dollar will rebound in the
short term, we expect China to maintain a relative stable renminbi
appreciation trend for the sake of financial stability.
„ As we stated earlier, the PBOC is still worried about possible inflationary
pressure although it started easing its monetary policy with the latest
rate cut. At the same time, the government has also been hesitant to
change policies related to the property market and property developers.
According to National Bureau of Statistics (NBS), the residential housing
sales declined 10.8% YoY in 7M08, compared to the rise of 27% YoY for
full-year 2007. At the same time, the national new residential house
index slumped 6.2% in July 2008 for the eighth consecutive month from
12.2% in November 2007. It is obvious that the bearish sentiment in the
property market will further drag down housing prices in the
foreseeable future. Although the government has clearly not made any
changes in policies towards the property market, we expect that it is
inevitable that it has to act against secondary housing purchases and
further cut the long-term lending rate to boost demand in the near
future. The reason is that there is rising pressure for the government to
stimulate China’s economic growth amid a global slowdown in the
coming months.
22
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
China Monthly Economic Indicators (2006-09)
2006 2007 2008E 2009E Jul07 Aug
Sep
Oct
Nov
-
Dec Jan08
Feb
Mar
Apr
May
Jun
Jul
Aug
Real economy (YoY %)
GDP*
11.1 11.4 10.0
-
11.2
-
- 10.6
-
-
10.1
-
-
VAIO (real)
16.5 18.5
18.0 17.5 18.9
17.9 17.3
17.4
15.4
15.4 17.8
15.7
16.0
16.0
14.7
12.8
-Light industry
17.0 19.6
15.9 14.6 16.4
14.4 14.3
15.2
-
11.8 15.7
12.1
13.5
13.3
12.2
11.7
-Heavy industry
15.3 16.3
18.9 18.8 20.0
19.4 18.6
18.4
-
16.9 18.7
17.2
17.0
17.1
15.7
13.2
Industrial sales ratio (%) 97.5 98.1
98.4 98.5 98.2
98.3 98.1
98.1
-
97.5 98.0
97.8
98.0
97.5
98.1
97.8
27.5 25.8 26.0 24.0
26.6 26.7 26.4
26.9 26.8
25.8
-
24.3 25.9
25.7
25.6
26.8
27.3
27.4
26.0 30.2
23.5
28.9 29.0 30.3
31.4 31.8
-
32.9 32.3
32.1
31.9
33.5
30.9
29.1
13.5 16.8 18.5 16.0
16.4 17.1 17.0
18.1 18.8
-
20.2 21.5
22.0
21.6
23.0
23.3
23.2
FAI* (YoY %)
- Property
Retail sales*
8.0
-
- 11.5
20.2
External sector
Exports (US$ bn)
969.1 1,218 1,386 1529 107.7 111.4 112.5 107.7 117.6 114.0 109.7
Export growth (YoY %)
87.4 109.0 118.7 120.5 121.5 136.7 134.9
27.2 25.7 13.8 10.3
34.1 22.7 22.8
22.2 22.7
21.6
26.7
16.8 31.0
791.6 956.0 1,099 1264
83.4 86.4 88.6
80.7 91.3
91.7
90.2
78.8 95.6 102.0 100.3 100.2 111.4 106.2
20.0 20.8 15.0 15.0
26.9 20.0 16.1
25.5 25.3
25.5
27.6
30.9 25.0
26.3
40.0
31.0
33.7
23.1
Trade balance (US$ bn) 177.5 262.0 287.0 178.3
24.4 25.0 23.9
27.1 26.3
22.7
19.5
8.6 13.4
16.7
20.2
21.4
25.3
28.7
7.7
13.1
11.2
6.9
9.3
7.6
7.8
9.6
8.3
7.0
10.9
Imports (US$ bn)
Import growth (YoY %)
FDI* (US$ bn)
63.0 74.8 62.0 60.0
5.0
5.2
5.3
6.8
21.8
28.1
17.6
26.9
21.1
Money supply (YoY %)
M0
12.7 12.1 13.5 13.0
15.1 15.0 13.0
13.4 13.6
12.1
31.2
6.0 11.1
10.7
12.9
12.3
12.3
M1
17.5 21.0 17.7 14.0
20.9 22.8 22.1
22.2 21.7
21.0
20.7
19.2 18.3
19.1
15.3
14.2
14.0
11.5
M2
16.9 16.7 15.5 14.5
18.5 18.1 18.5
18.5 18.5
16.7
18.9
17.5 16.3
16.9
18.1
17.4
16.4
16.0
Deposit rate, 12M (%)
2.25 4.14 4.14 4.14
3.87 3.87 3.87
4.14 4.14
4.14
4.14
4.14 4.14
4.14
4.14
4.14
4.14
4.14
Lending rate, 12M (%)
6.12 7.47 7.47 7.47
7.29 7.29 7.29
7.47 7.47
7.47
7.47
7.47 7.47
7.47
7.47
7.47
7.47
7.47
1,066 1,530 1,908 2130 1,385 1,409 1,434 1,455 1,497 1,528 1,590 1,647 1,682 1,757 1,797 1,809
-
-
6.3
4.9
FX reserves* (US$ bn)
Inflation (YoY %)
National CPI
1.5
4.8
7.0
5.2
5.6
6.5
6.2
6.5
6.9
6.5
7.1
8.7
8.3
8.5
7.7
7.1
*Periodical; no single month data from the NBS Sources: NBS, MOFTEC, PBOC and BOCI Research YoY %
VAIO
Heavy industry
Light Industry
Aug
17.5
18.8
14.6
Sep
18.9
20.0
16.4
Oct
17.9
19.4
14.4
Nov
17.3
18.6
14.3
According to the NBS, China’s value‐added industrial output (VAIO) grew 12.8% YoY in August, down from 14.7% YoY in July and 16.0% YoY in June. Delivery value of exports rose 16.3% YoY in August, up from the increases of 14.4% YoY in July and 13.3% YoY in June. Meanwhile, industrial sales grew 97.8% YoY in August, compared to increases of 98.1% YoY in July and 97.5% YoY in June. For 8M08, VAIO growth slowed to 15.7% YoY from 16.1% YoY in 7M08 and 16.3% YoY in 6M08. Due to shrinkage of exports, VAIO of textiles rose only 8.9% YoY in August, down from 10.0% YoY in July and 12.4% YoY in June. Meanwhile, VAIO of smelting and pressing of ferrous metals grew 8.1% YoY, and that of non‐metal mineral products went up 13.9% YoY, versus the corresponding increases of 13.9% YoY and 15.5% YoY in July. For raw chemical materials, VAIO growth decelerated sharply to 8.9% YoY in August from 15.5% YoY in July. A decline in demand, as well as a rise in raw material costs and oil prices had an impact the machinery sector. VAIO of ordinary machinery rose 15.0% YoY in August, lower than the increase of 18.4% YoY in July. At the same time, growth of VAIO of transport equipment dropped to 11.9% YoY in August from 15.8% YoY in July and 20.5% YoY in June. VAIO of electric and machinery and equipment went up 17.9% YoY in August from 17.2% YoY in July, while that of electronic and communication equipment edged up 15.7% YoY in August from 16.5% YoY in July. While the weak growth of VAIO in August was due in part to the seasonal impact (hot weather) and in part to the Olympics, we believe it also points to a trend for the future. VAIO is the biggest component of the Gross Domestic Product (GDP) at 43.0% with a contribution of 48.8% to growth last year. Therefore, the slowing VAIO growth will translate directly to lower GDP growth in the current year. Value Added Industrial Output (VAIO)
2007
Jul
18.0
18.9
15.9
October 2008 Dec
17.4
18.4
15.2
2008
Jan
15.4
15.5
15.6
Industrial Profits
Feb
15.4
16.9
11.8
Mar
17.8
18.7
15.7
Apr
15.7
17.2
12.1
May
16
17
13.5
Jun
16
17.1
13.3
Jul
14.7
15.7
12.2
Aug
12.8
13.2
11.7
Source: NBS 2006
Sep
Oct
Nov
Dec
YTD %
Aug
Total industrial profit (Rmb bn) 1,303.9 1,490.3 1,671.3 1,861.6 2,090.9
Total industrial losses (Rmb bn)
29.1
29.6
30.1
30.7
31
Net profit (Rmb bn)
19.7
20.1
22
23.9
27
Change (%)
23.4
23.3
23.1
22.3
23.1
Net profit at SOEs
19.5
19.7
20.1
19.3
19.4
Tax payments
1,303.9 1,490.3 1,671.3 1,861.6 2,090.9
Receivables
29.1
29.6
30.1
30.7
31
2007
Feb
293.2
43.8
49.3
24.9
18.9
293.2
43.8
May
Aug
Nov
991.9 1,692.0 2,466.8
89.3 129.7 171.7
902.6 1,562.3 2,295.1
42.1
37.0
36.7
42.3
31.0
29.6
24.9
24.4
25.3
18.8
19.5
18.8
2008
Feb
May
Aug
445.3 1,294.8
97.1 200.4
348.2 1,094.4 1,868.5
16.5
20.9
19.4
(5.6)
1.5
0.7
24.8
26.4
26.7
17.2
17.2
16.0
Source: NBS Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
23
24
Huaqiao in the Middle Kingdom
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Octoeber 2008
According to the NBS, China’s industrial profits rose 19.4% YoY in 8M08, down from the increases of 20.9% YoY in 5M08 and 37% YoY in 8M07. Meanwhile, sales revenue rose 29% YoY in 8M08, down from the jump of 29.3% YoY in 5M08, but 1.6ppt higher than the increase of 27.4% YoY in 8M07. The revenue pick‐up and profit decline reflect pressure of rising costs. Breaking down industries, profit of coal mining and dressing surged 142.8% YoY in 8M08 from 97.8% YoY in 5M08 and 41.2% YoY in 8M07. Meanwhile, profit of petroleum and natural gas grew 54.7% YoY in 8M08, up from 54.3% YoY in 5M08. The pick‐up in profit of the mining sector was mainly due to the sharp leap of selling prices. In 8M08, industrial profit of the steel sector rose 31.5% YoY, up from the increase of25.6% YoY in 5M08, mainly due to rebounds of exports and hikes in prices. For raw chemical materials and chemical products, profit grew 32% YoY in 8M08, 6ppts higher than the rise of 26% YoY in 5M08, yet 20.3ppts lower than the increase of 52.3% YoY in 8M07. At the same time, amid a decline in demand and a rise in costs, the machinery sector suffered a drop in profit growth. In 8M08, the profit of special‐purpose equipment rose 20.2% YoY and that of transportation equipment climbed 35.1% YoY, down from the corresponding increases of 25.9% YoY and 46.3% YoY in 5M08. Due to the government’s price caps on energy, profit of electricity production dropped 81.6% YoY in 8M08, compared to a fall of 74% YoY in 5M08. Meanwhile, the petroleum and natural gas sector posted a loss of Rmb96.1bn, up from Rmb44.3bn in 5M08, after realising a profit of Rmb32.3bn in 8M07. October 2008 FAI growth in the primary industries accelerated to 63.5% YoY in 8M08, from 61.9% YoY in 7M08. In the secondary and tertiary industries, FAI grew 28.8% YoY and 25.5% YoY, respectively, in 8M08, versus the corresponding increases of 27.9% YoY and 26.0% YoY in 7M08. A breakdown of the NBS data shows that FAI in coal mining rose 39.2% YoY in 8M08 from 37.5% YoY in 7M08. Meanwhile, investment in oil and gas grew 33.4% YoY in 8M08, compared to 33.5% YoY in 7M08 and 19.8% YoY in 6M08. As for electricity and heating power, FAI rose 10.2% YoY in 8M08, up slightly from 10.1% YoY in 7M08. Growth of FAI in the mining, smelting and pressing of ferrous metals eased to 30.6% YoY in 8M08, from 31.6% YoY in 7M08, while that in non‐ferrous metals accelerated to 42.9% YoY from 40.5% YoY. Due to consecutive shrinkage of sales, FAI growth in real estate eased to 29.1% YoY in 8M08 from 30.9% YoY in 7M08 and 33.5% YoY in 1H08. The pick‐up in FAI in recent months was partly due to the inflationary effect, plus a surge in government spending in quake‐stricken Sichuan Province, flood‐affected areas in South China and the policy housing system. Looking forward, we are concerned about a possible major slowdown in FAI in the property and manufacturing sectors. The two sectors accounted for more than 55% of the total FAI. The leading indicators suggest that both are on a downtrend. Retail Sales
2007
2008
YoY %
Jul
Aug
Sep
Oct
Nov
Dec
Jan-Feb
Mar
Apr
May
Jun
Jul
Retail sales
16.4
17.1
17.0
18.1
18.8
20.2
20.2
21.5
22
21.6
23.0
23.3
23.2
Fixed Asset Investments (FAI)
Urban
16.7
17.6
17.5
18.6
19.2
20.5
20.8
22.1
22.9
22.3
23.5
24.0
23.9
Rural
15.8
16.1
16.09
17.1
18.0
19.6
18.9
20.2
20.1
20.1
22.0
21.8
21.8
2007
YTD %
May
2008
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Feb
Mar
Apr
May
Jun
Total FAI
-
27.8
-
-
25.7
-
-
24.8
-
24.6
-
-
26.3
Urban FAI
26.7
27.5
26.6
26.7
26.4
26.9
26.8
25.8
24.3
25.9
25.74
25.6
26.8
Urban FAI /total FAI (%)
- Primary Industry
-
85.0
-
-
85.5
-
-
85.6
-
83.9
-
-
85.4
35.8
37.5
46.2
42.9
41.1
39.9
37.6
31.1
77.0
80.8
71.6
66.1
69.5
Jul
Aug
27.3
27.4
61.9
63.5
- Secondary Industry
28.9
29.0
28.9
29.5
29.3
29.6
29.7
29.0
26.1
25.9
25.9
25.6
26.6
27.9
28.8
- Tertiary Industry
23.5
24.6
24.5
24.3
24.0
24.7
24.4
23.2
22.6
25.3
24.9
25.0
26.2
26.0
25.5
- Property
27.5
31.3
28.9
29.0
30.3
31.4
31.8
32.2
32.9
32.3
32.1
31.9
33.5
30.9
29.1
Source: NBS Aug
Source: NBS According to the NBS, China’s retail sales grew 23.2% YoY in August, down slightly from 23.3% YoY in July. For urban and rural areas, sales rose 23.9% YoY and 21.8% YoY in August, compared to increases of 24% YoY and 21.8% YoY in July, respectively. For 8M08, total retail sales went up 21.9% YoY, compared to the rise of 21.7% YoY in 7M08. NBS data shows that China’s urban Fixed Asset Investment (FAI) grew 27.4% YoY in 8M08, stable relative to the increases of 27.3% YoY in 7M08 and 26.8% YoY in 1H08. Huaqiao in the Middle Kingdom
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Octoeber 2008
Breaking down the segments, retail sales of grain and oil grew 23.1% YoY, and those of meat, poultry and eggs rose 26.7% YoY, up sharply from corresponding increases of 18.3% YoY and 18.4% YoY in July. The pick‐ups in sales of the above two items were probably on a boost from the Olympics in August. Retail sales of sports and recreational goods and those of household appliances rose 10.1% YoY and 18.6% YoY, respectively, in August, down from the corresponding increases of 18.3% YoY and 18.8% YoY in July. Due to consecutive price rises, sales of petroleum and related products grew 49.4% YoY in August, but still down from the increases of 55.2% YoY in July and 50.2% YoY in June. At the same time, retail sales of communications equipment increased 4.5% YoY in August, compared to the rise of 6.1% YoY in July. For automobiles, growth of sales decelerated sharply to 19% YoY in August, from 27.8% YoY in July. Probably due to the shrinkage of housing sales, retail sales of construction and decoration material registered a hefty drop of 9.5% YoY in August, compared to the decrease of 3.4% YoY in July. Looking ahead, the slowdown of exports and shrinkage of enterprise profits, especially for labour‐intensive industries, may have a further negative impact on household income. We are concerned that the easing in household income, as well as existing inflationary pressure, may harm consumption growth in the future. Foreign Trade
YoY %
Exports
Imports
Trade balance (US$ bn)
October 2008 SAC data shows that exports of most traditional products were still on a downtrend. Exports of garments grew 2.6% YoY in 8M08, down from 3.4% YoY in 7M08, while those of footwear rose 14.3% YoY in 8M08, compared to 14.2% YoY in 7M08. At the same time, exports of steel products surged 36.7% YoY in 8M08, up sharply from the increase of 24.1% YoY in 7M08. The pick‐up in exports of steel sector was mainly due to large hikes of prices. Without the price contribution, export quantity of steel products showed a decline of 7.2% YoY in 8M08, compared to the decrease of 14.0% YoY in 7M08. As for machinery sector, a decline in demand, as well as a rise in raw material costs, started to have an impact on exports. Growth in exports of mechanical and electrical equipment decelerated to 24.7% YoY in 8M08 from 25.8% YoY in 7M08 and 25.4% YoY in 6M08. Meanwhile, exports of high‐technology products rose 21.3% YoY in 8M08, lower than the increase of 22.5% YoY in 7M08. In 8M08, China’s imports of commodities were quite strong. Import quantity of iron ore grew 22.6% YoY in 8M08, compared to 21.8% YoY in 7M08, while the unit price jumped 77.9% YoY. Import quantities of soybean and crude oil grew 24% YoY and 8.7% YoY, respectively, in 8M08, up from the corresponding increases of 22.8% YoY and 8.3% YoY in 7M08. For motor vehicles, imports surged 45.2% YoY to 2.82m units in 8M08. 2007
Jun
27.0
14.3
26.9
Jul
34.2
26.9
24.4
Aug
22.7
20.1
24.98
Sep
22.8
16.1
23.9
Oct
22.2
25.5
27.1
Nov
22.8
25.3
26.28
Dec
21.6
25.5
22.7
2008
Jan
26.7
27.6
19.5
Foreign Direct Investment (FDI)
Feb
16.8
30.9
8.56
Mar
31
25
13.4
Apr
21.8
26.3
16.7
May
28.1
40
20.2
Jun
17.6
31
21.4
Jul
26.9
33.7
25.3
Aug
21.1
23.1
28.7
Source: NBS 2007
Jul
17.8
5.04
Aug
11.87
5.18
Sep
(2.36)
5.27
Oct
13.18
6.78
Nov
35.04
7.68
Dec
50.5
13.1
2008
Jan
109.8
11.2
Feb
38.31
6.93
Mar
50.3
9.3
Apr
70.1
7.6
May
58.4
7.8
Jun
44.9
9.6
Jul
65.3
8.3
Aug
39.4
7.0
Source: NBS According to the State Administration of Customs (SAC), China’s exports grew 21.1% YoY in August, down from 26.9% YoY in July, while imports rose 23.1% YoY, 10.6ppts lower than the 33.7% YoY in the preceding month. Meanwhile, China’s trade surplus surged to US$28.7bn in August from US$25.3bn in July and US$21.4bn in June, representing an increase of 14.9% YoY. For 8M08, the trade surplus reached US$152bn, down 6.2% compared to the level in 8M07. Huaqiao in the Middle Kingdom
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YoY %
Actual FDI
US$ bn
27
According to the Ministry of Commerce (MOC), China’s actual Foreign Direct Investment (FDI) rose 39.4% YoY in August, down from 65.3% YoY in July and 44.9% YoY in June. The utilised FDI amounted to US$7.0bn in August, compared to US$8.3bn in July and US$9.6bn in June. For 8M08, the actual FDI totalled to US$67.7bn, up 61.4% YoY compared to that in the same period last year. Due to the financial crisis in the international market, international capital flows fluctuated sharply in recent months. However, capital flows into China were relatively stable. At present, the banking system still faces liquidity inflows transformed from incremental foreign exchange reserves. 28
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Consumer Price Index
YoY %
CPI
- Food
- Clothing
- Trans.& comm.
- Residences
- Medical segment
2007
Jul
5.6
15.4
(0.6)
(1.3)
4.4
2.2
Aug
6.5
18.2
(0.9)
(1.3)
4.3
2.3
Sep
6.2
16.9
(1.0)
(1.4)
4.2
2.6
Oct
6.5
17.6
(1.3)
(1.7)
4.8
2.9
Nov
6.90
18.2
(1.4)
(1.4)
6.0
3.1
Dec
6.50
16.7
(1.7)
(1.4)
5.9
3.2
2008
Jan
7.1
18.2
(1.9)
(1.1)
6.1
3.2
Feb
8.7
23.3
(1.4)
(1.4)
6.6
3.2
Mar
8.3
21.4
(1.2)
(1.7)
7
3.7
Apr
8.5
22.1
(1.4)
(1.7)
6.8
3.6
May
7.7
19.9
(1.5)
(1.6)
7.1
3.3
Jun
7.1
17.3
(1.5)
(1.1)
7.7
3.1
Jul
6.3
14.4
(1.4)
(0.3)
7.7
3.1
Aug
4.9
10.3
(1.1)
(0.2)
7.1
2.9
Source: NBS According to the NBS, China’s Consumer Price Index (CPI) grew 4.9% YoY in August, lower than the increase of 6.3% YoY in July. In 8M08, the CPI rose 7.3% YoY, down from 7.7% YoY in 7M08. The prices of most food items saw further declines in August. The average price of food went up 10.3% YoY in August, down from the increase of 14.4% YoY in July. Specifically, the prices of oil and fat, and meat and poultry rose 22.7% YoY and 8% YoY, respectively, in August, down sharply from the corresponding increases of 30.8% YoY and 16.0% YoY in July. Meanwhile, the price of grain surged 8% YoY, that of fresh eggs grew 2.7% YoY and that of fresh vegetables declined 0.5% YoY in August, compared to the corresponding increases of 8.6% YoY, 5.9% YoY and 8.4% YoY in July. In August, the prices of non‐food items edged up 2.1% YoY, the same as in July, and those of services inched up 1.4% YoY, slightly down from 1.5% YoY in July. Breaking down individual items, prices of household facilities articles and maintenance services rose 3.2% YoY in August, up slightly from 3.1% YoY in July and 2.9% YoY in June. The price of transportation declined 0.8% YoY and that of communications tools dropped 18.6% YoY in August, versus the corresponding decreases of 1% YoY and 19% YoY in July. At the same time, prices of residential items grew 7.1% YoY, 0.6ppt lower than 7.7% YoY in July. Inflation/Deflation
YoY %
EFPI
PPI
CPI
Crude oil
2007
Jul
2.4
3.6
5.6
(5.1)
Aug
2.6
3.8
6.5
(2.2)
Sep
2.7
3.6
6.2
(3.9)
Oct
3.2
4.5
6.5
4.2
Nov
4.6
6.3
6.9
22.6
Dec
5.4
8.1
6.5
34.6
2008
Jan
6.1
8.9
7.1
29.9
Feb
6.6
9.7
8.7
37.5
Mar
8
11
8.3
37.9
Apr
8.1
11.8
8.5
37.9
May
8.2
11.9
7.7
30.9
Jun
8.8
13.5
7.1
35.9
Jul
10
15.4
6.3
41.2
Aug
10.1
15.3
4.9
38.2
Source: NBS The ex‐factory price index (EFPI) for manufactured goods grew 10.1% YoY, and the Huaqiao in the Middle Kingdom
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October 2008 purchasing price index (PPI) for raw materials, fuel and power went up 15.3% YoY in August, versus the corresponding increases of 10.0% YoY and 15.4% YoY in July. The price hikes in mining sector pushed up growth rates of the EFPI and PPI. According to the NBS, most mining sectors showed high price growths in recent months. In August, prices of mining and quarrying rose 35.1% YoY from 34.1% YoY in July and 29.3% YoY in June. Specifically, the price of crude oil grew 38.2% YoY and that of coal mining went up 39.0% YoY, compared to the corresponding increases of 41.2% YoY and 32.6% YoY in July. However, due to a slowdown in demand, the price of smelting and pressing of ferrous metals grew 29.9% YoY in August down from 31.0% YoY in July, and that of non ferrous metals declined further to 2.3% YoY in August, compared to the decrease of 2.1% YoY in July. Thanks to the shrinkage of demand and drop of prices for most commodities in the international market, growths of the PPI and EFPI may have hit short‐term peaks in recent months. Meanwhile, the declines in food prices may further decelerate the rise of CPI in the near period. Going forward, however, China will face the challenge to liberalise price controls, which will further drive up inflationary pressure after 3Q08. We maintain our forecast for a 7% YoY rise in the CPI for 2008. Monetary Performance
YoY %
M0
M1
M2
Loan / deposit
M1/M2, %
2007
July
14.5
20.9
17.1
69.3
36.0
Aug
15.0
22.8
18.1
67.9
36.4
Sep
13.0
22.1
18.5
67.6
36.3
Oct
13.0
22.1
18.5
67.6
36.3
Nov
13. 6
21.7
18.5
67.8
37.1
Dec
12.1
21.0
16.72
67.2
37.8
2008
Jan
31.21
20.72
18.94
68.9
37.1
Feb
5.96
19.2
17.48
67.2
35.7
Mar
11.12
18.25
16.29
65.16
35.67
Apr
10.7
19.05
16.94
66.22
35.35
May
12.9
15.3
18.1
65.6
35.1
Jun
12.3
14.2
17.4
65.2
34.9
Jul
12.3
14.0
16.4
65.4
34.7
Aug
10.89
11.48
16.0
65.1
35.0
Source: NBS According to the PBOC, renminbi lending on the mainland grew 14.3% YoY in August 2008, down from 14.6% YoY in July and 2.8ppts lower than the rise of 17% in August 2007. Meanwhile, growth in renminbi deposits slowed to 19.3% YoY in August from 19.6% YoY in July. The continuous decline in lending growth caused the lending‐to‐deposit ratio drop to 65.1% in August 2008 from 65.4% in July and 67.8% YoY in August 2007. In August, the supply of M0 rose 10.89% YoY, down from 12.3% YoY in July. Mainly due to a decrease in demand deposits caused by the decline in lending growth, M1 growth decelerated to 11.5% YoY in August from 14% YoY in July. Meanwhile, owing to the continued high growth of saving deposits and time deposits, the M2 registered a steady growth of 16% YoY in August (16.4% YoY in July). 30
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PBOC statistics show that incremental renminbi lending amounted to Rmb271.5bn in August, down from Rmb381.8bn in July, and much lower than the Rmb302.8bn recorded in August 2007. The breakdown shows that incremental lending to households rebounded to Rmb50.4bn in August from Rmb49bn in July, much lower than the Rmb128.3bn recorded in the same period last year. We note that more incremental loans to households are likely in the short‐term, which reflects commercial banks’ pessimistic attitude toward the real estate market and their willingness to enlarge short‐term consumer credit. In August, incremental lending to non‐financial corporations and others amounted to Rmb221.1bn, versus the corresponding figures of Rmb332.8bn in July 2008 and Rmb267.6bn in August 2007. Renminbi deposits grew 19.3% YoY in August, a slight drop from the 19.6% YoY growth seen in July, but still 0.4ppt higher than the rise of 18.9% YoY in June. The slight mitigation of deposit growth was mainly because of the large drop in fiscal deposits. In August, total incremental renminbi deposits increased to Rmb650.1bn from Rmb468.2bn in July, while the breakdown shows that fiscal deposits dropped by Rmb39.5bn. Due to the sharp correction in the stock market and real estate market in some cities, incremental saving deposits amounted to 340.4bn, up from Rmb246.5bn in July 2008. In August, the amount of incremental non‐financial corporate deposits reached Rmb360.1bn, after having dropped Rmb5.5bn in July. The slower growth of corporate deposits is a result of monetary tightening. Huaqiao in the Middle Kingdom
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October 2008 Policy Highlights
„
PBOC cuts RRR and lending rate. The PBOC announced a 27bps cut to 7.2% per annum in the one‐year lending rate effective 15 September, but kept deposit rates unchanged. The six‐month, one‐ to three‐year and three‐ to five‐year lending rates were cut by 36bps, 27bps and 18bps, to 6.21%, 7.29% and 7.56%, respectively. For above five‐year loans, the lending rate was cut by 9bps to 7.74%. Meanwhile, the PBOC cut by 1ppt the RRR of commercial banks, excluding the Industrial & Commercial Bank of China (ICBC), the Agricultural Bank, Bank of China, China Construction Bank, The Communication Bank and the Postal Saving Bank. For local financial institutions in quake‐stricken areas, the RRR was cut by 2ppts. Our calculations show that the cut will see the total RRR of the sector decrease by 0.4ppts. Although we believe the conditions in China are not conducive for a full reduction of the RRR because of liquidity pressures stemming from the trade surplus and unchanged FDI, the moves indicate that PBOC understands the liquidity imbalance between different types of banks and seems concerned about the situation of small ones, as well as lending to small to medium‐sized enterprises (SMEs). „
SAFE to check banks' forex business. China will start regular annual checks of banksʹ forex operations to make sure they observe relevant rules, the State Administration of Foreign Exchange (SAFE) said on 29 August. The checks will cover banksʹ full‐year operations to see if they abide by forex management rules, according to a SAFE statement. Banks will be required to report relevant data to regulators, who will also examine their internal risk‐control systems. Banks found to have problems would be required to address their wrongdoings, the statement said. We believe the move is a concrete step towards implementing the countryʹs newly approved forex rules and curbs cross‐border speculative capital flows. „
MOF cancels stamp tax for stock purchases. China’s MOF announced on 18 September that it would to scrap the 0.1% stamp duty on share purchases effective 19 September, but retain that on sales unchanged at 0.1%. This is the second stamp duty measure this year. Meanwhile, Xinhua News Agency reported that Huijin Investment had decided to buy shares in ICBC, BOC and CCB in the equities market. Huijin clarified that the objective of the measure was to retain the China’s controlling status in these financial institutions, as well as to stabilise their share prices. In addition to the second 32
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October 2008 move on the stamp duty, the central government decided that the sovereign wealth fund partially perform as stabilisation fund this time. However, the Xinhua report did not say if the stock purchases would be of H or A shares. „
„
„
CSRC to introduce exchangeable bonds to market. The China Securities Regulatory Commission (CSRC) released draft rules to seek public opinion for listed companies’ shareholders to issue exchangeable bonds. According to the draft rules, shareholders of a listco will be allowed to issue a bond‐embedded option to exchange it for stocks they hold, by which the bond is required to be secured. The CSRC first officially talked about the scheme in late August. The proposal was in line the expectations of investors, although the rules were issued earlier than projected. The scheme will not mean the breaking of contracts made in the non‐tradable shares reform, but serve as other option for listcos’ shareholders to manage better their stock values, debt or fund‐raising activities. The move follows the CSRC’s lifting of its dividend requirement for refinancing, with objective to stabilise the stock market. Regulator releases draft rules on margin trading. The CSRC issued on 9 September preliminary rules outlining the operational requirements for brokers seeking to offer margin trading and other businesses. The rules include a provision holding brokers responsible for educating margin investors. According to the draft, securities companies that obtain approval to offer new business categories of securities brokering, asset management and margin trading should take effective measures in informing investors of relevant laws and risks. Investors have widely anticipated the introduction of margin trading services as a measure to encourage trading and prop up prices. Securities regulator Shang Fulin said earlier that the CSRC would adjust the pace of fund‐raising exercises and bring forward the launch of margin trading to ensure stability in the markets. investor confidence and stabilise the stock market, the CSRC said. The rally came after the government cancelled the 0.1% stamp tax on stock purchases and allowed its investment arm purchase shares of three major Chinese lenders on the secondary market. The CSRC intended to solicit public opinions on the draft regulation until 28 September. „
Encouragement for strategic SOEs to buy more shares in listed
subsidiaries. The top state assets regulator said on 18 September China was to encourage its 147 centrally administered SOEs to buy more stocks of their listed subsidiaries. Li Rongrong, director of the State‐owned Assets Supervision and Administration Commission (SASAC), said the regulatory body had long held that SOEs, particularly the 147 which report to the central government, should be an active force in facilitating a stable development of the stock market. Listed companies under the control of the 147 giants should play an exemplary role on the market, he added. Li stressed the Chinese economy was basically sound, and the 147 conglomerates were performing well. The SASAC supported them to buy more stocks of their listed companies based on their own growth requirements.
„
MOF cuts import taxes on equipment spare parts to support
manufacturing. The government has cut import taxes on spare parts for large equipment and cancelled the import tariff exemption on some complete sets. The adjustments were made to support the domestic manufacturing of large equipment, the MOF said. Taxes levied on domestic enterprises for imports of key spare parts for large equipment, including ultra‐ and extra‐high voltage transmission equipment and transformers, large petrochemical equipment and large coal‐chemical equipment, would be refunded and injected into the enterprises as investment from the nation, it said. The policy applied to imports after 1 January 2008, depending on the date of declaration of imports. In the meantime, the imports of some complete sets of equipment by enterprises approved after 1 September 2008 will no longer enjoy tax exemptions. Both domestic and foreign‐funded projects were subject to the new policy, the MOF said. Imports of such equipment by enterprises approved before 1 September will continue to enjoy the previous tax policies until 1 March 2009. CSRC to ease control over share repurchase to boost stock
market. The CSRC said on 21 September that it would make it easier for listed companies to buy back stocks in the latest government move to boost the equity market. Share repurchases through bidding at stock exchanges would no longer need approval from the CSRC, according to the draft regulation issued. It stated that such acts could take place after a report to the CSRC and public disclosure of the information. The change was made to improve the mechanism of share repurchase, which could help maintain Huaqiao in the Middle Kingdom
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34
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„
Octoeber 2008
SMEs to receive benefit package soon. The MOF announced that it would soon draft special rules requiring local governments to buy more products from small and medium‐sized enterprises (SMEs). The MOF said funding to SMEs would be increased significantly to help them cope with the tightened credit situation and falling global demands. The MOF will earmark Rmb3.51bn worth of special funds to help the growth of SMEs, which will also enjoy preferential tax policies. Of the Rmb3.51bn support package, Rmb500m will be for SMEs to acquire state‐of‐the‐art technologies. This yearʹs amount is 25% more than that of last year. A total of Rmb200m of the technology development fund would be used to subsidise institutions that provided guarantees for SMEs to secure bank loans, the MOF said. The SMEsʹ technological innovation fund will get Rmb.1.4bn, up 27.3% YoY. The MOF will use Rmb1.2bn, up 20%, to help the SMEs tap the international market through the provision of information and helping them through the often complicated global certification process. The MOF imposes a 20% tax on SMEs with low profit levels, and has cut the tax rate for hi‐tech SMEs to 15%, according to the newly promulgated corporate tax law. October 2008 Hong Kong Economy
„ Hong Kong’s Composite Consumer Price Index (CPI) grew 4.6% YoY in
August 2008, down from the rise of 6.3% YoY in July 2008, and well up
on the increase of 1.6% YoY in August last year. Breaking down the
numbers, the tail-raising factor contributed 3% and the year-to-date
price level changed 1.6% for 8M08, down sharply from the increase of
3.25% for 7M08. Overall, surging prices of food items and energy drove
up the CPI in the previous months this year and these factors will
subside somewhat if the US dollar stops depreciating further.
„ In August 2008, Hong Kong’s total exports in value terms grew only
1.9% YoY, while imports slowed to 1.5% YoY, versus the corresponding
increase of 11.1% YoY and 15.4% in July 2008. In 8M08, exports and
imports in value terms grew 8.4% YoY and 9.8% YoY, respectively. We
expect exports to resume a weakening trend in September as the global
economic slowdown accelerates, while imports will register mild growth
due to cuts in prices of commodities and food.
„ Hong Kong’s seasonally adjusted unemployment rate came in at 3.2%
for June-August 2008, lower than the 3.4% level at the beginning of the
year. However, this was mainly due to the enlarged labour force, as the
actual number of unemployed persons increased to 129,100 from
124,600 in the preceding three-month period. The last time Hong Kong
achieved such a low unemployment rate was before the Asian financial
crisis. The decline in the unemployment rate will support consumption
for a while. Going forward, infrastructure construction in Hong Kong is
likely to keep the unemployment rate at a low level.
„ Total retail sales in Hong Kong in July 2008 grew 13.8% YoY, up from
the increase of 11.7% YoY in June 2008; while the volume of retail sales
grew 6.6% YoY in August 2008, versus the increase of 4.1% in June
2008. The higher price level contributed to the growth of the retail sales
value, while the volume growth was much lower compared to that for
the same period last year..
Huaqiao in the Middle Kingdom
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35
36
Huaqiao in the Middle Kingdom
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Octoeber 2008
Policy Highlights
Major Economic Indicators
%YoY
GDP
Total exports
- Domestic exports
- Re-exports
Imports
Trade balance (HK$ bn)
Retail sales value
Unemployment rate (%)
Composite CPI
Fiscal deficit/surplus
(YTD HK$ bn)
Tourist arrivals
M2
Monetary base
3-month HIBOR
(Period everage %)
HSBC best lending rate (%)
Property price
(domestic premises)
October 2008 2006
7.0
9.4
(1.1)
10.0
11.6
(138.8)
7.3
4.8
2.3
5.8
2007
6.4
9.2
(18.9)
10.8
10.3
(180.5)
12.8
4.0
3.8
86.2
2008E
5.0
8.0
(12.0)
9.0
10.0
(210.0)
16.0
3.4
4.2
70.0
8.1
15.4
4.2
4.2
11.6
20.8
8.2
4.3
7.8
4.1
6.8
25.7
2007
Aug
7.5
(25.3)
9.5
9.0
(13.7)
15.2
4.2
1.6
1.2
Sep
6.8
8.5
(10.3)
9.4
9.3
(14.8)
15.8
4.0
1.6
(5.6)
Oct
9.8
(8.5)
10.8
12.1
(8.7)
16.8
3.9
3.2
18.2
Nov
6.6
0.8
6.9
9.3
(16.0)
19.5
3.6
3.4
50.6
Dec
6.9
8.2
6.5
8.3
10.3
(27.4)
16.9
3.4
3.8
86.2
2008
Jan
15.8
0.8
16.4
16.9
(7.5)
23.2
3.4
3.2
122.6
Feb
7.6
1.1
7.8
11.9
(15.8)
9.5
3.3
6.3
123.5
Mar
7.3
7.6
(1.0)
7.9
6.6
(28.1)
20.0
3.4
4.2
123.7
Apr
14.5
(10.0)
15.5
11.3
(16.2)
18.6
3.3
5.4
1.8
May
10.3
(12.0)
11.3
15.4
(27.5)
13.0
3.3
5.7
(5.7)
Jun
4.2
(0.6)
(20.2)
0.2
1.3
(24.0)
11.7
3.3
6.1
(16.5)
Jul
11.1
(16.3)
12.4
15.4
(19.5)
13.8
3.2
6.3
(24.2)
Aug
1.9
(17.1)
2.7
1.5
(12.9)
3.2
4.6
-
10.0
14.0
11.0
2.2
16.9 15.9 17.0 17.6 16.1 16.2 2.9 11.2 11.2 6.3
17.0 22.4 31.7 22.0 20.8 17.0 13.7 13.5 14.5 11.4
3.6 3.6 3.9 8.0 8.2 12.8 7.3 10.3 9.4 9.9
4.5 4.8 5.0 3.6 3.6 2.9 2.2 2.0 1.9 1.8
5.6
5.6
10.0
2.1
10.4
8.1
9.2
2.2
9.2
2.2
5.0
15.0
7.8 7.5 7.5 7.0 6.8 6.0 5.8 5.3 5.3 5.3
11.8 12.9 16.5 21.8 25.7 29.4 29.9 29.1 26.3 25.7
5.3
24.2
5.3
19.7
5.3
-
„
Liquidity Injection. On 25 September 2008, the Hong Kong Monetary Authority (HKMA) bought HK$3.883bn worth of US dollars to inject liquidity into the local banking system, marking the second such move in two weeks. As a result, the sum of balances on clearing accounts that banks maintain with the HKMA is projected to increase to HK$10.125bn. A HKMA spokesperson said that the move did not target any specific institution, but was a general measure aimed at easing inter‐bank liquidity. ʺThe HKMA will continue to monitor the market closely and, if necessary, deploy further measures to inject liquidity into the market,ʺ the spokesperson said. The injection helped ease liquidity pressure on smaller Hong Kong banks, which had been unable to secure short‐term loans from the bigger lenders in the inter‐bank market, especially after the run on Bank of East Asia. The HKMA said that rumours regarding BEAʹs troubles were groundless and that Hong Kong banks remained healthy. „
Regulatory review on Lehman-related protests. On 22 September 2008, the HKMA convened a meeting between representatives of investors who had purchased investment products related to Lehman Brothers, representatives of banks that had sold them and the trustees holding the collateral for the investments. A spokesperson said that the HKMA required banks to comply with the Code of Conduct for Persons Licensed by and Registered with the Securities and Futures Commission (SFC) in selling securities and futures products. The code requires intermediaries to explain to the clients the products and the risks involved. Individual investors in Hong Kong held HK$15.6bn (US$2bn) of structured notes arranged by or linked to Lehman, the SFC said. The tally includes HK$12.57bn in minibonds issued by Pacific International Finance Ltd, for which Lehman acted as arranger and swap guarantor. „
Global economic freedom report. On 16 September, Canadaʹs Fraser Institute of independent research institutions in Hong Kong released its 2008 annual report of the World Economic Freedom. Hong Kong earned 8.94 points in the first tally and Singapore 8.57 points. The report is based on the size of government, legal structure and security of property rights, capital flows, as well as the freedom of trade credit, labour and business regulation, and other indicators of five to 142 degrees of freedom economies points, out of 10 points. Hong Kong ranked first in two areas of the size of government and the freedom to trade, and, as a result had a total score of 0.37 points ahead of rival Singapore to continue to top the list. However, because of minimum wage legislation brewing in Hong Kong, the score in this area was down in the areas of credit and labour market regulation. The other top 10 economies are New Zealand, Switzerland, Britain, Chile, Canada, Australia, the US and Ireland in that order. Note: Forecast of unemployment rate and best lending rate refer to year‐end figures. Sources: Hong Kong Census and Statistics Department, HKMA, HTKB, CEIC, BOCI Research estimates Huaqiao in the Middle Kingdom
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Huaqiao in the Middle Kingdom
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Octoeber 2008
AUTOMOTIVE
HK listed – Marketperform
October 2008 CHEMICALS
HK listed – Marketperform
A shares – Marketperform
A shares – Marketperform
„ Domestic passenger car sales in August fell 6% YoY to 451,299 units. In 8M08,
domestic passenger car sales surged 13% YoY to 4.55m units.
„ Going forward, we believe a negative wealth effect due to the declining stock
markets and property prices may lead to a deceleration in car sales. We expect
China’s passenger car industry to post sales growth of 10% YoY in 2008.
„ In August, sales of heavy-duty trucks (including chassis) dropped 13% YoY and
those of semi-tractors fell 2% YoY. Large buses sales rose 25% YoY in 8M08.
„ China’s 19 key automobile manufacturing groups collectively registered profit
growth of 29% YoY to Rmb49.78bn for 7M08.
„ Demand growth rate of most of our domestic chemical products from January
to August presented slowing down from double digit to single digit rate given
the impact of stagnant demand from export business and property industry.
Only methanol demand growth rate increased from 14.5% of 2007 to 28.9% of
2008 given the replacement of gasoline and DME replacement of LNG. We
expect chemical industry will continue going to business recession in the next
years given the impact of global economy.
Denway Motor Group (0203.HK/HK$2.43) — Outperform Hualu Hengsheng (600426.SS/Rmb11.44) — Outperform Denway Motors’ net profit for 1H08 only edged up 1% YoY to Rmb1,236m. In 1H08, Denway’s 50%‐held Guangzhou Honda (GH) sold 142,335 cars, up 7% YoY. Earnings contribution from GH in 1H08 rose just 1% YoY to Rmb1,104m, due to the competitive environment of China’s sedan market. Production at GH was suspended as torrential rain flooded its workshops during 2‐9 June 2008. However, sales of GH in July 2008 surged 36% YoY and 57% MoM to 30,148 units. We reckon earnings contribution from 49%‐held Guangzhou Component may have risen 6% YoY to Rmb129m in 1H08. In early 2008, GH launched the eighth generation all‐new Accord sedan, sales of which surged 14% YoY to 73,690 units in 1H08, accounting for 51.8% of its total car sales, up from 48.4% in 1H07. Furthermore, sales of Accord sedan jumped 131% YoY and 43% MoM to 17,191 units in July 2008. We now expect GH’s car sales in 2008 to grow 12% YoY to 330,000 units. Hualu Hengsheng announced that the price of its production steam would rise to Rmb53.33/gigajoule from Rmb33.33/gigajoule effective on 1 September 2008, according to the Price Control Bureau of Dezhou City. The company estimated that it would use about 5.1m gigajoules of steam during 4Q08 and that its earnings would decrease by about Rmb68m for 2008 and Rmb180m for 2009. Taking into account the combined impact of the rise in the price of steam and tax refund, we expect Hualu’s EPS to drop 4% to Rmb0.88 for 2008 and 16% to Rmb1.03 for 2009. The stock trades at undemanding P/E multiples of 16.4x for 2008E and 14x for 2009E and we reaffirm our Outperform call on it. Sources: China Automotive Industry Newsletter, BOCI Research estimates
Huaqiao in the Middle Kingdom
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39
Product Prices
(Rmb/tonne)
4,400
(Rmb'000 /tonne)
40
3,900
35
3,400
30
25
20
2,900
2,400
15
1,900
10
1,400
900
Urea (LHS)
KCI (LHS)
Pure MDI (RHS)
Source: China Petroleum & Chemical Industry Association 40
07/08
Pretax margin (RHS)
Jul
0
(27)
(27)
(16)
2
49
(11)
37
(21)
(15)
7
2
(16)
24
38
4
01/08
Pretax profit (LHS)
Jun
13
24
34
16
14
(1)
18
57
16
11
15
13
5
49
14
15
07/07
Sales revenue (LHS)
Source: China Automotive Industry Newsletter 0
May
18
43
43
1
19
0
20
24
16
20
16
13
11
35
23
17
01/07
1-2 04
04/04
06/04
08/04
10/04
12/04
03/05
05/05
07/05
09/05
11/05
1-2 06
04/06
06/06
08/06
10/06
12/06
03/07
05/07
07/07
09/07
11/07
1-2 08
04/08
06/08
0
2
Apr
20
45
65
7
17
13
1
28
(8)
1
11
8
(1)
38
18
14
07/06
4
50
08E Feb08 Mar
14
27
27
20
77
70
20
39
63
5
2
18
15
25
21
9
15
15
13
11
3
25 (20) 10
10
22
4
12
13
2
13
17
24
13
20
26
5
13
7
25
47
48
13
1
11
14
19
25
01/06
100
07
19
44
92
17
16
8
21
27
14
23
22
23
18
50
8
22
07/05
6
06
14
20
64
4
11
25
7
9
4
8
30
37
23
21
10
25
01/05
150
% YoY
Trucks
Heavy
Semi-tractor
Medium
Light
Mini
Buses
Large
Medium
Light
Passenger cars
Sedan
MPV
SUV
Minivan
Total
07/04
8
01/04
(%)
10
07/03
(Rmb bn)
200
01/03
Key Statistics
Operating Performance of Auto Industry
07/02
Jiangling Auto’s net profit for 1H08 grew 32.3% to Rmb531m, even though revenue increased just 13.4% YoY to Rmb4,585m. The higher net profit growth was due to a one‐off government subsidy of around Rmb165m. Excluding the subsidy, Jiangling posted lower‐than‐expected 1H08 EPS of around Rmb0.46, almost equal to the level in 1H07. The gross margin narrowed to 22.8% in 1H08 from 23.3% in 1H07, reflecting an increase in sales volume and reduction in costs being negated by cuts in vehicle prices. Meanwhile, expenses in 1H08 increased faster than revenue growth.
On 22 September, a chlorine leak occurred at Wanhua Chlor‐Alkali Co (WCC) due to faulty equipment. WCC is the main chlorine supplier to Yantai Wanhai’s methylene diphenyl diisocyanate (MDI) plant. WCC is a subsidiary of the Wanhua Group and the listco has no stake in it. According to company estimates, WCC will cease production for about 20‐30 days in order to overhaul equipment, and this will set back Yantai’s MDI production volume by about 15,000 tonnes for 2008. As the Ningbo plant may make up for the lower volume output of the Yantai plant, we expect the accident to have a limited impact on the company’s earnings. We reaffirm our Outperform call on it. 01/02
Jiangling Motors (000550.SZ/Rmb10.00; 200550.SZ/HK$7.48) — Outperform Yantai Wanhua (600309.SS/ Rmb12.78) — Outperform 5
0
Poly MDI (RHS)
Key Statistics
YoY
06
07
%
Output
Urea
Potash
PVC
Nitric Acid
Price
Urea
KCI
Nitric Acid
Pure MDI
Poly MDI
PVC
08E
Mar08
Apr
May
Jun
Jul
Aug
11.5
10.6
20.0
13.1
10.5
12.0
15.0
10.0
5.4
30.9
1.3
15.3
10.7
18.6
11.7
14.1
5.3
(5.6)
6.0
20.5
10.2
33.9
10.4
4.5
6.7
8.5
8.9
7.2
6.1
14.3
(9.7)
(2.6)
% YoY
(2.4)
0.1
7.4
5.4
0.4
1.8
(14.0) 5.5
(24.0) 14.3
3.1
6.0
3.5
10.0
2.8
(3.5)
(5.5)
2.0
% MoM
3.2
3.9
(10.0)
(1.0)
(8.0)
5.3
1.0
13.0
1.2
0.0
(2.0)
3.3
9.4
0.6
5.9
0.0
(2.0)
(0.7)
7.1
18.7
3.5
(1.2)
(1.6)
2.5
10.6 (1.2)
5.2 1.0
28.2 3.0
(1.6) (1.6)
(6.0) 0.0
2.2 (1.7)
13.3
18.5
23.3
12.6
Sources: China Petroleum & Chemical Industry Association, BOCI Research estimates Huaqiao in the Middle Kingdom
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Octoeber 2008
CONSUMER – Beer, Wine & Liquor
HK listed – Marketperform
A shares – Outperform
October 2008 CONSUMER – Dairy & Others
HK listed – Marketperform
A shares – Marketperform
„
„
Beer output grew around 6.0% YoY to 29.33m kl in 8M08.
„
„
Liquor production volume increased about 17.9% YoY to 3.40m kl in 8M08.
Revenue and profit of liquor industry rose 33.2% YoY and 63.0% YoY,
respectively, in 5M08.
„ Industry sales revenue grew 30.5% YoY to Rmb629.5bn in 5M08.
„
„
Wine output grew about 38.5% YoY to 0.46m kl in 8M08.
„ Industry profit went up 21.4% YoY to Rmb3.3bn in 5M08.
„ Output of liquid milk products grew 10.3% YoY to about 11.1m tonnes in
In 5M08, revenue of the beer industry rose 14.2% YoY, while profit declined
4.2% YoY.
8M08.
„ Output of other dairy products grew 12.6% YoY to about 13.0m tonnes in
8M08.
Revenue and profit of wine industry rose 36.2% and 32.8% YoY, respectively, in
5M08.
China Foods (0506.HK/HK$2.62) — Outperform Food safety worries hit Chinese consumer stocks A rumour surfaced recently that the toxic chemical, nitrite, had been found in the products of Kweichow Moutai, Yantai Changyu, China Greatwall Wine and Tsingtao Brewery. It was a dark day for A‐share consumer stocks, as many stocks’ price fell as much as 10%. Moutai and Changyu claimed that this was only speculation and that China’s General Administration of Quality and Supervision, Inspection and Quarantine of China (GAQSIQ) had not carried out tests recently. The China Alcoholic Drinks Industry Association (CADIA) also announced on its official website that it was merely a rumour. There are now great concerns over food safety in China since the melamine scandal hit the dairy industry earlier. Safety fears may spread to other F&B companies. We think the share‐price declines are also due to concerns of an economic downtrend and high valuations. We have found out from channel distributors that total sales volume of high‐end liquor products decelerated during the mid‐autumn festival. Companies are now preparing for the National Day holidays. We think the high valuations of the liquor sector and concerns over a deceleration in earnings growth were other reasons for the drops in the share prices of producers of high‐end Chinese liquor. Earnings growths of the producers of high‐end liquor and wine remain steady and better than those of manufacturers of beer and dairy products. We select producers of high‐end liquor and wine as our top stocks for long‐term investments. Key Statistics
Beer & Liquor Outputs
(YoY %)
(% YoY)
40
35
30
25
20
15
10
5
0
2005 2006 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 2007 2008E
Output of liquor
Output of beer
Output of wine
Sources: China Light Industry Association, BOCI Research 06
Revenue
Beer
16
Liquor
31
Wine
25
Profit
Beer
20
Liquor
26
Wine
16
Gross margin (%)
Beer
34.0
Liquor
34.8
Wine
36.7
07
2006
2007
2008
08E 6M 9M 12M 5M 8M 11M 5M
17
33
28
18
35
30
11
24
29
13
26
27
16
32
25
20
31
19
18 16.3 14
34 34 33
23 18 36
21
35
18
22
39
24
11
23
11
20
21
13
21
26
16
30
26
27
23
37
18
17
38
19
(4)
63
33
34
35
37
35
34
35
34
35
37
33
36
39
34
36
36
33
36
36
30
36
38
34.0 34.5
36.0 37.0
37.0 37.5
Source: China Light Industry Association Huaqiao in the Middle Kingdom
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China Foods’ pro‐forma earnings grew 20% YoY to HK$242m in 1H08. The growth was due to a strong winery and beverage operations, and a smaller‐than‐expected loss of the edible oil segment, even though a greater loss was booked for the confectionery business. We believe the winery and beverage business will continue to be the main growth driver. Meanwhile, the worst should be over for edible oil, and we look for it to break even in 2H08 following a retreat in raw material prices. We revise up our 2008‐10 earnings forecast by 11‐13%. We retain our target price of HK$4.90 and reaffirm our Outperform call on the stock. Mengniu Diary (2319.HK/HK$8.44) — Underperform We lower our 2008‐10 earning forecasts for Mengniu because of the huge impact of the melamine scandal. We forecast revenue growths of 13% for 2008, 6% for 2009 and 10% for 2010, considering the depressed sales expected in 4Q08 and 1Q09. We cut our EPS forecast from Rmb0.83 to Rmb0.47 for 2008, from Rmb1.06 to Rmb0.53 for 2009 and from Rmb1.40 to Rmb0.62 for 2010, representing downward revisions of 43.7%, 49.8% and 55.7%, respectively. We lower our target price from HK$29.40 to HK$10.80, based on 20x 2009E P/E. We reaffirm our Underperform call on the stock. Liquid Milk & Other Dairy Product Outputs
(% YoY)
60
50
40
30
20
10
0
2001
2002
2003
Output of liquid milk
2004
2005
2006
42
2007
3M08
Output of other dairy products
Sources: China Dairy Yearbook, BOCI Research 41
Key Statistics
2008E
YoY %
Outputs
Liquid milk
Other dairy
products
Industry
Total assets
Total sales
Gross margin (%)
2006
2007
1H 2H 1H 2H
2008
2M
06
07
08E
25
15
16
23
19
23
25
10
25
19
7
16
25
29
11
10
11
21
23
15
22
22
12
18
23
16
27
23
11
15
23
14
22
23
15
23
22
16
29
18
Sources: China Statistical Yearbook, BOCI Research Huaqiao in the Middle Kingdom
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Octoeber 2008
HK listed – Outperform
A shares – Outperform
CONSUMER SERVICES – Gaming
comparable 20%-plus increase during May-July. Visitors from China grew only
10.6% YoY in August, down sharply from the 30% rise in July. Visitors from
Hong Kong and rest of the world edged up 5.7% and 7.1% YoY, respectively.
17.3% YoY in August, according to the China National Commerce Information
Centre. Sales of food items were up 30.9% YoY mainly on a boost from diary
products, egg, meat and edible oil, while those of gold and jewellery surged
44% YoY on the back of a stronger US dollar and the Olympics-related
souvenirs. Sales of ladies’ apparels edged up only 8.6%, while those men’s
apparels declined mildly.
„ The slower growth in August visitor arrivals was partly due to Beijing Olympics
and partly to the restrictions on mainland visitors travelling to Macau. We
expect to see a clearer picture from the September figures due out in
mid-October. From 1 September, mainland visitors under the Individual Visitor
Scheme (IVS) must secure a separate permit to visit Macau. Rumour has it that
Beijing can further restrict IVS travel to Macau to once every six months,
starting as soon as October.
Belle International (1880.HK/HK$5.64) — Underperformª Belle International’s net profit for 1H08 fell 1.4% YoY to Rmb988m, mainly due to the absence of interest income from subscription funds and the expiry of its preferential tax rate. Stripping out the one‐off interest income, core profit still grew 54.8%, thanks to acquisitions and rapid growth in the sportswear segment. Nevertheless, the margin pressure and sluggish sales per store warrant our concern. We anticipate that growth of distribution brands and the sportswear ones will outpace that of Belle’s in‐house footwear brands. In our view, Belle will transform itself from an own‐brand retailer to a distributor of third‐party brands, meaning that its valuation premium to Pou Sheng will shrink. Revenue from distribution of third‐party brands, for which the company has such rights, surged 8x to account for 13.5% of the footwear segment’s turnover in 1H08. The sportswear segment continued to outgrow the footwear one, with revenue up 70% YoY. With in‐house brands reaching maturity, we expect Belle’s future driver of revenue to be the distribution of third party brands, including mid‐ to high‐end footwear brands and foreign tier‐2 sportswear brands. Nevertheless, they command relatively low operating margins (5‐14%), compared to those of in‐house brands. We lower our target price for Belle from HK$8.10 to HK$5.00, equivalent to a blended P/E of 14x for 2009E, and downgrade our call from Marketperform to Underperform. (YoY %)
24
22
20
18
16
14
12
10
01/07
02/07
03/07
04/07
05/07
06/07
07/07
08/07
09/07
10/07
11/07
12/07
01/08
02/08
03/08
04/08
05/08
06/08
07/08
08/08
(Rmb bn)
950
900
850
800
750
700
650
600
Retail sales of consumer goods (LHS)
Source: CEIC Growth (RHS)
Wholesale and retail trades by category of main commodities
YoY %
Grain and oil
Meet, poultry and eggs
Clothing, shoes, hats & textiles
Sports & recreation articles
Household & video appliances
Furniture
Cosmetics
Gold, silver & jewellery
Communications appliances
Automobiles
Galaxy Entertainment (0027.HK/HK$2.01) — Outperform Galaxy Entertainment’s revenue in 2Q08 fell 22% YoY to HK$2.67bn, while EBITDA dived 69% YoY to HK$146m from HK$470m. The weaker‐than‐expected results were due to lacklustre contributions from franchised casinos, an unlucky streak on the VIP baccarat tables at the flagship StarWorld casino hotel and intense market competition resulting in higher commissions for junket operators. The headline loss for 1H08 amounted to HK$7.4bn, largely due to a one‐off non‐cash write‐down of HK$7bn related to its Macau gaming licence. The write‐off will have a material and positive impact on future results and significantly reduce the annual amortisation of the gaming licence by HK$0.6bn a year. Tighter liquidity and weaker growth prospects for Macau’s gaming industry prompted Moody’s Investors Service to downgrade the outlook for Galaxy Casino to negative from stable. Key Statistics
Macau Visitor Arrivals
Key Statistics
Retail Sales of Consumer Goods
1Q08
38.1
31.3
24.3
21.0
22.5
33.3
22.3
47.5
3.7
37.1
May08
27.6
25.4
21.6
13.0
10.6
37.1
17.5
29.4
2.7
32.0
Jun08
30.1
22.9
28.3
19.2
9.6
25.5
22.1
50.9
6.4
32.6
Jul08
18.3
18.4
26.8
18.3
18.8
19.6
31.8
43.6
6.1
27.8
2,500
Aug08
23.1
26.7
29.5
10.1
18.6
24.2
26.6
44.4
4.5
19.0
HK listed – Marketperform
„ Macau visitor arrivals rose to 2.58m in August, up only 8.5% YoY, off from the
„ The combined revenue of the mainland’s 100 largest retail enterprises rose
Gross revenue from game of fortune
('000)
2,000
1,500
1,000
500
0
01/06
02/06
03/06
04/06
05/06
06/06
07/06
08/06
09/06
10/06
11/06
12/06
01/07
02/07
03/07
04/07
05/07
06/07
07/07
08/07
09/07
10/07
11/07
12/07
01/08
02/08
03/08
04/08
05/08
06/08
07/08
08/08
CONSUMER – Retail
October 2008 China
Source: CEIC HK
Others
MOP m
VIP Baccarat
YoY %
Slot machine
YoY %
Others
YoY %
Total
YoY %
1Q07
12,002
50
753
72
5,652
32
18,407
45
2Q07 3Q07 4Q07 2007 1Q08 2Q08
13,206 13,668 16,886 55,762 20,801 20,100
58
50
49
52
73
52
825
876 1,141 3,595 1,354 1,395
81
64
82
75
80
69
5,536 5,797 6,680 23,665 7,668 7,390
31
35
34
33
36
33
19,567 20,341 24,707 83,022 29,823 28,885
50
46
46
47
62
48
Source: CEIC Source: NBS Huaqiao in the Middle Kingdom
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43
44
Huaqiao in the Middle Kingdom
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Octoeber 2008
HK listed – Outperform
A shares – Outperform
„ The price of oil dropped sharply in the first half of September on concerns over
demand amid the expected global economic slowdown. The price of ICE Brent
fell from US$116/bbl to US$90/bbl in middle of the third week of the month.
Only the worse-than-expected damage stemming from Hurricane Ike on oil
production facilities in the Gulf of Mexico and Texas and the weakening of the
US dollar help the price of ICE Brent to regain the US$100/bbl mark towards the
end of the month.
„ The discount of the price of Minas (the benchmark for Daqing oil) to that of ICE
Brent fluctuated between -US$2/bbl to +US$7/bbl in September, whereas the
discount of the price of Cinta (the benchmark for Shengli oil) to that of ICE Brent
fluctuated between US$4/bbl to US$13/bbl during the same period.
„ The median settlement price of Datong high-grade coal fell 1% MoM to
Rmb970/tonne and that of Shanxi high-grade coal was flat MoM at
Rmb895/tonne at Qinhuangdao in September. The coal inventory at
Qinhuangdao rose 13% to 8.7m tonnes on 24 September from the end of
August.
PetroChina (0857.HK/HK$8.63; 601857.SS/Rmb13.01) — Outperform© (H) PetroChina parent CNPC bought 60m A shares in the listco from the market to raise its stake from 86.29% to 86.32%. CNPC intends to continue to raise its stake in PetroChina by no more than 2% over the next 12 months through further purchases of its A shares. In addition, CNPC has undertaken not to sell any PetroChina shares in the next 12 months. If CNPC increases its stake by a further 2%, it will reduce the free float of PetroChina’s A shares by 90% and provide strong boost to the price of H shares. We have, therefore, upgraded our call on PetroChina’s H shares to Outperform. China Agri (0606.HK/HK$4.65) — Outperform China Agri’s earnings jumped 1.7x YoY to HK$1,686m in 1H08, mainly on the strong performances of its oilseed processing, biofuel and biochemical and brewing materials divisions. Despite our expectations of slightly weaker earnings for 2H08 due to the lower price of edible, we have increased our earnings forecast by 87% for 2008, 60% in 2009 and 38% for 2010. We increase our target price from HK$6.26 to HK$7.96 and reaffirm our Outperform call on the stock. Key Statistics
Crude Production, Import & Demand
(m tonne)
35
(US$/bbl)
150
30
120
25
20
90
15
60
Domestic output (LHS)
Apparent demand (LHS)
07/08
04/08
01/08
10/07
07/07
04/07
01/07
10/06
07/06
04/06
01/06
10/05
07/05
04/05
5
01/05
10
Net imports (LHS)
IPE Brent price (RHS)
Sources: National Bureau of Statistics, China Petrochem & Chemical Industry Association, Bloomberg 30
YoY %
07 08E 09E Feb08 Mar Apr May Jun
Output
Crude oil
1.6 1.8 2.1 3.8 2.3 0.0 0.8 1.5
Natural gas 13.8 11.8 10.6 13.1 28.1 14.8 28.1 41.8
Refining
8.0 6.0 6.0 9.7 4.3 2.7 (0.6) 5.9
throughput
Coal
6.3 8.4 5.7 13.5 8.7 15.9 13.2 11.4
Jul
4.5
12.7
10.2
11.8
Imports
Crude oil
12.4 7.2
Price
IPE Brent
(US$/bbl)
72.5 114.9 110.8 94.1 102.5 109.7 123.6 133.1 135.7
6.9
18.1 24.8 (3.9) 24.9
3.2 (7.0)
FINANCIALS (China)
HK listed – Marketperform
A shares – Marketperform
„ The PBOC cut the one‐year lending rate to 7.2% after nine interest rate hikes
since October 2004, and also reduced the required reserve ratio (RRR) for the
first time in nine years. The PBOC’s twin move of the rate cut and RRR reduction
suggests that the net profit growth of the China banking sector has already
peaked. Going forward, we believe Chinese banks will face contractions of net
interest margins (NIM), as well as rising asset quality problems.
„ Seven Chinese banks disclosed that their combined exposure to assets at risk
related to Lehman Brothers totalled about US$722m. Since the exposure is
actually trivial, relative to the huge assets of Chinese banks, there will be a
negative direct impact of about 0.5% on the 2008 earnings. However, the
impact of international turmoil will be huge considering the indirect impact
from weaker economic growth and total exposure of financial institutions to
foreign currency debt.
„ While we believe Huijin’s share purchases will help to stabilise the stocks of
ICBC, BOC and CCB, the move will not, in our opinion, change the operating
situation and profit of the three banks.
China Merchants Bank (3968.HK/HK$20.50; 600036.SS/Rmb17.60) —
Marketperform China Merchants Bank (CMB) has estimated that the PBOC’s twin move to reduce the lending‐rate and the RRR will lower its net interest income by Rmb160m in 2008 and Rmb1,040m in 2009, 2.3% below than our projection as we had factored into a possible structural change in liabilities and repricing risk of loans. At the same time, CMB also disclosed that it had held foreign currency bonds worth about US$2bn, with US$0.9bn is related to the current unprecedented disturbance among international financial markets, which may depress its profit in the future. So, we reiterate our Marketperform ratings on CMB’s H and A shares even though share prices have dropped to undemanding levels. Key Statistics
Growths of Loans & Deposits
(% YoY)
26
24
22
20
Industry Association, Bloomberg, BOCI Research estimates May Jun
Jul
Aug
Deposit (% YoY)
16.0
14.0
13.0
17.4
17.7 19.6 18.9 19.6 19.3
Lending (% YoY)
16.0
14.7
13.0
14.8
14.7 14.9 14.1 14.6 14.3
7-day inter-bank
lending rate (%)
2.1
2.3
2.5
2.3
2.6
2.8
3.1
2.7
2.8
Excess deposit
reserve ratio (%)
3.0
2.5
2.6
2.0
n.a
n.a
2.0
n.a
n.a
NPLs (%)
7.0
7.0
7.0
5.8
n.a
n.a
5.6
n.a
n.a
14
Source: NBS 09E Mar08 Apr
Loan
16
12
08E
Deposit
18
Sources: National Bureau of Statistics, China Petrochem & Chemical 07
New incremental 3,630 3,630 3,800 285.6 463.9 318.5 332.4 381.8 271.5
loans (Rmb bn)
06/03
08/03
10/03
12/03
02/04
04/04
06/04
08/04
10/04
12/04
02/05
04/05
06/05
08/05
10/05
12/05
02/06
04/06
06/06
08/06
10/06
12/06
02/07
04/07
06/07
08/07
10/07
12/07
02/08
04/08
06/08
08/08
ENERGY
October 2008 *NPLs based on listed companies’ data; all other data from PBOC Sources: Listed companies, PBOC, BOCI Research estimates Huaqiao in the Middle Kingdom
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Huaqiao in the Middle Kingdom
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Octoeber 2008
FINANCIALS (Hong Kong)
HK listed — Marketperform
October 2008 FINANCIALS – Insurance
„ According to mReferral, existing new homes mortgage market shares in
HK listed — Marketperform
A shares – Marketperform
„ The total premium income of Chinese insurance companies up to end-August
August 2008 stood at 19.6% for HSBC, 15.3% for BOC (Hong Kong), 11.3% for
Standard Chartered, 7% for Hang Seng Bank, 4.8% for DBS (Hong Kong), 4.5%
for Bank of East Asia, 3.7% for Wing Hang Bank, 3.3% for Citibank HK, 3.3% for
CCB (Asia) and 3% for Dah Sing Banking.
2008 was up 52.2% YoY at Rmb713.4bn, down slightly from growth of 52.9%
YoY up to July 2008. Furthermore, premium income from life insurance
increased 63.2% to Rmb540.7bn, while that from non-life insurance only rose
25.7% to Rmb172.7bn. Looking forward, we expect premium income growth to
drop in September due to a slowdown in demand for bank insurance products.
BOCＨong Kong (2388.HK/HK$14.64) — Outperform BOC Hong Kong (BOCHK) has said its total exposure to bonds issued by Lehman Brothers amounted to US$69.21m (about HK$540m). The amount comprises US$50m worth of senior unsecured bonds, of which BOCHK holds 100%, and a HK$150m in senior unsecured bonds held by 51%‐owned BOC Group Life Assurance Co Ltd. In light this situation, we assume that BOCHK will do a 100% write‐off for these amounts in 2H08. As a result, we trim our 2008E EPS forecast for BOCHK by 3.4%. We have not forecast any additional charges for the company’s exposure to US mortgage‐backed securities (MBS) because of the relatively short remaining duration (weighted average duration of two years) and past track record of conservative provision (HK$420m net write‐back for US subprime MBS in 1H08). An additional 10% provision for the entire MBS exposure is estimated to reduce 2008E net profit by 21.0%. At a dividend yield of 6.0%, we believe BOCHK’s valuation is defensive for fundamental investors with a through‐cycle perspective. Accordingly, we reaffirm our Outperform rating on the stock. However, we trim our long‐term growth assumption to 4% from 5% and reduce our target price to HK$19.50 from HK$23.30 after incorporating the latest information. For investors with a cautious view on exposure to US securities, we recommend Hang Seng Bank. China Life Insurance (2628.HK/HK$29.30; 601628.SS/Rmb25.26) — Marketperform China Life has said that it has no timetable for a group listing, which has decreased investors’ concerns over the company’s profitability arising from the losses related to old policies of the group. China Life also announced that it expected long‐term regular premium growth to remain stable with its expansion in rural districts. While we expect China Life to maintain a comparatively stable premium income growth over the long term, we project that there will be a decrease due to a slowdown in demand for bank insurance products. We reiterate our Marketperform ratings on China Life and set entry price of Rmb20.00 for its A shares and HK$22.00 for its H shares. Market Share Breakdown — August 2008
Non-life
Life
Key Statistics
Growths of Loans & Deposits
(% )
45
(% )
35
60
25
15
55
01/03
04/03
07/03
10/03
01/04
04/04
07/04
10/04
01/05
04/05
07/05
10/05
01/06
04/06
07/06
10/06
01/07
04/07
07/07
10/07
01/08
5
(5)
65
Deposit growth (LHS)
Loan-to-deposit (RHS)
Source: HKMA 50
Loan growth (LHS)
Prime
3M HIBOR
Prime - HIBOR
Savings deposit
rate
Loan growth
(% YoY)
Deposit growth
(% YoY)
07
6.85
3.75
3.10
1.35
08E
5.25
3.00
2.25
0.05
09E
5.25
3.00
2.25
0.20
Mar08
5.56
2.06
3.50
0.2
Apr
5.25
1.98
3.27
0.0
May
5.25
1.88
3.37
0.0
Jun Jul Aug
5.25 5.25 5.25
2.23 2.28 2.24
3.02 2.97 3.01
0.0 0.0 0.0
20.0 15.0 12.0 18.7
24.6 24.1 17.1 25.1
23.1 15.0 12.5 15.9
17.0 13.3 6.9
9.5
Others
38%
China
Pacific
10%
Source: CIRC China
Life
38%
Ping An
14%
Others
39%
PICC
39%
China
Ping An
Pacific
11%
11%
Insurance Premium Growth
(Rmb bn)
Non-life insurance
premiums
Life insurance
premiums
Total insurance
premiums
Growth rate (%)
Non-life insurance
premiums
Life insurance
premiums
Total insurance
premiums
156
06
199
07
08E Mar08 Apr May Jun Jul Aug
406
494
618
87
59
60
76
56
59
562
693
856
110
82
80
102
75
77
22
28
20
25
22
22
25
26
26
12
22
25
61
62
62
62
64
63
14
23
24
52
50
50
51
53
52
239
24
23
20
26
18
18
Sources: Bloomberg, Company data, BOCI Research estimates Sources: HKMA, BOCI Research estimates Huaqiao in the Middle Kingdom
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47
48
Huaqiao in the Middle Kingdom
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Octoeber 2008
MEDIA
HK listed – Outperform
A listed – Underperform
October 2008 METALS & MINING
„ A senior official of the State Administration of Radio, Film and Television
HK listed – Outperform
A shares – Outperform
„ As the global credit crunch worsens, there has been slowing demand in China.
(SARFT) has said that the industry regulator aims to cover about 360 cities with
handheld TV signals using Chinese CMMB technology.
Crude steel consumption fell 6.5% YoY to 34.9m tonnes, pointing to weak
domestic demand. We believe slowdown in the property market has affected
demand for long steel products, while lacklustre auto demand and export
decline has hit demand for flat steel products.
„ National broadcaster China Central Television has announced a 5-10%
advertising rate increase for its flagship CCTV-1 channel and as much as 30%
for other channels, effective next January.
„ Crude steel production in August fell 5.2% MoM, but was up 1.3% YoY. The
Beijing Olympics and low steel prices forced many companies in the sector to
cut production in August. Steel stocks have stayed at normal levels in recent
weeks, but we have heard that traders have become more reluctant to buy steel
from producers in anticipation of more price drops ahead.
SCMP Group (0583.HK/HK$2.58) — Underperform Following SCMP Group’s disappointing 1H08 results, we have cut our earnings forecast by 37% to HK$235m (EPS: HK$0.151) for 2008 and 25% to HK$227m (EPS: HK$0.145) for 2009. We have also reduced our target price from HK$3.20 to HK$2.20, based on 15x of 12‐month forward P/E, which is one standard deviation below the average since 2003. Assuming a payout ratio of about 90%, SCMP’s dividend yield may fall below 5% next year. We downgrade our call on the stock to Underperform. The stock, however, remains suspended as the controlling shareholder, Kerry Media, has yet to reach an agreement with a UK fund on ways to restore the freefloat from the current 11% to the required 25%. „ Mainland steel prices continued the slide that began at the end of June.
However, compared to the averages last year, mainland steel prices are still up
22.8% to 41.5%. Compared to 1H08, mainland steel prices are up 4.2% to 11.5%
depending on product types.
„ We believe that, at the current valuation, the market has priced in an earnings
downside for this year. As we enter 4Q08, investors are looking at 2009
prospects for the sector, which, at the moment, are unclear.
Shandong Gold Mining (600547.SS/Rmb38.23) — Outperform Despite the estimated 5% QoQ drop in the price of gold in 3Q08, we believe Shandong Gold will have seen a lower decline of only 3% QoQ in its ASP because of hedging. This means Shandong Gold’s 3Q08 results will be beat market expectations. Trading at 0.8x P/NAV and 12x 2008 P/E, the stock is undervalued. We reaffirm our Outperform call on it. US$ per million tonne
Newsprint (US$/mt)
Adspending (HK$m)**
Circulation* (k)
Readership* (k)
i-Cable TV ARPU
04
502 550
14,312 16,423
1,430 1,385
4,935 4,211
230 232
05
614
n.a.
1,351
4,108
218
Dec05 Jan06
614 620
n.a. n.a.
n.a. n.a.
n.a. n.a.
n.a. n.a.
Feb
622
n.a.
n.a.
n.a.
n.a.
Mar
634
n.a.
n.a.
n.a.
n.a.
Apr
637
n.a.
n.a.
n.a.
n.a.
May
642
n.a.
n.a.
n.a.
n.a.
Sources: Bloomberg 25/03/08
08/08/07
26/12/07
16/05/06
04/10/05
22/02/05
07/07/04
25/11/03
15/04/03
27/08/02
15/01/02
05/06/01
China print advertising volume growth (% YoY)
Newspaper
Magazine
Total
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
18.8
2.8
17.5
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a. n.a.
n.a. n.a.
n.a. n.a.
3-month Futures Aluminium and Copper
7,000
Huaqiao in the Middle Kingdom
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49
07
08E Apr08 May Jun
(5)
15
20
53.5 53.5 63.6 61.0 48.4 26.1
Ju
Aug Sep
Copper
Aluminium
Ord. Plate -40mm (12)
17
20
48.1 55.6 54.3 53.4 46.8 25.3
5,000
Hot-rolled sheet
(10)
10
15
40.4 36.8 43.1 48.9 42.7 25.4
3,000
Cold-rolled sheet
(19)
5
15
30.4 34.3 41.8 45.4 38.2 25.8
Galvanised steel
(13)
1
15
18.6 18.6 34.4 40.0 40.1 31.3
Aluminium
21
(5)
5
(4..3) (11.1) (10.4) (6.3) (8.1) (15.8)
1,000
* Including Oriental Daily, Apple Daily, Ming Pao, SCMP ** assuming 40% off discount Sources: Datastream, HKABC, AC Nielsen, Admango, HC Media Research
Key Statistics
06
(% YoY)
Quick speed wire
rod
(US$/tonne)
9,000
01/99
06/99
11/99
04/00
09/00
02/01
07/01
12/01
05/02
10/02
03/03
08/03
01/04
06/04
11/04
04/05
09/05
02/06
07/06
12/06
05/07
10/07
03/08
Key Statistics
03 (% YoY)
Newsprint Prices
750
700
650
600
550
500
450
400
Source: LME 50
77
0
0
Copper
(6.0) (3.1) (1.2) 3.1 (6.8) (11.1)
Sources: Bloomberg, Company data, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
Following the continuous declines of property transaction volumes in major
Chinese cities, a number of city governments, including those of Xi’an,
Xiamen, Chengdu, Changsha and Shenyang, have launched incentive policies
to boost property sales and restore market confidence. Incentive measures
include lowering transaction costs and deed taxes, subsidising homebuyers,
reducing down payments and extending loan tenors for public provident
fund schemes, granting permanent city residency through home purchases,
and cutting certain fees and taxes for developers.
„
The ASP of commodity houses in 70 mainland cities grew 5.3% YoY in August
2008, 1.7ppts lower than that in July, according to NDRC statistics. Haikou,
Yinchuan, and Beijing led the way on prices with rises of 16.5%, 12.4%, and
11.7% respectively.
Formal official scheme of medical and healthcare reform still needs time Source: Chinese Medicine Economic Information 05/08
Net profit margin (RHS)
24.6
32.1
29.4
51.1
51.6
45.1
Bulk drugs
24.1
33.5
32.2
48.7
66.1
85.2
110
Biological drugs
22.1
32.3
29.6
45.8
41.9
57.0
105
Medical device
31.6
50.0
38.9
49.1
62.9
54.1
100
Finished drugs
22.9
31.0
27.4
49.8
59.7
43.7
TCM Yinpian
36.8
40.3
32.7
65.2
36.1
26.9
TCM
21.1
25.8
24.2
52.6
31.0
16.2
95
90
Sources: Chinese Medicine Economic Information, BOCI Research
Land development index
Vacancy area index
Housing development area index
estimates Source: Soufun.com Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
51
52
Property dev. investment index
Property dev. climate index
07/08
Net profit (LHS)
02/08
Pharm total
115
04/08
11/07
08.5
01/08
08/07
08.2
10/07
Total revenue (LHS)
05/07
07.11
07/07
02/07
08.5
04/07
6
Key Statistics
Property Indices
08.2
01/07
7
Profit Increase(%)
07.11
10/06
8
Sales Increase (%)
Time
07/06
9
04/06
(%)
10
01/06
(Rmb bn)
600
500
400
300
200
100
0
12/06
CR Land’s underlying net profit for 1H08 surged 68% YoY to HK$637m. In 1H08, CR Land’s booked area increased 48% YoY to 234,110 sqm with booked revenue from property sales up 34% YoY at HK$1.7bn. It sold 172,587sqm (down 16% YoY) for a contracted value of Rmb1.6bn (down 24% YoY) in 1H08. In July 2008, CR Land added a land bank of 4.29m sqm for a total consideration of HK$9.045bn, satisfied with the placement of new shares to major shareholder China Resources Holdings. As a result, the company now has a total land bank of 21.94m sqm (20.7m sqft in terms of attributable GFA) in 17 cities in China. As at June 2008, CR Land had a total investment land bank of 678,637m sqm (584,817 sqm in terms of attributable GFA). Net rental income in 1H08 grew 23% YoY to HK$390m, accounting for 40% of gross profit for the period.
10/05
Key Statistics
Revenue of Pharmaceutical Industry
China Resources Land (1109.HK/HK$7.95) — Outperform 07/05
We have initiated coverage on Central China Real Estate (CCRE) with a Marketperform rating. The company is a leading local developer in Henan with a track record of over 15 years. CCRE has a land bank of 5.97m sqm in 19 cities across Henan, sufficient for its development in the next three to four years. 04/04
Central China Real Estate (0832.HK/HK$0.68) — Marketperform 01/04
China has been reducing investments in its medical and healthcare system since 1980, empowering hospitals to make money on their own. The first official medical reform began in 1997, but was deemed to be unsuccessful in 2005. In 2006, a new medical reform effort began. In April 2008, the authorities issued the first draft of the medical reform scheme, and the latest one is the second draft. We think an official trial run of the medical and healthcare reform may begin in several cities next year before being extended to the entire in 2010. In our opinion, the reform measures will boost the need for medicines and also lead to greater consolidation of the pharmaceutical industry, both of which will drive its long‐term development. Stocks of major pharmaceutical companies now trade at P/E multiples of 27.2x for 2008E, 20.5x for 2009E and 16.6x for 2010E and a 2009E PEG ratio of 0.78x. This, coupled with a projected annual sales increase of 17‐18% and profit growth of 25‐30%, means that the stocks of pharmaceutical companies are fairly valued. Amid the current economic uncertainties, we still think the pharmaceuticals industry is a safe harbour due to its relatively rapid and certain growth. As such, we reaffirm our Outperform rating for the pharmaceuticals sector. Tianjin Tasly Pharmaceutical, Shanxi Yabao Pharmaceutical, Jiangsu Kanion Pharmaceutical and Huadong Medicine remain our top picks in the industry. HK listed – Marketperform
A shares – Marketperform
„
04/05
It was reported on 10 September 2008 that the China’s State Council
executive meeting, which Premier Wen Jiaobao presided, examined “the
advice on issues of further deepening the reform of the medical and
healthcare system”, and resolved that a public discussion would be open for
the second time. We see medical reform is a long-term performance driver for
pharmaceutical companies.
PROPERTY (China)
01/05
„
HK listed – Outperform
A shares – Outperform
10/04
PHARMACEUTICALS
October 2008 07/04
(% YoY)
Property investment
Residential property
investment
Commodity housing starts
(area)
Commodity housing
completion area
Commodity housing sales
area
Commodity housing sales
amount
Average selling prices
06
23
26
07 08E Mar08 Apr May Jun
30 23
32
32 32
38
32 25
39
36 35
41
Jul Aug
20 19
21 21
17
21
18
24
8
18
17
(8)
(3)
9
10
10
21
1
14
0
13
3
38
26
1
2
(12) (14)
(7)
(27) (36)
55
44
8
9
(8)
(6)
(4)
(24) (41)
13
15
7
3
4
5
5
4
2
Sources: China Real Estate Net, Soufun.com, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
PROPERTY (Hong Kong)
Developers – Marketperform
Investors/REITs – Outperform
„
Volume of property transactions shrank further due to a slowdown of the
economy and poor performance of the stock market. This is in line with our
expectations of a further correction of the residential property market in
Hong Kong.
„
We retain our Marketperform call on the sector. Among developers, we like
Cheung Kong (Holdings) and MTR Corp.
We lower our underlying earnings forecasts for Sun Hung Kai Properties (SHKP) by 10% for the fiscal year to 30 June 2009 and 12% for FY10. We also cut our target price from HK$125.20 to HK$90.90. We reaffirm our Marketperform rating on SHKP. Henderson Land Development (0012.HK/HK$38.20) — Marketperform We reaffirm our Marketperform call on Henderson Land Development (HLD) and lower our target price from HK$53.80 to HK$41.90, based on the average NAV discount of 45% during 2Q03 to reflect its slower completion progress in China and depleting land bank in Hong Kong. After years of disappointment on its farmland conversion progress, we finally see some progress for three of its sites. Any finalisation of land premium at reasonable costs will be a driver of HLD’s share price. Sino Land (0083.HK/HK$9.80) — Underperform We revise down our target price to HK$8.26 based on a discount of 45% to its FY09E NAV of HK$15.01. We reaffirm our Underperform call on Sino Land given that its NAV is more sensitive to the changes in property prices and our expectations that the residential property market will continue its downturn until the middle of next year at the earliest. Take-up (LHS)
Sources: Housing Department, Centaline 2006
2008E
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
Supply (LHS)
7
6
5
4
3
2
Vacancy (RHS)
06
We prefer consumer companies targeting the mass market in China amid
concerns of an economic slowdown. China Dongxiang and Hengan
International have posted strong interim results and fit our criteria.
The 1H08 net profit of China Dongxiang (CDX) surged 95.6% YoY to Rmb656.8m. Stripping out a one‐off gain from negative goodwill from the acquisition of a 91% stake in Japan‐based Phenix early this year, its bottom line came in up 52.1% YoY. The Kappa brand continued to be the major growth driver. Sales of the Kappa brand in China accounted for 91.9% of CDX’s total, up 73.5% YoY. CDX had 2,487 retail outlets selling Kappa products in China and Macau, representing a net year‐on‐year increase of 542 outlets. The gross margin for the Kappa brand in China improved from 62.2% in 1H07 to 63.7% in 1H08, thanks to a better product mix with higher mark‐up ratios. Thus, the overall margin improved from 60.8% in 1H07 to 61.1% in 1H08. CDX will launch Phenix’s brands in China next year. We see this as an opportunity for the company to reduce its reliance on the Kappa brand. We lower our target price for CDX from HK$5.61 to HK$4.75, but reaffirm our Outperform rating on it. Hengan International (1044.HK/HK$21.35) — Outperform Hengan International’s net profit for 1H08 came in up 33.4% YoY at Rmb628m. Gross profit margin was almost unchanged, thanks to a better products mix and higher ASP. The tissue paper and diaper businesses achieved strong sales growths of 45.4% YoY and 43.5% YoY, respectively, in 1H08. Demand for Hengan’s products is less susceptible to fluctuations of the economy. We see a product mix improvement as a major practice for Hengan to enhance profitability in future. Hengan plans to acquire Total Good Group, which manufactures and distributes snack foods in China. Although the synergy between a personal hygiene products company and a snack foods company is not clear, we believe that some such effect from brand, distribution and logistics management can be achieved. The acquisition will have minimal impact on Hengan’s core business. We have left our target price unchanged at HK$28.86 and reaffirm our Outperform rating on the stock. China Dongxiang — Profit & Loss
Private Residential Property Completions & Sales
Key Statistics
07 08E Mar08 Apr
May
Jun
Jul Aug
CCI
1
25
(1)
35
31
30
29
27
-
CCL Index
3
24
(2)
32
28
32
29
26
22
Trans. No.
(20) 47 (12)
16
(0)
(23)
(1)
(20) (53)
Trans. Val
(20) 67
(9)
37
(23)
(24)
46
(14) (59)
Primary trans (19) 40 (30)
211
(82)
(80)
64
(73) (92)
Unsold stock 12 (58)
(65)
(64)
(56)
(46) (40)
4
-
Sources: Centaline, Midland, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
HK listed – Outperform
China Dongxiang (3818.HK/HK$2.42) — Outperform Sun Hung Kai Properties (0016.HK/HK$88.20) — Marketperform %
SMALL/MID-CAP
„
No. of Units
40,000
35,000
30,000
25,000
20,000
15,000
10,000
October 2008 53
Year ended 31 Dec
Revenue (Rmb m)
Change (%)
Net profit (Rmb m)
Fully diluted EPS (Rmb)
Change (%)
P/E (x)
CFPS (Rmb)
P/CF (x)
EV/EBITDA (x)
DPS (Rmb)
Yield (%)
Hengan International — Profit & Loss
2006 2007 2008E 2009E 2010E 859 1,711 2,320 3,124 3,749
99
36
35
20
481
306
734
887 1,185 1,428
0.07 0.16 0.16 0.21
0.25
122
(1)
34
21
711
32.7 14.7 14.9 11.1
9.2
0.08 0.14 0.18 0.23
0.28
28.8 16.4 12.7 10.1
8.4
20.9 11.1
8.7
6.3
5.1
0.00 0.01 0.06 0.08
0.10
0.0
0.5
2.7
3.6
4.3
Sources: Company data, BOCI Research estimates 54
Year ended 31 Dec
Revenue (Rmb m)
Change (%)
Net profit (Rmb m)
Fully diluted EPS (Rmb)
Change (%)
P/E (x)
CFPS (Rmb)
P/CF (x)
EV/EBITDA (x)
DPS (Rmb)
Yield
(%)
2006
4,115
35.8
697
0.64
52.6
33.6
0.48
44.3
0.0
0.43
2.0
2007 2008E 2009E 2010E
5,687 7,762 9,916 11,649
38.2
36.5
27.8
17.5
1,006 1,264 1,685 1,872
0.88
1.09
1.43
1.58
38.7
23.2
31.7
10.6
24.2
19.7
14.9
13.5
1.12 (0.27)
0.15
0.23
19.0
- 146.2
93.5
0.0
0.0
0.0
0.0
0.59
0.72
0.96
1.07
2.7
3.4
4.5
5.0
Source: Company data, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
TECHNOLOGY
HK listed – Outperform
A shares – Outperform
„
According to WitsView, shipments of large-size LCD panels in August rose
7.8% MoM and 2.2% YoY to 35.3m units, thanks to the seasonal demand
recovery. Sales of LCD panels grew a strong 18.6% MoM mainly in the
26-inch, 22-inch and 42-inch categories.
„
Worldwide sales of semiconductors rose 7.6% YoY (2.8% MoM) to US$22.2bn
in July from US$20.6bn. Year-to-date sales through July grew 5% to
US$148.3bn. Total semiconductor sales, excluding memory products,
increased 11.6% YoY and 3.2% MoM.
Handsets shipment in 2Q08 rose 11.8% to 304.7m units, according to
Gartner. The weakening global economy resulted in slower-than-expected
growth and we expect the slowdown to revert in 2H08.
TPV Technology (0903.HK/HK$2.32) — Outperform TPV’s net profit for 2Q08 rose 16.5% YoY (13.2% QoQ) to US$51.4m, mainly on a 30.6% YoY (5.9% QoQ) growth in turnover. Sales of monitors grew 28.5% YoY (11.5% QoQ) to a record high US$2,064m, while those of LCD TVs jumped 62.4% YoY (28.1% QoQ) to US$468m. TPV’s gross margin expanded 10bps to 4.58% in 2Q08 due to steady panel prices and channel sales. However, operating margin slipped from 3.31% in 1Q08 to 2.18% in 2Q08. With healthy contributions from associates (mainly distribution and LCD module assembly companies) and lower tax expenses, TPV’s net margin stayed above 2.0%. We estimate TPV’s gross margin to come under pressure from 3Q08, mainly owing to the sharp decline in LCD monitor panel prices since the end of June. After taking into account slowing end demand and a possible margin squeeze in 2H08, we lower our 2008‐10E EPS forecasts for TPV Technology by 10‐16%. On the other hand, we believe that the burgeoning LCD TV outsourcing trend will partly soften the impact of cyclical nature of the industry and benefit leading assemblers like TPV over the medium term. We reiterate our Outperform call on TPV. Key Statistics
Worldwide Semiconductor Billings
(%)
6%
4%
2%
0%
-2%
-4%
Worldwide semiconductor billings (LHS)
Sources: SIA 07/08
06/08
05/08
04/08
03/08
02/08
01/08
12/07
11/07
10/07
09/07
08/07
07/07
06/07
05/07
04/07
03/07
-6%
02/07
01/07
(US$ m)
23,500
23,000
22,500
22,000
21,500
21,000
20,500
20,000
19,500
19,000
18,500
18,000
MoM change (RHS)
-8%
TELECOMS (China)
HK listed –Marketperform
A shares – Marketperform
In a bid to support the home-grown 3G standard, industry regulator Ministry
of Industry and Information Technology has announced a low-rate tariff plan
for China Mobile’s TD-SCDMA services.
„
China Telecom (0728.HK/HK$3.34) — Outperform China Telecom added 690,000 broadband users in August to a total of 41.45m, slightly higher than our estimate, but less than the July gain of 810,000. It also lost 690,000 local voice users to 213.6m, a faster‐than‐expected decline. Meanwhile, China Unicom has announced a net loss of 398,000 users in its CDMA division to 42.36m users in August, after losing 413,000 users in July. China Telecom shareholders have approved the acquisition of the CDMA business from Unicom for Rmb43.8bn and completion is scheduled in October. We reaffirm our Outperform call on China Telecom. China Mobile (0941.HK/HK$80.35) — Outperform China Mobile announced the net addition of 7.18m subscribers in August against 7.11m in July, to bring its total base to 428.87m. The gain was marginally weaker than our estimate. We reaffirm our Outperform rating for China Mobile. China Unicom (0762.HK/HK$11.32; 600050.SS/Rmb5.43) — Marketperform (H&A) China Unicom announced the net addition of 909,000 GSM users in August to 129.46m, slightly lower than our expectation. Meanwhile China Netcom reported a 407,000 decline in fixed‐line users to 107.8m but a 272,000 rise in broadband users to 24.25m. The two companies have agreed to merge following Unicom’s sale of its CDMA business to China Telecom. We reiterate our Marketperform rating on Unicom. Fixed-line & Mobile Networks’ Monthly Net Additions
Key Statistics
12,000
120%
10.4
10.2
12.5
31.5
64.6
8,000
100%
80%
Capacity & utilisation rate 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08
Foundry capacity
289 298 261 272 307 313 298 308
(wafer start per weekx1000)
Foundry utilisation rate (%)
92
81
79
93
94
94
94
93
Total IC capacity
1,808 1,884 1,872 1,972 2,093 2,118 2,155 2,210
(wafer start per weekx1000)
Total IC utilisation rate (%)
89
86
87
89
90
90
91
89
0
-20%
-40%
(4,000)
-60%
sales
Semiconductor
revenue America (US$ bn)
Europe (US$ bn)
Japan (US$ bn)
Asia Pacific (US$ bn)
Total
06
07
08E 2Q07 3Q07 4Q07 1Q08 2Q08
44.9 44.0 42.6 9.9 10.9 11.3
39.9 39.1 41.7 9.6 10.2 10.8
46.4 45.5 47.8 11.6 12.3 13.1
116.5 123.5 135.8 28.7 31.4 33.2
247.7 252.1 273.0 59.9 64.7 68.4
10.2
10.2
12.3
30.4
63.1
Sources: SIA, SICAS Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
60%
40%
4,000
20%
0%
01/03
04/03
07/03
10/03
01/04
04/04
07/04
10/04
01/05
04/05
07/05
10/05
01/06
04/06
07/06
10/06
01/07
04/07
07/07
10/07
01/08
04/08
07/08
„
October 2008 Fixed-line (LHS)
Source: MII 55
56
Mobile (LHS)
Fixed-mobile ratio (RHS)
(m subscribers)
2007 2008E 2009E Apr08 May Jun
Jul Aug
National mobile sub.
547.3 653.0 756.8 583.5 592.1 600.8 608.4 617.3
net adds
86.2 105.7 103.7
8.9 8.6
8.6
7.6 8.9
CM total subscribers
369.3 457.9 537.6 399.5 407.0 414.6 421.7 428.9
net adds in period
68.1 88.5 79.7
7.4 7.5
7.6
7.1 7.2
CU-G total sub.
119.2 135.2 159.7 125.4 126.5 127.6 128.6 129.5
net adds in period
13.3 16.0 24.5
1.2 1.1
1.1
1.0 0.9
CU-C total sub.
41.1 44.6 57.7 43.1 43.2 43.2 42.8 42.4
net adds in period
4.6
3.5 13.1
0.3 0.1
0.0 (0.4) (0.4)
National broadband sub
66.5 82.1 96.1 72.9 74.4 76.0 77.8 78.7
net adds in period
15.6 15.6 14.0
1.5 1.5
1.6
1.8 0.8
CT broadband sub.
35.7 43.0 49.6 38.4 39.1 40.0 40.8 41.5
net adds in period
7.3
7.3 6.6
0.7 0.7
0.9
0.8 0.7
CN broadband sub.
19.8 24.5 28.7 22.1 22.6 23.4 24.0 24.3
net adds in period
4.7
4.7 4.2
0.5 0.5
0.7
0.6 0.3
National fixed-line sub. 365.4 363.1 359.9
360 359 356 355 357
net
adds
(2.3)
(2.3)
(3.2)
(1.0)
(1.1)
(2.6)
(1.3)
1.6
Sources: MII, Company data, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
TELECOMS (Hong Kong)
HK listed – Outperform
October 2008 TRANSPORT – Aviation
Industry regulator Office of the Telecommunications Authority has proposed
to extend the existing telephone number fee (now HK$3 each applicable to
holders of service-based operator licences and unified carrier licences) to
public radio paging service operators and mobile virtual network operators.
Industry participants have until October 31 to comment on the proposals.
„
HK listed – Marketperform
A listed – Marketperform
In August, the Chinese airlines sector saw the largest single-month decrease
in traffic growth. The sector’s revenue passenger-kilometres (RPK) decreased
14.0% YoY to 23.46bn in August. However, with the continuing drop in the
price of oil and the close of the Beijing Olympic, we expect traffic to return to
normal.
„
Air China (0753.HK/HK$3.65; 601111.SS/Rmb6.09) — Marketperform Hutchison Telecom (2332.HK/HK$8.75) — Underperform As Air China’s largest operating base is in Beijing, it suffered from Olympic Games‐related side effects, such as upgraded security measures, as well as the slowdown of the global economy. As a result, Air China’s RPK in August fell 16.3% YoY to 5,268m, while its passenger load factor (PLF) declined 13.0ppts YoY to 71.1%. Apple Inc has begun selling its iPhone online in Hong Kong at HK$5,400 each for the 8GB model and HK$6,200 each for the 16GB model. The phones are not restricted to Hutchison, the original sole distributor, and can be used on any carrier’s network. The prices quoted are actually not that cheap when one considers the monthly fee that the user has to pay. We estimate that buying from Apple directly will make sense only if one’s monthly wireless communications bill is about HK$85, a very low end‐user charge indeed by Hong Kong’s standard. We, therefore, conclude that this will have little impact on HTIL’s businesses. We reiterate our Underperform call on the stock.
China Eastern Airlines (0670.HK/HK$1.36; 600115.SS/Rmb4.30) — NR China Eastern Airlines’ RPK in August decreased 25.3% YoY to 4,209m, while PLF declined 8.6ppts YoY to 69.4%. China Southern Airlines (1055.HK/HK$1.50; 600029.SS/Rmb3.69) — NR China Southern Airlines’ RPK in August decreased 18.7% YoY to 6,759m, while its PLF fell 8.7ppts YoY to 71.7%. Sources: OFTA, BOCI Research estimates 2.72
0.97
1.72
1.73
1.74
1.74
1.75
9.64 9.69 9.79
118.3 110.2 132.4
9.91
136.2
9.95
131.0
0.84
1.57
2.42
3.27
4.12
0.63
0.21
1.18
0.39
1.82
0.59
2.47
0.80
3.14
0.98
Sources: OFTA, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
30
20
10
0
(10)
(20)
GDP
Freight
Sources: NBS, BOCI Research estimates 57
58
Passengers
2008E
2.70
0.97
2007
2.70
0.96
(YoY % )
40
2006
2.69
0.96
Key Statistics
Passengers, Freight & GDP YoY Growths
2005
2.68
0.96
2004
Jun
3.74
1.75
1.99
13.7
2003
May
3.74
1.75
1.99
12.6
2002
04/08
01/08
10/07
07/07
04/07
01/07
Mobile numbers ported
Apr
3.74
1.75
1.99
11.6
2001
Fixed numbers ported
10/06
07/06
04/06
01/06
10/05
07/05
04/05
01/05
10/04
07/04
04/04
0.0%
01/04
0.5%
Mar
3.73
1.74
1.99
11.4
2000
1.0%
Feb08
3.72
1.75
1.98
14.0
1999
1.5%
2007 2008E 2009E
3.7 3.8 3.8
business
1.7 1.8 1.8
residential
2.0 2.0 2.0
Ported fixed-line
182.0 150.7 142.8
numbers
Internet connections 2.7 2.8 2.8
narrowband
1.0 1.0 1.0
dialup
residential
1.7 1.8 1.9
broadband
Cellular users
9.6 10.5 11.3
Ported cellular
1,387 1,519 1,512
numbers
IDD traffic (m
9.5 10.3 10.9
minutes)
Outgoing
7.2 8.0 8.6
2.3 2.3 2.3
Incoming
1998
subscribers)
(m
Fixed-line installed
2.0%
Key Statistics
1997
Ratios of Ported Fixed-line & Mobile Nos
05
06
07 Mar08 Apr
May
Jun
Jul Aug Mar
RPK YoY %
Air China
CSA
CEA
13
67
32
15
12
38
14
15
12
1
6
2
0
6
0
(7)
1
(0)
(6)
(4)
(12)
(8) (16)
(4) (19)
(13) (25)
1
6
2
PLF YoY %
Air China
CSA
CEA
74
70
69
76
72
71
77
73
70
78
75
73
77
77
73
71
70
68
73
71
70
73
75
73
78
75
73
71
72
69
Sources: Bloomberg, Company data, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
According to the Ministry of Transport, total passenger volume of national
highway transport in August 2008 grew 10.6% YoY to 1.84bn persons and
passenger turnover volume rose 11.7% YoY to 105.78bn person-kilometres.
Both growth rates for August were 0.9% and 3.3% lower than those for August
2007. The total freight volume of national highway transport grew 14.1% YoY
to 1.54bn tonnes, while freight turnover volume rose 16.5% YoY to 108.96bn
tonne-kilometres. The growth rate of freight volume was 0.9% higher than
that for August 2007, while that of freight turnover volume was 2.8% lower.
Sources: MOC, CEIC 286 276 283 275 281 290
219 213 218 211 216 218
16 23 14 17 24 47
2
2
2
2
2
2
1,151 1,174 1,264
104 100 104 102 103 106
16
17
19
1,136 1,187 1,317
690 794 913
1
1
2
2
2 2
102 105 109 113 108 109
39 45 56 81 77 66
% YoY
30-days moving average
Sources: Bloomberg Baltic Dry Index
24/08/08
74 77
30/05/08
22
60
3/5/2008
21
60
(US$)
12,000
10,000
8,000
6,000
4,000
2,000
0
10/12/07
21
65
Key Statistics
Baltic Dry Index (BDI) Trend
07/09/07
3,142 3,371 3,641
2,379 2,445 2,592
236 331 480
70
Net profit of CCC for 1H08 dropped 19.8% YoY to Rmb2.2bn, despite turnover growth of 29.1% YoY to Rmb75.7bn. The 1H08 net profit included compensation income of Rmb123m from the government (Rmb636m was booked in 1H07), a loss of Rmb337m on derivative instruments and a net foreign exchange loss of Rmb371m. New contract value in 1H08 surged 27.2% YoY to Rmb129.0bn. The value of CCC’s backlog orders rose 12.5% YoY from the level as at end‐2007 to Rmb268.1bn and up 46.5% YoY. We cut our net profit forecasts for CCC by 7.7% to Rmb6.3bn for 2008 and 1.3% to Rmb9.2bn for 2009 after revising our assumptions. We cut our target price for CCC from HK$14.20 to HK$10.00, following our profit forecast revisions. We reaffirm our Outperform rating on CCC, as we believe that the downside for the stock is limited after the recent sell off, as its valuation is much lower than the 10.6x 2009 P/E for its Asian peers.
13/06/07
897
China Communications Construction (1800.HK/HK$7.78) — Outperform 19/03/07
809
Singamas’ 1H08 net profit declined 16.7% YoY to US$13.6m, although turnover edged up 0.8% YoY to US$762m. Box sales volume in 1H08 fell 9.6% YoY to 364,247TEUs (20‐foot equivalent units). The average selling price (ASP) per container was US$2,131/TEU, up 11.4% YoY, following the strengthening of the steel price. We lower our 2008 net profit forecast for Singamas by 34.6% to US$37.3m after cutting our sale volume assumption and factoring in the fair value loss from derivative financial instruments. We reaffirm our Outperform rating on Singamas due to its low valuation of 3.3x 2008 P/E, but cut our target price to HK$2.60 from HK$4.70. 23/12/06
07 08E 09E Mar08 Apr May Jun Jul Aug
1,357 1,548 1,718
119 119 117 115 138 6
722
Rate for very large crude carriers (VLCC) closed at WS107.5 in September, up
34.4% MoM from WS80.0 in August. The year-to-date average closing was
WS107.8.
28/09/06
2007
2008E
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
Total length of expressway (LHS)
Total length of railway (LHS)
Length of expressway - New add (RHS)
Length of rail - New add (RHS)
(person, bn)
Passenger turnover
(person-km, bn)
Freight carried (tonne, bn)
Freight turnover (tonne-km, ibn)
FAI (Rmb bn)
Road
Passenger carried
(person, in bn)
Passenger turnover
(person-km, in bn)
Freight carried (tonne, bn)
Freight turnover (tonne-km, bn)
FAI (Rmb bn)
„
04/07/06
Total Lengths of Railways & Expressways Key Statistics
Railway
Passenger carried
The Baltic Dry Index (BDI) dropped again in September, down 52.8% MoM
from 6,809 points to 3,217 points at end-September. The year-to-date
average closing of the index stands at 8,087.6.
09/04/06
Daqin Railway carried out its production plan smoothly in 1H08. Freight transport volume increased 16.4% YoY to 211.05m tonnes. Peak daily transport volume reached 1.045m tonnes. Coal transport volume increased 18.6% to 185.429m tonnes, representing 21.3% of the national rail transport for coal in 1H08, and much faster than the coal transport growth (11.6%) of the national rail system. The company’s strong top‐line growth in 1H08 was partially due to the snowstorms and urgency of thermal coal transport demands, and in part to the direct connection of more heavy‐haul trains from Hohhot Railway Bureau to Daqin’s dedicated coal transport line. Gross margin remained flat on tight cost control measures. Administrative expenses jumped 42.7% YoY, due to the fact that the company had a management expenses reversal of Rmb 72m in 1H07. The rise in financial expenses was due to other payables related to the purchase of HXD locomotives and freight cars. Taxes went down 15.1% after the statutory tax rate decreased from 33% to 25%. Daqin announced a plan to purchase HXD‐type locomotives under its 400m‐tonne capacity expansion. The 1H08 earnings of Daqin Railway were generally in line with our expectation. We revise down our target price from Rmb20.37 to Rmb14.52, equivalent to 25x 08 EPS. We reaffirm our Outperform rating on the stock. (km)
10,000
8,000
6,000
4,000
2,000
0
„
05/01/06
Daqin Railway (601006.SS/Rmb12.97) — Outperform (km)
HK listed – Marketperform
A shares – Marketperform
Singamas Container (0716.HK/HK$1.37) — Outperform 100,000
80,000
60,000
40,000
20,000
0
TRANSPORT – Marine
07/09/05
„
HK listed – Outperform
A listed – Outperform
09/05/05
TRANSPORT – Land
October 2008 04/01/05
Shenzhen
Shanghai
Dalian
Tianjin
Qingdao
Xiamen
Ningbo
Guangzhou
06
14
20
21
24
22
20
36
41
07
10
25
20
28
24
18
30
40
08E Mar08 Apr May Jun
8
43
5
12 (0)
9
18
9
8
9
24
43
14
26 19
18
23
23
23 19
8
7
5
6
6
13
11
10
19
9
17
22
15
11 16
28
41
28
34 44
Jul Aug
13 2
4 11
29 21
18 9
7
6
14 21
22 17
22 (1)
Sources: MOC, BOCI Research estimates Sources: CEIC, MOC, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
59
60
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
UTILITIES (China)
HK listed – Outperform
October 2008 UTILITIES (Hong Kong)
HK listed – Marketperform
A shares – Outperform
China’s power generation growth decreased to 10.9% during January-August.
The decline started in June with a monthly power output growth of 8.3% YoY,
before decelerating to 8.1% in July and 5.1% in August. This was primarily due
to a slowdown in the economy. We see most serious fallbacks in provinces
with relatively high developed areas and more dependent on export growth.
Furthermore, some industries and areas in north China had to limit
production due to the Olympics. Additionally, as the hot season this year was
relatively moderate and shorter, demand of air-conditioners declined. Still,
power shortages in some local districts were due to closures of some plants
on the scarce supply of high-priced coal.
China Power International (2380.HK/HK$1.57) — Outperform We think the market has excessively discounted CPID for its small scale compared to Datang and Huaneng and low margins relative to Datang and CR Power. However, as the flagship of China Power Investment Group, CPID is boosting its top line, not only with the 3.5GW Wuling hydropower project, but with a number of other hydro and nuclear projects. We expect CPID to post a capacity CAGR of 13.9% for 2007‐10 even without Wuling, which will support a generation CAGR of over 20% during the same period. CPID used to enjoy bigger tariff hikes than peers due to its low base for mine‐mouth plants, but these should see rates similar to those in affluent areas. Furthermore, over 85% of fuel is procured through contracts, for which prices are already close to market levels, which means there is limited room for fuel costs to go up further as long as spot prices stay stable. CPID shares trade at 0.48x leading P/B compared to 1~1.5x last year, and 6.4x EV/EBITDA 2009E. We rate CPID Outperform with a target price of HK$2.64. GD Power (600795.SS/Rmb6.23) — Outperform© Further tariff hike expectations, falling spot coal price and declining financing costs will lead to a gradual recovery in the profitability of the power industry. We believe GD power, which had better resilience amid poor operating conditions in 1H08, will be able to stabilise its earnings growth. We firmly believe in GD Power’s growth potential as its pipeline construction will lead to attributable capacity CAGR of 12% during 2008‐14E. We upgrade our rating for the stock to Outperform with target price of Rmb6.60, based on a two stage DCF method using a WACC of 9.12% and a perpetual growth rate of 1.0%. (%)
(%)
25
70.0
20
65.0
55.0
10
50.0
5
45.0
0
40.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E
Demand growth (LHS)
Supply growth (LHS)
We have upgraded our rating for CLP to Marketperform with a new target price of HK$60.8. The removal of LNG terminal among other things has resulted in lower capex guidance for the new SOC proposal of HK$39.9bn over the next five years. Lower permitted return at home and lacklustre growth driver abroad will put a cap on its bottom line for 2008‐10. However, CLP remains a defensive stock in volatile market. Hong Kong & China Gas (0003.HK/HK$17.40) — NR Hong Kong & China Gas (HK Gas) posted a 1H08 profit of HK$2.5bn, down 54% primarily due to a substantial reduction in non‐recurrent gain. The 1H08 EPS for its principal business came in at HK$0.304s, up 3.1% and the company declared an interim DSP of HK$0.12. HK Gas’ local gas business maintained steady growth as volume sold edged up 2%. HK Gas has raised its tariff by HK$3/GJ effective 1 October 2008 amid a saturated local market and rising operating costs. Its mainland business saw continued growth as 25 new piped city‐gas projects were injected during the period. HK Gas now has upstream to downstream natural gas businesses, water supply and waste water treatment operations. as well as ECO emerging energy initiatives involving 80 projects spreading across 17 municipalities. The gas catalyst be Beijing’s plan to transmit natural gas from Sichuan to eastern and southern China, construction of Phase II of the west‐to‐east pipeline and recent increase in imported LNG. As gas and water prices move towards market‐based levels, HK Gas’ mainland operation will benefit. Policy favours a series of clean energy alternatives that ECO is working on. The company’s 45.6% owned PVG saw 1H08 profit double to HK$101m. During the period, one gas project was commissioned. We think the mainland integrated utilities platform will add a growth element to HK Gas. 1H08
Net profit/loss
Capacity utilisation (RHS)
YoY (%)
CRP
CPI
(Rmb m) (Rmb m) (Rmb m) (HK$ m) (HK$ m)
406
(544)
(506)
1,006
(250)
(78)
(119)
(193)
(29)
(457)
Domestic revenue chg (%)
14
17
60
83
46
EBITDA margin (%)
27
14
14
24
9
Net margin (%)
2
(2)
(4)
8
(6)
Unit fuel cost (Rmb/MWh)
169
227
225
209
193
Coal consumption (g/KWh)
333
325
337
339
337
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
(m MWh)
6
12
10
5
8
4
6
4
3
2
0
Quaterly electricity produced (LHS)
61
62
2
Monthly electricity consumed (RHS)
Sources: Company data, BOCI Research estimates Sources: The Electric Power Industry of China, BOCI Research estimates Sources: Company data, BOCI Research estimates CLP Holdings — Investment Summary
Electricity Supply Demand & Utilisation
(m
Datang Huaneng Huadian
60.0
15
CLP Holdings (0002.HK/HK$61.50) — Marketperform© Key Statistics
Electricity Supply Demand & Utilisation
CLP spearheaded its counterpart Hong Kong Electric (HKE) in renewing its
Scheme of Control (SOC) for a further five years with an average basic tariff
cut of 12% and doubling of fuel clause charge, which resulted in a 3% net
tariff reduction.
„
09/03
12/03
03/04
06/04
09/04
12/04
03/05
06/05
09/05
12/05
03/06
06/06
09/06
12/06
03/07
06/07
09/07
12/07
03/08
06/08
„
Year ended 31 Dec
Revenue
Change (%)
Net profit (HK$m)
Fully diluted EPS (HK$)
Change (%)
P/E (x)
CFPS (HK$)
P/CF (x)
EV/EBITDA (x)
DPS (HK$)
Yield
(%)
2006 2007 2008E 2009E 2010E
45,702 50,789 50,688 53,176 55,072
18.7
11.1
(0.2)
4.9
3.6
9,900 10,608 9,801 8,575 8,935
4.11
4.40
4.07
3.56
3.71
7.1
(7.6) (12.5)
4.2
(13.3)
14.9
13.9
15.0
17.2
16.5
5.84
5.13
5.14
5.40
5.26
10.5
11.9
11.9
11.3
11.6
12.0
10.7
11.4
13.0
12.7
2.41
2.48
2.29
2.21
2.30
3.9
4.1
3.7
3.6
3.8
Sources: Company data, BOCI Research estimates Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
BOCI Stock Universe
China – HK
China – HK
RIC Company
Automotive
2357 AviChina (H)
1114 Brilliance Auto (R)
0203 Denway Motors (R)
0489 Dongfeng Motor Group (H)
0300 Kunming Machine (H/A)
0425 Minth Group (P)
1122 Qingling Motors (H)
2338 Weichai Power (H/A)
Average
Price 1M. YTD. 3M avg. Free float EPS
Y/E (25/09/08) chg chg daily T/O mkt. cap.^ 08E
($) (%) (%) (HK$ m) (HK$ m) (HK$)
(27)
(31)
(12)
(2)
(25)
(16)
(17)
(6)
(17)
(56)
(68)
(51)
(45)
(63)
(67)
(34)
(44)
(54)
10
8
43
57
2
6
1
28
19
Chemicals
0338 Shanghai Petrochem (H/A) Dec
0297 Sinofert HK Hldg (R)
Dec
Average
1.77 (26)
3.90 (13)
(20)
(63)
(46)
(55)
44
103
73
Conglomerates
0291 China Resources (R)
Dec
Average
18.58 (10)
(10)
(45)
(45)
Consumer Products
2020 Anta Sports Products (P)
Dec
3818 China Dongxiang (P)
Dec
0506 China Foods (R)
Dec
0359 China Haisheng Juice (P)
Dec
0904 China Green
April
3398 China Ting (P)
Dec
0828 Dynasty Fine Wines (R)
Dec
1169 Haier Electronics (P)
Dec
1044 Hengan International
Dec
0124 Kingway Brewery (R)
Dec
2319 Mengniu Dairy (P)
Dec
2331 Li Ning (P)
Dec
(P)
0157 Natural Beauty
Dec
1070 TCL Multimedia (R)
Dec
0322 Tingyi (P)
Dec
0168 Tsingtao Brewery (H/A)
Dec
3331 Vinda International
Dec
2698 Weiqiao Textile (H)
Dec
2088 Xiwang Sugar (P)
Dec
8259 Yantai North Andre Juice (H) Dec
Average
4.60
2.42
2.62
0.80
6.01
0.90
1.17
0.80
21.35
0.69
8.44
13.60
1.65
0.15
8.80
14.02
2.32
4.15
2.03
0.46
(8)
(17)
(13)
(30)
(16)
(23)
(2)
(20)
(19)
(19)
(63)
(26)
3
(35)
0
(12)
(5)
(34)
(12)
(17)
(18)
Consumer Services
1880 Belle International (P)
Dec
3308 Golden Eagle
Dec
0493 Gome Electrical (P)
Dec
2006 Jin Jiang Hotel (H)
Dec
0980 Lianhua Supermarket (H)
Dec
1832 Times (P)
Dec
(H)
8277 Wumart Stores
Dec
3389 Xinyu Hengdeli (P)
Dec
Average
5.64
7.00
2.15
1.03
10.96
2.94
6.31
1.68
Energy
0606 China Agri-Industries (R)
Dec
1898 China Coal (H/A)
Dec
(H/A)
2883 China Oilfield Services
Dec
(R)
0883 CNOOC
Dec
0639 Fushan Energy
Dec
Dec
0857 PetroChina (H/A)
(H/A)
1088 Shenhua Energy
Dec
Dec
0386 Sinopec (H/A)
1171 Yanzhou Coal (H/A)
Dec
Average
4.65
9.60
8.55
9.70
2.63
8.63
21.15
8.18
9.50
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
0.90
0.56
2.43
3.00
4.07
3.76
1.00
32.00
October 2008 EPS
09E
(HK$)
P/E P/E EPS gr. EPS gr. Yield Yield
08E 09E 08E
09E 08E 09E
(x) (x)
(%)
(%) (%) (%)
1,505 (0.10) (0.09)
1,254 0.03© 0.05© 16.4 12.3
11,327 0.38
0.41 6.5 5.9
8,530 0.55
0.58 5.5 5.2
458 0.82
1.19 5.0 3.4
2,010 0.61
0.85 6.2 4.4
745 0.08
0.09 12.5 11.0
4,001 5.45
6.40 5.9 5.0
29,829 0.98
1.18 8.3 6.7
59
0
14
9
26
33
17
10
21
4,078 (0.42)
8,469 0.35
12,547 (0.03)
0.10
0.47
0.28
(4.2) 17.3 (263)
11.1 8.4
64
3.4 12.8 (99)
91
91
20,767
20,767
0.92
0.92
1.16
1.16
20.2 16.0
20.2 16.0
(58)
(58)
(55)
(59)
(28)
(54)
(62)
(52)
(39)
(68)
(70)
(53)
(33)
(71)
(30)
(46)
(45)
(63)
(40)
(42)
(51)
31
22
8
1
13
1
1
1
71
1
245
93
1
2
37
32
4
9
1
2
29
3,207
6,580
1,865
321
2,354
548
408
404
9,948
844
8,827
9,757
1,135
303
11,152
9,182
1,216
1,734
701
480
70,966
0.38
0.18
0.19©
0.35
0.55
0.19ª
0.14
0.16
1.09
0.00
0.54ª
0.77
0.13©
0.06
0.00
0.65
0.12©
1.71
0.62
0.09
0.40
0.55
0.24
0.25©
0.36
0.72
0.21ª
0.17
0.20
1.43
0.00
0.60ª
0.96
0.15©
0.07
0.00
0.84
0.19©
1.83
0.73
0.12
0.48
(24)
10
(34)
(18)
(8)
(2)
(21)
(41)
(17)
(52)
(14)
(57)
(68)
4
(21)
(5)
(62)
(29)
96
15
100
5
8
0
9
7
24
24,042 0.29ª 0.35ª 19.7 16.0
3,436 0.31
0.40 22.7 17.5
3,909 0.21
0.27 10.3 7.9
1,684 0.10
0.13 10.2 8.1
3,054 0.66
0.77 16.6 14.2
642 0.20
0.27 14.5 11.1
4,249 0.37
0.45 17.1 13.9
1,273 0.23
0.31 7.4 5.5
2,708 0.31
0.38 13.8 11.0
(5)
(24)
(12)
(13)
(41)
(13)
(17)
(15)
(23)
(18)
(11)
(61)
(52)
(27)
(48)
(38)
(55)
(44)
(39)
(41)
648
649
116
1,570
35
1,607
789
1,279
354
783
12.2
13.3
14.1
2.3
11.0
4.6
8.3
5.0
19.6
15.8
17.5
12.7
2.6
21.6
19.3
2.4
3.3
5.2
10.6
6
6
8.4
32
10.1
0
10.5 44
2.2 131
8.4
19
4.4 (23)
7.1
16
3.9
19
14.9 24
0.0
0
14.0 (30)
14.2 51
11.0 44
2.2 (100)
0.0
0
16.6 39
12.2 33
2.3
(4)
2.8
25
3.7
48
7.4
18
14
69
26
49
34
46
31
25
37
7,074 0.83© 0.79© 5.6 5.9 158
39,459 0.94
1.33 10.2 7.2
61
13,105 1.00
1.31 8.6 6.5
61
124,624 1.37
1.46 7.1 6.7
68
3,969 0.17
0.85 15.3 3.1 (606)
182,084 0.86ª 1.02© 10.0 8.5
(6)
71,935 1.70
2.09 12.4 10.1 35
137,260 0.46
0.73 17.9 11.2 (39)
18,595 2.00
2.57 4.7 3.7 168
598,107 1.04
1.35 10.2 7.0 (11)
Analyst
Target
Rec price
(HK$)
11
33
9
6
44
39
14
18
22
0.0
0.0
6.6
1.9
5.9
1.6
3.4
1.9
2.7
0.0 Wang Yusheng MP 1.28
0.0 Wang Yusheng U 0.76
7.0
Eric Hu
OP 3.30
1.9
Eric Hu
OP 4.65
8.7
SHI Qi
OP 6.30
2.7
Eric Hu
OP 15.30
4.6
Eric Hu
OP 1.90
2.3
Eric Hu
OP 57.50
3.4
(124)
33
(46)
0.0
0.8
0.4
0.0 Lawrence Lau U 2.74
0.8 Ni Xiaoman OP 8.12
0.4
26
26
3.2
3.2
2.7 Ashley Cheung U
2.7
17.3
45
31
34
5
32
6
18
28
31
0
13
24
15
(17)
0
30
58
7
17
40
21
4.0
2.4
2.3
7.1
2.8
11.4
6.8
5.3
3.4
0.0
1.2
2.8
6.7
0.0
2.4
1.8
1.3
12.4
9.2
5.8
4.5
5.9
2.8
3.2
8.5
3.0
11.4
7.8
6.6
4.5
0.0
1.5
3.5
7.3
0.0
0.0
2.8
2.2
13.2
10.7
8.0
5.1
Sarah Xing
Jenny Chan
Jenny Chan
Jenny Chan
Sarah Xing
Frank He
Sarah Xing
Zhao Zongjun
Sarah Xing
Zhao Zongjun
Sarah Xing
Frank He
Jenny Chan
Jenny Chan
OP
OP
OP
OP
OP
OP
U
NR
OP
U
Uª
U
OP
OP
U
MP
OP
U
OP
OP
10.33
4.75
4.90
2.50
12.15
1.31
2.80
28.86
0.96
10.80
18.14
2.33
0.91
1.05
16.00
2.90
8.20
4.20
1.05
23
30
30
26
17
31
23
35
25
2.0
1.5
3.2
4.3
2.1
3.9
3.6
5.4
3.4
2.0
1.9
4.2
5.3
3.1
3.9
3.6
6.8
4.0
Ashley Cheung
Liu Du
Ashley Cheung
Ashley Cheung
Ashley Cheung
Ashley Cheung
Sarah Xing
Uª
OP
OP
OP
OP
OP
OP
OP
8.10
9.10
4.50
5.15
13.20
4.10
9.15
4.65
(5)
41
32
6
397
18
23
61
28
67
3.7 3.5 Lawrence Lau OP 7.96
2.0 2.8 Lawrence Lau OP 18.79
2.3 2.4 Lawrence Lau OP 16.55
4.9 5.2 Lawrence Lau OP 14.53
0.0 13.3 Lawrence Lau OP 6.96
4.5 5.3 Lawrence Lau OP 11.00
2.8 3.4 Lawrence Lau OP 34.08
1.4 2.3 Lawrence Lau MP 7.90
5.3 6.7 Lawrence Lau OP 24.00
3.0 5.0
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
63
RIC Company
Price 1M. YTD. 3M avg. Free float EPS
Y/E (25/09/08) chg chg daily T/O mkt. cap^. 08E
($) (%) (%) (HK$ m) (HK$ m) (HK$)
EPS
09E
(HK$)
P/E P/E EPS gr. EPS gr. Yield Yield
08E 09E 08E 09E 08E 09E
(x) (x) (%) (%) (%) (%)
Financials
3988 Bank of China (H/A)
3328 Bank of Communications (H/A)
0998 China Citic Bank (H/A)
0939 China Construction Bank (H/A)
0165 China Everbright (R)
0966 China Insurance (R)
2628 China Life (H/A)
3968 China Merchant Bank (H/A)
0133 CM China Direct Investments
1398 ICBC (H/A)
2328 PICC (H)
2318 Ping An (H/A)
Average
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
3.11
7.40
3.59
5.28
11.92
13.70
29.30
20.50
14.90
4.68
3.52
52.60
(6)
(18)
(23)
(15)
(8)
(7)
5
(21)
(22)
(12)
(12)
(2)
(12)
(18)
(32)
(27)
(20)
(52)
(36)
(27)
(36)
(58)
(16)
(68)
(37)
(36)
0.40
0.81
0.52
0.54
0.71
0.91
1.06
2.06
0.51
0.58
2.02
0.92
8.5
10.1
7.5
10.1
12.3
19.9
33.4
10.2
10.0
7.0
29.8
14.4
Industrials
0914 Anhui Conch (H/A)
Dec
1800 China Com. Construction (H)
Dec
(H/A)
0390 China Railway
Dec
(H/A)
1186 China Railway Construction
Dec
3323 China National Bldg Material (H) Dec
(P)
3339 CIMH
Dec
3898 CSR Times Electric (H)
Dec
(H/A)
1072 Dongfang Elec. Machinery
Dec
0317 Guangzhou Shipyard Int’l (H/A) Dec
(H/A)
Dec
0350 Jingwei Textile
2689 Nine Dragons Paper (P)
Jun
1893 Sinoma
Dec
2002 Sunshine Paper
Dec
3393 Wasion Meter (P)
Dec
(0P)
0505 Xingye Copper
Dec
Average
34.80
7.78
4.87
9.60
9.53
6.20
5.70
22.00
9.17
0.89
3.16
3.86
2.40
1.80
0.94
(11)
(41)
(18)
(16)
(25)
(6)
(12)
(9)
(32)
(23)
(27)
(22)
(11)
(27)
(18)
(20)
(49)
(62)
(55)
n.a.
(68)
(50)
(50)
(67)
(79)
(74)
(84)
(59)
(65)
(62)
(77)
(64)
268
616
186
164
130
22
14
28
19
1
47
32
0
2
1
136
33,187
31,141
17,842
16,819
8,627
3,173
2,601
3,742
1,444
161
4,053
4,521
568
647
2,750
11,163
Dec
Dec
Dec
Dec
2.90
0.91
0.35
1.87
(12)
(12)
(15)
(18)
(14)
(42)
(46)
(30)
(64)
(45)
0
2
0
5
2
208
741
301
764
504
0.26
0.06
0.00
0.41
0.18
0.27
0.06
0.00
0.42
0.19
11.0 10.8 2,800
16.0 15.7 8
0.0
0
4.5 4.4 (3)
13.5 8.8 936
Metals & Mining
0347 Angang New Steel (H/A)
Dec
2600 CHALCO (H/A)
Dec
(H)
3993 China Molybdenum
Dec
(H/A)
1053 Chongqing Iron & Steel
Dec
(H)
2626 Hunan Non-ferrous Metals
Dec
(H/A)
Dec
0358 Jiangxi Copper
(H)
3330 Lingbao Gold
Dec
(H/A)
0323 Maanshan Iron
Dec
(P)
1862 Sino Gold
Dec
(H)
3833 Xinjing Xinxin Mining
Dec
(H)
2899 Zijin Mining
Dec
Average
7.55
5.40
4.00
1.60
1.010
8.36
2.08
2.67
31.80
2.05
4.25
(29)
(20)
(15)
(28)
(20)
(27)
5
(16)
14
(11)
(16)
(15)
(65)
(66)
(72)
(59)
(79)
(56)
(57)
(48)
(33)
(77)
(65)
(62)
221
362
71
6
12
224
3
98
9
10
204
111
6,719
21,910
4,427
881
1,382
10,109
577
4,653
7,091
1,414
16,755
75,918
1.48
0.46
0.71
0.48
0.06
1.88
0.57
0.57
0.65
0.26
0.28
0.67
1.91
0.57
0.90
0.52
0.07
1.61
0.76
0.59
2.54
0.35
0.35
0.93
5.1 4.0 16
11.8 9.5 (47)
5.7 4.4 35
3.3 3.1 56
17.7 14.8 (44)
4.4 5.2 18
3.7 2.7 72
4.7 4.5 43
48.7 12.5
7.8 5.8 (38)
15.2 12.1 47
11.7 7.1 16
29 9.8 12.7
25 1.6 2.0
27 6.0 7.4
10 10.7 11.4
20 2.3 2.3
(15) 6.7 5.7
34 9.3 13.1
4
7.7 7.7
290 0.0 0.0
35 3.3 4.4
25 3.5 4.7
44 5.5 6.5
2.84 (32) (62)
6.80 (18) (53)
(25) (57)
4
0
2
625 0.60
559 1.26
1,184 0.93
0.57
1.52
1.04
4.7
5.4
5.0
(6)
20
7
Media
1000 Beijing Media Corp (H)
8002 Phoenix TV (P)
0205 SEEC Media (P)
0811 Xinhua Winshare (H)
Average
Pharmaceuticals
0874 Guangzhou Pharm. (H/A)
Dec
8069 Tong Ren Tang Tech. (H)
Dec
Average
64
1,090 236,832
708 101,516
202
15,150
2,187 135,727
108
8,429
37
7,634
2,691 215,323
1,035
54,563
8
1,289
2,312 390,802
106
12,158
998 134,603
957 1,314,025
0.36
0.73
0.48
0.52
0.97
0.69
0.88
2.02
0.47
0.50
1.77
0.85
7.8
9.1
6.8
9.9
16.8
15.1
27.6
9.9
9.1
6.1
26.1
13.1
45
52
83
53
(69)
(37)
(44)
70
71
19
(40)
16
2.39
2.99 14.5 11.7 24
0.48ª 0.71ª 16.3 11.0 2
0.25
0.35 19.9 13.8 89
0.37
0.56 25.6 17.2 14
0.80
1.23 11.9 7.7 63
0.97© 1.13© 6.4 5.5 44
0.43
0.55 13.2 10.4 19
3.62
0.00
6.1 0.0
4
2.97
3.46
3.1 2.6 49
0.48
0.61
1.9 1.4 27
0.72
1.06
4.4 3.0 31
0.24
0.35 16.2 11.0 7
0.52
0.75
4.6 3.2 39
0.34
0.43
5.3 4.2 30
0.22ª 0.25ª 4.3 3.7 (21)
1.23
1.15 11.2 7.7 33
5.0
4.5
4.7
61
16
38
Analyst
Target
Rec price
(HK$)
9
5.1 5.5
Yuan Lin
11
3.5 3.9
Yuan Lin
10 5.4 5.7
Yuan Lin
2
4.5 4.5
Yuan Lin
(27) 1.2 0.9 K.W. Wong
32 0.4 0.6 K.W. Wong
21 1.0 1.4
Yuan Lin
2
2.2 2.2
Yuan Lin
K.W. Wong
10 5.4 5.8
Yuan Lin
16 10.2 11.9 Yuan Lin
14 0.7 0.8
Yuan Lin
9
3.5 3.8
OP
OP
MP
MP
MP
MP
MP
MP
NR
OP
OP
MP
4.00
11.40
5.00
6.36
13.40
16.40
31.20
24.20
25
48
44
49
54
16
26
0
16
29
48
47
43
27
16
32
MP
OP
OP
OP
OP
OP
OP
OP
OP
OP
OP
OP
OP
OP
MP
36.90
10.00
7.80
13.41
15.50
10.15
8.50
40.00
55.70
12.30
14.93
6.21
8.50
6.30
1.07
Allan Ng
Allan Ng
Allan Ng
Allan Ng
U
OP
NR
OP
9.00
1.45
8.10
Belle Chan
Belle Chan
Belle Chan
Belle Chan
Belle Chan
Belle Chan
Belle Chan
Belle Chan
Belle Chan
Belle Chan
Belle Chan
OP
U
OP
OP
U
OP
OP
OP
OP
MP
OP
21.00
4.50
10.40
5.90
0.90
23.00
7.80
5.90
55.00
2.65
8.06
2
2
0
2
1
1.4 1.7 Grace Tang
1.3 1.9 Jimmy Lam
1.2 1.9
Patrick Li
0.9 1.4
Patrick Li
1.9 2.9 Grace Tang
4.6 5.3
Eric Hu
3.4 4.4
SHI Qi
6.2 0.0
6.6 12.4
171.6 221.5
4.7 6.9
1.9 2.7 Lawrence Lau
3.3 4.7
7.6 9.5
SHI Qi
7.3 8.5 Sarah Xing
18.5 23.7
7.9
2.1
0.0
5.5
3.3
5.2
7.4
6.3
7.9
2.2
0.0
6.1
3.4
6.4
8.9
7.7
-
6.20
12.60
54.60
OP 11.10
OP 23.00
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
China – HK
October 2008 HK – HK
RIC Company
Price 1M. YTD. 3M avg. Free float EPS
Y/E (25/09/08) chg chg daily T/O mkt. cap^. 08E
($) (%) (%) (HK$ m) (HK$ m) (HK$)
EPS
09E
(HK$)
Property
3383 Agile Property (P)
2868 Beijing Capital Land (H)
0588 Beijing North Star (H/A)
0832 Central China Real Estate
0688 China Overseas (R)
1109 China Resources Land (R)
2007 Country Garden (P)
3900 Greentown China (H)
0563 Neo-China Group (P)
1207 Shanghai Real Estate (P)
0604 Shenzhen Investment (R)
0272 Shui On Land (P)
3377 Sino-ocean Land (R)
Average
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Apr
Dec
Dec
Dec
Dec
3.43
1.02
1.26
0.68
9.40
7.95
2.48
3.78
4.95
0.59
1.26
3.80
2.40
(38)
(33)
(24)
(55)
(25)
(3)
(31)
(32)
(3)
(19)
(38)
(37)
(33)
(29)
(76)
(78)
(74)
n.a.
(42)
(54)
(73)
(69)
(28)
(70)
(77)
(58)
N/A
(64)
184
6
4
2
557
233
60
15
0
4
26
204
204
115
5,332
981
663
340
35,378
12,167
6,897
2,150
16,538
429
2,130
7,156
3,606
84,828
0.61ª 1.9 5.6 178
0.25 3.9 4.1 (12)
0.00 4.3 0.0 20
0.43© 1.9 1.6 288
1.12 10.1 8.4 42
0.74 17.0 10.8 20
0.41 7.3 6.0 11
0.84ª 3.7 4.5 45
0.74 6.8 6.7 43
1.8 0.0 28
0.20ª 5.7 6.3 (60)
0.54 5.7 7.1
0
0.28 8.6 8.5 (36)
0.51 6.2 5.0 39
Dec
Dec
Mar
Mar
Dec
Dec
Dec
0.20
8.34
2.57
3.90
0.23
58.00
25.65
10
(9)
(37)
(30)
(36)
(14)
(23)
(20)
(48)
(39)
(55)
(44)
(72)
(2)
(15)
(39)
0
25
4
156
14
269
93
80
95 0.08
1,261 3.54
1,075 0.42
19,076 0.40
3,624 (0.01)
50,028 1.54
4,186 1.46
79,346 1.06
Dec
Dec
Dec
Dec
80.35
16.90
3.34
11.32
(15)
(20)
(15)
(20)
(17)
(42)
(28)
(46)
(37)
(38)
3,277 408,280
176 26,190
447 46,224
324 44,692
1,056 525,385
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
3.65
4.13
6.67
1.36
26.60
10.88
1.50
9.53
1.55
3.68
6.00
4.12
3.23
1.37
2.57
4.89
(3)
(17)
13
(14)
(3)
(40)
(9)
(10)
(21)
15
1
(37)
(17)
(15)
(20)
1
(11)
(69)
(43)
(50)
(82)
(45)
(47)
(78)
(54)
(66)
(35)
(29)
(58)
(63)
(60)
(61)
(61)
(56)
139 16,080
4
2,055
76
8,978
34
2,449
189 28,230
198 14,078
48
3,215
63 10,488
133
3,739
28 10,167
44
7,255
0
935
9
2,395
2
549
14
3,290
37
7,008
64 120,911
Technology
3355 ASMC (H)
1211 BYD (H)
0861 Digital China (R)
0992 Lenovo Group (R)
0981 SMIC (P)
0700 Tencent Holdings
0763 ZTE (H/A)
Average
Telecoms
0941 China Mobile (R)
0906 China Netcom (R)
0728 China Telecom (H)
0762 China Unicom (R/A)
Average
Transport
0753 Air China (H/A)
0995 Anhui Expressway (H/A)
0694 Beijing Capital Airport (H)
0670 China Eastern Airlines (H/A)
0144 China Merchants (R)
1138 China Shipping (H/A)
1055 China Southern Airlines (H/A)
1199 COSCO Pacific (R)
2866 CSCL (H)
0525 GS Railway (H/A)
0177 Jiangsu Expressway (H/A)
0357 Meilan Airport (H)
0548 Shenzhen Expressway (H/A)
0716 Singamas (P)
0368 Sinotrans Shipping (R)
0576 Zhejiang Expressway (H)
Average
Utilities
0392 Beijing Enterprises (R)
2380 China Power Int'l (R)
0836 China Resources Power (R)
0991 Datang Int'l (H/A)
0270 Guangdong Investment (R)
1071 Huadian Power (H/A)
0902 Huaneng Power (H/A)
1083 Towngas China (P)
1065 Tianjin Capital (H/A)
2688 Xinao Gas (P)
Average
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
28.70
1.57
17.64
4.75
2.21
2.10
5.65
2.52
1.28
10.00
1
(32)
(5)
1
(22)
(4)
3
(17)
(3)
(16)
(9)
(23)
(57)
(35)
(32)
(50)
(47)
(31)
(39)
(66)
(35)
(42)
1.78 ª
0.26
0.30
0.35©
0.93
0.47
0.34
1.01©
0.73
0.34
0.22ª
0.67
0.28
0.59
P/E P/E EPS gr. EPS gr. Yield Yield
08E 09E 08E 09E 08E 09E
(x) (x) (%) (%) (%) (%)
(66)
(5)
0
23
21
58
20
(16)
1
0
(9)
(20)
2
6
12.3
10.8
5.9
16.2
1.8
1.4
4.1
8.4
3.2
16.4
5.6
4.8
3.3
7.1
6.3
9.8
0.0
16.2
2.2
1.9
4.6
6.9
4.5
0.0
4.8
4.8
3.3
5.1
Analyst
Target
Rec price
(HK$)
MPª 4.80
U 1.71
U 1.90
TIAN Shixin MP 1.04
Manfred Ho OP 13.50
Manfred Ho OP 9.55
OP 4.80
U 5.30
OP 13.20
MP 1.96
Manfred Ho OP 1.26
OP 7.20
Manfred Ho OP 4.40
0.11
3.86
0.57
0.40
0.07
2.01
2.25
1.32
2.5
2.4
6.2
9.8
37.7
17.6
12.7
1.8 15
34
2.2
8
9
4.5 75
36
9.6 183
2
3.3 (50) N.A.
28.9 59
30
11.4 55
54
8.8 49 (119)
0.0
8.5
5.8
4.2
0.0
0.5
1.3
2.9
0.0
9.3
7.8 Ashley Cheung
4.4
Frank He
0.0
0.7
Frank He
1.8
Allan Ng
3.4
OP 1.10
OP 42.90
OP 6.80
OP 6.50
U 0.60
U 52.32
OP 46.00
6.63
1.67
0.34
0.77
2.35
7.23
1.64
0.37
0.69
2.48
12.1
10.1
10.0
14.7
11.7
11.1
10.3
9.0
16.5
11.7
34
5
6
(1)
11
9
(2)
11
(11)
2
3.7
3.9
2.4
2.0
3.0
4.1
3.9
2.2
2.0
3.1
Allan Ng
Allan Ng
Allan Ng
Allan Ng
OP 118.00
U 30.20
OP 4.90
MP 15.00
0.26
0.52
0.30
0.00
1.75
2.13
0.00
1.02
0.00
0.24
0.44
0.28
0.33
0.39
0.70
0.56
0.29
0.52
0.00
0.00
1.79
2.46
0.00
1.14
0.00
0.30
0.50
0.00
0.50
0.62
0.70
0.59
14.1
8.0
22.1
15.2
5.1
9.4
15.4
13.6
14.5
9.7
3.5
3.7
11.2
12.7
7.9
0.0
0.0
14.9
4.4
0.0
8.3
0.0
12.4
11.9
0.0
6.4
2.2
3.7
0.0
5.3
(34)
60
(12)
100
17
36
100
(31)
5
18
(4)
(5)
0
125
0
25
11
0
0
0
2
16
0
12
0
24
15
0
51
60
0
0
12
3.1 0.7
7.7 7.7
0.7 0.0
0.0 0.0
3.0 3.0
7.3 8.5
0.0 0.0
4.9 5.7
0.0 0.0
2.8 3.1
5.7 6.6
2.2 0.0
6.0 8.5
7.4 11.9
9.1 9.1
0.0 0.0
3.7 4.0
Du JianPing
Patrick Li
Jimmy Lam
Jimmy Lam
Jimmy Lam
Patrick Li
Patrick Li
Patrick Li
Jimmy Lam
Jimmy Lam
-
MP 3.72
MP 5.17
U 4.54
U 1.02
U 27.70
OP 27.00
U 1.80
OP 18.20
NR
MP 3.50
MP 6.17
U 3.60
OP 4.69
OP 2.60
OP 6.20
U 4.77
48 13,391 2.27© 2.92© 12.6 9.8 36
29 3.2
16
2,547 (0.01) 0.27 (157) 5.8 (105) N.A. 0.0
142 48,200 0.59
1.07 29.9 16.5 (28) 81 0.6
189 23,967 0.23
0.48 20.8 9.9 (41) 110 1.9
18
4,466 0.00
0.00
0.0
0
0
0.0
31
3,005 (0.09) 0.18 (23.0) 11.5 (135) (300) 0.0
187 33,374 0.06
0.14 99.2 41.3 (91) 140 0.6
3
1,250 0.17
0.27 14.8 9.3 113 59 0.0
3
443 0.24
0.00 5.3 0.0
5
0
7.1
11
4,675 0.71
0.82 14.2 12.2 22
16 1.7
65 135,317 0.42
0.61 1.9 11.6 (23) (267) 1.5
4.1
5.7
1.2
4.1
0.0
2.2
1.4
0.0
0.0
1.7
2.0
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Peter Yao
Peter Yao
Peter Yao
-
OP 33.00
OP 2.64
MP 19.00
OP 5.74
OP 4.16
OP 2.75
MP 5.50
OP 5.54
U 1.80
MP 12.40
65
RIC Company
Price 1M YTD 3M avg. Free float
Y/E (25/09/08) chg. chg. daily T/O mkt. cap.^
(HK$) (%) (%) (HK$ m) (HK$ m)
EPS
08E
(HK$)
EPS
09E
(HK$)
P/E
08E
(x)
0.31
5.20
0.35
0.22
0.29
1.07
0.49
0.39
0.97
0.34
0.20
0.57
0.07
0.81
0.39
5.60
0.42
0.25
0.32
1.24
0.57
0.43
1.22
0.42
0.27
0.72
0.11
0.92
5.8 4.6
9.9 9.2
1.9 1.6
12.6 11.2
11.1 10.1
20.3 17.5
5.8 5.0
2.1 1.9
15.4 12.2
11.2 9.0
12.3 9.1
11.6 9.2
5.9 3.8
9.7 8.0
0
24
25
12
21
23
29
0
18
28
33
21
(42)
15
1388
0330
0420
0709
0393
0494
0590
1382
589
0210
0178
0321
0333
Consumer Products
Embry Form
Esprit
Fountain Set
Giordano
Glorious Sun
Li & Fung
Luk Fook Holdings
Pacific Textiles
Ports Design
Prime Success
Sa Sa
Texwinca
Top Form
Average
Jun
Jun
Aug
Dec
Dec
Dec
Mar
Mar
Dec
Dec
Mar
Mar
Mar
1.81
51.55
0.68
2.79
3.22
21.70
2.83
0.83
14.90
3.77
2.46
6.64
0.42
14
(35)
(15)
(5)
(6)
(11)
(18)
(28)
(32)
(1)
(20)
(5)
(26)
(15)
(71)
(56)
(66)
(25)
(32)
(31)
(61)
(61)
(45)
(35)
(23)
(5)
(53)
(43)
1
454
1
7
1
296
4
1
34
7
7
22
1
64
0341
1212
0052
0035
0027
0045
0999
0200
3813
0069
0242
1836
0573
Consumer Services
Café de Coral
Lifestyle
Fairwood
Far East Consortium
Galaxy Entertainment
HK&S Hotels
I.T
Melco Int'l
Pou Sheng Int’l
Shangri-La Asia
Shun Tak
Stella
Tao Heung
Average
Mar
Dec
Mar
Mar
Dec
Dec
Feb
Dec
Sep
Dec
Dec
Dec
Dec
13.70
8.11
6.25
1.52
2.01
8.42
1.08
2.62
1.02
10.84
2.67
8.53
1.74
(11)
(14)
(25)
(13)
(37)
(22)
(14)
(47)
(40)
(31)
(41)
(33)
(14)
(27)
(29)
(61)
(42)
(66)
(73)
(39)
(63)
(78)
n.a.
(56)
(78)
(51)
(35)
(58)
7
26
2
6
6
8
2
32
9
41
42
9
1
16
0662
0023
2388
1111
0183
2356
0440
0636
0011
0388
0005
0349
1389
2888
0302
0096
Financials
Asia Financial Hldgs
Bank of East Asia
BOC HK (R)
Chong Hing Bank
CIFH (R)
Dah Sing Banking
Dah Sing Financial
Fubon Bank (HK)
Hang Seng Bank
HKEx
HSBC
ICBC (Asia) (R)
Ming An (Holdings)
Standard Chartered
Wing Hang Bank
Wing Lung Bank
Average
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
Dec
2.23
26.00
14.64
16.26
5.35
9.66
40.25
3.29
146.30
98.30
123.60
15.98
0.83
206.40
62.70
138.00
(21)
(16)
(21)
(15)
(11)
(15)
(20)
(22)
(2)
(3)
2
(7)
(23)
3
(29)
(9)
(13)
(48)
(51)
(33)
(12)
10
(47)
(48)
(31)
(9)
(56)
(6)
(24)
(68)
(29)
(46)
45
(27)
0057
0838
2320
0179
2314
0255
0635
0669
0303
1223
0752
0710
0551
Industrials
Cheng Hsong
EVA Precision Ind.
Hop Fung
Johnson Electric
Lee & Man Paper
Lung Kee
Playmates
Techtronic
V-Tech
Symphony
Pico Far East
Varitronix
Yue Yuen
Average
Mar
Mar
Dec
Mar
Mar
Dec
Mar
Dec
Mar
Dec
Oct
Dec
Sep
2.02
0.71
0.85
3.02
5.31
3.25
2.39
7.05
46.00
0.26
0.72
3.15
20.15
(16)
(41)
(35)
(3)
(28)
(12)
(23)
(3)
(8)
(27)
(22)
(20)
4
(18)
(57)
(76)
(70)
(29)
(84)
(8)
(68)
(9)
(18)
(70)
(67)
(45)
(28)
(48)
66
182
54,421
346
4,079
1,534
45,811
738
618
5,099
3,254
1,048
3,701
295
121,127
P/E EPS gr. EPS gr. Yield Yield
09E 08E 09E 08E 09E
(x)
(%)
(%) (%) (%)
26
8
20
13
10
16
16
10
26
24
35
26
57
22
6.6
8.1
26.5
7.9
9.0
4.0
8.8
83.1
3.8
3.0
8.5
5.4
9.6
14.8
Analyst
8.3
8.1
30.9
7.9 Ashley Cheung
9.9
Frank He
4.6
10.2
15.7
Frank He
4.6
Sarah Xing
3.0 Ashley Cheung
11.0
6.5
Frank He
12.0
10.4
Target
Rec price
(HK$)
OP 6.15
U 61.60
U 2.50
OP 3.80
MP 4.28
MP 26.00
OP 8.59
OP 4.20
OP 25.00
OP 5.80
OP 3.98
OP 7.50
OP 1.23
3,808 0.77
4,412 0.74
445 0.80
1,525 0.39
1,989 0.02
5,388 0.68
507 0.16
1,737 0.84
1,593 0.32©
14,263 0.65
2,455 0.33
2,089 1.26
748 0.25
38,122 0.52
0.94
0.78
1.03
0.72
0.26
0.75
0.18
1.40
0.19©
0.84
1.22
1.45
0.33
0.76
17.8
11.0
7.8
3.9
100.5
12.4
6.8
3.1
3.2
16.8
8.1
6.8
7.0
15.8
14.6
10.4
6.1
2.1
7.7
11.2
6.0
1.9
5.4
12.9
2.2
5.9
5.3
3.4
13
22 3.6 4.8
23
5
3.5 3.8
19
29 9.6 9.1
21
84 8.8 16.1
115 (1,200) 0.0 1.5
15
10 2.4 2.7
33
13 10.2 8.3
740
66 6.5 10.7 Ashley Cheung
68
(41) 6.9 4.9
20
30 3.1 4.1
3
270 4.9 18.4
11
15 10.0 11.8 Ashley Cheung
19
32 8.6 11.5
85
(18) 5.4 7.7
OP
OP
OP
MP
OP
U
U
U
OP
U
OP
OP
OP
18.75
19.60
12.34
4.05
10.00
15.00
3.08
13.00
3.85
19.80
13.50
17.50
5.00
1
920 0.10ª
281
19,155 1.08ª
382
52,937 1.39ª
6
1,662 0.66
59
9,336 0.65
10
2,253 1.13
13
4,006 10.80
13
964 0.40
524 106,005 9.16
1,199
99,308 5.10
3,045 1,483,892 12.10
30
6,352 1.41
3
668 0.06
63 290,514 17.59
40
9,504 5.76
59
12,102 3.98
382 2,098,659 4.75
0.21ª
2.07ª
1.55©
1.15
0.90
1.35
25.20
0.40
9.11
4.87
12.49
1.68
0.08
19.08
5.79
3.93
5.98
22.3
24.1
10.5
24.6
8.2
8.5
3.7
8.2
16.0
19.3
10.2
11.3
20.8
11.7
10.9
34.7
14.9
10.6
12.6
9.4
14.1
5.9
7.2
1.6
8.2
16.1
20.2
9.9
9.5
18.9
10.8
10.8
35.1
12.7
(80)
(59)
(5)
(43)
103
31
157
3
(4)
(11)
(4)
(1)
(76)
14
(16)
(33)
4
110
92
12
74
38
19
133
0
(1)
(5)
3
19
33
8
1
(1)
28
1.8
2.8
6.0
3.3
0.0
4.5
4.0
5.8
4.3
4.7
6.2
5.3
1.2
3.7
4.6
1.2
3.8
3.6
5.0
6.4
4.2
1.1
5.4
5.0
5.8
4.5
4.5
6.8
6.3
2.4
4.0
4.6
1.2
4.5
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
K.W. Wong
OP
MP
OP
U
MP
U
U
U
OP
U
U
OP
OP
OP
U
MP
3.70
25.50
19.50
14.40
6.20
12.50
56.80
4.60
176.40
97.40
120.40
25.20
1.44
269.40
96.70
120.20
4.0 6.7
1.9 1.4
2.1 1.6
13.0 11.1
4.2 3.1
4.9 3.9
34.1 26.6
8.5 7.4
6.7 6.4
1.8 1.6
4.5 3.3
3.5 2.9
10.4 9.2
7.4 6.3
2
68
43
0
26
35
17
419
17
27
33
11
15
58
(41)
41
30
17
35
27
29
14
5
14
38
20
13
19
12.4
15.5
14.1
5.1
4.9
10.2
2.1
2.6
10.6
39.2
13.9
14.3
4.3
12.1
5.9
22.5
18.8
5.1
8.1
12.9
2.9
2.8
10.9
43.1
18.1
16.8
4.9
14.0
-
1
1
0
9
32
0
0
16
22
0
1
1
51
10
444
230
137
4,549
1,564
887
3,191
8,488
6,875
166
530
837
12,718
40,615
0.51
0.37
0.40
0.23
1.27
0.66
0.07
0.83
6.83
0.14
0.16
0.89
1.94
1.03
0.30
0.52
0.52
0.27
1.71
0.84
0.09
0.95
7.18
0.16
0.22
1.07
2.19
1.15
U 3.02
OP 4.41
OP 4.82
U 4.00
OP 20.54
OP 7.90
OP 1.31
U 7.50
OP 71.78
OP 1.68
OP 2.44
OP 8.92
OP 29.60
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
HK – HK
China – A
Price
1M YTD 3M avg. Free float EPS
Y/E (25/09/08) chg. chg. daily T/O mkt. cap.^ 08E
(HK$) (%) (%) (HK$ m) (HK$ m) (HK$)
EPS
09E
(HK$)
P/E
08E
(x)
Dec
Dec
Mar
4.00
0.87
1.69
Mar
Mar
Dec
Dec
1.83
0.90
2.58
33.85
(22)
(13)
(2)
(21)
(14)
Property
2778 Champion REIT
0001 Cheung Kong
0041 Great Eagle
0405 GZI REIT
0010 Hang Lung Group
0101 Hang Lung Properties
0012 Henderson Land
0014 Hysan
0683 Kerry Properties
0823 The Link REIT
0017 New World Dev.
0808 Prosperity REIT
0016 SHK Properties
0083 Sino Land
Average
Dec
Dec
Dec
Dec
Jun
Jun
Jun
Dec
Dec
Mar
Jun
Dec
Jun
Jun
3.25
94.85
16.60
2.49
26.00
19.18
38.20
20.30
27.80
16.80
9.70
1.40
88.20
9.80
Technology
0522 ASM Pacific
0148 Kingboard
2878 Solomon Systech
0903 TPV
Average
Dec
Dec
Dec
Dec
RIC Company
Media
0100 Clear Media
1097 i-Cable
0685 Mingpao
(20) (51)
(11) (45)
(6) (11)
P/E EPS gr. EPS gr. Yield Yield
09E 08E 09E 08E 09E
(x)
(%)
(%) (%) (%)
Analyst
Target
Rec price
(HK$)
1
0
0
1,044
580
184
0.45
0.04
0.11
0.34
0.03
0.18
8.9 11.6
22.3 26.4
15.0 9.5
62
(57)
27
(24)
(15)
57
0.0
3.4
4.7
0.0
3.4
5.3
Allan Ng
Allan Ng
Allan Ng
OP
U
OP
6.30
0.88
1.88
(34)
(34)
(5)
(28)
(30)
1
3
0
23
4
1,143
909
2,493
10,082
16,435
0.21
0.08
0.15
3.09
0.59
0.23
0.15
3.45
0.73
8.6 7.8
11.1 0.0
17.1 17.8
10.9 9.8
13.4 11.9
52
5
(16)
6
3
9
0
(4)
11
10
13.1
6.8
5.4
5.8
5.6
8.7
0.0
4.7
7.2
4.2
Allan Ng
Allan Ng
Allan Ng
Allan Ng
OP
U
U
OP
3.90
1.14
2.20
53.00
(16)
(9)
(25)
3
(17)
(18)
(15)
(2)
(21)
(7)
(15)
(7)
(15)
(24)
(13)
(29)
(34)
(43)
(19)
(39)
(46)
(48)
(9)
(56)
(0)
(65)
(9)
(47)
(65)
(36)
26
746
25
4
45
195
192
44
117
159
146
2
837
121
190
3,177 0.15
131,813 9.00
5,487 1.45
1,718 0.21
21,835 5.55
38,956 2.29
38,219 7.54©
12,398 1.14
18,540 1.99
35,902 0.74
22,920 2.00
1,257 0.06
124,404 10.87
22,559 1.61
479,183 3.19
0.16
10.46
1.70
0.24
2.03
1.70
2.86ª
1.17
2.51
0.88
1.29
0.05
5.25
1.12
2.24
21.7
10.5
11.4
11.9
4.7
8.4
5.1
17.8
14.0
22.7
4.9
23.3
8.1
6.1
12.2
20.3
9.1
9.8
10.4
12.8
11.3
13.4
17.4
11.1
19.1
7.5
28.0
16.8
8.8
14.0
(86)
(25)
(78)
(5)
56
44
45
(70)
3
10
73
(77)
28
18
(4)
7
16
17
14
(63)
(25)
(62)
3
26
19
(35)
(17)
(52)
(31)
(13)
10.5 9.5
OP 6.00
2.6 2.7 Manfred Ho OP 124.70
3.5 4.1
OP 34.00
8.4 9.6
OP 3.50
2.7 2.8 Manfred Ho MP 35.30
3.4 3.5 Manfred Ho MP 25.90
2.9 3.1 Manfred Ho MP 41.90
4.2 10.1
OP 25.00
3.5 3.7 Manfred Ho U 34.50
4.3 5.2
MP 21.20
4.3 5.7 Manfred Ho OP 22.80
10.0 9.3
OP 2.00
2.8 3.0 Manfred Ho MP 90.90
4.3 4.6 Manfred Ho U
8.26
4.4 5.2
44.75
28.00
0.19
2.32
(11)
(15)
(23)
(41)
(22)
(22)
(40)
(72)
(59)
(48)
31
39
2
14
22
8,215 3.59
16,425 3.48
443 0.06
2,895 0.63ª
27,978 1.94
3.79
3.89
0.08
0.68ª
2.11
12.5
8.0
3.0
3.7
6.8
11.8
7.2
2.4
3.4
6.2
10
16
33
(2)
14
6
12
25
7
12
6.8 7.2
2.6 2.9
24.9 29.1
9.0 9.7
10.9 12.2
Frank He
OP
U
U
OP
74.20
42.80
0.70
4.50
Telecoms
2332 Hutchison Telecom
Dec
0008 PCCW
Dec
0315 SmarTone
Jun
Average
8.75
3.48
5.53
(12)
(28)
(27)
(22)
(25)
(25)
(24)
(25)
56
76
3
45
12,844
12,665
1,606
27,115
0.21
0.33
0.64
0.39
0.31
0.39
0.71
0.47
42.7 28.2
10.5 8.9
8.7 7.8
20.6 15.0
439
35
33
169
51
18
12
27
1.7
6.3
11.6
6.5
Allan Ng
Allan Ng
Allan Ng
U
OP
OP
11.55
6.10
10.60
Transport
0066 MTR Corporation
Dec
0316 OOIL
Dec
2343 Pacific Basin
Dec
Average
23.60
20.75
6.95
(6)
(20)
(30)
(19)
(18)
(64)
(45)
(42)
147
45
166
119
30,641
4,155
9,945
44,741
1.90
4.38
3.19
3.15
1.67
3.16
2.64
2.49
12.4 14.1
4.7 6.6
2.2 2.6
6.4 7.8
(30)
(86)
41
(25)
(12)
(28)
(17)
(19)
2.0 2.1 Manfred Ho OP
5.3 3.9 Jimmy Lam U
22.4 19.0 Jimmy Lam OP
9.9 8.3
29.70
23.10
18.15
Utilities
0002 CLP
Dec
0003 HK & China Gas
Dec
0006 HK Electric
Dec
Average
61.50
17.40
47.70
(8) 15
(2) (20)
(4)
6
(5)
1
310
156
184
217
15.1
20.0
13.0
16.0
(8)
(48)
5
(17)
(13)
8
(26)
(10)
3.7
2.0
4.4
3.4
60.80
23.50
46.00
0282 Next Media
0018 Oriental Press
0583 SCMP
0511 TVB
Average
October 2008 106,637 4.07ª
57,420 0.87
55,992 3.67
220,049 2.87
3.56ª
0.94
2.72
2.41
17.3
18.5
17.5
17.8
1.7
7.8
12.7
7.4
3.6
2.0
3.9
3.2
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Peter Yao
-
MP
OP
MP
67
Price 1M YTD 3M avg. Free float
(25/09/08) chg. chg. daily T/O mkt. cap.^
(¥) (%) (%)
(¥ m)
(¥ m)
RIC Company
EPS
08E
(¥)
EPS
09E
(¥)
P/E
08E
(x)
P/E EPS gr. EPS gr. Yield Yield
09E 08E 09E 08E 09E
(x)
(%) (%) (%) (%)
Analyst
Rec
Target
price
(¥)
-
OP
91.50
Agriculture
002069 Zhangzidao Fishery
Average
14.27 (19) (70)
(19) (70)
82
82
403
403
2.86
2.86
3.76
3.76
5.0
5.0
3.8
3.8
64
64
31
31
10.0 13.2
10.0 13.2
Automotive
600166 Beiqi Foton Auto
000625 Chongqing Changan (A/B)
000951 CNHTC Jinan Truck
600006 Dongfeng Automobile
000800 FAW Car
000927 FAW Xiali
600660 Fuyao Group Glass Ind.
600418 Jianghuai Auto
000550 Jiangling Motors (A/B)
002048 Ningbo Huaxiang
600303 Shuguang Automotive
600686 Xiamen King Long Motor
000338 Weichai Power (A/H)
000581 Weifu High Tech
600066 Zhengzhou Yutong Bus
Average
5.13 (9) (61)
4.02 (2) (74)
20.65 23 (60)
3.23
1 (63)
6.45
6 (66)
4 (76)
3.51
5.86
7 (67)
3.18 (5) (65)
10.00
9 (52)
4.85 (13) (67)
5.02 (13) (67)
6.39 (10) (58)
37.48 (3) (57)
7 (64)
6.67
11.79 (5) (56)
(0) (63)
22
80
81
22
115
43
86
23
12
65
17
40
107
48
52
54
2,663
2,677
3,115
2,584
4,935
1,120
5,411
2,664
992
1,784
580
2,576
6,639
2,254
4,414
2,960
0.52
0.40
1.61
0.31
0.62
0.13
0.49
1.09
1.03
0.43
0.82
0.79
4.79
0.45
1.28
0.98
0.57
0.72
1.93
0.34
0.75
0.21
0.63
1.39
1.16
0.65
0.91
0.85
5.63
0.59
1.27
1.17
9.9 9.0
10.1 5.6
12.8 10.7
10.4 9.5
10.4 8.6
27.0 16.7
12.0 9.3
16.0 2.3
9.7 8.6
11.3 7.5
6.1 5.5
8.1 7.5
7.8 6.7
14.8 11.3
9.2 9.3
11.7 8.5
8
38
(6)
29
82
(13)
7
18
17
48
52
27
10
10
78
27
10
80
20
10
21
62
29
28
13
51
11
8
18
31
(1)
26
3.1 3.3
0.0 0.0
Eric Hu
1.5 1.9
Eric Hu
3.1 4.6 Wang Yusheng
2.3 3.7 Wang Yusheng
1.7 1.4 Wang Yusheng
4.3 4.1 Wang Yusheng
7.2 10.7
Eric Hu
3.3 3.9
Eric Hu
0.1 0.1 Wang Yusheng
5.0 5.4
2.0 2.2
Eric Hu
1.4 1.7
Eric Hu
3.0 3.4 Wang Yusheng
5.4 5.3
Eric Hu
2.9 3.5
MP
OP
OP
MP
MP
U
MP
OP
OP
MP
OP
OP
OP
MP
OP
13.00
7.20
19.30
6.80
10.12
2.50
7.30
11.50
10.40
6.20
16.40
9.30
67.60
6.60
15.20
Chemicals
600299 Blue Star New Materials
000839 CITIC Guoan
600426 Hualu Hengsheng
000707 Hubei Shuanghuan S & T
000422 Hubei Yihua
600423 Liuzhou Chemical
600409 Sanyou Chemical Industries
000677 Shandong Hailong
600315 Shanghai Jahwa United
600688 Shanghai Petrochem (A/H)
000912 Sichuan Lutianhua
000731 Sichuan Meifeng
600500 Sinochem Int'l
600309 Yantai Wanhua
600871 Yizheng Chemical (A/H)
600352 Zhejiang Longsheng
Average
10.11
9.34
11.44
7.15
12.97
8.67
4.81
3.14
26.63
5.23
8.45
5.40
8.82
12.78
3.58
9.40
(10)
(13)
(19)
(12)
(5)
(30)
(16)
(19)
(21)
(5)
(6)
(16)
(4)
(21)
(7)
(30)
(15)
(73)
(46)
(57)
(47)
(44)
(61)
(60)
(73)
(34)
(69)
(58)
(63)
(60)
(66)
(66)
(46)
(58)
71
626
46
130
88
45
151
52
18
30
121
52
103
92
7
140
111
1,577 13.36
2.21
0.8 4.6
4,080 0.81
1.59 11.5 5.9
2,087 0.92
1.22 12.5 9.4
2,416 0.79
0.98
9.1 7.3
2,019
0.0 0.0
1,347 0.72
1.00 12.0 8.6
2,620 0.76
0.83
6.3 5.8
1,509 0.14
0.22 22.3 14.0
3,497 0.98
1.33 27.1 20.0
3,766 (0.37) 0.09 (14.0) 60.8
1,648
0.0
2,073 0.55
0.78
9.8 6.9
4,538 0.58
0.68 15.3 12.9
8,219 1.18ª 1.45ª 10.8 8.8
716 0.01
0.01 447.5 255.7
5,888 0.65
1.33 14.4 7.1
3,000 1.51
0.98 39.0 26.7
1,186
40
42
286
41
28
(79)
56
(269)
(12)
18
33
(100)
85
97
(83)
96
34
24
39
10
59
35
(123)
41
18
22
(75)
104
14
2.5 2.5 Ni Xiaoman
1.6 2.1 Ni Xiaoman
0.9 1.0 Ni Xiaoman
1.4 4.2 Chen Tian
0.0 0.0 Ni Xiaoman
0.6 0.7 Ni Xiaoman
5.4 10.4 Chen Tian
2.0 3.5 Chen Tian
0.7 0.8 Ni Xiaoman
0.0 0.0 Lawrence Lau
0.0 0.0 Ni Xiaoman
7.4 10.4 Ni Xiaoman
2.0 2.3 Ni Xiaoman
3.9 4.7 Ni Xiaoman
0.0 0.0 Lawrence Lau
2.0 4.0 Ni Xiaoman
1.9 2.9
OP
OP
OP
OP
U
OP
OP
MP
OP
U
OP
MP
OP
OP
U
OP
47.00
55.60
24.40
14.70
4.00
20.00
11.40
3.42
42.50
4.82
18.00
9.90
16.20
26.10
3.71
19.95
Consumer Products
600429 Beijing Sanyuan
000725 BOE Technology
600597 Bright Dairy
600737 COFCO Tunhe
000651 GREE
600202 Harbin Air Conditioning
000848 Hebei Chengde Lolo
600060 Hisense
000016 Konka (A/B)
600519 Kweichow Moutai
600559 Laobaigan Liquor
000568 Luzhou Laojiao
000527 Midea Electric Appliances
600690 Qingdao Haier
600962 SDIC Zhonglu Fruit Juice
600616 Shanghai First Provisions
600839 Sichuan Changhong
600779 Sichuan Swellfun
000100 TCL Corp
600600 Tsingtao Brewery (A/H)
600870 Xiamen Overseas Electronic
000729 Yanjing Brewery
000869 Yantai Changyu
000858 Yibin Wuliangye
600887 Yili Industrial
Average
5.59
3.22
4.87
10.07
17.83
9.40
13.38
6.60
3.22
129.19
6.74
25.45
10.28
15.30
9.51
14.31
3.58
14.53
2.87
15.89
1.74
12.40
50.58
16.75
9.03
42
(23)
(20)
(22)
(2)
(11)
(26)
2
(4)
(10)
(33)
(17)
20
(8)
(34)
(1)
(9)
(28)
(11)
(26)
(26)
(1)
(23)
(12)
(43)
(13)
(38)
(74)
(62)
(47)
(46)
(44)
(53)
(51)
(27)
(44)
(69)
(45)
(58)
(59)
(56)
(48)
(59)
(48)
(51)
(59)
(74)
(41)
(41)
(63)
(63)
(53)
32
32
21
92
84
43
10
29
31
141
30
70
85
79
38
35
54
63
72
65
8
92
19
292
164
67
66
10
71
47
48
52
158
105
19
74
30
29
95
0
35
24
49
38
20
51
18
47
30
34
0
33
77
31
8
22
11
22
31
0
29
0
21
31
35
19
25
68
1,189
7,070
1,167
4,053
9,047
948
1,460
1,345
1,375
52,674
450
18,202
2,601
10,069
1,159
3,561
4,553
4,266
2,854
3,745
264
6,002
4,200
34,278
3,353
7,195
0.08
0.22
0.36
1.73
0.68
4.56
0.31
1.13
1.34
0.87
0.65
0.63
0.80
0.58
0.42
1.80
0.54
0.96
0.98
0.26
0.53
2.25
0.91
6.05
0.55
1.48
1.45
1.06
0.72
0.77
1.05
0.75
0.51
2.36
0.73
1.14
1.33
71.7
0.0
22.1
28.0
10.3
0.0
19.7
0.0
0.0
28.3
21.7
22.5
7.7
17.6
14.6
22.7
0.0
18.2
0.0
27.4
0.0
29.5
28.1
31.0
9.4
17.2
0.0
0.0
18.7
19.0
7.9
0.0
14.7
0.0
0.0
21.4
12.3
17.2
7.1
14.4
13.2
18.6
0.0
13.8
0.0
21.2
0.0
24.3
21.4
22.9
7.9
11.0
0.5
0.0
2.9
1.5
3.9
0.0
3.1
0.0
0.0
1.2
1.5
2.8
5.2
1.7
2.7
2.0
0.0
0.5
0.0
3.7
0.0
1.4
3.2
0.6
3.9
1.7
0.0
0.0
3.1
2.5
5.0
0.0
4.0
0.0
0.0
1.8
2.1
3.7
5.6
2.1
3.0
2.4
0.0
0.6
0.0
4.7
0.0
1.9
4.2
0.7
4.4
2.1
U
2.50
U
1.60
U
5.50
OP 12.60
OP 32.90
OP 10.40
Zhao Zongjun OP 24.50
U
4.29
U
2.94
Zhao Zongjun OP 180.00
Zhao Zongjun OP 15.00
Zhao Zongjun OP 40.00
U 22.78
OP 17.40
Zhao Zongjun MP 17.93
OP 35.00
U
4.50
Zhao Zongjun OP 27.00
U
1.63
Zhao Zongjun MP 22.00
U
3.13
Zhao Zongjun MP 13.00
Zhao Zongjun OP 70.80
Zhao Zongjun OP 22.00
U 24.00
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
China – A
October 2008 China – A
Price
RIC Company
1M YTD 3M avg. Free float
EPS
EPS
P/E
P/E EPS gr. EPS gr. Yield Yield
(25/09/08) chg. chg. daily T/O mkt. cap.^
08E
09E
08E
09E
08E
09E
08E 09E
(x)
(x)
(%)
(%)
(%)
(%)
(17)
9
2.1
2.2
Liu Du
OP
15.40
(¥) (%) (%)
(¥ m)
(¥ m)
(¥)
(¥)
127
1,397
0.44
0.48
30.6 28.0
Target
Analyst
Rec
price
(¥)
Consumer Services
600258 Beijing Capital Tourism
13.46
5 (72)
600828 Chengdu People's Dep Store
11.35 (24) (47)
7
814
0.65
0.83
17.5 13.7
41
28
1.7
2.2
Liu Du
OP
29.05
600693 Fujian Dongbai Group
10.21 (18) (32)
14
2,111
0.43
0.58
23.7 17.6
87
35
0.9
1.7
Liu Du
OP
15.70
000978 Guilin Tourism
11.00
3 (53)
22
1,028
0.39
0.59
28.2 18.6
30
51
0.0
0.5
Tracy Feng
OP
28.34
600754 Jinjiang Development (A/B)
11.90
(6) (41)
32
2,583
0.46
0.51
25.9 23.3
5
11
2.9
3.0
Liu Du
OP
15.16
002033 Lijiang Tourism
13.70
11 (51)
14
705
0.33
0.60
36.1 19.8
(51)
82
0.0
2.2
Liu Du
OP
15.00
600832 Oriental Pearl
8.05
18 (29)
128
4,946
0.12
0.12
70.0 64.9
31
8
0.0
0.2
Liu Du
U
7.25
26.14 (10) (48)
48
5,187
1.09
1.52
24.0 17.2
60
39
1.1
1.5
Liu Du
OP
45.90
(2) (46)
49
1,940
0.12
0.12
70.0 64.9
31
8
0.0
0.2
16.35
600859 Wangfujing Dept ST
Average
Energy
601898 China Coal (A/H)
12.04
10 n.a.
334
18,358
0.70
1.01
17.3 11.9
58
45
1.4
1.9 Lawrence Lau OP
601808 China Oilfield Service (A/H)
15.29 (11) (55)
72
7,698
0.87
1.15
17.5 13.3
61
32
1.1
1.2 Lawrence Lau OP
19.74
600348 Guoyang New Enegry
12.31
234
2,487
1.42
2.10
8.7
5.9
38
48
5.2
7.7
Grace Tang
42.60
000617 Jinan Disesel Engine
1 (54)
OP
8.04 (11) (79)
18
868
0.37
0.47
21.7 17.1
(10)
27
0.6
0.9
Grace Tang
MP
7.40
600123 Lanhua Sci-Tech
18.05 (12) (46)
153
3,388
1.67
1.77
10.8 10.2
18
6
2.7
2.9
Grace Tang
MP
50.00
601699 Lu'an Environmental Energy
17.23 (10) (57)
99
6,544
1.73
2.44
10.0
7.1
13
41
4.0
6.6
Grace Tang
OP
20.76
600583 Offshore Oil Engineering
15.37 (14) (41)
0.0
601857 PetroChina (A/H)
13.01
77
6,087
-
-
(4) (58)
348
52,384
0.73
0.86
601666 Pingdingshan Tian'an Coal
18.04 (11) (61)
227
7,951
1.77
601088 Shenhua Energy
28.07
1 (57)
415
50,248
1.43
600028 Sinopec (A/H)
10.82
7 (54)
541
91,959
0.40
000983 Xishan Coal
12.50 (26) (61)
229
7,121
600188 Yanzhou Coal (A/H)
12.90
(9) (41)
179
900948 Yitai Coal (B)
21.59 (23) (67)
4
(8) (56)
209
(3) (55)
Average
0.0
0
0
0.0
0.0 Lawrence Lau NR
-
17.9 15.1
(3)
19
2.6
3.1 Lawrence Lau OP
16.44
2.72
10.2
6.6
72
54
4.4
6.7
OP
26.60
1.77
19.6 15.8
35
24
2.9
3.5 Lawrence Lau MP
27.24
0.64
27.4 17.0
(38)
62
0.9
1.5 Lawrence Lau OP
11.80
2.48
3.13
5.0
4.0
185
26
6.6
9.8
OP
42.16
4,644
1.64
2.13
7.9
6.1
199
30
3.4
4.3 Lawrence Lau OP
22.94
7,170
2.60
3.20
8.3
6.7
24
23
1.9
2.3
19,065
1.37
1.80
13.0
9.8
47
31
2.7
3.7
102
4,303
0.73
0.97
11.1
8.4 3,550
33
0.8
Grace Tang
Grace Tang
Grace Tang
OP
46.72
1.0
Zhang Jian
OP
29.04
Financials
600816 Anxin Investment & Trust
14.16
601169 Bank of Beijing
8.11 (16) (60)
220
10,100
0.89
1.02
9.1
8.0
41
15
4.3
5.1
Yuan Lin
OP
16.00
601988 Bank of China (A/H)
3.70
1 (44)
137
24,419
0.32
0.35
11.6 10.6
45
9
3.8
4.1
Yuan Lin
OP
4.01
601328 Bank of Communication (A/H)
5.98 (20) (62)
305
93,755
0.66
0.72
9.1
8.3
53
9
3.8
4.2
Yuan Lin
MP
8.50
601009 Bank of Nanjing
9.93
3 (48)
100
6,199
0.77
0.88
12.9 11.3
24
14
3.1
3.5
Yuan Lin
OP
14.00
002142 Bank of Ningbo
7.58
(5) (65)
98
4,662
0.63
0.80
12.0
9.5
47
27
2.8
3.6
Yuan Lin
MP
20.00
601998 China Citic Bank (A/H)
5.09
(5) (50)
89
11,716
0.41
0.45
12.4 11.3
78
10
3.3
3.5
Yuan Lin
MP
5.89
601939 China Construction Bank (A/H)
4.71 (11) (52)
319
44,027
0.46
0.47
10.2 10.0
53
2
4.5
4.5
Yuan Lin
MP
5.79
600036 China Merchants Bank (A/H)
17.60 (24) (56)
839
128,110
1.79
1.83
9.8
9.6
72
2
2.3
2.4
Yuan Lin
MP
22.00
600030 CITIC Securities
23.08
23 (48)
1,951
128,853
1.10
1.37
21.0 16.8
(41)
25
0.9
1.3
Zhang Jian
OP
27.50
600837 Haitong Securities
19.66
17 (28)
372
4,853
0.33
0.33
59.6 59.6
(50)
0
0.5
0.5
Zhang Jian
U
8.25
000562 Hong Yuan Securities
19.80
50 (49)
243
10,618
0.46
0.45
43.0 44.0
(67)
(2)
0.5
0.5
Zhang Jian
U
11.50
601398 ICBC (A/H)
601166 Industrial Bank
600016 Minsheng Bank
000686 Northeast Securities
4.37 (10) (46)
499
58,387
0.41
0.45
10.7
9.7
71
10
5.0
5.5
Yuan Lin
OP
5.90
16.27 (26) (69)
716
63,453
2.58
2.68
6.3
6.1
47
4
4.4
4.5
Yuan Lin
OP
29.00
5.17 (12) (55)
536
44,765
0.50
0.47
10.3 11.0
47
(6)
3.3
2.7
Yuan Lin
U
5.00
121
2,925
0.89
0.92
21.8 21.0
(54)
3
1.0
1.0
Zhang Jian
OP
19.58
19.36
23 (62)
600000 Pudong Bank
15.68 (26) (61)
750
69,236
2.12
2.43
7.4
6.5
116
15
4.1
4.7
Yuan Lin
MP
22.70
601318 Ping An Insurance (A/H)
36.26 (17) (66)
1,556
141,155
1.35
1.86
26.9 19.5
(35)
38
0.9
1.0
Yuan Lin
MP
49.60
000001 Shenzhen Development
15.31 (24) (60)
274
26,680
1.96
1.79
7.8
8.6
45
(9)
2.4
1.9
Yuan Lin
MP
19.00
(4) (55)
486
46,222
0.97
1.07
16.5 15.2
213
10
2.7
2.9
Average
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
69
RIC Company
Industrials
600585 Anhui Conch (A/H)
600761 Anhui Heli
600973 Baosheng Sci & Tech
601390 China Railway (A/H)
601186 China Railway Cons. (A/H)
600970 China Sinoma
600150 China State Shipbuilding
600875 Dongfang Electric Mach. (A/H)
002164 Donly Transimission
601002 Gem-Year Industrial
600685 Guangzhou Shipyard Int’l (A/H)
000528 Guangxi Liugong Machinery
002175 Guanglu Measuring Instru’t
600312 Henan Pinggao Electric
002204 Heavy Ind. Steel Casting
600308 Huatai Paper
002097 Hunan Sunward Intelligent
600072 Jiangnan Heavy Industry Co
000666 Jingwei Textile Mach. (A/H)
600495 Jinxi Axle
600806 Kunming Machine (A/H)
002147 Maanshan Fangyuan
Slewing Ring
600406 Nari Technology Deve.
600425 Qingsong Building Materials
and Chemicals
600031 Sany Heavy Industry
600517 Shanghai Zhixin Electric
000680 Shantui Construction Mach.
000837 Shanxi Qinchuan Machinery
000410 Shengyang Machine Tools
002028 Sieyuan Electric
000401 Tangshan Jidong Cement
600582 Tian Di Sci. & Tech.
002122 Tianma Bearing
000877 Tianshan Cement
600169 Taiyuan Heavy Industry
600458 Times New Materials
600089 Xinjinag Tebian Electric
Apparatus Stock
000425 Xugong Science & Tech.
000157 Zoomlion Heavy Industry
Average
Media
600037 Beijing Gehua CATV
600825 Xinhua Media
Average
Metals & Mining
000898 Angang New Steel (A/H)
600019 Baosteel
601600 CHALCO (A/H)
600357 Chengde Xinxin Vanadium
601005 Chongqing Iron & Steel (A/H)
000831 Guanlu
600362 Jiangxi Copper (A/H)
601958 Jinduicheng Molybdenum
600808 Maanshan Iron (A/H)
600282 Nanjing Steel
600219 Nanshan Aluminium
000629 Panzhihua Steel
600547 Shandong Gold
000709 Tangshan Iron & Steel
000630 Tongling Nonferrous Matel
000612 Wanfang Aluminium
600005 Wuhan Steel
600888 Xinjiang Joinworld
000807 Yunnan Aluminium
000960 Yunnan Tin
601899 Zijin Mining
Average
70
Price 1M YTD 3M avg. Free float
(25/09/08) chg. chg. daily T/O mkt. cap.^
(¥) (%) (%)
(¥ m)
(¥ m)
25.36
10.40
11.23
5.76
9.61
44.60
51.69
26.17
7.88
4.28
15.96
15.39
7.14
9.01
12.65
8.79
11.26
9.66
3.42
15.18
18.75
11.00
EPS
09E
(¥)
P/E EPS gr. EPS gr. Yield Yield
09E 08E 09E 08E 09E
(x) (%) (%) (%) (%)
12.1
11.8
7.2
26.9
28.9
16.5
8.6
8.2
16.8
23.8
6.0
10.6
5.3
10.0
22.2
7.7
11.5
34.5
8.3
22.7
26.0
19.3
9.7
10.3
5.4
18.8
19.4
12.2
5.8
0.0
9.6
12.6
5.1
7.5
3.5
7.5
11.7
6.1
7.7
32.2
6.4
17.1
18.0
10.8
24
(2)
54
44
(15)
79
9
4
52
100
46
21
60
43
16
26
75
33
27
14
26
63
25
15
33
43
49
36
47
74
0
16
41
0
33
89
26
50
7
29
33
44
79
1.7 2.1 Grace Tang MP 33.60
2.6 2.9
Eric Hu
MP 11.15
4.2 7.5
NR
0.9 1.3
Patrick Li
OP 6.72
0.9 1.3
Patrick Li
OP 11.89
1.6 2.2 Grace Tang OP 62.10
2.3 3.4
Xu Minle OP 60.23
4.6 0.0
OP 50.00
0.9 1.5
SHI Qi
OP 13.12
0.9 1.6
SHI Qi
MP 11.90
3.3 5.8
OP 57.05
3.6 5.0
Eric Hu
OP 26.60
4.2 6.7
Eric Hu
OP 36.00
3.3 4.4
NR
0.6 1.3
SHI Qi
OP 21.60
3.2 34.1 Ni Xiaoman OP 22.80
3.5 5.2
SHI Qi
OP 32.34
0.6 0.6
OP 28.00
3.5 4.7
OP 12.30
1.3 1.8
SHI Qi
OP 17.8
1.1 1.7
SHI Qi
OP 12.93
2.1 3.7
SHI Qi
MP 15.30
Analyst
Rec
Target
price
(¥)
182
34
23
287
385
18
171
96
11
33
90
35
4
21
21
42
42
38
26
26
17
14
16.78 (14) (46)
6.43
4 (32)
16
29
1,309
1,471
0.74
0.47
0.96
0.81
22.7
13.7
17.5
7.9
28
52
30
72
1.3
3.6
Grace Tang
MP
OP
21.00
7.99
(57)
(44)
(51)
(40)
(68)
(35)
(65)
(42)
(46)
(37)
(48)
(55)
(35)
147
19
61
19
36
23
52
16
22
14
15
21
133
24,180
2,252
5,408
1,694
1,987
3,868
4,917
3,394
2,744
949
3,572
826
13,968
1.26
1.59
0.90
0.37
0.29
1.23
0.50
1.67
1.90
0.55
1.21
0.32
0.70
1.81
2.76
1.21
0.51
0.40
1.43
0.91
2.29
3.02
0.90
1.72
0.57
1.07
12.9
9.9
10.0
18.0
22.9
19.4
14.4
8.9
21.2
13.0
15.6
23.9
23.3
9.0
5.7
7.5
13.0
16.6
16.7
7.9
6.5
13.4
8.0
10.9
13.4
15.2
12
92
41
76
107
19
39
39
102
10
59
88
49
44
0
34
38
38
16
82
37
59
64
42
78
53
1.5 2.2
SHI Qi
2.0 5.3
2.0 2.7
SHI Qi
0.9 1.2
Eric Hu
0.6 0.9
Eric Hu
0.8 0.8
Eric Hu
5.6 10.4 Grace Tang
2.2 3.1
SHI Qi
0.9 1.5
SHI Qi
3.1 5.0 Grace Tang
1.0 1.4
0.8 1.4
SHI Qi
0.2 0.3
-
OP
OP
OP
OP
MP
OP
OP
OP
OP
OP
OP
OP
OP
20.16
64.00
18.00
7.60
6.40
29.50
10.00
23.20
60.40
9.35
24.20
11.4
23.00
2 (31)
26 (52)
(8) (55)
33
163
60
4,362
11,628
5,147
1.16
1.22
1.17
1.46
1.78
1.58
13.3
11.4
15.9
10.5 2,220
7.8
39
10.9 99
26
46
40
1.5
0.4
2.0
1.9
0.6
3.7
SHI Qi
Eric Hu
OP
OP
21.90
26.70
10.80
4 (66)
12.80 (12) (62)
4 (66)
173
19
173
5,999
2,016
5,999
0.38
0.80
0.59
0.32
1.01
0.67
28.3
16.0
22.2
33.9
12.6
23.3
11
347
179
(16)
26
5
0.0
2.0
1.0
0.5
2.3
1.4
Allan Ng
Liu Du
U
OP
12.50
27.30
8.71
7.15
9.27
5.50
3.69
4.26
15.18
11.53
4.46
3.91
7.31
11.06
38.23
4.55
8.16
11.17
7.40
8.55
5.31
14.47
4.59
221
467
239
56
24
69
143
350
80
49
63
294
219
183
66
123
387
14
51
290
341
163
7,751
33,807
13,289
3,128
1,322
1,836
4,314
6,201
4,577
3,162
3,664
20,697
5,988
8,084
4,540
3,217
23,200
1,144
2,383
3,737
6,928
8,016
1.29
0.90
0.39
0.59
0.43
0.18
1.64
1.32
0.50
0.57
0.61
0.31
2.67
0.78
0.91
1.67
1.10
0.69
0.42
1.46
0.28
0.89
1.66
1.00
0.50
0.75
0.46
0.39
1.40
1.27
0.52
0.64
0.69
0.50
2.80
0.92
0.95
1.73
1.22
1.00
0.45
1.92
0.35
1.01
6.8
7.9
23.8
9.4
8.6
23.7
9.3
8.7
8.9
6.9
7.3
36.1
14.3
5.8
9.0
6.7
6.7
12.4
12.6
3.1
16.4
11.6
5.2
7.1
18.5
7.4
8.0
10.9
10.8
9.1
8.5
6.1
6.5
22.2
13.7
4.9
8.6
6.5
6.1
8.6
11.8
2.4
13.1
9.3
10
24
(49)
32
59
(69)
17
(6)
44
(48)
(30)
18
345
32
14
18
32
15
(14)
30
47
25
29
11
28
28
7
117
(15)
(4)
4
12
13
63
5
18
4
4
11
45
7
32
25
21
7.5
5.0
0.8
5.5
4.1
0.5
3.2
2.9
4.0
6.6
1.4
1.2
3.8
7.7
3.3
4.5
7.4
0.8
5.5
1.0
3.3
3.8
9.6
5.6
1.0
7.3
4.3
0.9
2.8
2.8
4.0
7.4
1.6
2.3
4.0
9.0
3.6
4.7
8.0
1.2
5.8
1.3
4.4
4.4
Belle Chan
Belle Chan
Belle Chan
Xu Minle
Belle Chan
Le Yukun
Belle Chan
Le Yukun
Belle Chan
Xu Minle
Le Yukun
Xu Minle
Le Yukun
Le Yukun
Le Yukun
Le Yukun
Le Yukun
Le Yukun
Le Yukun
Le Yukun
Belle Chan
OP
OP
U
OP
OP
OP
OP
OP
OP
OP
OP
OP
OP
OP
MP
OP
OP
OP
U
MP
OP
26.00
9.00
5.90
8.95
8.50
5.90
35.50
26.80
6.90
6.84
9.10
9.59
80.00
5.40
9.10
25.00
9.20
17.30
7.60
25.60
9.30
15.39
13.90
2
(28)
0
17
(10)
(10)
(7)
(13)
(21)
(12)
(4)
(8)
0
(11)
7
(6)
3
(9)
(17)
(7)
(11)
5
(2)
(4)
(1)
8
(1)
(9)
(15)
(3)
(15)
(13)
(12)
(8)
(5)
(71)
(59)
(76)
(71)
(58)
(75)
(70)
n.a.
(56)
(66)
(73)
(41)
(55)
(71)
(68)
(75)
(62)
(68)
(75)
(74)
n.a.
(66)
24,184 2.10
2.62
2,450 0.88
1.01
964 1.57
2.09
26,991 0.21
0.31
23,595 0.33
0.50
3,522 2.70
3.66
7,594 6.02© 8.85©
1,990 3.18
355 0.47
0.82
884 0.18
0.34
2,565 2.67
3.11
4,431 1.45
2.04
104 1.36
2.02
1,398 0.90
1.20
677 0.57
1.08
2,866 1.14
1.43
746 0.98
1.47
2,101 0.28
0.30
777 0.41
0.53
1,001 0.67
0.89
2,478 0.72
1.04
538 0.57
1.02
P/E
08E
(x)
(64)
(72)
(69)
(50)
n.a.
(25)
(79)
(71)
(56)
(58)
(80)
(63)
(70)
(45)
n.a.
(69)
(80)
(77)
(67)
(39)
(59)
(51)
16.25
15.80
9.02
6.65
6.63
23.84
7.20
14.81
40.35
7.16
18.83
7.64
16.28
(9)
(5)
(10)
10
1
(19)
(15)
(3)
(20)
(9)
(11)
(10)
(12)
(8)
(18)
(18)
(10)
(5)
(10)
(1)
(9)
(21)
EPS
08E
(¥)
2.3
6.2
Huaqiao in the Middle Kingdom
THIS DOCUMENT MAY NOT BE DISTRIBUTED IN OR INTO THE PRC.
Octoeber 2008
China – A
RIC Company
Pharmaceuticals
600085 Beijing Tongrentang
000423 Dong-E E-Jiao
600332 Guangzhou Pharm.l (A/H)
000963 Huadong Medicine
600276 Jiangsu Hengrui Medicine
600535 Tianjin Tasly Pharm.
600351 Yabao Pharmaceuticals
000538 Yunnan Baiyao
Average
Germany
Price 1M YTD 3M avg. Free float
(25/09/08) chg. chg. daily T/O mkt. cap.^
(¥) (%) (%)
(¥ m)
(¥ m)
EPS
08E
(¥)
EPS
09E
(¥)
P/E
08E
(x)
P/E EPS gr. EPS gr. Yield Yield
09E 08E 09E 08E 09E
(x) (%) (%) (%) (%)
Analyst
Rec
Target
price
(¥)
14.31
0 (51)
14.37 (13) (56)
6.69 (22) (61)
9.54
9 (42)
34.30 (4) (28)
11.09 (2) (50)
9.81 (18) (43)
29.58 (3) (15)
(7) (43)
40
129
14
12
25
21
19
56
39
2,795
5,271
705
2,145
8,574
2,381
1,177
5,584
3,579
0.72
0.60
0.53
0.46
1.08
0.53
0.57
0.83
0.67
0.88
0.65
0.51
0.79
1.38
0.66
0.80
1.11
0.85
19.9
24.0
12.6
20.7
31.8
20.9
17.2
35.6
22.8
16.3
22.1
13.1
12.1
24.9
16.8
12.3
26.6
18.0
22
50
56
15
13
47
68
34
38
22
8
(4)
72
28
25
40
34
28
2.1
2.5
2.1
2.4
1.1
2.1
0.0
0.8
1.6
2.6
3.4
2.4
4.1
Eric Hu
1.4
2.6
2.4 He Changming
1.1
2.5
MP
OP
OP
OP
OP
MP
OP
OP
28.70
35.50
19.60
13.50
61.50
21.20
20.00
41.50
6.40
5.92
12.12
5.94
8.59
4.59
8.15
5.50
9.17
13.51
8.85
4.99
(70)
(67)
(69)
(67)
(59)
(74)
(47)
(73)
(46)
(58)
(65)
(62)
(63)
8
141
80
718
37
20
119
286
77
280
113
54
161
714
4,109
5,759
56,167
1,722
1,831
14,963
6,553
5,641
14,244
10,225
2,308
10,353
0.72
0.52
1.01
0.65
0.37
1.09
0.40
0.94
0.79
1.18
0.46
0.59
0.73
0.88
0.57
1.38
0.80
0.46
1.42
0.56
1.18
1.11
1.97
0.74
1.11
1.02
8.9
11.4
12.0
9.1
16.1
4.2
20.4
5.9
11.6
11.4
19.2
8.5
11.6
7.3
10.4
8.8
7.4
12.9
3.2
14.6
4.7
8.3
6.9
12.0
4.5
8.4
6
(7)
11
81
28
195
5
62
39
93
59
16
49
22
10
37
23
24
30
40
26
41
67
61
88
39
4.5
1.7
0.6
1.9
2.2
1.1
2.2
0.7
0.8
3.0
2.0
3.6
2.0
5.5
1.9
0.8
2.4
2.7
1.5
2.9
0.9
1.1
5.2
3.4
6.6
2.9
Zhou Lu
TIAN Shixin
TIAN Shixin
TIAN Shixin
Zhou Lu
Zhou Lu
Zhou Lu
TIAN Shixin
TIAN Shixin
TIAN Shixin
TIAN Shixin
Zhou Lu
MP
MP
MP
OP
OP
MP
OP
OP
OP
OP
OP
U
8.81
6.70
17.10
12.10
11.40
7.49
12.34
11.71
13.90
19.77
13.50
5.99
5.07 (10) (68)
4.29 (24) (68)
28.70 (11) (37)
(15) (58)
31
30
150
70
1,931
958
14,052
5,647
0.79
0.37
1.27
0.81
0.41
2.01
1.21
6.4
11.6
22.5
13.5
0.0
10.5
14.3
8.3
23
6
55
28
0
11
58
23
5.9
2.6
1.0
3.2
0.0
2.8
1.4
1.4
Allan Ng
OP
U
OP
10.05
12.95
47.00
7 (55)
7 (55)
504
504
44,889
44,889
0.24
0.24
0.23
0.23
23.0
23.0
23.5
23.5
(4)
(4)
(2)
(2)
1.5
1.5
1.9
1.9
Allan Ng
MP
5.90
Transport
601111 Air China (A/H)
600012 Anhui Expressway (A/H)
600026 China Shipping (A/H)
000039 CIMC (A/B)
601006 Daqin Railway
600033 Fujian Expressway
601333 GS Railway(A/H)
600004 Guangzhou Baiyun Airport
600035 Hubei Chutian Expressway
600377 Jiangsu Expressway (A/H)
600269 Jiangxi Ganyue Expressway
600350 Shandong Expressway
600009 Shanghai Airport
600018 Shanghai Port
000089 Shenzhen Airport
600548 Shenzhen Expressway(A/H)
600125 China Railway Tielong
000900 Xiandai Investment
600320 Zhenhua Port Machinery
Average
5.87 (4) (79)
4.46 (6) (52)
12.20 (19) (67)
8.49 (2) (67)
12.97 (0) (49)
5.86
7 (38)
3.98
3 (58)
12.33
3 (41)
4.29 (4) (49)
5.57
0 (47)
10.02
8 (45)
5.72 13 (43)
17.19 (1) (54)
4.70
8 (48)
6.95
1 (45)
6.18 21 (51)
6.00 10 (45)
15.60
5 (54)
10.87 (1) (57)
2 (51)
296
15
122
54
161
40
66
39
16
14
39
21
126
45
38
34
47
44
105
57
7,566
2,812
6,647
10,396
33,746
1,676
7,246
6,126
1,663
2,245
6,788
3,810
18,799
2,374
4,538
1,348
4,200
4,389
12,201
7,278
0.22
0.47
1.88
0.94
1.56
0.71
0.21
0.46
0.35
0.38
0.90
0.45
0.59
0.86
0.27
0.33
0.34
1.79
0.75
0.73
0.25
0.47
2.17
1.02
0.16
0.26
0.62
0.41
0.44
0.94
0.54
0.75
0.39
0.46
0.40
1.99
1.12
0.76
26.2
9.6
6.5
9.0
8.3
0.0
19.0
26.7
12.2
14.6
11.1
12.8
29.1
5.5
26.2
19.0
17.8
8.7
14.5
13.9
23.6
9.5
5.6
8.3
83.1
0.0
15.3
20.0
10.5
12.6
10.7
10.7
22.9
0.0
17.7
13.5
15.2
7.8
9.7
15.2
(31)
49
36
(21)
121
26
5
28
21
20
(4)
27
(33)
19
(20)
5
1
21
21
15
11
1.7 0.4
0
6.3 6.3
15 5.7 6.6
8
4.7 5.1
(90) 2.9 3.3
0
0.0 0.0
24 2.3 2.5
33 1.9 2.5
16 4.1 4.8
15 5.4 6.2
4
2.2 2.2
20 3.5 4.2
27 0.5 0.7
10.0 0.0
48 2.2 3.2
40 2.8 3.9
17 0.0 0.0
12 6.7 7.9
49 1.8 2.8
14 3.5 3.5
Utilities
000690 Baolihua New Energy
600008 Beijing Capital
601991 Datang Intl Power (A/H)
600795 GD Power Dev
000539 Guangdong Electric
600027 Huadian Power (A/H)
600011 Huaneng Power(A/H)
600323 Nanhai Development
600886 SDIC Huajing Power
600649 Shanghai Water
600642 Shenergy
000027 Shenzhen Energy
600874 Tianjin Capital (A/H)
000767 Zhangze Electric
Average
6.38
2 (60)
5.41
1 (74)
7.29
1 (65)
6.23 21 (29)
5.63 (3) (61)
3.80 (5) (60)
7.11 16 (52)
3 (28)
8.66
8.69 19 (48)
7.90 (12) (61)
6.90
1 (61)
8.08
5 (67)
5.02 (13) (49)
3.57 (9) (71)
2 (56)
88
78
35
195
21
29
66
16
63
100
72
40
100
18
66
4,991 0.50
4,166 0.34
36,783 0.17
21,382 0.20
2,246 0.37
4,336 (0.07)
41,998 0.05
1,158
5,919 0.74
4,465 0.23
5,568 0.66
3,885 0.72
801 0.21
848
9,896 0.34
0.56
0.36
0.24
0.40
0.14
0.11
0.80
0.75
0.42
12.8
15.9
42.9
31.2
15.2
(54.3)
142.2
0.0
11.7
34.3
10.5
11.2
23.9
0.0
21.3
11.4 72
12 0.6
0.0
13
0
3.7
20.3 (41) 112 1.0
26.0 (39)
20 0.5
14.1 12
8
3.4
27.1 (450) (300) 0.0
64.6 (90) 120 0.4
0.0
0
0
0.0
10.9 17
8
2.4
0.0
(0)
0
1.1
0.0
6
0
4.8
10.8
4
4
4.3
0.0
5
0
1.6
0.0
0
0
0.0
13.2 (35) (1) 1.7
Property
000043 CATIC Real Estate
600675 China Enterprise
000024 China Merchants Prop
000002 China Vanke (A/B)
600007 China World Trade Centre
600067 Citichamp Dartong
000402 Financial Street
600383 Gemdale
600325 Huafa Indsutrial Share
600048 Poly Real Estate Group
000069 Overseas Chinese Town
000006 Shenzhen Zhenye Group
Average
Technology
600183 Shengyi Sci-Tech
000970 Zhong Ke San Huan High-Tech
000063 ZTE (A/H)
Average
Telecoms
600050 China Unicom (A/R)
Average
5.43
(17)
(14)
(11)
(13)
(0)
(35)
1
(21)
(16)
(1)
(8)
(21)
(13)
October 2008 Price 1M YTD 3M avg. Free float
(25/09/08) chg. chg. daily T/O mkt. cap.^
(€) (%) (%)
(¥ m)
(¥ m)
RIC Company
Agriculture
5AB Asian Bamboo
EPS
08E
(¥)
EPS
09E
(¥)
P/E
08E
(x)
P/E EPS gr. EPS gr. Yield Yield
09E 08E 09E 08E 09E
(x) (%) (%) (%) (%)
Analyst
Rec
Target
price
(€)
8.61 (12) (42)
(12) (42)
0
0
47
47
1.48
1.48
1.93
1.93
5.8
5.8
4.5
4.5
179
179
30
30
1.2
1.2
2.3
2.3
-
OP
17.08
Average
Transport
ZEF Zhong De Waste Tech.
Average
20.99 (16) (36)
(16) (36)
0
0
87
87
2.11
2.11
2.56
2.56
9.9
9.9
8.2
8.2
27
27
21
21
0.0
0.0
0.0
0.0
Frank Lai
OP
35.00
Price 1M YTD 3M avg. Free float
(05/09/08) chg. chg. daily T/O mkt. cap.^
(S$) (%) (%)
(¥ m)
(¥ m)
EPS
08E
(¥)
EPS
09E
(¥)
P/E
08E
(x)
P/E EPS gr. EPS gr. Yield Yield
09E 08E 09E 08E 09E
(x) (%) (%) (%) (%)
Analyst
Rec
Target
price
(S$)
Singapore
RIC Company
Industrial
Midas Midas Holdings
0.44 (17) (71)
(17) (71)
2
2
187
187
0.04
0.04
0.05
0.05
10.4
10.4
8.1
8.1
12
12
28
28
5.2
5.2
6.3
6.3
Frank Lai
OP
1.46
Average
1.00 (39) (70)
(39) (70)
7
7
533
533
0.14
0.14
0.16
0.16
7.2
7.2
6.2
6.2
14
14
17
17
1.5
1.5
1.7
1.7
Frank Lai
OP
2.65
Average
Property
YLLG Yanlord Land
NB: Outperform (OP) = ≥+10% compared with the relevant benchmark index over a 6-month period; Underperform (U) = ≤-10% compared with the relevant benchmark index over a
6-month period; Marketperform (MP) = ≤+10% and ≥-10% compared with the relevant benchmark index over a 6-month period; Not Rated (NR) ^: Represents total figures, while others are averages
 Initiating coverage, Arrows (©ª) indicate a change in rating or a change in earnings forecast of at least 5% during the past month; earnings forecasts for NR stocks
are I/B/E/S estimates
Sources: Reuters, BOCI Research estimates
Du JianPing
Patrick Li
Jimmy Lam
Jimmy Lam
Patrick Li
Patrick Li
Patrick Li
Du JianPing
Huiming Liu
Patrick Li
Patrick Li
Patrick Li
Du JianPing
Du JianPing
Patrick Li
Patrick Li
Patrick Li
Jimmy Lam
MP
MP
OP
U
OP
OP
MP
OP
OP
MP
OP
OP
OP
U
OP
MP
MP
OP
OP
5.31
5.12
23.90
8.50
14.52
8.29
5.40
13.56
5.70
5.73
12.62
6.69
18.83
16.50
8.62
5.45
6.04
19.64
17.60
YU Nian
Yu Nian
-
OP
MP
MP
MP
U
U
MP
OP
OP
U
OP
U
U
U
13.48
4.74
7.03
5.50
11.80
3.80
6.26
10.07
18.50
4.11
6.74
14.40
2.27
4.03
0.6
0.0
2.1
0.6
3.4
0.8
0.8
0.0
2.9
0.0
0.0
4.3
0.0
0.0
1.1
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23/10
14/11
03/11
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3Q08
3Q08
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3Q08
3Q08
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3Q08
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10/6/2008
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Liuzhou Chemical (600423.SS)
Jiangsu Hengrui Medicine (600276.SS)
Huafa Indsutrial Share (600325.SS)
Tian Di Sci. & Tech. (600582.SS)
Hualu Hengsheng (600426.SS)
Zoomlion Heavy Industry (000157.SZ)
Guilin Tourism (000978.SZ)
HUADONG MEDICINE CO LTD-A (000963)
Yantai Wanhua (600309.SS)
Qinghai Salt Lake Potash (000792.SZ)
Times New Materials (600458.SS)
Shandong Gold (600547.SS)
Zhangze Electric (000767.SZ)
Qingsong Building Materials and Chemicals (600425.SS)
Xugong Science & Technology (000425.SZ)
Wangfujing Dept ST (600859.SS)
Gem-Year Industrial (601002.SS)
Shanghai Zhixin Electric (600517.SS)
Hong Yuan Securities (000562.SZ)
Jiangxi Ganyue Expressway (600269.SS)
Beijing Capital Tourism (600258.SS)
Baosheng Sci & Tech (600973.SS)
Jinxi Axle (600495.SS)
Zhejiang Longsheng (600352.SS)
Sichuan Lutianhua (000912.SZ)
Bank of Nanjing (601009.SS)
JIANGLING MOTORS CORP LTD-A (000550)
JIANGLING MOTORS CORP LTD-B (200550)
Offshore Oil Engineering (600583.SS)
Xinjinag Tebian Electric Apparatus Stock (600089.SS)
Midea Electric Appliances (000527.SZ)
Yanjing Brewery (000729.SZ)
Xiandai Investment (000900.SZ)
Yunnan Baiyao (000538.SZ)
Shandong Expressway (600350.SS)
Shanghai First Provisions (600616.SS)
Dongfeng Automobile (600006.SS)
Shandong Hailong (000677.SZ)
Gemdale (600383.SS)
Sichuan Changhong (600839.SS)
Tianma Bearing (002122.SZ)
China Yangtze Power Corp (600900.SS)
Fujian Expressway (600033.SS)
Hubei Shuanghuan Sci & Tech (000707.SZ)
Laobaigan Liquor (600559.SS)
TBEA Co Ltd (600089.SS)
Guanlu (000831.SZ)
Beijing Sanyuan (600429.SS)
Guangxi Liugong Machinery (000528.SZ)
Qingdao Haier (600690.SS)
China Unicom (A/R) (600050.SS)
Economic data (China)
CPI
Retail Sales
VAIO
FAI
Economic data (Hong Kong)
Unemployment rate
Composite CPI
GDP
Retail sales value
Results announcements (China)
Shenzhen Development (000001.SZ)
Shengyang Machine Tools (000410.SZ)
Baolihua New Energy (000690.SZ)
Fuyao Group Glass Industries (600660.SS)
GD Power Dev (600795.SS)
Yitai Coal (B) (900948.SS)
Northeast Securities (000686.SZ)
Bank of Ningbo (002142.SZ)
Wanfang Aluminium (000612.SZ)
Luzhou Laojiao (000568.SZ)
Yibin Wuliangye (000858.SZ)
Sanyou Chemical Industries (600409.SS)
Poly Real Estate Group (600048.SS)
Hubei Yihua (000422.SZ)
Nari Technology Development (600406.SS)
Xishan Coal (000983.SZ)
Henan Pinggao Electric (600312.SS)
Maanshan Fangyuan Slewing Ring (002147.SZ)
Sichuan Meifeng (000731.SZ)
Minsheng Bank (600016.SS)
Huatai Paper (600308.SS)
Lijiang Yulong Tourism Co (002033)
Dong-E E-Jiao (000423.SZ)
Guoyang New Enegry (600348.SS)
Zhangzidao Fishery (002069.SZ)
Oriental Pearl (600832.SS)
Tianjin Tasly Pharmaceuticals (600535.SS)
Yunnan Aluminium (000807.SZ)
Yunnan Tin (000960.SZ)
Tangshan Jidong Cement (000401.SZ)
Xinjiang Joinworld (600888.SS)
Kweichow Moutai (600519.SS)
Hunan Sunward Intelligent (002097.SZ)
Lanhua Sci-Tech (600123.SS)
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3Q08
3Q08
3Q08
3Q08
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3Q08
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3Q08
3Q08
3Q08
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3Q08
3Q08
3Q08
3Q08
3Q08
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3Q08
3Q08
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3Q08
3Q08
3Q08
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10/22/2008
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Jiangnan Heavy Industry Co (600072.SS)
Taiyuan Heavy Industry (600169.SS)
Xiamen King Long Motor (600686.SS)
Hubei Chutian Expressway (600035.SS)
Shuguang Automotive (600303.SS)
Shanghai Water (600649.SS)
Bank of Communication (A/H) (601328.SS)
Bank of China (A/H) (601988.SS)
SDIC Huajing Power (600886.SS)
SDIC Zhonglu Fruit Juice (600962.SS)
Yuntianhua (600096.SS)
Sieyuan Electric (002028.SZ)
China Enterprise (600675.SS)
FAW Xiali (000927.SZ)
FAW Car (000800.SZ)
Zhong Ke San Huan High-Tech (000970.SZ)
Sinochem Int'l (600500.SS)
Panzhihua Steel (000629.SZ)
Nanshan Industrial (600219.SS)
Lu'an Environmental Energy (601699.SS)
Shanghai Airport (600009.SS)
Nanjing Steel (600282.SS)
Shanghai Siyuan Electric (002028.SZ)
China Citic Bank (A/H) (601998.SS)
Shenzhen Zhenye Group (000006.SZ)
CATIC Real Estate (000043.SZ)
Ningbo Huaxiang (002048.SZ)
Financial Street (000402.SZ)
Shanxi Qinchuan Machinery (000837.SZ)
Sinopec (A/H) (600028.SS)
COFCO Tunhe (600737.SS)
CNHTC Jinan Truck (000951.SZ)
Guilin Guanglu Measuring Instrument (002175.SZ)
Harbin Air Conditioning (600202.SS)
Wuhan Steel (600005.SS)
Tianshan Cement (000877.SZ)
Tongling Nonferrous Matel (000630.SZ)
Zhengzhou Yutong Bus (600066.SS)
Beijing Capital (600008.SS)
GREE (000651.SZ)
Beijing Gehua CATV (600037.SS)
China Railway Tielong (600125.SS)
Jinan Disesel Engine (000617.SZ)
China State Shipbuilding (600150.SS)
Jianghuai Auto (600418.SS)
CITIC Guoan (000839.SZ)
Shanghai Port (600018.SS)
Pingdingshan Tian'an Coal (601666.SS)
Shenzhen Overseas Chinese Town (000069.SZ)
Sichuan Swellfun (600779.SS)
Xinhua Media (600825.SS)
3Q08
3Q08
3Q08
3Q08
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3Q08
3Q08
3Q08
3Q08
3Q08
3Q08
3Q08
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3Q08
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3Q08
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3Q08
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3Q08
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3Q08
3Q08
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October 2008 Shenzhen Energy (000027.SZ)
Nanhai Development (600323.SS)
Beijing Tongrentang (600085.SS)
Hisense (600060.SS)
Daqin Railway (601006.SS)
Baosteel (600019.SS)
Zhenhua Port Machinery (600320.SS)
China Sinoma (600970.SS)
Guangzhou Baiyun Airport (600004.SS)
Citichamp Dartong (600067.SS)
TCL Corp (000100.SZ)
Tangshan Iron & Steel (000709.SZ)
Shenergy (600642.SS)
Bright Dairy (600597.SS)
Anhui Heli (600761.SS)
Beiqi Foton Auto (600166.SS)
Sany Heavy Industry (600031.SS)
Xiamen Overseas Electronic (600870.SS)
Shenzhen Airport (000089.SZ)
Blue Star New Materials (600299.SS)
Yili Industrial (600887.SS)
Shengyi Sci-Tech (600183.SS)
Chengdu People's Dept Store (600828.SS)
Shanghai Jahwa United (600315.SS)
Hebei Chengde Lolo (600848.SZ)
3Q08
3Q08
3Q08
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3Q08
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3Q08
10/30/2008
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FY08
FY08
3Q08
3Q08
3Q08
3Q08
1H08
3Q08
3Q08
3Q08
3Q08
2Q08
3Q08
FY08
FY08
3Q08
10/2/2008
10/9/2008
10/27/2008
10/27/2008
10/28/2008
10/28/2008
10/29/2008
10/29/2008
10/29/2008
10/29/2008
10/29/2008
10/30/2008
10/30/2008
10/2/2008
10/9/2008
10/27/2008
Results announcements (Hong Kong)
Nine Dragons Paper (P) (2689.HK)
New World Development (17.HK)
TCL Multimedia (R) (1070.HK)
TCL Communication (R) (2618.HK)
Bank of Communications (H/A) (3328.HK)
Bank of China (H/A) (3988.HK)
I.T (999.HK)
ASM Pacific (522.HK)
SMIC (P) (981.HK)
Tong Ren Tang Technologies (H) (8069.HK)
China Citic Bank (H/A) (998.HK)
Lenovo Group (R) (992.HK)
Sinopec (H/A) (386.HK)
Nine Dragons Paper (P) (2689.HK)
New World Development (17.HK)
TCL Multimedia (R) (1070.HK)
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BOCI Research Team
Recently Published Research
Date
Title
22-Sep Central China Real Estate
Sector
Author(s)
PROPERTY-Developers TIAN Shixin
9-Sep Huaqiao In The Middle Kingdom Monthly
- Sep08
(8621) 6860 4866 ext 8519
(852) 2905 2107
[email protected]
[email protected]
3-Sep Chengde Lolo
Consumer Prod - F & B ZHAO Zongjun
27-Aug Tencent Holdings
Technology - Internet
Property - Developers
6-Aug Huaqiao In The Middle Kingdom Monthly
- Aug08
[email protected]
(852) 2905 2108
CHENG Manjiang (8610) 9922 9128
25-Aug Huarui Heavy Ind. Steel Casting Industrials - Machinery
Email
Manfred HO
Chemicals Miscellaneous
11-Aug Residential Outlook
MACRO & STRATEGY
Tel.
Anthony LOK
9-Sep Shanghai Jahwa United
NI Xiaoman
(8621) 6860 4866 ext 8319
[email protected]
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YE Bingnan
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NI Xiaoman
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Huaqiao In The Middle Kingdom Monthly
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DISCLOSURE
The views expressed in this report accurately reflect the personal views of the analysts. Each analyst declares that neither he/she nor his/her associate serves as an officer of nor has any financial interests in relation to the listed corporation reviewed by the analyst. None of the listed corporations reviewed or any third party has provided or agreed to provide any compensation or other benefits in connection with this report to any of the analysts, BOCI Research Ltd and BOCI Group. Member companies of BOCI Group confirm that they, whether individually or as a group (i) do not own 1% or more financial interests in any of the listed corporations reviewed. Certain member companies of BOCI Group have an individual employed by or associated with BOCI Group serving as an officer of Bank of China. Certain member companies of BOCI Group are involved in making a market in the securities of Bank of China, China Construction Bank, China Life Insurance, China Merchants Bank, China Mobile, China Telecom, Hong Kong & China Gas, HSBC Holdings, Industrial & Commerical Bank of China and PetroChina. Certain member companies of BOCI Group has/have had investment banking relationships with China Railway Group, Central China Real Estate, Fushan Energy and MTR Corp within the preceding 12 months. Notwithstanding that BOCI Research Ltd and BOC International Holdings Ltd is a subsidiary of Bank of China Ltd and affiliate of BOC HK Ltd, BOCI Research Ltd and BOC International Holdings Ltd have no authority whatsoever to give any information or make any representation or warranty on behalf of Bank of China Ltd and BOC Hong Kong Ltd. This disclosure statement is made pursuant to paragraph 16 of the “Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission” and is updated as of 30 September 2008. Waiver has been obtained by BOC International Holdings Limited from the Securities and Futures Commission of Hong Kong to disclose any interest the Bank of China Group may have in this research report. Huaqiao in the Middle Kingdom
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