2013_INVESTMENT_STRATEGY_REPORT_ON_THE_CREDIT_BOND_MARKET：LOWER_EXPECTATIONS_FOR_RETURN_AS_LOWER_EXPECTATIONS_FOR_RETURN_AS_OPPORTUNITIES_ALWAYS_FOLLO

lowerexpectationsforreturnas,opportunitiesalwaysfollowrisks,2013investmentstrategyreportonthecreditbondmarket,analyst,quqinga0230511040079,2012.12,highlights,whilewehavetalkedmoreaboutopportunitiesin2012,“risks”mightbethekeytoneofthemarketin2013;,overseasmarketsareexpectedtorampup,gainingabetterfootingthanin2012.asecondrecessionisnotlikelytobeseenintheusasa,compromisewillprobablybeachievedonthefiscalcliffissue,givennascentsignsofrecoveryasevidencedbypickupintherealestatemarketand,improvementsinemployment.theeuropeaneconomyontheotherhandisrightatthetroughofau-shapedcycle,whichmeansitwilltakealong,timeforanyrecoverytotakeplace.howeverimpactoftheeuropeandebtcrisisonfinancialmarketsisexpectedtobealleviated,placehowever,alleviated.,webelieveurbanizationwillbecomeanewdriverforeconomicgrowthinchina.asaresult,thedowntrendofchinaseconomytakesplaceina,gradualmannerof“downturnstabilizationfurtherdownturnfurtherstabilization”.inthenearterm,recoveryintherealestatesectorand,corporatestockreplenishmentwillhavepositiveimpactontheeconomy.,webelievethecreditbondmarketwillfaceareleaseofcreditrisksin2013:,whilethebroadeconomywillnotdisappoint,certainindustriesstillfacethedeteriorationofcreditrisks;processofthesecondurbanizationmeans,themigrationofcreditrisksaswellasdeteriorationofcreditworthiness,whichmightbereleasedthroughincreasedchannels,notnecessarythe,defaultofcreditbonds,asthedefaultrisksofotherfinancingfacilitiescouldfeedthroughintothecreditbondmarket.regulationofshadowbanksis,likelytosparkriskrelease;,webelievethemarketwillalsofaceliquidityrisksin2013:,liquidityisnotabundantonthebondmarket;therewillbehigherpressureintermsofcreditbondsupply;uncertaintiesaroundregulationofshadow,banksaddtotheuncertaintiesregardingfundingsourcesofcreditbonds;assystematicrisksthreatenthebondmarket,liquiditywillshifttorisk,assetsfromthedebtmarketinare-balancingofassetclasses;insurersandotherprincipalinvestorsinthecreditbondmarketwillhavelower,demandforcreditbondsastheirinvestmentscopeexpands;,2013d,doesnotbdwellfcreditbdit,tbode,llfor,ditbondsintermsofi,finvestmentstrategy;yieldswilledgeupth,t,ttt,ildilld,throughoutthyear,resultingislightl,htthe,ltiinlihtlossit,intermsof,f,cleanpricesbutwillstillregisterpositivereturnsintermsofdirtyprices;opportunitiesmightcomeafterthereleaseofrisks:,fromastandpointofbothabsoluteandrelativedefensiveness,long-termcreditbondsdonothavemuchinvestmentvalue,whileshort-term,financingbondsarecheaper.thoughtheeconomictroughistobeconfirmedin1h,potentialreleaseofcreditriskswillpersistinindividualsectors,andcompanies.creditspreadsdonotsupportanyfurtherdecline,andmorestringentregulationonshadowbankswillincreasetheriskof,correctioninlowratedbondswithriskreleaseproportionaltoregulationcorporatedefaultriskwillbealleviatedin2hwhentheeconomy,low-ratedbonds,regulation.,rebounds,butthebondmarketwillstillbehurtbysystematicrisksasinflationhikes;wideningofliquidityspreadsofcreditbondswillalsobring,aboutrisks.,investmentvalueoflow-ratedvariessignificantly:timingmaymeanagreatdifferenceinreturns;high-ratedlackssystematicopportunities;short-,termfinancingbondsarethecheapest.,,申万研究,2,keycontents,1.,riskisakeywordinthecreditbondmarketin2013,2.,whilelong-termdriversfortheeconomyareclearlyvisible,the,deteriorationofcreditworthinesscannotbeneglected,3.,creditriskimminent,4.,liquidityriskcloseontheheels,5.,investmentstrategy:returnsalwaysfollowriskrelease,3,1.1an“equilibriummarket”forthehigh-ratedbuta“bullmarket”forthelow-rated,thehigh-ratedsawyieldsgoingdownandupagainin2012,finallyendingbasicallyonparwithyearbeginning;,manifestingthefeatureofan“equilibriummarket”,withthedirectionofinterestratechangeinlinewiththebottoming-,outofeconomy.,thankstoreducedconcernovercorporatedefaultrisk,marketliquiditywasbetterthanin2011.low-ratedcreditbonds,enjoyedabullmarketthroughouttheyear,albeitasignificantcorrectionin3qcausedbytightliquidity.,theriskappetitepickedupinthebondmarketin2012,incontrasttobearisheconomicoutlook.,yieldsofhigh-ratedcreditbondsreturnedtothelevelofyear,highrated,beginning,whileyieldsoflow-ratedcreditbondsslumped,7.0,50,6.5,0,6.0,5.5,5.0,4.5,-150,150,-100,-50,yieldsofthelow-ratedcreditbondsslumped,5.5,(aa):5y(rhs),t-bond:5y,(aaa):5y,2013yinterestyields,5.0,50,4.5,(a,aa):1y,(aa,aa):1y,(aa,aa):3y,(aa,aa):5y,t-b,bond:1y,t-b,bond:3y,2.5,11-12-01,11-12-16,6,11-12-31,12-01-18,8,12-02-07,7,12-02-22,2,12-03-08,8,12-03-23,3,12-04-10,0,12-04-25,5,12-05-11,12-05-28,8,12-06-12,2,12-06-28,8,12-07-13,3,12-07-30,0,12-08-14,4,12-08-29,9,12-09-13,3,12-09-28,8,12-10-19,9,12-11-05,5,12-11-20,0,12-12-05,5,-200,source:swsresearch,,申万研究,(aa):5y,y(rhs),3.0,t-b,bond:5y,3.5,(a,aa):3y,4.0,4,1.2akeywordin2013:risk,economicprospectsnotpessimisticintheshortterm,norisitoptimisticinthelongterm:macroeconomicdata,showedimprovementsin4q12,suggestingthattheeconomyisnolongeratriskintheshortterm;however,the,marketisnotoptimisticaboutlong-termgrowtheither,arguingthattheeconomicdownturnisfarfromoveryet.what,istheengineforlong-termgrowth?itseemsthattheanswercanbefoundinurbanization.,while,whilweh,havetlkdmoreaboutopportunitiesi2012“ik”mightbthkt,talked,bt,titiin2012,“risks”ihtbethekeytoneofthmarketi2013,fthe,ktin2013;,thebondmarketwilllacksystematicopportunitiesin2013;absoluteandrelativereturnsofcreditbondswillno,longerremainhigh;,creditrisk:whilethebroadeconomicdataisnotdisappointing,certainindustriesdonotperformwell;development,infinancingsourceshasalsoprovidedincreasedchannelsforthereleaseofcreditrisks;,liquidityrisk:thefundingfrontisnotoptimisticingeneral;fundmovementmightbeseenasaresultofthere-,re,balancingofassetallocation;liquidityriskmightbeinducedbymorestringentregulationonshadowbanks;,asthereis“nogainwithoutpain”,returnsin2013mightfollowriskrelease;,,申万研究,5,keycontents,1.,riskisakeywordinthecreditbondmarketin2013,2.,whilelong-termdriversfortheeconomyareclearlyvisible,the,deteriorationofcreditworthinesscannotbeneglected,3.,creditriskimminent,4.,liquidityriskcloseontheheels,5.,investmentstrategy:returnsalwaysfollowriskrelease,6,2.1theworldeconomyisunlikelytogetworse,mainstreaminstitutionsexpectoverseasmarketstorampupandgainabetterfootingthanin2012;,oecdleadingindicatorsshowthatthecrisisistaperingoffandtrendingclosertopotentialgrowth.,inthenextyear,theworldeconomywillmakeaturnwithanuptrend,convergenceofoecdleadingindicators,2012e,2.4,1.0%,0.5%,0.0%,jun-2008,8,jun-2009,9,3.5,3.7,3.8,2.7,3.0,2013e,2013.1q2013.2q2012.3q2013.4q,1.5%,global,us,eurozone,japan,china,bloomberg,2.2,2.6,2.1,imf,3.3,3.6,3.5,worldbank,3.2,mar-2008,8,dec-2007,7,-0.5%,-1.0%,-1.5%,sep-2008,8,3.3,3.4,2.5,dec-2008,8,3.0,jun-2010,0,mar-2009,9,jun-2011,mar-2010,0,sep-2009,9,mar-2011,1,mar-2012,2,dec-2009,9,sep-2010,0,dec-2010,0,sep-2011,1,jun-2012,2,dec-2011,1,sep-2012,2,sws,2.9,3.2,3.0,source:ceic;swsresearch,,申万研究,7,dawnofeconomicrecoveryperceivedintheus,supplypressurehasmoderatedmarkedlyintherealestatesector,s,l,h,dtd,kdlith,ltt,t,inventory-salesratefornewhomes,inventory-saleratioforexistinghomes,therealestatemarketisprogressivelypickingup,hikesinstockandpropertymarketsbringsaboutthe,wealtheffectamongresidents,whichinturndrives,consumerconfidenceandimprovesthelabormarket;,thetusslebetweentwopartieswillultimatelypreventthe,usfromgoingoverthefiscalcliff;,qe“n”isonthestocks.,n,12,11,10,9,8,7,6,5,4,3,2,thewealtheffectcausedbyapickupinvalueof,residentsfinancialassets,9,110,50000000,100,90,80,40000000,35000000,30000000,70,60,50,45000000,55000000120,8,savingsrate(lhs),householdfinancialassets,7,6,5,4,3,2,1,0,jan-0,02,jun-0,02,nov-0,02,apr-0,03,sep-0,03,feb-0,04,jul-04,04,dec-0,may-0,05,oct-0,05,mar-0,06,aug-0,06,jan-0,07,jun-0,07,nov-0,07,apr-0,08,sep-0,08,feb-0,09,jul-09,dec-0,09,may-1,10,oct-10,mar-1,11,aug-1,11,jan-12,jun-12,source:swsresearch,jan-,-05,apr-,-05,jul-,-05,oct-05,-06,jan-,apr-,-06,jul-,-06,oct-06,-07,jan-,apr-,-07,jul-,-07,oct-07,-08,jan-,apr-,-08,jul-,-08,oct-08,-09,jan-,apr-,-09,jul-,-09,oct-09,jan-,-10,apr-,-10,jul-,-10,oct-10,jan-,-11,apr-,-11,jul-,-11,oct-11,-12,jan-,apr-,-12,jul-,-12,oct-12,40,2001-1,2001-7,2002-1,2002-7,2003-1,2003-7,2004-1,2004-7,2005-1,2005-7,2006-1,2006-7,2007-1,2007-7,2008-1,2008-7,2009-1,2009-7,2010-1,2010-7,2011-1,2011-7,2012-1,2012-7,consumerconfidencerebounds,cci(consumerconfidenceindex),expectationindex,currentindex,,申万研究,8,europe:atthetroughofa“u-shape”cycle,monetaryliquidityenvironmentgraduallyimproveswithquantitativeeasingbytheecb;,thepressureofdebtpaymentwillbecomelessonerousin2013,thoughgreecewouldhavethegreatestpressure,inmay;impactoftheeuropeansovereigncrisisonfinancialmarketsisexpectedtobealleviated.,certainly,certainlyitwillstilltakealongtimefortheeconomytorecover,recover.,monetaryenvironmentimprovesineurope,relativelyhigherdebtpaymentpressureinaprilandmay,m2growth,900,euro100mn,800,700,600,500,400,300,200,100,0,2013-,-1,2013-,-2,2013-,-3,2013-,-4,2013-,-5,growthoftotaloutstandinghouseholdloans,greek,spain,portugal,ireland,italy,16,growthoftotaloutstandingloansfornon-financialenterprises,14,12,10,8,6,4,2,0,-2,2011-1,2011-6,2012-4,2009-5,2010-3,2010-8,2009-10,2011-11,2012-9,2013-,-6,2013-,-7,2013-,-8,2013-,-9,2013-10,2013-11,2006-1,2006-6,2007-4,2007-9,2008-2,2006-11,2008-7,source:ceic;swsresearch,2008-12,,申万研究,2013-12,-4,9,2.2long-termdownturnofchinaseconomyisagradualprocess,downturnofjapanseconomyisnotaone-wayprocess,gdp(lhs),15%,25,populationover65yearoldas%oftotalpopulation(rhs),23,10%,21,5%,0%,196,60-12,196,63-09,196,66-06,196,69-03,197,71-12,197,74-09,197,77-06,198,80-03,198,82-12,198,85-09,198,88-06,199,91-03,199,93-12,199,96-09,199,99-06,200,02-03,200,04-12,200,07-09,201,10-06,downturnofchinaseconomyisgradual(caifang),14%,14.00,12.00,13%,10.00,1000,12%,11%,10%,9%,8%,10.29,8.00,6.00,4.00,400,2.00,0.00,798183858789919395979901030507091113151719,year,period,7.19,6.08,9.83,-5%,5%,-10%,-15%,19,17,15,13,11,9,7,5,themarketreachesaconsensusonthedowntrendofchinas,economy.but,issuchaprocesscontinuousorgradual?,differentpathswillhaveverydifferentimpactsonfinancial,markets;,webelieveitwillbeadownturnprocessof“downturn,stabilizationfurtherdownturnfurtherstabilization”.suchan,assumptionissupportedbyboththeoverseasexperienceand,demographicsfactor(caifang),seeenteringintoaplateauwithoutanygapafewpoints,tegto,ateautout,y,e,ots,onchinaspotentialgrowthrate.,downturnoftheuseconomyisnotaone-wayprocess,8%,gdpgrowth,populationover65yearoldas%(rhs),6%,4%,2%,0%,-4%,1960-03,1962-06,1964-09,1966-12,1969-03,1971-06,1973-09,1975-12,1978-03,1980-06,1982-09,1984-12,1987-03,1989-06,1991-09,1993-12,1996-03,1998-06,2000-09,2002-12,2005-03,2007-06,2009-09,2011-12,-2%,source:swsresearch,,申万研究,10,2.3urbanizationwillbecomeanewengineforlong-termgrowthinchinaseconomy,thoughthepopulationbonusisonthevergeofaturningpoint,thecountryremainsbetterpositionedcomparedto,developedcountries;,ahugescopestillexistsforurbanizationinchinaincomparisonwithdevelopedcountries,althoughthe,urbanizationratehasalreadyexceeded50%;,chinasgdpislikelytodoubleagainin10yearsledbyurbanization.,chinastillhasthepopulationadvantage,chinas,chinasurbanizationrateislowerthanthatinjapanandkorea,75%,%,69.9%,71.5%,70%,68.5%,65%,60%,55%,china:populationintherangeof15-64yearoldas%,japan:populationintherangeof1564yearoldas%,15-64,korea:populationintherangeof15-64yearoldas%,1996,2000,2004,1988,1992,2008,1960,1964,1968,1972,1976,1980,source:swsresearch,1984,50%,,申万研究,11,existingissuesintheurbanizationprocess,lowurbanizationratesinthemidandwestregionswillprovidegreaterpotentialfortheurbanizationprocessgoing,forward;,thereisagreatdifferenceintermsofurbanizationratewhenlookingatdifferentstatisticaldataofregisteredurban,citizensandresidentpopulation;thecoreissueinthesecondroundofurbanizationwouldbeconvertingthemigrant,pp,;,g,g,ruralpopulationtourbancitizens.,theurbanizationratevarieslargelyintheeast,midandwestregions,urbanizationratesdifferentiateaccordingtodifferentstatisticaldata,55,50,45,40,35,30,25,2001,1,2002,2,2003,3,2004,4,urbanizationrate(permanentresidence),urbanizationrate(registeredpermanentresidence),2005,5,2009,9,2010,0,2006,6,2007,7,source:ceic;swsresearch,,2008,8,申万研究,12,2011,1,20,theurbanizationprocessmeanshigherdemandforconsumptionandinfrastructurefacilities,theurbanizationprocessmeanshigherconsumptionexpenditure,consumerexpenditurepercapita:urban(china),consumerexpenditurepercapita:rural(china),16,000,14,000,12,000,10,000,8,000,6,000,4,000,2,000,2000,0,1990,1992,1994,1996,1998,2000,2002,2004,2006,theurbanizationprocessmeanshigher,consumptionexpenditure;,higherdemandforinfrastructurefacilities;,2008,theurbanizationprocessmeanshigherdemand,urbaninfrastructurequalityvariessignificantlyinchina,200,180,160,140,120,100,80,60,40,20,0,rural,camera,color-tv,mobilephone,e,homecomputer,urban,r,refrigerator,washinmachine,ng,source:swsresearch,air-c,conditioner,m,motorcycle,,申万研究,2010,13,creditworthinessdeterioratesduringurbanization,urbanizationisalsoaprocesswheretheservicesectorgrowsrapidly,wherebyalargenumberofnewjobscan,becreated.,however,theforemostissueinurbanizationisfundingsources:whenfundsareraisedthroughbondissuance,g,p,privatecapital,thesupplyofcreditbondsexpandsconsequently;riseinlocal,p,ppy,p,q,y,trustfinancingandabsorptionofp,governmentsdebtscombinedwithdeteriorationofcorporatecreditworthinessmeansthatmorechannelsare,providedforthereleaseofcreditrisk.,structuralchangeinaggregatefinancing,employmentisdrivenbystructuraladjustmentsofindustries,2000,80,70,60,50,200,40,30,20,10,50,0,2008-,2010-,2011-4,2011-9,2012-2,2009-3,2009-8,2010-1,2010-6,2012-7,0,-50,150,100,300,250,350,employmentofprimaryindustryas%,employmentofsecondaryindustryas%,employmentoftertiaryindustryas%,1500,loan,trust,netfinancingthroughcorporatebondissuance,equityfinancingfornon-financialfirms,1000,500,2005-,2005-1,2005-6,2006-4,2006-9,2007-2,2007-7,2007-,2008-5,0,-500,source:swsresearch,1980-,1981-,1982-,1983-,1984-,1985-,1986-,1987-,1988-,1989-,1990-,1991-,1992-,1993-,1994-,1995-,1996-,1997-,1998-,1999-,2000-,2001-,2002-,2003-,2004-,2005-,2006-,2007-,2008-,2009-,2010-,,申万研究,14,2.4howtosupporttheeconomyinthenearterm?recoveryintherealestatesector,andinventoryreplenishment,whiletheeconomicdownturnin2012waslargelycausedbydeclineintherealestatesector,thatsectorhasnow,seensignsofrobustrecovery,whichwillcontributepositivelytoinvestmentandconsumption;,currentinventorylevelsarelowduetocontinuouscorporatedestocking,thereforeinventoryreplenishmentin1q,willhaveanotablepositiveimpactontheeconomy.,currentinventoryislow;inventoryreplenishment,takesplacein1qofeachyear,realestatesales,60,50,40,30,20,10,0,-10,-20,commoditysales:furniture,areboundinsalesofdurablegoodsdrivenbypickup,inrealestatesales,commoditysales:homeappliance,commoditysales:buildingand,buildingmaterial,40,35,inventory:yoy:coal,inventory:yoy:ferrousmetal,inventory:yoy:autovehicle,30,25,20,15,10,5,0,jul-10,jan-10,jan-11,jul-11,mar-10,jan-12,sep-10,mar-11,mar-12,jul-12,nov-10,nov-11,sep-12,sep-11,may-10,may-11,may-12,nov-12,jan-11,feb-11,mar-11,apr-11,may-11,jun-11,jul-11,aug-11,sep-11,oct-11,nov-11,dec-11,jan-12,feb-12,mar-12,apr-12,may-12,jun-12,jul-12,aug-12,sep-12,oct-12,-5,source:swsresearch,,申万研究,15,keycontents,1.,riskisakeywordinthecreditbondmarketin2013,2.,whilelong-termdriversfortheeconomyareclearlyvisible,the,deteriorationofcreditworthinesscannotbeneglected,3.,creditriskimminent,4.,liquidityriskcloseontheheels,5.,investmentstrategy:returnsalwaysfollowriskrelease,16,3.1whilethebroadeconomyisnotdisappointing,risksexistincertainindustries,thebroadeconomyisdecent:gdpisnotdeteriorating,continuestostabilizegradually;,performanceattheindustrylevelismixed,whilecertainindustriesfacethedeteriorationofcreditrisk:seebe,preparedfordangerintimesofpeaceaspeculationonfuturerisksourcesinthecreditbondmarket.,earningsgrowthqoq,utility,13%,41%,160%,21%,2%,-12%,9%,-14%,3%,-88%,88%,0%,-13%,-42%,-39%,39%,0.5,0,mar-10,mar-11,mar-12,se,ep-09,se,ep-10,se,ep-11,se,ep-12,mar-13,se,ep-13,commercialtrade,lightindustry,mining,machineryequipment,agriculture,non-ferrousmetal,informationequipment,ferrousmetal,-2%,-102%,-13%,-33%,13%,-23%,-10%,foodandbeverage,electronics,homeappliance,realestate,gdpmom(rhs),4q11,1q12,7%,43%,-13%,10%,-2%,76%,15%,-1%,18%,-50%,50%,-22%,-14%,-22%,-39%,39%,-10%,-37%,6%,-27%,-13%,-19%,-19%,regulatorsbecomemoreopen-mindedwithregardtodefaults;,performancevarieslargelyindifferentindustries,2q12,10%,33%,-18%,8%,-1%,1%,15%,-1%,-1%,-26%,26%,-22%,-13%,1%,-44%,44%,-24%,-33%,-10%,-28%,-29%,-67%,-13%,3q12,75%,63%,41%,20%,14%,13%,12%,11%,6%,-6%,6%,-10%,-13%,-17%,-23%,23%,-28%,-31%,-31%,-37%,-45%,-59%,-98%,macroeconomicdatawillnotdeterioratefurtherin2013andwill,evenimproveslightly,13,gdpyoy(lhs),12,11,4.5cateringandtourism,financialservice,4,medicalbiology,3.5,informationservice,3t,transportation,tti,2.5buildingmaterial,2,transportequipment,10,9,8,1.5textileandapparel,1chemical,7,6,mar-05,mar-06,mar-07,mar-08,se,ep-05,se,ep-06,se,ep-07,source:swsresearch,se,ep-08,mar-09,,-166%,-119%,申万研究-217%,17,-37%,3.2creditworthinessmigratingdownward,thesecondurbanizationprocessincludesthemigrationofcreditrisks:fromtheindebtednessofthe,centralgovernmenttothatoflocalgovernments,andfromtheindebtednessoflargesoestothatof,enterpriseswithlowercreditworthiness;,financingsourcesarechanging:fromcreditloanstomultiplefinancingsources,butriskandreturnare,g,gg,p,g,notcongruent;,creditriskswillfindmorechannelsforrelease,notnecessarythedefaultofcreditbonds,asdefaultrisks,ofotherfinancingfacilitiescouldfeedthroughintocreditbonds,especiallythelow-ratedsegment.,creditworthinessdeteriorationofcreditissuers,thefinancingsourcesareexpanding,butriskprotectionisnotsufficient,70%,middle-low-ratedcreditbondissuanceratio,65%,60%,55%,50%,45%,40%,35%,30%,1,2,3,4,5,6,7,8,9,10,11,12,1,2,3,4,5,6,7,8,9,10,11,12,1,2,3,4,5,6,7,8,9,10,11