汇丰银行股投资地图更光明的贸易谈判前景和改革

1、5 July 2019Equity Research ReportValuations have become attractive after a 14% decline from this years highuHSBCIndex Qianhai level*2019eHSBC Qianhai implied 12m forward PEwhile we see the resumed tradks and supply-sideuUpsidereforms in the financial sector as supportiveWe provide three investment t

2、hemes, 12 bottom-up stock ideas, and keep our year-end index targets unchanged3,0153,5003,8944,50016.1%15.6%22.1%6.6%SHCOMP CSI300SZ Component MSCI China13.3x13.3x18.8x12.2xu11,5009,4208085After an eventful first half of the year that ended with China and the US restartingAs of 3 July 2019.Source: W

3、ind, MSCI, Refinitiv Datastream, HSBC Qianhai Securities estimatestradks in Osaka, we keep our bullish A-share year-end index targets unchanged.At current levels we forecast up to 22% upside for the A-share market, primarily driven by a valuation re-rating on three key factors. The first is the supp

4、ly-side structural reforms in the financial sector that are ongoing and include increasing credit support to private enterprises. The second is counter-cyclical macro policies that continue to be unveiled, reducing concerns about deteriorating earnings growth. The Sector AllocationCons Disc Cons Sta

5、ples Energy Financials Health Care IndustrialsITMaterials Comm Svcs Utilities Real EstateSource: HSBC Qianhai Securities estimatesUnderweight OverweightNeutral Neutral Neutral Overweight Overweight UnderweightNeutral Neutral Neutralthird is that Sino-US trade tensions may ease as bilateral tradks co

6、ntinue; webelieve a deal is likely to be reached at the APEC summit in mid-November 2019.Sector adjustments: We upgrade the IT sector to overweight as uncertainties over exporting high-tech products to China have diminished post the G20 summit. We stay overweight on industrials as we believe the pol

7、icy stimulus for that sector will stay in place, and machinery and electrical equipment should benefit from support for high- end manufacturing and a search domestically for import substitutes. We also favour consumer staples given their defensiveness and stable earnings, and our view is that valuat

8、ions still have room to improve. We stay neutral on the financial sector, and stick to preferring insurers and brokers on our expectations for a better equity market in the second half of the year that would benefit business operations and investment returns. We think banks will remain under pressur

9、e due to softer revenue expectations under ongoing policy support for SMEs.Investment themes: Amid the volatile environment we offer up three investment themes for investors to consider:Steven Sun*, CFA (S1700517110003)Head of Research, HSBC Qianhai Securities Limited HSBC Qianhai Securities Limited

10、 stevensunBob Liu* (S1700519060003)Head of A-share Equity Strategy HSBC Qianhai Securities Limited bob.h.liuKate Zhang* (S1700118050003) Research AssociateShenzhenuA potential re-rating of mid- and small-caps due to loosened M&A regulationsand the launch of the STAR market (Chinas new tech board

11、).* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations.uPossible beneficiaries of increasing foreign inflows.New listings on the STAR market.uWe also offer up 12 bottom-up stock ideas from HSBC Qianhai Securities researchanalys

12、ts.Issuer of report: HSBC Qianhai Securities LimitedDisclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.View HSBC Qianhai Securities at:CHINA INDEX TARGETSA-share Investme

13、nt AtlasBrighter outlook on tradks and refreshed reformsEquity StrategyChina获取报告1、2、3、每周群内7+报告；当日华尔街日报、4、行研报告均为公开利归原作者所有，起点财经仅分发做内部学习。扫一扫关注 回复：加入“起点财经”群。Equity Strategy5 July 2019Trading the trade tensionsSince June the “smart” money has been returning as valuations have become attractive following

14、a 14% decline from their highWhile we keep our year-end index targets unchanged, we provide three investment themes and 12 bottom-up stock ideasWe also think earnings estimates will decline further for the A-shareuuumarket, and see the resumption of tradks and financial sectorsupply-side reforms as

15、supportive as this should reduce the equity- risk premiumInvestment strategyWe introduce three investment themes amid theIn this report we keep our year-end index targets unchanged. However, as the tradks showsigns of resuming in the second half of the year and Chinas supply-side reforms in the fina

16、ncial sectors continue, we provide investors with three investment themes. These are: (1) a potential re-rating of mid- and small-caps, (2) identifying possible beneficiaries of foreign inflows, and (3) examining the new listings on the STAR market. Amid this volatile environment, we also offer up12

17、 bottom-up stock ideas from HSBC Qianhai Securities research analysts.tradks and signs ofcontinuing financial reformsSector-wise, the only change we make is upgrading IT to overweight. The semiconductorindustry and hardware sector took the hardest hit on concerns over increasing trade tensions, so w

18、ith valuations looking attractive we expect a re-rating given the positive outcome from therecent G20 talks and signs that US companies can resume selling to.Elsewhere, we remain overweight on industrials as the governments stimulus efforts continue. We also continue to favor consumer staples given

19、their defensive quality and stable earnings, and our view that valuations still have room to improve. We stay neutral on financials and prefer brokers and insurers as we see them benefitting from a bullish equity market throughout the restof the year.Our year-end index targets remain unchanged for t

20、he SHCOMP at 3,500, SZ Component at 11,500, CSI300 at 4,500. This implies 15-22% upside from current levels for the A-share market. And we estimate MSCI China to be 85 (from HSBC regional strategist, previously weestimated at 94).Valuation becomes attractive againChinas A-shares suffered a pull-back

21、 in the second quarter of the year, triggered by a revisionof overly optimistic growth forecasts and the temporary six-week suspension of the Sino-UStradks. From the year-high in April to this years low in June the Shanghai Composite Indexand CSI 300 index have corrected 14.2% and 13.8%, respectivel

22、y. The result is they are trading2Equity Strategy5 July 2019at 13.3x and 12.4x PE as of 28 June, respectively, compared to their five-year averages of 14.5x and 12.6x. However, we see three reasons why the equity risk premium currently at 4.81% and calculated by the difference between the implied re

23、turn of CSI 300 Index and 10year Treasury will further narrow and push up valuations.The first is the financial sector supply-side structural reforms, the second is that counter-cyclical macro policies continue to be unveiled, and the third is the improving Sino-US trade tensions as we believe a dea

24、l is likely to be reached at the APEC summit in mid-November 2019. Bothcountries need an agreement as they are vulnerable to an economic slowdown.CSI 300 Index and implied equity risk premium to reach April levelCSI 300 Index and valuation comparison: equities vs. bonds4,200.004,000.003,800.003,600.

25、003,400.003,200.003,000.002,800.0010.008.006.004.002.00-2.00-4.00-6.004,200.004,000.003,800.003,600.003,400.003,200.003,000.002,800.007.00%6.50%6.00%5.50%5.00%4.50%4.00%3.50%3.00%2019-01-022019-03-022019-04-30 2019-06-282019-01-022019-03-02 2019-04-302019-06-28CSI 300 Index (LHS)CSI 300 Index (LHS)A

26、-Share PE median-reciprocal of 10 year treasury yield (RHS)Equity risk premium (RHS,%)Source: WindSource: Wind“Smart” money returned in JuneStarting from June, northbound money has showed signs of positive inflows, although domestic margin traders have been exiting the market. Northbound inflows tot

27、alled RMB40.9bn in June, following massive outflows in the previous two months, and likely looking to buy at these low price levels. For instance, in both January and February when prices were also low, northbound inflows exceeded RMB60bn, while the balance of margin financing by domestic retail inv

28、estorscontinued to drop in the first two months.3Equity Strategy5 July 2019CSI 300 Index and money flows15.004,200.004,000.0010.003,800.005.003,600.000.003,400.00-5.003,200.00-10.003,000.00-15.002,800.002019-01-022019-01-272019-02-212019-03-182019-04-122019-05-072019-06-012019-06-26HK-Mainland Stock

29、 ConnectNorth-bound flow 5-day average (bn RMB,LHS)Margin trading inflow 5-day average (bn RMB,LHS)CSI 300 Index (RHS)Source: WindEarnings estimates can be lowerFrom a short-term perspective the direct impact on earnings, from the tariffs imposed so far, aremostly on Shenzhen-listed IT and industria

30、ls, which have high exports exposure. In our worst-case and hypothetical scenario, and if the remaining USD300bn ofgoods imported intothe U.S. are also to face tariffs, then we estimate that total overseas revenue as a percentage of total revenue for A-shares would drop to 8.90% from 9.77% in 2019,

31、and the impact on earnings growth would fall 1.0ppt from Wind consensus of 14.3% to 13.3% y-o-y. Under the status quo, and with all other conditions being equal, the total overseas revenue as a percentage of total revenue for A-shares would drop to 9.42% from 9.77% in 2019, and the earnings impact w

32、ould be -0.4ppt lower from Wind consensus of 14.3% to 13.9% of 2019e earnings growth. If we consider the indirect impact on the supply chain, we estimate the earnings growth will furtherdrop to 9.8% in our base-case scenario or 7.1% in our worst-case scenario.Impact on A-share 2019 earnings growth u

33、nder a trade war scenarioDirect impact0.4pptIndirect impact4.1pptTotal impact Earnings growth 2019eBase case (USD200bn)Worse base (USD200bn + USD300bn)Source: HSBC Qianhai Securities estimates4.5ppt 7.2ppt9.8%7.1%1.0ppt6.2pptFrom a long-term perspective, we estimate A-share earnings CAGR of 8.30% th

34、rough 2025ewithout any Sino-US tensions. But in a worst-case scenario when there are prolonged Sino-US tensions, the CAGR would drop to 7.62%, which is -0.68ppt or 8.19% lower.Under this scenario of prolonged Sino-US tensions, two broad categories computers,electronic and electrical products, as wel

35、l as basic ms and fabricated mproducts wouldsuffer the most. We estimate that their earnings CAGR would drop by 31.8% and 11.3% to 1.8%and 1.8%, respectively, from 2020e to 2025e.4Equity Strategy5 July 2019More financial reforms can lower the cost of equityFollowing the deleveraging of the real econ

36、omy in 2018, which achieved partial success, the next stage is financial reforms. The initial trial of aggressive deleveraging caused concerns within the market, so this year government authorities are implementing financial reforms more carefully, namely supply-side structural reforms in the financ

37、ial sector. This change also underlines how the reform focus has switched from aggressive deleveraging to structural adjustment, helping reduce concerns by easing fears that aggressive deleveraging could lead toa dry up in liquidity and a sharp decline in the economy.The PBOC and the CBIRC jointly a

38、nnounced that Baoshang Bank was taken over on 24 May 2019, any claims worth over RMB50m could not be fully guaranteed. This shows the authorities determination to change the perception that the principal in high-yielding shadow-banking products would always be guaranteed. If such a perception is suc

39、cessfully changed, then the effective risk-free rate will decline from current levels on financial products down to Treasury Yields with corresponding maturities.The incident indicates that authorities are actively seeking to reduce the accumulated credit risks of small banks, which would alleviate

40、some of the markets concerns about the risks in Chinas banking system. By guiding expectations and providing suggestion to market participants, the authorities are trying to limit Baoshang Banks risks to individual cases. All suchmeasures help to reduce the risk premium, in our view.The focus of sup

41、ply-side structural reform in the financial sector also includes increasing credit support for private enterprises (POEs), especially small and medium-sized businesses (SMBs), and developing diverse and deep capital markets. SMBs contribute meaningfully to theeconomy but typically receive a far smal

42、ler proportion of overall loan support.However, we do not believe it is a long-term solution for the government to push banks to lend to SMBs. The logical solution is to develop capital markets that meet the financing needs of enterprises at different development stages, like what the regulatory aut

43、horities did with the launch of the STAR board and Shanghai-London Connect in 2019. From a strategic perspective, launching the STAR market is both Chinas best form of defense as well as its best offensive measure in view of the prolonged Sino-US trade tensions, as well as recent legislativeefforts

44、in the US that could restrictcompanies access to the US capital market.5Equity Strategy5 July 2019Investment strategyWe keep our end-2019 index target unchanged: SHCOMP at 3,500, SZ Component at 11,500, CSI300 at 4,500, implying 15-22% upside for A-share indexesprefer staples on domestic demand; ind

45、ustrials on infrastructure stimulus; and the IT sector given favorable G20 summit outcomesWe provide three investment themes: beneficiaries of foreign flows, STAR market new listings, and bottom-up stock ideasuuuThe art of the deal and reforms to the supply-sideThe soft economic growth momentum in t

46、he first half of this year was not driven by the direct effects from the trade war via weaker exports. In fact, export growth remained at a decent level in recent months, partially reflecting the front-loading of export activities amid concerns of possible further tariffs (Exhibit 1 and Exhibit 2).

47、Instead, the slowdown has been mainly driven by a decline in domestic demand, which weakened due to insufficient counter-cyclical stimulusand possible fears that the trade war could worsen.If the economy continues to weaken, thegovernment is likely to have more pressureweighing on it and less bargai

48、ning power in the follow-up negotiations with the U.S. Since June we have seen additional loosening, with the most notable being to allow a government special bond issuance to be used as equity to borrow loans from banks. HSBC economists still expect the government to take more measures that include

49、 targeted easing on the private business sector and to further cut taxes and fees in the corporate sector, as well as more opening up and urbanisation (From the Horses Mouth: Chinas options to offset tariff impact, 21 May 2019).While currency depreciation has seldom been used as a defense, pressures

50、 on the RMB have increased and HSBC FX strategist have projected a possible no-deal scenario of 7.25 USD- RMB rate (Renewed China-US tariff war China Economics and FX implications, 10 May2019).Chinas supply side reform is meaningful, as although increased stimulus can be taken as an instant pill, it

51、 can have side effects too, and be ineffective over the long run. In the following chapters, we look into supply-side reform that should result in a structural improvement toChinas capital market, and may help offset softer earnings growth and risks from the trade war.6Equity Strategy5 July 2019Exhi

52、bit 1. Chinas exports and imports picking up at least partially due to front-loadingChina export YoY (seasonal adjusted) China export MoM (seasonal adjusted)China import YoY (seasonal adjusted) China import MoM (seasonal adjusted)(%)30.0020.0010.000.00-10.00-20.00Jan-18Mar-18May-18Jul-18Sep-18Nov-18

53、Jan-19Mar-19May-19Source: Wind, HSBC Qianhai SecuritiesExhibit 2. Trade with the US is lower than in 2018 but it remains steady(USDm)65,00060,00055,00050,00045,00040,00035,00030,00025,00020,000Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18China trade with USJan-1

54、9Source: Wind, HSBC Qianhai SecuritiesIndex targetsProgress in Sino-US talks a positiveWe think the market will react positively to any improvement in tradks, as A-share turnoverpicked up 57% on 19 June after news that China and the US are resuming tradks, and withthe G20 meeting suggesting short-te

55、rm relief in the tech supply chain. Solid evidence is needed,of course, on the progress of resumed tradks to see a meaningful market rebound.We are also confident because we think stock market performance is important to leaders on both sides, and believe the weaker the equity market performance, th

56、e more cooperative both sides will be, as the large drops in the US market in 2018 was a worst-case scenario that both sides would want to avoid (Lessons from the Sino-US trade tensions in 2018, 10 May 2019).While consensus is still forecasting 13-14% earnings growth, our estimates are 8-10% in 2019/20e, according to our analysis of the impact on sector earnings.Equity risk premium still has room to narrowAs of 28 June, the Shanghai Composite Index and