中国经济视角：中国企业脉搏

1、GlobalResearch11 June 2019China Economic PerspectivesUBSEvidenceLabInside:ThePulseonChinese Corporates - China CFO SurveyCorporate sentiment improved before trade war escalationUBS Evidence Labs 4th wave of China CFO survey (of 558 Chinese firms) was conducted in late Mar and early Apr 2019, before

2、trade war escalated in early May. 78%ofrespondentsanticipatedbettersalesrevenueinthenext6months,higherthan 73% in the Aug-2018 survey, and more reported higher capacity utilization. It may havebeensupportedbygrowthaccelerationinMarchandpositivesentimentontrade wardevelopmentthen.Expectationsonexport

3、ordersandcreditpolicyalsoimproved, and tax cuts are seen to help corporate profits though more respondents than previously still expected a lower profit margin.CAPEX intention stayed solid but headwinds aheadMorerespondentsplannedtoincreaseCAPEXinthecomingyearthanpreviously(64% vs61%)andsurprisingly

4、,morereportedchallengesinrecruitingthanpreviouslydespite thetradewar.Respondentsintheindustrialmachinery,ITandconsumerstaplessectors showedhigherCAPEXintention.ThetopareasforinvestmentallocationareR&D,and upgrade of equipment & machinery. We think corporate CAPEX intention have likely been underpinn

5、ed by policy easing, tax cuts & support since late 2018, andimproved outlook on trade war at the time of the survey. Recent trade war escalation and slowinggrowthmomentumwillbekeyheadwindsforcorporatecapexgoingforward.Credit easing was felt, but 50% still reported high credit costMore respondents re

6、ported eased credit access (51%) and lower credit cost (27%) in the past 12 months, thanks to policy easing. Looking forward, fewer respondents expected credit tightening, and more easing on bank loans are expected. However, 54%ofrespondentsstillexpectedahighercreditcostinthefuture,whichissurprising

7、 given credit easing. Notably, fewer small/medium firms saw higher credit cost than large peers, thanks to the governments recent effort to support SMEs and theprivate sector. We expect Chinas overall credit growth to rebound to 11.5% at end-2019 (from10.4%inApril),andaveragecreditcosttofallmodestly

8、albeitwithoutanycutin benchmark lending rates.More firms felt pain from trade war and cut CapexRespondents were more optimistic about a trade deal and future export orders at the time of the survey than last November. Nevertheless, more respondents reported negative effects from the trade war than p

9、reviously and 38% of those negatively affected said they have cut domestic Capex. In addition, 50% of those affected planned to move part of export production outside of China in 2019. The direct negative impact of supply chain shift on FAI is relatively small, but the indirect impact through weaker

10、 profitability and sentiment may be larger, which may lower manufacturing FAI to 2% in 2019 from 9.5% in 2018.Implication for China equity strategyThissurveyindicatesthatcorporateprofitsmaystaysubduedintherestof2019,while tax & fee cuts could provide some offset. We note four investment implications

11、: 1)we continue to prefer large caps over small caps; 2) we prefer consumer related sectors with more hiring difficulties boding well for household disposable income growth, and cautiousoverindustrialautomationdemandoutlookowingtoweakerCAPEXoutlook;3)ourshort-termtacticalcallistotriminternet/financi

12、als/autosinfavourofdefensives, and 4) should trade stand-off related weak sentiment punish more stocks, we would vew tat as an prtnty to ad hgh acever (m-to-gh s/t mar).EconomicsEconomicsChinaChinaTao HYPERLINK mailto:wang.tao +852-29717525Ning HYPERLINK mailto:ning.zhang +852-29718135Lei HYPERLINK

13、mailto:lei.meng +86-213-8668939Wendy HYPERLINK mailto:wendy.m.liu +852-37123785ThisreporthasbeenpreparedbyUBSSecuritiesAsiaLimited. ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURESBEGIN ONPAGE23. UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbe aware that the

14、 firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Key findings from the 4th wave of UBS Evidence Labs China CFO surveyThe 4th and latest China CFO survey of 558 cor

15、porates was conducted in late MarchandearlyApril2019(beforethetradewarescalationinearlyMay),whena trade deal looked likely and economic activities accelerated in March. Apart from regular questions about general business conditions, expectations and CAPEX intentions, there are also additional questi

16、ons about trade war impact andsupply chain shifts, as a follow-up to the HYPERLINK /shared/d2RfBVDGgc special trade war survey last November. The tradewarupdateportionoftheCFOsurveyhasalreadybeenpublished(see HYPERLINK /shared/d2a3CZzWuveyw The HYPERLINK /shared/d2a3CZzWuveyw Changing CFO Sentiment

17、on Trade War) and this report covers the results more holistically.More respondents expected stronger sales and new orders, but weaker margins. 78% and 73% of respondents anticipated higher revenues and an increase in domestic new orders, respectively, higher than 73% and 68% in the Aug-2018survey.T

18、hestrongercorporateexpectationinthesurveymayhavebeen supported by growth acceleration in March and positive sentiment on trade war development when the survey was conducted. Sentiment since then may have deteriorated as trade war escalated and growth momentum slowed. That said, more respondents expe

19、cted a lower profit margin than previously, althoughmore citedlowercorporatetaxasapositiveformargins,thelattermayreflecttherecent taxcuts.Weexpectcorporateprofittodeceleratein2019.Inparticular,largefirms continuedtobemoreoptimisticthanmediumandsmallpeers,andwecontinueto prefer large caps over small

20、caps thisyear.CAPEX intention stayed solid but may face more headwinds. 64% of respondentsplannedtoincreaseCAPEXinthecomingyear,upfrom61%inAug- 2018butlowerthan69%inJan-2018.HoweverthoseplanningtocutCAPEXalso rosemarginallyto15%,likelyindicatingrisinguncertainties.Industrialmachinery, IT and consume

21、r staples showed higher CAPEX intention. Research & development, upgrade of equipment & machinery and inventory & other working capital are top 3 areas of corporate investment allocation, slightly morepreferred by respondents than Aug-2018. We think the corporate CAPEX intention is likely underpinne

22、dbypolicyeasing&supportsinceH22018andpositivesentimentfor tradewar,thelatterofwhichhowevershouldhavedeterioratedafterthesurvey.Credit easing has been felt, but 50% of respondents (albeit fewer SME) stillsawhighercreditcosts.MorerespondentsthanlastAugustreportedeased credit access (51%) and lower cre

23、dit cost (27%) in the past 12 months, thanks to Chinas policy easing. Looking forward, more respondents (31%) than before thoughttighteningofoverallcreditconditionisunlikely,especiallyforbankloans. That said, 54% of respondents still expected a higher credit cost, slightly higher than52%inAug-2018.N

24、evertheless,fewersmall/mediumfirmssawhighercredit cost than large respondents, likely thanks to the governments recent efforts to support SMEs and the private sector. In the coming months, we expect Chinas overall credit growth to resume rebounding to 11.5% at end-2019 (from 10.4% in April),andavera

25、gecreditcosttofallmodestlyalbeitwithoutanycutinbenchmark lending rates, thanks to continued crediteasing.Better trade war sentiment, but more companies feeling negative effects and supply chain shift likely to accelerate. In late March and early April, 44% of respondents expected a trade deal soon,

26、up from 28% last November, and 73% expected an increase of new export orders in the next 12 months, higherthan both the Nov and Aug 2018 surveys. However, more respondents reported negativeeffectsfromthetradewarthaninNovember.Notablyonly10%ofthose affected said they have laid off workers and 81% (vs

27、 73% previously) reported some difficulties of recruitment, suggesting a resilient labour market. However, 31% of negatively affected companies plan to cut jobs in the next 6 months.38% ofthosenegativelyaffectedsaidtheyhavecutdomesticCAPEX.Inaddition,about 50% planned to move part of export producti

28、on outside of China in 2019. The direct negative impact of a supply chain moving out of China on overall FAI is relativelysmall,buttheindirectimpactthroughweakerprofitabilityandsentiment may be larger. We expect China manufacturing FAI to slow to 2% in 2019 from 9.5% in 2018.China equity strategy vi

29、ews: This survey likely indicates that listed corporate profits may stay subdued in the rest of 2019 on moderating revenue growth and margin pressure, while tax & fee cuts could provide some offset. Our short-term tacticalcallistotriminternet/financials/autosinfavourofdefensivesinanticipation offurt

30、herde-riskingbeforeeasing.Shouldtradestand-offrelatedweaksentiment punish more stocks, we would view that as an opportunity to add high aher (mid-to-hgh gro/nt margn) among the hne ito. In terms of style,wecontinuetopreferlargecapsoversmallcaps.Forsectorallocations,we prefer consumer related sectors

31、 with more hiring difficulties boding well for household disposable income growth, and cautious over industrial automation demand outlook owing to weaker CAPEX outlook.How has Chinas corporate sentiment changed?Stronger sales expectation but weaker margin outlookRespondents were more optimistic for

32、future sales revenue and new orders than last August. 78% of the respondents expected higher revenue in the next 6 months, up from 73% in the Aug-2018 survey and 74% in the Jan- 2018 survey. Respondents confidence in domestic and export new orders both increased.73%ofallrespondentsexpectedbetterdome

33、sticneworders(upfrom 68% in Aug-2018). Among the firms that export products and/or services, 75% expectedanincreaseinnewexportorders,upfrom68%intheprevioussurvey.The stronger corporate sentiment in this survey may have been boosted by a big acceleration in March activities and positive sentiment for

34、 trade war development when the survey was conducted. The trade war escalation in early May and recent growth momentum slowdown may have weighed on the corporate sentiment after the survey.Figure 1: Business outlook for sales revenue over the next 6 months11%67%12% 9%11%62%17% 10%10%64%17% 9%8%70%13

35、% 8%Apr 201911%67%12% 9%11%62%17% 10%10%64%17% 9%8%70%13% 8%Figure 2: Business outlook for sales revenue over the next 6 months by sectorMaterials Industrials Real FinancialsMaterials Industrials Real FinancialsConsumerDiscretionaryConsumer StaplesIT Telecommunication ServicesHealth OverallJan2018Ju

36、ly 20170%20%40%60%100%SignificantlyincreaseSomewhatincreaseStaythesameSomewhat Significantlydecrease0% 20% 40% 60% 80% 100%SignificantlyincreaseSomewhatincreaseSource: UBSEvidenceLabSource: UBS EvidenceLabFigure 3: Expected change in export new orders over the next 12 months9%66%15% 9%8%60%19%13%9%6

37、2%19%9%5%60%23%11%Apr 20199%66%15% 9%8%60%19%13%9%62%19%9%5%60%23%11%Figure 4: Expected change in domestic new orders over the next 12 months13%60%18%9%11%57%24%7%11%54%27%7%8%61%22%8%Apr 201913%60%18%9%11%57%24%7%11%54%27%7%8%61%22%8%Aug2018Aug2018Jan2018Jan2018July2017July20170%20%40%60%80%Signifi

38、cantlyincreaseSomewhatincreaseStaythesameSomewhatdecrease Significantlydecrease0%20%40%60%80%100%SignificantlyincreaseSomewhatincreaseStaythesameSomewhat SignificantlydecreaseSource: UBSEvidenceLabSource: UBSEvidenceLab.Forrespondentsthatexportproductand/orservices.But more respondents expected a lo

39、wer profit margin. Even before the recent trade war escalation, corporate outlook for profit margin became more cautious, with 24% of firms anticipated a lower profit margin, higher than 18% in theAug-2018survey,whilethoseseeingahighermarginedgeddownto49%.By sector, materials, consumer discretionary

40、 and utilities are the sectors with most firms expecting a profit margin fall over the next 12 months. In fact, the profit marginsfornon-financialA-shareshavebeenunderdownwardpressurerecently.More expected lower corporate tax a positive factor for profit margins. For the factors that influence profi

41、t margins, fewer respondents cited rising corporate taxesasanegativefactorforprofitmarginsthantheAug-2018survey,whilemore respondentsbelievedlowercorporatetaxescouldsupportprofitmargins.Thisisin linewithourviewsabouttax&feecutsthisyear(see HYPERLINK /shared/d2sqrDIHv9djZT NPCmeetingtakeawayand HYPER

42、LINK /shared/d2wRao5YADH implications for equity market from tax cuts).Figure5:Expectationforprofitmarginoverthenext12 monthsFigure 6: Expectation for profit margin over the next 12 months by sectorApr 2019 2%48%26%22% 2%HealthCareConsumer StaplesAug 2018 2%Jan 2018 3%48%46%31%29%17% 1%19% 2%Informa

43、tion TechnologyOverallOverallReal Telecommunication ServicesJuly 2017 2%46%28%22% 1% ConsumerDiscretionaryMaterials0%20%40%60%80%100%RisesharplyRisemodestlyRemainFallmodestlyFall sharply0% 10% 20% 30% 40% 50%FallmodestlyFall sharplySource: UBSEvidenceLabSource: UBS EvidenceLabLimited growth multipli

44、er, positive for profits. Of the total tax & fee cuts of RMB 2 trillion planned for 2019, the corporate sector would enjoy reduction of 1.6-1.7 trillion. We think tax & fee cuts this year will have HYPERLINK /shared/d2sqrDIHv9djZT limited multiplier effect in boosting CAPEX and growth, but could sup

45、port corporate profits and cash flows.WeestimateVATcollectedfromA-sharecompanieswilldecreasebyaround RMB 190 billion. Firms with stronger pricing power should see more tax savings andthereforeenhancedprofitability.Chemical,ConstructionMaterial,Realestate and Auto sectors are more likely to benefit.

46、We estimate a 4ppts cut in pension contributions could raise net profits of all A-share companies by 1.6% (2.2% for non-financials) (see more discussions HYPERLINK /shared/d2wRao5YADH here).Corporate profits may face downward pressure in 2019. Chinas industrial profits have cooled down visibly from

47、10% in 2018 (-1%y/y in Q4 2018) to -3% in the first 4 months of 2019. Industrial revenue grew by 5% YTD 2019, only modestly lower than 9% in 2018. Given lingering downward pressure and trade war escalation, we think corporate profits is likely to stay subdued in the rest of 2019,whiletax&feecutscoul

48、dprovidesomeoffset. HYPERLINK /shared/d2iZwXA73hOMx/ A-sharetotalearningsfellby 44.5% in Q4 and rose by 9.8% in Q1, which may have been distorted by large amounts of Q4 goodwill write-offs and other charges. However, there is little evidence of revenue growth re-acceleration so far, as A-share top-l

49、ine growth for non-financials continues to slow from 13.6% in 2018 to in 10.5% in Q12019.Figure 7: Expectation for the factors that will cause profit margin to fall over the next 12 monthsOther factor not mentionedHigher corporate taxes Higher interest paymentsLess pricingpowerHigher non-labor input

50、 costsHigher labor costs0%20%40%60%80%Figure 8: China industrial profit breakdownIndustrial profit growth, ex mining (% y/y, 3mma) 40Due to profit margin Due to profit margin Due to revenuegrowthIndustrial profit growth, ex mining302520151050-5Apr 2019Aug 2018Jan2018July2017111213141516171819Source:

51、 UBSEvidenceLabSource: CEIC, UBSestimatesFigure 9: A-share revenue growth (quarterly, YoY, all A- shares and non-financials)Figure 10: A-share non-financials gross and net margins (quarterly)35%30%25%20%15%10%5%0%-5%-10%Q111 Q411 Q312 Q213 Q114 Q414 Q315 Q216 Q117 Q417 Q318AllA-shares(quarterly)Non-

52、financial A-shares(quarterly)21%20%19%18%17%GrossmarginNetmargin7.0%6.0%5.0%4.0%3.0%2.0%1.0%0.0%Source: Wind,UBSestimatesSource: Wind, UBS estimatesFigure 11: UBS top-down A-share earnings estimatesProfit growth (YoY)201420152016201720182019EA-shares7.4%2.4%6.9%18.7%-1.5%5.7%Non-financials2.0%-10.0%

53、25.4%32.5%-4.8%3.0%Financials12.0%11.9%-4.7%7.2%2.0%8.7%Source: Wind, UBS estimatesHigher capacity utilization, more positive for large firmsLower inventory and higher capacity utilization. 27% of the respondents said theirinventorylevelwerelowerthantheaverageoverthepast5years,compared with 21% in t

54、he previous survey. Moreover, 65% of respondents expected capacitytomoveto/abovefullutilisationoverthenext12months,upfrom63%in theprevioussurvey.Chinasaverageindustrialcapacityutilizationratehasstayed modestlyhighataround76%inrecenttwoquarters,slightlylowerthanlate2017and H1 2018 but much higher tha

55、n that in 2016. The survey showed that supply capacity consolidation may continue.Figure12:Currentinventorylevelcomparedtoaverage level over the past 5yearsFigure 13: Expected change in capacity utilisation over the next 12 monthsApr 201935%35%27%Apr 2019Aug 201837%36%21%6%Aug 2018Jan2018July201724%

56、33%39%38%32%26%Jan2018July20170%4%29%57%8%6%30%55%8%7%28%58%7%7%29%4%29%57%8%6%30%55%8%7%28%58%7%7%29%54%8%40%60%100%0%20%40%60%80%100%HigherSameLowerWe dont hold anyinventoryContinue to have plenty of spare capacity Sparecapacitywillbegintotightenmaterially Capacity will move to fullutilisationCapa

57、city will move above full utilisationSource: UBSEvidenceLabSource: UBS EvidenceLabStaffing more challenging, but trade war may lead to more lay-offs. 81% of respondents expected employee staffing to become at least somewhat challenging(comparedwith70%inAug-2018survey).Theincreaseinrecruitment costs

58、is still the biggest challenge, followed by difficulty in retention. However, among 365 respondents that reported negative impact from the trade war, 10% have laid off employees and 23% lowered wages due to trade war, while 31% plan to cut jobs in the next 6 months.Figure 14: Change in employee staf

59、fing over the past few yearsFigure 15: Key drivers of increased challenges in employee staffing7%74%10% 9%6%64%20%7%8%66%16% 8%7%70%16% 7%Apr20197%74%10% 9%6%64%20%7%8%66%16% 8%7%70%16% 7%Aug2018Jan2018July20170%20%40%60%Much more challenging Somewhat more challenging100%100%More recruitment costsDi

60、fficult in retentionInternal training and development issuesReduced employee Skill shortageNo changeJuly2017Jan2018Aug 2018Apr 2019Source: UBSEvidenceLabSource: UBS EvidenceLabFromthemacroperspective,Chinaslabourmarkethasbeenrelativelyresilient YTD2019,withsurveyedbasedunemploymentrateedgingdownto5.