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Sportswear: Faster-than-expected recovery in May; upgrade to OVERWEIGHT.
Sportswear brands reported positive May sales growth, helped by store re-openings, traffic resumption, consumption vouchers and product discounts. Liquidation of old inventory looks orderly and has not impacted new collections, offsetting our earlier fears. We expect more positive news flow in 2Q20, with the market reacting constructively. Upgrade to OVERWEIGHT on the positive momentum and the fasterthan- expected recovery materialising in 2Q20.
Coal: Supply tightness supports the recent coal market rally, but this will not be sustainable in 3Q20.
Domestic thermal coal prices have rebounded by 17% since 10 May 20 to Rmb542/tonne currently. Coal inventory levels at ports remain on a downtrend due to supply side limitations; stocks at the QHD port are now 42% below the average in May. IPPs’ daily consumption is back to pre-COVID-19 levels, pointing to recovering economic activities. However, the strong uptrend may be unsustainable, given the recovery in domestic coal supply. Maintain UNDERWEIGHT on the coal sector.
Automobile: Retail sales growth returned to positive mode in May; HDT sales spiked 62% yoy. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda.
In the last week of May, retail sales growth of PVs returned to positive mode, while growth momentum of wholesale shipments moderated. According to dealers, the growth in retail sales was mainly driven by price cuts, especially for Chinese brands. Luxury brands are holding up their product prices well, though inventory days edged up from April to May. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda.
Greater China Daily: Friday, June 5, 2020
KEY HIGHLIGHTS Sector Automobile Retail sales growth returned to positive mode in May; HDT sales spiked 62% yoy. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda. Coal Supply tightness supports the recent coal market rally, but this will not be sustainable in 3Q20. Sportswear Faster-than-expected recovery in May; upgrade to OVERWEIGHT. TRADERS’ CORNER Goldwind (2208 HK): Trading Buy Range: HK$7.83-7.84 NagaCorp (3918 HK): Trading Buy Range: HK$10.34-10.36
Desmond Chong Chee Wai ...
- Jacquelyn Yow Hui Li
- Jonathan Koh
- Ken Lee
- Kong Ho Meng
- Kwanchai Atiphophai
- Leow Huey Chuen
- Neo Chen Wentao
- Raphon Prima
- Robin Yuen
- Sandra Huang Jieqiong
- Singapore Research Team
- Ziv Ang Sze Champ
Regional Morning Notes - Friday, June 05, 2020
GREATER CHINA Sector Automobile: Retail sales growth returned to positive mode in May; HDT sales spiked 62% yoy. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda. Coal: Supply tightness supports the recent coal market rally, but this will not be sustainable in 3Q20. Sportswear: Faster-than-expected recovery in May; upgrade to OVERWEIGHT. INDONESIA Update Bank Negara Indonesia (BBNI IJ/BUY/Rp4,140/Target: Rp6,175): Temporary spike in 2020 credit costs. MALAYSIA Sector Oil & Gas: We upgrade our sector valuation to >US$40/bbl on a potential U-shaped recovery, and see selec...
China Economics: US-China trade war escalation piles further pressure on weak Renminbi.
Trade tensions between the US and China reached a new high on 23 Aug 19 as retaliations from China were swiftly met with further tariff hikes and threats from the US. The higher tariffs will bring further pressure on China’s external balance; hence we are lowering our USDCNY forecast to Rmb7.20 at end-19 and Rmb7.60 at end-20.
Sportswear: Faster-than-expected recovery in May; upgrade to OVERWEIGHT.
Sportswear brands reported positive May sales growth, helped by store re-openings, traffic resumption, consumption vouchers and product discounts. Liquidation of old inventory looks orderly and has not impacted new collections, offsetting our earlier fears. We expect more positive news flow in 2Q20, with the market reacting constructively. Upgrade to OVERWEIGHT on the positive momentum and the fasterthan- expected recovery materialising in 2Q20.
Coal: Supply tightness supports the recent coal market rally, but this will not be sustainable in 3Q20.
Domestic thermal coal prices have rebounded by 17% since 10 May 20 to Rmb542/tonne currently. Coal inventory levels at ports remain on a downtrend due to supply side limitations; stocks at the QHD port are now 42% below the average in May. IPPs’ daily consumption is back to pre-COVID-19 levels, pointing to recovering economic activities. However, the strong uptrend may be unsustainable, given the recovery in domestic coal supply. Maintain UNDERWEIGHT on the coal sector.
Automobile: Retail sales growth returned to positive mode in May; HDT sales spiked 62% yoy. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda.
In the last week of May, retail sales growth of PVs returned to positive mode, while growth momentum of wholesale shipments moderated. According to dealers, the growth in retail sales was mainly driven by price cuts, especially for Chinese brands. Luxury brands are holding up their product prices well, though inventory days edged up from April to May. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda.
Greater China Daily: Friday, June 5, 2020
KEY HIGHLIGHTS Sector Automobile Retail sales growth returned to positive mode in May; HDT sales spiked 62% yoy. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda. Coal Supply tightness supports the recent coal market rally, but this will not be sustainable in 3Q20. Sportswear Faster-than-expected recovery in May; upgrade to OVERWEIGHT. TRADERS’ CORNER Goldwind (2208 HK): Trading Buy Range: HK$7.83-7.84 NagaCorp (3918 HK): Trading Buy Range: HK$10.34-10.36
Desmond Chong Chee Wai ...
- Jacquelyn Yow Hui Li
- Jonathan Koh
- Ken Lee
- Kong Ho Meng
- Kwanchai Atiphophai
- Leow Huey Chuen
- Neo Chen Wentao
- Raphon Prima
- Robin Yuen
- Sandra Huang Jieqiong
- Singapore Research Team
- Ziv Ang Sze Champ
Regional Morning Notes - Friday, June 05, 2020
GREATER CHINA Sector Automobile: Retail sales growth returned to positive mode in May; HDT sales spiked 62% yoy. Maintain MARKET WEIGHT. Top picks: Weichai, DFM, Brilliance and Yongda. Coal: Supply tightness supports the recent coal market rally, but this will not be sustainable in 3Q20. Sportswear: Faster-than-expected recovery in May; upgrade to OVERWEIGHT. INDONESIA Update Bank Negara Indonesia (BBNI IJ/BUY/Rp4,140/Target: Rp6,175): Temporary spike in 2020 credit costs. MALAYSIA Sector Oil & Gas: We upgrade our sector valuation to >US$40/bbl on a potential U-shaped recovery, and see selec...
Economics: PMI - Worsening employment outlook outweighs the positives
China’s official manufacturing PMI retreated to 50.6% but non-manufacturing PMI rose to 53.6% in May 20, likely boosted by the sustained recovery in construction activities as well as a pick-up in demand mom during the May Golden Week. We would like to highlight the declines in both employment sub-indices as a key concern, considering the NPC has repeatedly emphasised “stabilising employment” as the main priority in the absence of a GDP growth target in 2020.
Economics - Two Sessions Beyond The Government Work Report
Upon conclusion of the Two Sessions, we note that the 2020 draft Budgets largely complement key policy goals put forth in the GWR. Meanwhile, the NDRC’s Development Plan for 2020 is primarily angled towards the attainment of China’s 13th FYP goals. Premier Li re-iterated the importance of keeping to the bottom line of targeted easing and ensuring “Six Security” for positive economic growth in 2020. Further policy support could also be promptly introduced if necessary.
Economics: 2020 Government Work Report - Employment and business survival vital for now; lower 2020 GDP growth forecast to 0% yoy.
In the absence of a GDP growth target for 2020, macroeconomic policies in the GWR were largely underpinned by the “twin pillars” of employment and SME survival. While the change in wordings and notable absence of phrases such as “keeping macro leverage ratio stable” point to room for further easing in 2H20, policies to prop up consumer spending were overly vague. Slash 2020 retail sales growth forecast to 0.5% yoy and lower full-year GDP growth forecast to 0% yoy accordingly.
Jayson Kong ...
- Julia Pan Mengyao
- Lee Yuk Kei
- Neo Chen Wentao
- Robin Yuen
- Sandra Huang Jieqiong
- Tham Mun Hon
- Vanness Wong Wan
Greater China Daily: Monday, May 18, 2020
KEY HIGHLIGHTS Economics Economic Activity Consumption still not pulling its weight; all eyes now on the Two Sessions. Results AAC Technologies (2018 HK/HOLD/HK$42.65/Target: HK$42.00) 1Q20: The worst quarterly earnings, but no V-shaped rebound. JD.com (JD US/BUY/US$48.96/Target: US$56.00) 1Q20: Results triple beat; guides revenue growth of 20-30% yoy in 2Q20. Update Ganfeng Lithium Co (1772 HK/BUY/HK$27.55/Target: HK$34.00) Lithium industry recovery to be further delayed on pandemic impact; long-term prospects remain intact. Xtep (1368 HK/BUY/HK$2.74/Target: HK$3.50) Retail recovery...
Economics: Economic Activity - Consumption still not pulling its weight; all eyes now on the Two Sessions
China’s key economic activity indicators remained on a recovery path as IP and retail sales growth improved to 3.9% yoy and -7.5% yoy respectively in Apr 20 while FAI growth recovered to -10.3% yoy in 4M20. The 6.2% mom growth in FAI reflects China’s push towards normalisation but retail sales growth of 0.3% mom in Apr 20 shows a lag in consumption recovery. Our attention now turns to the Two Sessions starting on 21 May 20, where key economic targets for 2020 will be announced.
Ivy Xu Da ...
- Joyce Chan Pui Lai
- Julia Pan Mengyao
- Nick Liu Sunliang
- Oscar Jiang
- Robin Yuen
- Shaun Tan
Greater China Daily: Wednesday, October 9, 2019
KEY HIGHLIGHTS Sector Consumer Observations from National Day Golden Week. Internet Volume growth slowing down, tourism spending increasing. Property Housing sales volume exceeds expectations. TRADERS’ CORNER China Res Beer (291 HK): Trading Buy Range China Res Gas (1193 HK): Trading Buy Range
Greater China Daily: Friday, October 4, 2019
KEY HIGHLIGHTS Sector Automobile BMW may skip special rebates to dealers for 3Q19, pressuring dealers’ new car sales margins. REITs & Landlords Office & retail: Uncertainties may linger; downgrade to MARKET WEIGHT. Sportswear Channel checks suggest a healthy 3Q19. TRADERS’ CORNER Haidilao (6862 HK): Trading Buy Range Café de Coral (341 HK): Trading Buy Range
Strategy - Alpha Picks: Greater China October Conviction List
As we continue to expect market volatility, we maintain exposure to names that have resilient earnings or are expected to enjoy an earnings growth recovery, such as Ausnutria Dairy (1717 HK), CSPC (1093 HK) and Dongfeng Motor (489 HK), and add PICC P&C (2328 HK) to our BUY list.
Carol Dou Xiao Qin ...
- Greater China Research Team
- Johnny Yum Chung Man
- Joyce Chan Pui Lai
- Ken Lee
- Michael Cheung Ho Bun
- Tham Mun Hon
Greater China Daily: Thursday, October 3, 2019
KEY HIGHLIGHTS Strategy Alpha Picks: Greater China October Conviction List No change in strategy; adding PICC P&C to our BUY list. Initiate Coverage Shenzhen Mindray Bio-Medical Electronics Co (300760 CH/BUY/Rmb184.46/Target: Rmb235.00) Becoming a global medtech giant. Update China Yongda Auto Services Holdings (3669 HK/BUY/HK$6.59/Target: HK$9.00) Acquires a niche dealer of Porsche, Mercedes-Benz and Lexus at attractive valuation. TRADERS’ CORNER Conch Venture (586 HK): Trading Buy Range Lenovo Group (992 HK): Trading Buy Range