中国股市2020年展望：改革与创新.pdf

ubs/investmentresearch This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 67. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the 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. Global Research 26 November 2019 China Equity Strategy 2020 year-ahead outlook: reforms model portfolio changes We set end-2020 targets of 93/4,400/14,500/28,700 for MSCI-China/CSI-300/MSCI- HK/HSI. Details of our model portfolio changes are in Figure 120. Sector category Model portfolio stock picks (+/-1% weight changes) Weights (old) Weights (new) MXCN Rel. MXCN Consumer GAC (+), Shenzhou, Midea (+), Yanghe, TAL(-), Hualan Bio, Sino Biopharm (-) 18.9% 15.0% 15.4% EW Financials CCB-H, ICBC-H, Huatai-H, Ping An (-), CPIC-H (-), PICC P Green Innovations and tech leaders; Blue Regulations; Yellow Maturing industry; Black Multiple drivers) Source: UBS Hong Kong in 2019 We think the biggest surprise in 2019 for Chinese equities was Hong KongChinas offshore financial centre. Hong Kong experienced social unrest since June. Hong Kong: from manufacturing to services to finance We illustrate Hong Kongs GDP growth since 1970 in Figure 5. Through the late 80s, jobs and income were more distributed when manufacturing was a core part of the local economy. But as finance became a large mix of local economy, higher-paying jobs became more concentrated among a smaller number of residents, particularly after 2000. Manufacturing prevailed prior to Chinas opening-up. After the manufacturing sectors ascent in the 1960s, its growth gradually moderated in the mid-1970s. The prosperity of the 60s and 70s led to rising demand for residential and commercial properties, and the newly arrived equity markets facilitated the listing of large local property companies in the 1970s-80s. Manufacturing relocated; services grew after Chinas opening up. Mainland Chinas opening up attracted Hong Kong manufacturers to move to its coastal provinces and utilise the cheaper local labour and resources locally. It also opened up a vast market for merchandise imports into mainland China. Consequently, Hong Kong relocated manufacturing to the mainland, and grew its service sectors in the city. k12 after school tutoring (TAL, EDU) Battery equipment (Wuxi Lead, Yinghe Tech) Liquid milk (Yili, Mengniu)Home appliances (Midea, Haier) Independent power producers (Huaneng)Custom furniture (Oppein) Laser (Hans Laser) Retailing (Yonghui) Beer (CR Beer) Coal (Shenhua Energy)Healthcare services (Aier, Topchoice) NEV (Geely) Hotel (Jinjiang) Baijiu (Moutai) Panel (TCL) Steel (Baoshan Iron the import and export industrys share of GDP has remained flat since 2010 but its annual contribution to employment decreased from 15.1% in 2000 to 10.5% in 2018. But finance is capital intensive, not labour intensive. As finances mix in GDP grew, the share of the population benefiting from its well-paid jobs remained a low mix of total employment (Figure 6-Figure 7). Figure 6: Hong Kongs GDP composition Figure 7: Hong Kongs employment composition Source: CEIC, UBS Source: CEIC, UBS -10%0%10%20%30%40%50%050100150200250300350400Nominal GDP (USD mn) Nominal GDP growth (y-y, RHS)1972: CKH and SHKP were listed1978: The Chinese economic reform started after the 3rd plenum of the 11th Central Committee1997: HK reunification1997-98: Asian financial crisis2007-08: Global financial crisis1984: Sino-British Joint Declaration was signed1986: The Stock Exchange of HK (SEHK) commenced trading1993: First H-share (Tsingtao Brewery) was listed in HK2000: HKEx and MTR were listed2003: the SARS outbreak2014-2017: Stock connect program and Bond connect program commenced2009: HK introduced the pilot scheme for offshore RMB settlement1980-81: Hang Lung/Sino /HLD/Hysan were listedImport & Export Wholesale & Retail Financial & Insurance Public Adm, Social & Personal Service Ownership of Premises Construction Real Estate 0%10%20%30%40%50%60%70%80%90%100%2000200120022003200420052006200720082009201020112012201320142015201620172018Import & Export Trade Transport, Storage, Postal etc. Retail Accommodation & Food Services Financing +Insurance Prof & Business Svc Human Health & Social Work Activities Education Construction Other Services 0%10%20%30%40%50%60%70%80%90%100%2009201020112012201320142015201620172018China Equity Strategy 26 November 2019 8 Since the 90s, MSCI-HK net profit margins have been close to 20% This is a reflection of large below-the-line investment and associate income, and the fact that listed Hong Kong companies were capitalising on the citys strong inflows of new residents, travellers and capital. Figure 8: MSCI HK: revenue growth and earnings growth Figure 9: MSCI HK: net profit margins Source: DataStream, IBES, UBS Source: Thomson Reuters, DataStream, IBES, UBS estimates Such rent-seeking business model and the citys inability to expand its housing stock led to world-leading property prices. Hong Kongs property outperformed the MSCI-HK since 2015 (Figure 10). Figure 10: Hong Kongs property outperformed equity since 2015 Source: DataStream, Centadata, UBS Shenzhen started out by learning from Hong Kong Across the Shenzhen River to the north of Hong Kongs new territories, Shenzhens Special Economic Zone was established on 26 August 1980. It had stretches of rice paddies, some farm equipment factories, and fewer than 310,000 permanent residents. Since then, Shenzhen has learned from Hong Kong and developed its own manufacturing base and much more. We show Shenzhens GDP growth trajectory in Figure 11. We note that many of todays business leaders in China (internet, tech, financials) established themselves in Shenzhen in the late 80s and 90s. -50%-40%-30%-20%-10%0%10%20%30%40%50%60%1987198919911993199519971999200120032005200720092011201320152017MSCI HK - y-y revenue growth (IBES)MSCI HK - y-y earnings growth (IBES)-10%0%10%20%30%40%50%60%70%MSCI HK - net margin (IBES)MSCI HK - net margin (adjusted universe aggregate)-100%-80%-60%-40%-20%0%20%40%60%80%100%-100%-50%0%50%100%150%200%250%19941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019CCL Index growth since 1994 MXHK growth since 1994HSI growth since 1994 CCL Index y-y growthChina Equity Strategy 26 November 2019 9 Figure 11: Shenzhens GDP development and some key events over past decades Source: Shenzhen Government, Company data, UBS Figure 12 shows Shenzhens GDP composition since its open-up. Industrials, a labour-intensive sector, stayed elevated at near 40% of Shenzhens nominal GDP. Financials, retailers and property are also key contributors to Shenzhens economy. This is a direct result of Shenzhens land policy which has kept its industrial land allocation elevated. Figure 12: Shenzhens GDP composition: industrials led at c39% (2018) Source: Statistics Bureau of Shenzhen, UBS More broadly, mainland China followed Hong Kongs land and property development practices early on. But it subsequently learnt from Japans Heisei Boom and Singapores public housing system. Hence (Figure 13), since 2012, housing prices and stock prices have tended to move in opposite directions. Furthermore, since 2017, the mainland property market came under greater scrutiny for social reasons. As a city holding the most expensive properties in -20%-10%0%10%20%30%40%50%60%70%050100150200250300350400Shenzhen: Nominal GDP (USD bn) Shenzhen: Nominal GDP growth (RHS)1980: Shenzhen (SZ) Special Economic Zone was established 1990: Shenzhen Stock Exchange was established 1984: Xiaoping Dengs first visit to SZ 1992: Xiaoping Dengs second visit to SZ 1997: Hong Kong reunification 1995: BYD was founded in SZ 1998: Tencent was founded in SZ 2006: DJI was founded in SZ 2010: All SZ districts were included in the Special Economic Zone 2017: SZs GDP exceeded Guangzhou 2018: SZs GDP exceeded Hong Kong 1987: Huawei was founded in SZ 1988: Ping An was founded in SZ 2019: SZ set to become “a model city“ for implementing wide-raning reforms Industrials Construction Transports, etc. Wholesale and retail sales Hotels and catering services Financials Real estate Others 0%10%20%30%40%50%60%China Equity Strategy 26 November 2019 10 China, Shenzhens government aims to address the housing issue with a long-term plan of building 1.7m housing units from 2018 to 2035, with 60% (over 1m) public housing, half of which are to be for rental. Figure 13: Property vs equity prices in mainland China have rotated Source: Wind, National Bureau of Statistics of China, UBS More importantly, Shenzhen focused on growth via innovation Figure 14: Asian metropolis: GDP and GDP per capita Figure 15: Shenzhens R&D as a % of GDP reached 4.2% in 2018 Note: *2018 projection data. *2017 data. For data reported in local currency, average exchange rate in 2018 is used when converting to USD. Source: CEIC, World Bank, National Bureau of Statistics of China, Tokyo Metropolitan Government, Statistics Korea, UBS Source: World Bank, Xinhuanet, UBS 0100020003000400050006000-10-505101520200520062007200820092010201120122013201420152016201720182019(%) Monthly price index growth of new residential property in 70large/medium-size city (yoy, old index till 2017)Monthly price index growth of new residential property in 70large/medium-size city (yoy, new index since 2010)SHANGHAI SHENZHEN CSI 300 - PRICE INDEX (RHS)70,307 20,417 21,205 28,669 64,582 48,717 23,516 33,704 010,00020,00030,00040,00050,00060,00070,00080,00002004006008001,0001,2002018 nominal GDP (USD bn) 2018 GDP per capita (USD, RHS)4.6% 4.6% 4.2% 3.2% 3.0% 2.8% 2.1% 0.8% 0.0%1.0%2.0%3.0%4.0%5.0%Israel(2017)Korea(2017)Shenzhen(2018)Japan(2017)Germany(2017)US (2017) China(2017)HK(2017)R&D as % of GDP