Nov 9,2018
Economic Acumen
Commentary by CEBI Research Team

The Fed to keep rates on hold while hinting rate hike in December


At the conclusion of the seventh Federal Open Markets Committee (FOMC) policy meeting in 2018 on 8th November, the U.S. Federal Reserve (the Fed) left the target range of the Fed fund rates (FFR) unchanged at 2.0% to 2.25%.
The Fed reiterated that job creation and household spending grew strongly along with moderated growth in business fixed investment, keeping the unemployment rate at low level. Both overall inflation and core inflation stayed at above 2% on a yearly basis, reflecting stable upswing in pricing pressures of the U.S economy.
Despite global growth headwinds, the Fed is still optimistic on the resilient growth momentum of the U.S. economy with which gradual rate hike cycle remains intact to ensure price stability and prevent U.S. economy from overheating. We believe there will be one more rate hike in 2018.





Oct 31,2018
Economic Acumen
Commentary by CEBI Research Team

Hong Kong economic momentum to turn softening


Echoing global headwinds in the form of on-going trade disputes, interest rate hike, decelerating global growth momentum and escalation of geo-political risks, Hong Kong (HK) economy is seen to face easing of economic activities.
For domestic environment, the theme for 2019 outlook will be the shift to the balance of growth drivers, with consumption and investment rather than external trade contributing more to economic growth. For external environment, gradual U.S. rate hikes and slowing China's economic growth remain as the key threats to HK economy.
The recent openings of the Guangzhou-Shenzhen-Hong Kong Express Rail Link and Hong Kong-Zhuhai-Macau mega bridge enhance economic links with China which will spur HK economic benefits.
We remain positive towards HK economic growth on the back of balanced and solid economic fundamentals. For 2018 and 2019, we forecast HK economy to grow modestly by 3.6% and 3.0%.





Oct 19,2018
Economic Acumen
Commentary by CEBI Research Team

China’s economic strength weakened in 3Q2018


China's third-quarter economic activities for 2018 witnessed a slowing growth momentum with GDP surging at 6.5% YoY, below consensus estimate of 6.6%, 2Q2018's 6.7% and 1H2018's 6.8%,with growth of fixed asset investment (FAI), industrial production and retail sales decelerating in vary degrees from previous quarters while job market pointed to stable trend.
In sum, China's economy still maintained a stable growth of 6.7% YoY in the first nine months of 2018. Looking forward, the escalation of trade tensions, the U.S. monetary tightening and weakness of renminbi remain as the major downside risks of China's economy in coming quarters.
We believe China's macroeconomic conditions remain stable and the economy will expand by 6.5% YoY in 4Q2018 with which GDP growth will reach 6.6% YoY in 2018.





Oct 8,2018
Economic Acumen
Commentary by CEBI Research Team

The PBOC’s fourth RRR cut in 2018


With the aim to boost the stable development of the real economy, optimize the liquidity structure of commercial banks and financial markets, lower financing costs, and support small businesses, private enterprise and innovation, the PBOC announced a cut of 100bp in the required reserve ratio (RRR), effective October 15, 2018.
This is the fourth RRR cut in 2018, reducing the RRR for big banks to 14.5 percent and for smaller banks to 12.5 percent. A net RMB 750 billion potential credits will be injected in the economy with which the cut releases around RMB 1.2 trillion in liquidity with RMB 450 billion of that to offset the maturing medium-term lending facility (MLF) loans.
Overall, the latest RRR cut along with the previous three RRR cuts in 2018, which unleashed trillions of liquidity in the market, help strengthen growth momentum of China's economy.





Sep 17,2018
Economic Acumen
Commentary by CEBI Research Team

China’s economic indicators showed stable growth in August


Amid the pessimistic market sentiment driven by the US-China trade disputes, U.S rate hikes and currency depreciation across emerging market (EM) economies, Chinafs economic indicators showed a mixed trend in August, with growth of fixed asset investment (FAI) decelerating further while industrial production and retail sales accelerating in varying degrees.
External trade showed modest growth even though the U.S. will be likely to impose tariffs on extra worth of USD 200bn Chinese goods. Inflation stayed uptrend on higher pork prices due to the outbreak of swine fever. Job market remained healthy as August survey-based urban unemployment rate dropped to 5.0% from July’s 5.1%. In general, China’s economic indicators for August maintained steady growth trend.
In the face of trade war and unstable economic conditions of some EM economies, the global economy is bracing for surging market volatilities that threaten global growth outlook with which China’s economy may be at risk of slowdown in coming quarters. We believe China policymakers will fine-tune both monetary and fiscal policies to strengthen momentum of growth in economic activities and China’s economy is rebalancing to attain more stable economic expansion.





Sep 10,2018
Economic Acumen
Commentary by CEBI Research Team

China’s trade remained steady in August despite fears of US-China trade war


Despite the escalating trade friction with the U.S., China's external trade has been surprisingly resilient in August with exports and imports growing at 7.9% YoY and 18.8% YoY. Trade surplus reached RMB 179.8bn.
However, the latest release of China's August official New Export Orders and Import Indexes, the sub-index of manufacturing PMI, fell to 49.4 and 49.1, signaling that external trade sector will experience contraction driven by the impact of trade war.
Pessimistic outlook for international trade driven by increasing trade tensions between the U.S. and the rest of the world has disrupted the global supply chain with which global trade will likely shrink to some extent in coming months.
In order to resist headwinds of trade war, the Chinese Ministry of finance announces to offer export tax refund for domestic manufactured products in selected sectors.





August 30,2018
Economic Acumen
Commentary by CEBI Research Team

China's environmental protection initiatives remain intact


The continuation of urbanization and rising hygienic standard of general population spur the demand for more investment in waste treatment facilities. Amid rising awareness of environmental pollution, China's current reliance on fossil fuels will be reduced by increasing use of more clean and renewable energy.
In general, China is stepping up efforts to protect the environment during the 13th Five-Year Plan (FYP) period (2016-2020) with which trillion of dollars are projected to invest in the environmental sector to enhance environmental quality.
Environmental sustainability is rapidly moving up the agenda for China and China's environmental service sector will benefit from rising government expenditures to tackle environmental issues.





August 21,2018
Economic Acumen
Commentary by CEBI Research Team

Dollar strength and trade disputes weighted on emerging markets


The second half of 2018 is clouding with a worsening global economic outlook amid heightened risks on trade disputes and dollar strength. Plunging Turkish Lira triggered by the U.S.'s doubling of tariffs on steel and aluminum imports from Turkey has set off a contagious wave of financial assets sell-off in emerging markets.
The Lira crisis reflects the concerns about the healthiness of EM economies with high levels of USD debt and reliance on external trade as the U.S. is stepping up efforts to negotiate better trade deals and raise interest rate with capital flowing out of EM.
In sum, tightening of liquidity to suppress potential hiking inflation in the U.S, deteriorating financial market conditions and loss of investors' confidence are at the root of surging market volatility. More intense volatility on the prices of EM financial assets is in sight with which the dollar rally and escalating trade tensions will deepen financial market turbulence.





August 14,2018
Economic Acumen
Commentary by CEBI Research Team

China’s economic indicators slowed in July


Amid the pessimistic market sentiment driven by the trade disputes with the U.S., China demonstrated a slow start of second half in the economic activities. China's economic indicators for July showed weakening trend, with growth in fixed asset investment (FAI), industrial production and retail sales decelerating in varying degrees while inflation remained mild.
Job market has been steadily growing as new urban jobs increased by 8.8 million in the first seven months of 2018, year-to-year rise of 0.25 million. July survey-based urban unemployment rate reached 5.1%. Although domestic demand showed decelerating trend, China's economy continues to retain the path of steady recovery.
In sum, domestic demand remains as the major driver of 2H2018 GDP growth and the policymakers will fine-tune economic policies to strengthen momentum of growth in economic activities.





August 9,2018
Economic Acumen
Commentary by CEBI Research Team

China’s inflation edged up in July


China's July CPI inflation edged up 2.1 % YoY (+0.3% MoM). The rise of inflation in July was attributable to surging month-to-month increase in non-food prices due to climbing price of petroleum and diesel, resulting 11.2% rise in transportation fuel YTD. 7M2018 CPI reached 2.0% YoY, reflecting stable uptrend of general price level.
Producers' prices posted a positive growth of 4.6% YoY (+0.1% MoM) in July. The extended rebounding of producer prices was mainly attributed to surging energy prices. The rise of factory prices during 7M2018 reached 4.0%, demonstrating an upward trend and reflecting the continuation of stable economic recovery.
In sum, although rising trade tensions between China and the U.S remain a concern for global economic outlook, the steady trend of consumer prices and factory-gate prices indicates that China's economic momentum remains resilient, supported by strong domestic demand and healthy global demand.





August 2,2018
Economic Acumen
Commentary by CEBI Research Team

China’s manufacturing sector expanded slowly at the start of 2H2018


China's manufacturing PMI for July edged down to 51.2 from 51.5 last month. The downtrend also extended to the services sector, as non-manufacturing PMI for July moderated to 54.0 against 55.0 in June.
Economic activities in manufacturing sector expanded at a decelerating pace in July on the effects of adverse weather and escalating global trade tensions with which most manufacturing sub-indices worsened, reflecting that manufacturing activities are slowing with demand continuing to wane.
Given the ongoing trade disputes with the U.S, the tightening measures of property market and push for financial deleveraging, China's economy will face varying degrees of economic fluctuations in 2H2018.
Proactive fiscal programs to support domestic demand along with moderately tightened monetary policy help create a favorable environment to revive growth. We believe the China's economic fundamentals remain resilient and the economy will expand by 6.5% YoY in 2H2018 with which 2018 GDP growth will reach 6.6% YoY.





August 1,2018
Economic Acumen
Commentary by CEBI Research Team

The Fed to keep rates on hold while hinting more rate hikes in 2018


The U.S. Federal Reserve (the Fed) voted unanimously to leave target range of the Fed fund rates (FFR) unchanged, at 1.75% to 2.0%. The Fed pointed out that job creation, household spending, and business fixed investment grew strongly, keeping the unemployment rate at low level while both overall inflation and core inflation stayed at above 2% on a yearly basis, reflecting upswing in pricing pressures of the U.S economy.
Amid the Fed's optimistic assessment on the resilient growth momentum of the U.S. economy, we expect that there will be two more rate hikes in 2018, likely one in September and one in December.
The increasing likelihood of rate hikes in coming months and the escalating trade tensions between China and the U.S. are posing downside risks to the global economy, which will further enhance market volatility and weaken market sentiment over investment.
Market concerns over corporate earnings risks lead to a high risk premium for equity investments. For 2H2018, global equity markets will follow a much more volatile path due to rising protectionist sentiment in the U.S.





July 25,2018
Economic Acumen
Commentary by CEBI Research Team

China to continue fending off property market speculation in 2H2018


China's June property prices demonstrated a fast pace of growth in 20 months, posting month-to-month acceleration of new home prices in 63 cities out of 70 cities tracked by the National Bureau of Statistics.
In 1H2018, property prices in 1st- and 2nd-tier cities became stabilized while the housing prices in 3rd- and 4th-tier cities was restrained because of destocking and strict control policy. For 2H2018, China will continue to discourage speculative property investment while long-term mechanism and policies will be implemented to prevent property bubble and major market turbulence.
With the expectations of slower residential property sales, higher inventory levels, and tighter onshore liquidity, the downside risks of the property sector are rising and we believe further property price stabilization will remain intact. Considering the effect of tightening measures in property market, we set our forecast for China's 2H2018E GDP at 6.5%.





July 16,2018
Economic Acumen
Commentary by CEBI Research Team

China’s economic strength sustained in 1H2018


China's GDP witnessed a solid growth of 6.7% YoY in 2Q2018 (Consensus' 6.7% and 1Q2018's 6.8%) and 6.8% YoY in 1H2018 (Consensus' 6.7% and 2017's 6.9%), signaling the pickup trend of economic activities. Domestic demand and external trade surged steadily, indicating that China's economy stays on the path of recovery.
For 2H2018, the escalation of trade tensions triggered by the U.S to impose tariffs on Chinese goods may endanger China's growth momentum. China's policymakers will remain cautious to handle economic fluctuations by exercising appropriate economic policies to withstand the negative impact of trade disputes on external demand. Domestic demand remains as the key growth driver of the economy in which consumer spending and fixed asset investment will play a bigger economic role in 2H2018.
We believe the overall macroeconomic conditions remain stable and the economy will expand by 6.5% YoY in 2H2018 with which 2018 GDP growth will reach 6.6% YoY.





July 13,2018
Economic Acumen
Commentary by CEBI Research Team

Trade war to cloud the outlook of China’s external trade in 2H2018


China's external trade still maintained a steady growth in 1H2018, with exports and imports growing at 4.9% YoY and 11.5% YoY. Trade surplus reached RMB 901.32bn. However, on both monthly and quarterly basis, growth of total trade posted slowing momentum as June exports and imports rose only 3.1% and 6.0% (May's 3.2% and 15.6%) while 2Q2018 exports and imports surged only 3.2% and 11.0% (1Q2018's 7.4% and 11.7%).
In sum, pessimistic outlook for international trade driven by increasing trade tensions between the U.S. and the rest of the world disrupts the global supply chain with which global trade will likely shrink to some extent in 2H2018. We believe overseas demand for Chinese products to soften on the kickoff of full-blown trade war, which in turn will undermine growth momentum of China's total trade.
Provided that trading partners such as EU, Japan and ASEAN countries could maintain their current pace of growth and policy tools would be employed effectively by Chinese regulators, China's external trade sector should be able to resist the trade headwinds, lending support to the soft-landing of external trade growth in 2H2018.





July 5,2018
Economic Acumen
Commentary by CEBI Research Team

Surging market volatility to reign over Hong Kong stock market in 2H2018


The second quarter of 2018 was dominated by the escalation of trade tensions between China and the U.S., a period when the performance of Hong Kong (HK) equities were suppressed by growing worries over the spillover effects of full-blown trade war on global economic recovery in 2H2018. HK stock market experienced increasing global and local risks with uncertainty and falling liquidity which led to correction of 3.8% in 2Q2018.
For 2H2018, HK market will follow a much more volatile path due to rising protectionist sentiment in the U.S. However, HK equity market remains attractive on strong growth of corporate earnings growth and investors take advantage of dips in the market to accumulate equities.
Investors will shift their investment interest to China for higher returns. The concerns over trade war's impact on the China's growth will fade gradually as it is already well-priced by the market. We estimate the HangSeng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) to reach 31,000 and 12,300 by end-2018E, equivalent to a 12.0x and 8.9x 2018E P/E.





June 25,2018
Economic Acumen
Commentary by CEBI Research Team

The PBOC’s RRR cut to resist growth headwinds


The People's Bank of China (PBOC) announced a 50bp cut in the required reserve ratio (RRR), effective July 5, 2018.
Overall, the PBOC's move will release around RMB 700 billion in potential credit, which is more than the net injection of RMB 400 billion in the previous RRR cut in April.
In sum, the escalating trade tensions between the U.S. and China and the U.S. monetary tightening are expected to exert pressure on China's economic growth in 2H2018.
The latest RRR cut will help support the real economy and stabilize financial markets, thus strengthening efforts to maintain sustainable growth momentum.
The PBOC will still maintain neutral and prudent monetary policy to cultivate an appropriate monetary and financial environment for China's economic growth and supply-side structural reforms.





June 15,2018
Economic Acumen
Commentary by CEBI Research Team

Weaker-than-expected China’s May data in sight


China's economic indicators for May demonstrated weakening trend, with growth in fixed asset investment (FAI), industrial production and retail sales slowing in varying degrees.
Despite a mild deceleration in domestic demand, China's economic momentum remains stable as job market has been steadily growing with which May survey-based urban unemployment rate dropped to 4.8% from April's 4.9%, supporting our view that China's economy continues to retain the path of steady recovery.
In sum, China will continue to accelerate reforms for more balanced and sustainable growth and we expect China's economy will maintain steady growth momentum for the rest of 2018. In general, China's economy is expected to maintain a healthy growth of 6.6% in 2018.





June 14,2018
Economic Acumen
Commentary by CEBI Research Team

The Fed’s second rate hike in 2018


As expected, the U.S. Federal Reserve (Fed) lifted the benchmark federal funds rate for the second time to 1.75%-2.00% in 2018, an increase of a quarter of a percentage point.
Characterized by fiscal expansion through tax cuts along with surging individual and government spending, the U.S. economy looks on track to pursue faster expansion of economic activities while job creation surged as the unemployment rate fell to 3.8%, the lowest since 2000. Latest May inflation and core inflation edged up to 2.8% YoY and 2.2% YoY respectively which has exceeded the Fed's 2% inflation target, indicating that general price level in the U.S is trending upward.
Recent Fed moves, namely seven 25bps rate hikes since 2015 and the downsizing of its balance sheet, have shown the fact that the Fed aims to move gradually to tighten monetary policy in an attempt to ensure the economic upturn and head off inflation. We believe the U.S. economic activities have been reviving at a solid pace with the upbeat resilience, which will likely to warrant two more rate hikes in 2H2018.





June 6,2018
Economic Acumen
Commentary by CEBI Research Team

Equity markets to embrace surging volatilities and opportunities


The first five months of 2018 emerged to be a period that volatilities of global equity markets were skewed to the high side and a clouding global growth outlook came with heightened economic and political risk.
Rising U.S. protectionism posts near-term risks on global outlook with which the U.S. actions against China and other countries spark bouts of volatility and derail the momentum of global economic recovery.
In sum, the continued mix of worldwide monetary policies, escalating trade tensions and political instability in the Korean Peninsula, Eurozone as well as the Middle East could make the global economic recovery more challenging, which may trigger more short-term turbulences in equity markets in coming quarters.
Despite market turbulence, we believe the synchronized global expansion will make equity investment more attractive on rising corporate profitability and the outlook for equity markets stays positive in 2H2018.





June 1,2018
Economic Acumen
Commentary by CEBI Research Team

Eurozone bracing growth headwinds


Entering into 2018, Eurozone demonstrated signs of slowdown as GDP's growth slowed from 2.7% YoY and 2.8% YoY in 3Q2017 and 4Q2017 to 2.5% in 1Q2018. On quarter-to-quarter basis, GDP's growth grew 0.4%, down from 0.6% in 4Q2017.
Soft growth of economic indicators in 1Q2018 indicated that strong momentum of 2017 growth, the strongest since the pre-recession year of 2007, may not extend into 2018 amid heightened political uncertainties in Italy and Spain as well as global trade tensions triggered by the U.S.
In sum, the structural vulnerabilities, financial market fragmentation, weak bank balance sheets, Brexit and weak government finances, remain as the main challenges of Eurozone.
The uncertainty about the future of the Eurozone and political risks is weighting on recovery of Eurozone, which will decelerate economic momentum in coming quarters due to weakening growth in corporate investments and consumer spending. We forecast Eurozone will grow by 1.8% in 2018.





May 24,2018
Economic Acumen
Commentary by CEBI Research Team

Hong Kong economic momentum to stay upbeat


Hong Kong (HK) economy retained a resilient path of economic momentum in 1Q2018. GDP growth for 1Q2018 demonstrated an upswing of 4.7% YoY, surpassing 4Q2017's 3.4% and 2017's 3.8% with which growth of economic indicators accelerated in varying degrees.
Inflation pressure remained mild at 2.3% while the unemployment rate dropped to 2.8%, the lowest in 20 years.
The rebound of retail sales with surging number of visitors to HK as well as robust domestic consumption fueled by escalating residents' income are the key factors to sustain robust consumption growth.
Gradual U.S. rate hikes may consider as the threat to the economy but HK economy is likely to benefit from steady China's economic growth, the U.S. economic recovery as well as the easing fears of US-China trade war.
We remain optimistic towards HK economic growth on the back of robust economic conditions. For 2018 as a whole, we forecast HK economy to grow by 3.8%





May 15,2018
Economic Acumen
Commentary by CEBI Research Team

China’s economic momentum remains stable despite mild deceleration in April data


Entering into 2Q2018, China's economic indicators for April faltered, with growth in fixed asset investment (FAI) and retail sales slowing in varying degrees. Despite a mild deceleration in domestic demand, China's economic momentum remains stable.
China's job market has been steadily growing as April survey-based urban unemployment rate dropped to 4.9% from March's 5.1%, supporting our view that China's economy continues to retain the path of stable recovery.
In sum, we expect GDP growth to maintain a medium-high growth rate as China's economy grows with more emphasis on quality and efficiency. In general, the overall macroeconomic conditions maintain a stable momentum and we believe the economy will expand by 6.6% YoY in 2018.





May 9,2018
Economic Acumen
Commentary by CEBI Research Team

The U.S. economy to gain more traction with upswing in inflation


Entering into 2018, economic recovery of the U.S. economy continued with the economic fundamentals improving in varying degrees. The U.S. economy grew at an annualized rate of 2.3% in first quarter of 2018, indicating that the recovery momentum is on track. Job creation in the U.S. economy surged as the unemployment rate continued to trend down to 3.9%, the lowest since 2000.
Although the recent FOMC meeting voted to left target range of the Fed fund rates (FFR) unchanged at 1.5% to 1.75%, latest wages and prices grew at 2% YoY which has reached the Fed's 2% inflation target, indicating that inflation is trending upward and more rate hikes are likely in coming FOMC meetings.
Looking forward, the Fed will launch gradual rate hikes and unwind the balance sheet in an orderly manner to ensure a smooth transition to a normalized monetary policy by avoiding disruption of economic recovery and enhancement of market volatility. The upbeat resilience of the U.S. economy, accompanied by a faster-than-expected pace of global economic recovery, will likely to warrant three more rate hikes in 2018.





May 2,2018
Economic Acumen
Commentary by CEBI Research Team

Optimism over Hong Kong economic outlook underpinning property market


Hong Kong (HK) economy gains strong traction as economic activities enjoyed an upswing of 3.8% YoY during 2017 driven by strong-than-expected growth in consumption, investment and exports. Strong expansion of economic activities has strengthened the organic growth of residential properties prices and private offices prices which posted 16.7% YoY and 4.5% YoY in 2017 and 1Q2018. Rent surged 8.6% YoY and 1.2% YoY as well.
Entering into 2018, the upward trend is still in sight despite multiple rounds of government demand-side tightening measures in place.
Although the U.S adopts a gradual path of monetary tightening through rate hikes and shrinking of balance sheet in 2018 which may cool down HK's overheated property market and exert some downward pressures on HK economy, strong economic fundamentals along with corporate tax cut for small enterprises, increased tourist visit and several investment themes such as the "Belt and Road" initiative, the "Guangdong-Hong Kong-Macao Greater Bay Area" initiative will be able to support rebound of economic activities in HK, thus extending the buoyant growth of Hong Kong's property.





Apr 26,2018
Economic Acumen
Commentary by CEBI Research Team

A new era of quality growth through “Made in China 2025” strategy


The "Made in China 2025" strategy, a blueprint for upgrading the China's manufacturing sectors, has seen steady progress since 2015.
The strategy lists mega projects for China manufacturing upgrade by 2025, including construction of national manufacturing innovation centers, intelligent manufacturing, industrial base capacity and quality enhancement, green manufacturing and high-end equipment innovation.
It emphasizes a deep integration of information technology and industrialization and the development of new-generation information technologies, and calls for promotion of smart equipment, as well as domestic IP for key general chips to ensure national information and cyber security and the growth of China's electronic product industry.
The move signals that the China will revitalize growth momentum through quality instead of quantity and ensure that the benefits of economic growth will be shared by a larger population, further boosting domestic demand and improving the livelihood of citizens.





Apr 17,2018
Economic Acumen
Commentary by CEBI Research Team

A good start of 1Q2018 China's economy


China’s economy demonstrated stabilized trend and sound development in 1Q2018 as real GDP growth remained steady at 6.8% YoY, in line with the market consensus and unchanged from the previous quarter’s growth.
1Q2018 macro indicators embraced uptrend as investment, consumption and external trade edged up at a stable pace. The latest data for March support our view that China economic growth will stay on the path of recovery.
Overall, as China achieves great progress to widen economic openness and conduct supply-side structural reforms such as reducing industrial production overcapacity and financial deleveraging as well as prioritizing growth quality and efficiency in new development era, China’s economy is rebalancing to attain more sustainable economic expansion.
We are of the view that the overall macroeconomic conditions remain stable and China’s GDP growth will reach 6.6% YoY for 2018.





Apr 17,2018
Economic Acumen
Commentary by CEBI Research Team

A good start of 1Q2018 China's economy


China’s economy demonstrated stabilized trend and sound development in 1Q2018 as real GDP growth remained steady at 6.8% YoY, in line with the market consensus and unchanged from the previous quarter’s growth.
1Q2018 macro indicators embraced uptrend as investment, consumption and external trade edged up at a stable pace. The latest data for March support our view that China economic growth will stay on the path of recovery.
Overall, as China achieves great progress to widen economic openness and conduct supply-side structural reforms such as reducing industrial production overcapacity and financial deleveraging as well as prioritizing growth quality and efficiency in new development era, China’s economy is rebalancing to attain more sustainable economic expansion.
We are of the view that the overall macroeconomic conditions remain stable and China’s GDP growth will reach 6.6% YoY for 2018.





Apr 11,2018
Economic Acumen
Commentary by CEBI Research Team

eNew phase of opening up’ for China


President Xi Jinping delivers a keynote speech at the opening ceremony of the Boao Forum for Asia Annual Conference 2018, pledging 'new phase of opening up' for China.
He stresses opening-up, inclusive development for global prosperity, laying out plans to broaden market access to China's economy, including broader market access for foreign investors in the services industry, especially in the financial and manufacturing sectors, creation of an attractive investment environment for foreign enterprises, enforcement of intellectual property rights (IPR) law and expansion of imports.
As China's economy grows with more emphasis on quality and efficiency amid making great progress in structural reforms, President Xi's commitment to further widen the economic openness helps China maintain a medium-high growth rate.
In general, the overall China's macroeconomic conditions maintain a stable momentum and we believe the economy will expand by 6.6% YoY in 2018.





Mar 26,2018
Economic Acumen
Commentary by CEBI Research Team

Escalating fears of global trade war


After launching tariffs on steel and aluminum, U.S. President Donald Trump has unveiled a plan to impose tariffs on USD $60 billion Chinese exports to the US. The new tariffs are intended to penalize China for the unfair trade practices with the U.S that causes a huge U.S. trade deficit.
The U.S government also points to regulations that force many U.S. businesses to hand over their technology to Chinese companies as a condition for being able to do business in China with which technology transfer has damaged the interests of the U.S. enterprises.
The U.S. Treasury has been given 60 days to come up with new restrictions on investment by Chinese firms in the U.S.
The move may trigger a costly trade war with the world's second-largest economy with which China, the U.S. and all trading partners will suffer from potential contraction of world trade growth.
Implementation of the tariffs sets the stage for some potential business conflicts among countries in the future.





Mar 22,2018
Economic Acumen
Commentary by CEBI Research Team

The Fed’s first rate hike in 2018


As expected, the Federal Reserve (Fed) lifted the benchmark federal funds rate for the first time to 1.50%-1.75% in 2018, an increase of a quarter of a percentage point.
Characterized by fiscal expansion through tax cuts along with surging individual and government spending, the U.S. economy looks on track to pursue faster expansion of economic activities. Recent Fed moves, namely four 25bps rate hikes since 2017 and the downsizing of its balance sheet, have shown the fact that the Fed aims to move gradually to tighten monetary policy in an attempt to ensure the economic upturn and head off inflation.
We believe the U.S. economic activities have been reviving at a solid pace with unemployment rate reaching a 16-year low.
In 2018, three more 25bps rate hikes are expected in line with the balance sheet shrinkage. We think the U.S. economy will continue to recovery modestly with its GDP growing by 2.8% YoY this year.





Mar 14,2018
Economic Acumen
Commentary by CEBI Research Team

China’s economic momentum remained stable in 2M2018


China's economic data for first two months of 2018 demonstrated an upward trend, with growth in fixed asset investment (FAI), retail sales, industrial production and external trade showing stable growth in varying degrees.
The latest economic indicators support our view that China economic growth continues to retain the path of stable recovery.
We expect 1Q2018 GDP growth to maintain a medium-high growth rate as China will further make great progress in structural reforms and the economy grows with more emphasis on quality and efficiency. In general, the overall macroeconomic conditions maintain a stable momentum and we believe the economy will expand by 6.6% YoY in 2018.





Mar 6,2018
Economic Acumen
Commentary by CEBI Research Team

China’s 2018 NPC: stepping up reforms and opening-up


China's goal of maintaining a stable economic growth to achieve full employment and building a moderately prosperous society become the major emphasis of 13th National People's Congress (NPC) in 2018.
Deepening structural reforms to achieve sustainable economic development is the central theme of this year China's NPC as the year of 2018 marks the 40th anniversary of the adoption of the reform and opening-up policy. As China's reform drive deepens, it has begun to upgrade the program to make its development fairer and more sustainable, shifting its focus from quantity to quality.
This year NPC emphasizes to strongly promote high-quality growth and address development's imbalances and inadequacies.
In sum, China's efforts to promote stable social and economic development, enhance economic stability at home, create new jobs, deepen economic structural reforms, accelerate financial de-risking, alleviate poverty, effectively strengthen environmental clean-up and enhance opening-up policy would become the major agendas in 2018.





Mar 2,2018
Economic Acumen
Commentary by CEBI Research Team

China Everbright Greentech Limited (1257 HK)


Inline 2017 results Net profit up 52% yoy; Matintain BUY
CEGL reported an inline FY2017 results with profit up 52% yoy and core earnings up 45% yoy
Biomass construction revenue: +47% yoy; Biomass operating revenue: +124% yoy; HWT revenue + 29% yoy
Overall margin declined by 1.7ppt to 31% as lower margin biomass operating revenue rose faster than HWT revenue
CEGL declared a final dividend of HK$0.09, implying 19% payout
Factoring in the latest project wins and higher earnings assumption, we arrive at a new target price of HK$8.50. Maintain BUY





Feb 28,2018
Economic Acumen
Commentary by CEBI Research Team

HK’s massive budget surplus in sight


On February 28, the HKSAR government announced the annual budget for 2018/19. The government has posted a massive budget surplus of HK$138 billion for 2017/18, mainly driven by surging individual and corporate tax revenues, land premium and stamp duties amid resilient GDP growth of 3.8% in 2017.
Although there are concerns over HK fiscal landscape regarding volatile revenue sources and narrow tax base, HK still manages to maintain the fiscal surplus for 14 consecutive years since FY 2004/05.
For the year of 2018, the U.S is tightening monetary policy gradually through rate hikes and balance sheet reduction which may dampen the overheated property market of HK and also exert some downward pressures on HK economy. Nonetheless, solid economic fundamentals along with tax relief for enterprises and individuals, rising number of tourists and investment themes including the "Belt and road" initiative and the "Guangdong-Hong Kong-Macao Greater Bay Area" initiative will be able to support a healthy rebound of economic activities in HK.
We believe the fiscal surplus for FY 2018/19 remains intact and HK economy will maintain growth momentum at 3.2% in 2018.





Feb 12,2018
Economic Acumen
Commentary by CEBI Research Team

China’s inflation edged down in January


China's January CPI inflation decelerated to 1.5% YoY (+0.6% MoM) from 1.8% YoY in December 2017 (+0.3% MoM) but in line with the consensus estimate. The drop of inflation was attributable to a year-to-year decrease in food price at 0.5% this month as well as the easing of non-food price from December’s 2.4% to 2.0%. Producers’ prices posted a positive growth of 4.3% YoY (+0.3% MoM) in January, which was in line with the consensus estimate but lower from 4.9% YoY (+0.8% MoM) in the previous month. The easing of producer prices was mainly due to high-based effect. The factory prices still demonstrated an upward trend, which was driven by stable economic recovery and surging commodity prices. In sum, the stable uptrend of CPI and PPI indicates that, supported by strong domestic and global demand, China’s economic momentum remains resilient.





Feb 8,2018
Economic Acumen
Commentary by CEBI Research Team

A good start of 2018 China’s trade


China's external trade demonstrated a sound and steady upward momentum in January. Exports, in Yuan terms, rose 6.0% YoY, higher than consensus' 2.6% but lower than December's 7.4% while imports, in Yuan terms, grew 30.2% YoY, beating consensus' 5.3% and December's 0.9%.
The acceleration of trading activities was mainly supported by buoyant global demand for goods from China, and surging imports driven by resilient domestic demand and massive imports of commodities due to the cold weather conditions in January. Looking ahead, a global economic recovery will continue to support China's external trade sector although rising protectionism and uncertainty in international demand could affect trade growth in 2018.
The further stable pick-up in growth of trade to major trading partners such as the U.S., EU and ASEAN increases the likelihood that the current global trade improvement is sustainable. In our view, China's foreign trade growth is expected to remain on a positive track in 2018.





Feb 1,2018
Economic Acumen
Commentary by CEBI Research Team

FOMC leaves rates unchanged after the first meeting in 2018


At the conclusion of the first Federal Open Markets Committee (FOMC) policy meeting in 2018 on 31st January, the U.S. Federal Reserve (the Fed) voted to left target range of the Fed fund rates (FFR) unchanged, at 1.25% to 1.50%.
The Fed points out that gains in employment, household spending, and business fixed investment have turned solid along with low unemployment rate and inflation is expected to rise throughout the year.
We believe that the Fed will launch gradual rate hikes and unwind the balance sheet in an orderly manner to ensure a smooth transition to a normalized monetary policy by avoiding disruption of economic recovery and increase of market volatility.





Jan 25,2018
Economic Acumen
Commentary by CEBI Research Team

Global growth upsurge


The world economy is gaining momentum and bracing a robust pace of resilient growth as corporate earnings become stronger, oil and commodity prices rebound and geopolitical risks are skewed to the downside. Economic activities in the advanced economies and emerging markets have continued to improve, supported by recovering industrial production and surging global trade.
The revised global growth forecasts for 2018 and 2019 to 3.9% from previous estimate of 3.7% by the International Monetary Fund (IMF) further justify that global economy is gaining strength.
The optimism is also reflected in the equity market, with major indices breaking new highs since the start of 2018. In sum, the reawakening of global economic momentum will further strengthen global trade and investment, paving the way for a stronger growth for the global economy in coming years.





Jan 19,2018
Economic Acumen
Commentary by CEBI Research Team

China's economy rebounded with 6.9% growth in 2017


In 2017, China's economy maintained the momentum of stable and sound development. China's economic expansion remained steady at 6.8% YoY in 4Q2017, beating the market estimates of 6.7% and unchanged from the previous quarter's growth.
As China continues to make progress in supply-side structural reforms including reducing industrial production overcapacity and financial deleveraging, prioritizing growth quality and efficiency in new development era, the country's GDP growth rate in 2017 maintained a medium-high growth rate at 6.9% YoY, marking its first rebound since 2010.
Steady growth of macroeconomic indicators was driven by China's supply-side structural reform and macro-control innovation which led to the country's low urban unemployment, pick-up in imports and exports, improvement in the performance of enterprises, increase in fiscal revenue and residents' income. Overall, China's economy is rebalancing to attain more sustainable economic expansion.
We are of the view that the overall macroeconomic conditions remain stable and China's GDP growth will reach 6.6% YoY for 2018.





Jan 10,2018
Economic Acumen
Commentary by CEBI Research Team

China’s inflation remained stable in 2017


China's December CPI inflation edged up 1.8 % YoY (+0.3% MoM and November's +1.7% YoY), beneath the consensus estimate of +1.9%. The rise of inflation in December was attributable to surging month-to-month increase in food prices due to cold weather.
Producers' prices posted positive growth of 4.9% YoY (+0.8% MoM) in December, beating the market expectation of 4.8% but lowering than November's 5.8% due to the high-base effect. The upward trend of factory-gate prices was driven by stable economic recovery, a tight labor market and cuts on overcapacity.
For 2017, the CPI inflation fluctuated between 0.8% and 2.5%, with year-end inflation reaching 1.6%, safely lower than the official target of 3.0% and 2016's 2.0%. The PPI rose 6.3% YoY in 2017, reversing the deflation of producer prices between 2012 and 2016. In sum, the stable trend of consumer prices and factory-gate prices indicates that China's economic momentum remains resilient, supported by strong domestic demand and healthy global demand.





Jan 5,2018
Economic Acumen
Commentary by CEBI Research Team

Equity markets carrying new highs in 2018


2017 was a year of harvest in the global stock market. Dow, S&P 500, NASDAQ and Nikkei posted YoY growth of 25.1%, 19.4%, 28.3% and 19.1% while Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) soared 36.0% and 24.6%.
The global business cycle continues to evolve with global economies demonstrating a steady upswing in economic activities and the monetary stance of major economies becomes clearer and more transparent.
Stable tightening of liquidity to suppress potential hiking of inflation, improving financial market conditions and gradual restoration of confidence are at the root of sustaining the growth of economic activities. As strong economic growth boosts corporate earnings, global equity markets can rise further. We expect the global economic recovery to gain more traction, thus extending equity market rally in 2018.





Dec 14,2017
2018
Market and Investment Outlook

2018 Market and Investment Outlook


Global economy to gain more traction in 2018
China economic outlook for 2018: new era of growth
Hong Kong economic outlook for 2018: economy strengthening on track
Investment themes for 2018





Dec 7,2017
Economic Acumen
Commentary by CEBI Research Team

Hong Kong economy strengthening on track


Hong Kong (HK) economy gains strong traction again in 2017 as economic activities enjoyed an upswing of 3.9% YoY during 9M2017 driven by strong-than-expected growth in consumption, investment and exports. Inflation pressure remained mild as composite CPI for 10M17 dropped further to 1.4% from 1H17's 4.0% while the labor market remained resilient with the seasonally adjusted unemployment rate standing at 3.0%.
For 4Q2017, we expect to see a continuing buoyant growth as Hong Kong's economic recovery remains intact with which 4Q2017 and 2017 GDP growth will reach 3.4% and 3.8%.
For 2018, although the U.S adopts a gradual path of monetary tightening through rate hikes and shrinking of balance sheet which may cool down HK's overheated property market and exert some downward pressures on HK economy, strong economic fundamentals along with corporate tax cut for small enterprises, increased tourist visit and several investment themes such as the "Belt and Road" initiative, the "Guangdong-Hong Kong-Macao Greater Bay Area" initiative will be able to support healthy rebound of economic activities in HK. We remain optimistic towards HK economy with GDP growth to grow by 3.2% in 2018.





Nov 23,2017
Economic Acumen
Commentary by CEBI Research Team

Global economy to gain more traction in 2018


In 2017, global economic recovery has been more impressive as global growth is skewed to the high side and a better-than-expected global growth outlook comes with heightened political risk. The global economy is strengthening gradually. The recovery momentum has been characterized by improving productivity growth and inflation. Pickups in investment, trade, and industrial production, coupled with stronger business and consumer confidence, lend great support to the recovery. Surging commodity prices also help exacerbate these trends since 2017.
As the global business cycle continues to evolve with global economies demonstrating a steady upswing in economic activities, a marked improvement in economic conditions of developed and emerging worlds attracts the attention of global central banks to watch out liquidity conditions and inflationary pressures.
The monetary stance of major economies becomes clearer and more transparent as the U.S. Fed will continue to tighten monetary policy on a gradual basis and the ECB begins to unwind its monetary stimulus through cutting bond purchases from January 2018. Only Japan shows no signs to retreat from expansionary monetary policy.
Stable tightening of liquidity to suppress potential hiking of inflation, improving financial market conditions and gradual restoration of confidence are at the root of sustaining the growth of economic activities. We expect the global economic recovery to gain more traction in 2018.





Nov 14,2017
Economic Acumen
Commentary by CEBI Research Team

China’s economic momentum remains stable despite mild deceleration in October data


China's economic data for October faltered, with growth in fixed asset investment (FAI), retail sales, industrial production and external trade slowing in varying degrees. Despite a mild deceleration in October data, China's economy remains stable.
The latest economic indicators support our view that China economic growth will stay on the path of stable recovery with which the economy is undergoing readjustments while bracing for the new norm of slower expansion.
We expect 4Q2017 GDP growth to maintain a medium-high growth rate as China will further make great progress in structural reforms and the economy grows with more emphasis on quality and efficiency. In general, the overall macroeconomic conditions maintain a stable momentum and we believe the economy will expand by 6.6% YoY in 4Q2017 with which 2017 GDP growth will reach 6.8% YoY.





Nov 13,2017
Corporate research
TMT

Razer Inc.-Unpacking the gaming company IPO


Razer Inc. (1337 HK) (“the Company”) is a leading lifestyle brand offering gaming hardware, software and services. In its coming IPO, the Company recorded an oversubscription of around 290 times. Apart from the recent stock rally, its overwhelmed order is probably due to the fast growing global gaming industry and the Company’s unique positioning. In this report, we will take a glance at Razer’s business model and the potential opportunities and risks of this newcomer of stock market.





Nov 9,2017
Economic Acumen
Commentary by CEBI Research Team

China’s inflation edged up in October


China's October CPI inflation accelerated to nine-month high at 1.9% YoY (+0.1% MoM) from September's 1.6% YoY (+0.5% MoM) and the consensus estimate of 1.8%. For 10M17, CPI inflation fluctuated between 0.8% and 2.5%, with the YTD CPI inflation reaching 1.5%. The rise of inflation in October was attributable to the low base effect, higher food price and stable non-food prices.
Producers' prices posted positive growth of 6.9% YoY (+0.7% MoM) in October, which was in line with previous month's growth rate and beat the expectation of 6.6%, reflecting that price pressure was driven by stable economic recovery, a tight labor market, cuts on overcapacity and temporary disruptions to industrial production due to holidays.
The stable uptrend of CPI and PPI indicates that China's economic momentum remains resilient, supported by strong domestic demand and healthy global demand.





Oct 26,2017
Economic Acumen
Commentary by CEBI Research Team

4Q2017 investment outlook under the vision of “new era” for China


The 19th CPC National Congress successfully concluded on October 24. This year CPC congress commenced with General Secretary and Chinese President Xi Jinping's report laying out major economic achievements during the past five years and his vision for an increasingly prosperous China as the country embarks on a journey to build a "great modern socialist country" for a "new era".
China's economy has been transitioning from a phase of rapid growth to a stage of high-quality development which help build a modernized economy. China will leverage the fundamental role of consumption in promoting economic growth and enhance the framework of regulation underpinned by monetary policy and macro-prudential policy. China will maintain a medium-high growth rate that makes great progress in structural reforms with which the economy grows with more emphasis on quality and efficiency.
Looking ahead in the fourth quarter and new few years, sustainable growth would be prioritized over breakneck economic growth and the government will further proceed with encouraging medium-high end consumption, strengthening supply-side structural reform through further reduction of industrial overcapacity, keeping up with deleveraging efforts, accelerating the implementation of China's Belt and Road initiative, speeding up the development of the Greater Bay area and Xiong'an New District, promoting greater sophistication in the industrial sector, deepening reforms in state-owned enterprises (SOE) as well as improving environmental protection.





Oct 25,2017
Sector Outlook
China Banks

Behind the RRR new rule – “CCB may benefit most among major banks”


Just before the National Day vacation, the PBOC announced that it would widen the scope of targeted RRR cut and allow more lenders supporting the vulnerable sectors to enjoy at least 50bps discount in reserve. This is the first RRR relaxation in 18 months and we believe at least Rmb500bn will be unlocked from the system when the new rule becomes effective in January 2018. Four banks under our coverage are expected to benefit and CCB (939 HK) may be the only one among Big4 to enjoy the more preferential 150bps discount.





Oct 20,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-China’s economy maintained the momentum of stable and sound development in 3Q2017


China's GDP grew 6.8% YoY in 3Q2017, in line with consensus but slower than 1H2017's 6.9%. The GDP of China in 9M2017 increased 6.9% YoY. Most economic indicators point to an even development in the economic segments, with which FAI continued to moderate while pickup trend was observed in retail sales, industrial production and external trade.
Major achievements have been made in economic development during the past five years, General Secretary and Chinese President Xi Jinping said in his remark delivered at the 19th National Congress of the Communist Party of China. Speaking at the opening session, Xi also laid out his vision for an increasingly prosperous China as the country embarks on a journey to build a "great modern socialist country". China's economy has been transitioning from a phase of rapid growth to a stage of high-quality development which help build a modernized economy. China will leverage the fundamental role of consumption in promoting economic growth and enhance the framework of regulation underpinned by monetary policy and macro-prudential policy.
We expect 4Q2017 GDP growth to maintain a medium-high growth rate as China will further make great progress in structural reforms including reduction of industrial production overcapacity and deleveraging with which the economy grows with more emphasis on quality and efficiency. In general, the overall macroeconomic conditions remain stable and we believe the economy will expand by 6.7% YoY in 4Q2017 with which 2017 GDP growth will reach 6.8% YoY.





Oct 13,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-China’s trade remains sound and steady in 3Q2017


China's external trade demonstrated a sound and steady upward momentum in September. Exports (RMB) rose 9.0% YoY (-1.2% MoM), lower than consensus' 10.9% but higher than August's 6.9% while imports (RMB) grew 19.5% YoY (6.7% MoM), beating consensus' 16.5% and August's 14.4%. 9M2017 trade growth maintained robust growth with exports and imports, in Yuan terms, surging by 12.4% and 22.3%.
The acceleration of trading activities are mainly supported by buoyant global demand for goods from China, and surging imports driven by domestic demand and rising commodities prices.
Looking ahead, a brighter international outlook will continue to support China's external trade sector, with International Monetary Fund (IMF) raised its forecasts for global growth to 3.6% and 3.7% in 2017 and 2018 respectively, reflecting that the global economic recovery is on track.





Oct 12,2017
Sector Outlook
HK Property

Views on policy address-Farmland conversion to unlock hidden value


HK CE Carrie Lam presented her maiden policy address on 11 October. Her housing policy focuses on increasing subsidized housing and strengthening housing ladder. No further cooling measures or re-sell restrictions is suggested. But she also didn’t touch on the topic of farmland conversion and developers’ share price weakened as a result. However, we believe it’s just a matter of time as it is the less controversial way to increase land supply. We expect Henderson (12 HK), SHKP (16 HK) and NWD (17 HK) will benefit from their sizeable farmland reserve.





Oct 3,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-Upbeat September PMI signals strong momentum in China’s economy


In September 2017, China's manufacturing PMI edged up to 52.4 percent from August's 51.7 percent, beating market consensus of 51.1 percent and hitting the highest level since April 2012.
China's non-manufacturing sector also expanded at the fastest pace since June 2014, with its September's PMI reaching 55.4 percent, up from 53.4 percent in August.
The steady uptrend in both manufacturing and non-manufacturing sectors adds to strong economic resilience of China's economy.
China's macro environment will continue to exhibit stable growth with which economic indicators will generally improve for 3Q2017 and the uptrend will continue in a steady and gradual manner underpinned by accelerating consumption and investment as well as stable export growth. Our forecast of GDP growth for 3Q2017 is 6.8% YoY.





Sep 26,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-Eurozone embedded into brighter outlook


German Chancellor Angela Merkel secured a 4th term in Germany's election though her victory was clouded by her weakened parliamentary bloc and a surge in support for the far-right party.
At the start of 2017, political risks arising from elections in the Netherlands, France and Germany were considered the major hurdle facing the Eurozone. There had been fears that radical changes in government could create more policy uncertainties, hampering economic recovery. Amid diminishing political risks in the Eurozone following a series of elections that saw populist politicians defeated, the cyclical rebound of the Eurozone economy is set to turn stronger and more sustained.
The latest victory of Angela Merkel signals the market that Germany, Europe's largest economy, will continue to support the structural reforms and strengthen economic recovery within the zone in the post-Brexit era.
Deeper co-ordination and integration of economic policy within Eurozone is expected, thus demonstrating real economic convergence within the zone. Annual GDP growth for Eurozone is projected to rise from 2016's 1.7% to 2.0% in 2017.





Sep 21,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-Normalization of balance sheet kicks off in October


At the conclusion of the FOMC meeting on 20 Sep, 2017, the Fed unanimously voted to left target range of the FFR unchanged, at 1.0% to 1.25%. It also unveiled the timeline to gradually unwind USD4.5tn in U.S. Treasury and mortgage-backed securities which accumulated during and after the 08 financial collapse. The Fed will start cutting its massive size of balance sheet in Oct initially by USD10bn per month.
After launching two rate hikes in 1H2017, the Fed aims to maintain the gradual path of monetary tightening in an attempt to strike a balance between robust economic recovery and surging price level. Normalization of balance sheet is a complement rather than a substitute to monetary policy tightening through rate hikes. Paring down the massive size of the Fed balance sheet does tighten the money supply, but the gradual pace with relatively small size of unwinding is expected to have a mild impact on financial markets.
The U.S. economy has been reviving in a robust pace with unemployment rate reaching a 16-year low. The upbeat momentum of the U.S. economy and equity market, accompanied by a stable global economic recovery, will likely to afford more rate hikes in 2018 and 2019.





Sep 20,2017
Corporate Research
China Banks

Downgrade CRCB (3618 HK) to Hold – “Lackluster interim”


Chongqing Rural Commercial Bank (“CRCB” 3618 HK) reported a disappointing interim. Although the bank managed to deliver inline profit growth, overdue ratio almost doubled and NPL ratio increased. CRCB also suffered a drastic QoQ NIM decline while large banks showed margin rebound. We lift the valuation discount in model and arrive at new TP of HK$4.60. Downgrade to Hold.





Sep 20,2017
Sector Outlook
China Banks

1H17 review – “The strong getting stronger”


The interim results has proved our preference on large banks correct. Big 5 and CMB reported solid results with margin rebound and asset quality recovery. But smaller banks saw QoQ margin decline, climbing NPL ratio and even balance sheets shrinkage. Going forward, we believe large banks will continue delivering better results under the deleveraging. We keep Bank of China (“BOC” 3988 HK) and China Construction Bank (“CCB” 939 HK) as our top pick, but downgrade CRCB (3618 HK) to Hold because of its asset quality deterioration and drastic margin contraction.





Sep 12,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-Renminbi remains strong despite China unwinds forex reserve requirement


PBOC confirmed to scrap reserve requirements of 20% for financial institutions settling foreign exchange forward renminbi positions. Rules to put aside the reserves have been launched before in an attempt to curb speculation in renminbi. The loosening of the substantial supervision reflects PBOC's willingness to relax the regulatory grips, as depreciation sentiments fade away after a recent rally of renminbi of 6% during 9M17.
We believe strength of renminbi will remain intact on robust momentum of China's economy and weakening of USD due to uncertainties over the rate hike schedule and U.S. economic policy outlook.
The key to a healthy appreciation of the renminbi lies in improving its onshore and offshore circulation, managing appreciation expectations and enhancing transparency of the regulatory framework.
We expect a freer renminbi market without reserve constraint will allow China to promote in further opening of its forex market and improve the fundamental value of the renminbi through encouraging more organic market growth and diversifying cross-border channels for trade and investment.





Aug 28,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-Global economy: keeping the momentum forward


Regulatory accomplishments through financial reforms in post-crisis period become the main contents of keynote speech of leading central bankers in the world.
The U.S. Fed Chair Janet Yellen hinted in her Jackson Hole address that financial reforms are crucial to enhancing the healthiness of global economy. While the ECB President Mario Draghi hinted that the global recovery is firming up and Eurozone's economic uptrend is in sight. However, more time is needed to meet inflation target, indicating that the ECB might not begin tightening monetary policy soon.
Global liquidity remains abundant amid gradual path of the U.S. monetary tightening and continuation of credit loosening in Eurozone.
Though regional imbalances still exists, the global economy is in a broad-based upturn. As recovery momentum in different economies continue to diversify, more complex economic situations and marked variations in monetary policies are likely to be seen in the future.





Aug 24,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-An important step in telecom sector reform


China Unicom (CU)’s Shanghai-listed unit (600050 SH) announced that strategic investors will provide no more than RMB61.7bn of a total RMB78bn it aims to generate through a private placement, as the company fleshed out the details of the plan following a green light from regulators. In our view, this marks an important step in the government’s efforts to bring in private capital into state firms, laying a foundation for and deepening the reform of State-owned enterprises. More private capital participation can be expected in other sectors, with the aim to create synergies from closer cooperation with strategic investors and achieve better corporate governance.





Aug 17,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen-Domestic consumption to remain uptrend


Entering the 2H17, China's economy shows signs of slowdown in economic activities as the lagged impacts of curbing industrial overcapacity, deleveraging and the tightening of property market begins to weigh on growth. The softening of July's economic indicators reignited concerns about the trajectory of China's economy in 2H2017. Domestic demand, especially domestic consumption, remains sluggish as China's July retail sales growth slowed to 10.4% from June's 11.0%.
Since economic conditions have demonstrated signs of slowdown, more stimulus may be employed in coming months to invigorate growth with which the government may beef up its policy to spur domestic consumption.
We are still bullish on China's consumption growth, as we believe that the market potential is largely untapped and China is trying to shift to a consumption-driven economy. Judging from the recent fluctuations in retail sales growth and the overall economic condition, we expect that retail sales will expand by 10.6% YoY in 2H17.





Aug 16,2017
Sector Outlook
China Banks

1H17 preview - Expect inline results with better NPL ratio


China banks will kick start the interim reporting from mid-August, and our coverage are set to deliver 1-11% net profit growth. NPL ratio is expected to drop slightly as corporate earnings improved. Large banks with strong deposit base will report NIM rebound, while the smaller lenders may struggle due to deleveraging squeeze. Although regulatory scrutiny may further step up, the undemanding valuation and love from Southbound fund should support the sector in terms of trading. Buy: CCB, BOC and CRCB.





Aug 9,2017
Corporate Research
China Environmental Protection

Everbright Greentech Result comments 1H17 - In line withexpectation


CEGL’s total revenue for 1H17 increased by 69% YoY to HK$2,047mn. EBIT increased by 60% YoY to HK$713mn, and net profit increased by 57% YoY to HK$457mn, accounting for 53% of our full year profit estimate for FY17. The result is pretty much within our expectation, with major growth driver coming from increased revenue contribution of operation projects (YoY 81% to HK$710mn) and increase in construction revenue (YoY 63% to HK$1,304mn). For 1H17, CEGL’s projects portfolio has reached 73 (2016end: 63), with 27 projects in operation, 12 projects in construction and 34 projects in planning. As CEGL’s projects implementation remained in our expectation, we maintain our target price of HK$6.68.





July 27,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen - Fed keeps rates on hold


At the conclusion of its two-day meeting on 26 July, the U.S. Federal Reserve (the Fed) has kept the target range of the Fed fund rates within 1.0% and 1.25%. After launching two rate hikes in 1H2017, the Fed aims at maintaining a slow path of monetary tightening amid sluggish wage growth and relatively stable pricing pressures. It also indicates that it is close to unwinding the $4.5 trillion in U.S. Treasury and mortgage-backed securities accumulated during and after the financial crisis in 2008.
The Fed still maintains the stance that economic activities have been expanding moderately, with improvement in the labor market and the rising price level to be the signals supportive of the future rate hike.
The U.S. economy has been reviving in a solid pace. Sustainability of the upbeat momentum of the U.S. economy and equity market, accompanied by a stable pace of global economic recovery, will likely to substantiate one more rate hike in 4Q2017 and the commencement of the balance sheet downsizing in late 3Q2017.





July 17,2017
CEB International Research

Company initiation - China’s economy trended upwards in 1H2017


The first half of 2017 was marked by stable recovery of economic activities in China, whose major indicators are showing signs of improvement. With a solid growth of 6.9% YoY (up 1.7% QoQ) in both 2Q2017 and 1H2017, China's economic activities continue to edge up strongly.
The latest data support our view that China's economy will stay on the path of recovery. The pickup trends observed in most economic indicators will continue, including those of external trade, investment, and industrial output.
A continued macro turnaround is highly likely and we expect 2H17 GDP growth to remain robust as China makes great progress in structural reforms including reduction of industrial production overcapacity and deleveraging with which the economy grows with more emphasis on quality and efficiency.
The overall macroeconomic conditions remain stable and we believe the economy will expand by 6.6% YoY in 2H2017 with which 2017 GDP growth will reach 6.7% YoY.





July 5,2017
CEB International Research

Company initiation - China Everbright Greentech Limited (1257 HK)


China Everbright Greentech Limited (“CEGL”) is a leader in the fast-growing China environmental protection (EP) industry. Its business includes biomass power generation, hazardous waste treatment (HWT), solar energy and wind power generation.
Efficient participant in EP industry.CEGL operates in fast-growing industries supported by favorable governmental policies. Investment in the PRC EP industry is expected to grow at a CAGR of 17.5% from Rmb1,600.0bn in 2017 to Rmb3,049.4bn in 2021. The company’s business has been growing quickly in number of projects, power generation and waste treatment capacity. With efficient management, utilization ratio of its biomass projects reached over 86.8% in 2016.
Unique biomass business model. As the only company to employ integrated biomass and waste-to-energy (WTE) business model in China, CEGL can provide one-stop services for local governments to handle both biomass waste and household waste at the same location. In our view, these integrated projects provide an ideal option especially in places where standalone WTE projects are not commercially viable.
Competitive advantages in HWT sector. The company’s HWT projects are located in eastern China where generation of hazardous waste is highest. With careful project selection and strong technical capabilities, CEGL ranks third nationwide and first in eastern China in terms of aggregate disposal designed capacity for all projects in operation, under construction and at the planning stage as of Dec 31, 2016.
Initiate with BUY rating on attractive valuation. CEGL operates in two fastest growing subsectors (Biomass and HWT) in China’s EP sectors. We project its 2017E and 2018E net income to be HK$857mn (+36% YoY) and HK$1,025mn (+20% YoY). We believe the company’s share is trading at an attractive valuation of 12.5x 2017PE as compared to an industry average of 13.5x. Our DCF-derived fair value for the company is HK$6.68 (24% upside), implying a 2017E and 2018 P/E multiple of 16.1x and 13.5x.





July 4,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –“Bond Connect” : a wider path for international investors


The People's Bank of China (PBOC) and the Hong Kong Monetary Authority (HKMA) announced that trail operation of Northbound Trading of "Bond Connect" will commence on 3 July 2017.
The Northbound Connect allows foreign investors to participate in PRC domestic bond market, following two stock connect schemes with the Shanghai and Shenzhen stock exchanges and their Hong Kong counterpart.
Such a direct access to China's RMB $67 trillion (USD $9.9 trillion) bond market is a milestone of China's further liberalization of its capital account and is an important step in the country's financial market reform.





June 29,2017
2H2017 Market and Investment Outlook

2H2017 Market and Investment Outlook


Global economy in 2H2017 appears to embrace more volatilities in financial markets with continued acceleration of global economic activities, amid continued mix of monetary policies , massive tax cuts in the US, political instability in Korean Peninsula and Middle East as well as Brexit talks.
China’s economic growth will be more balanced for 2H17 on the acceleration in private consumption and investment, together with improvement in export growth. Our GDP growth forecast for 2017F is 6.7% YoY by to taking into account of the moderating economic recovery. Current accommodative macroeconomic policies will be fine-tuned to sustain growth in 2H17.
Despite the rally in 1H17, HK stock market is still considered as a potential laggard, with the HSI and HSCEI currently trading on 2017 PER multiples of 12.4x and 8.3x, which are still below their respective 15-year average. We forecast that the HSI and HSCEI will reach 27,000 and 11,800, with PER multiples of 13 and 9.4 respectively by end-2017.





CEB International Research



June 15,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Fed’s second rate hike in 2017: two down, two more to go


The Federal Reserve (Fed) has raised the benchmark short-term interest rate by 25 bps for the second time in 2017.
Though the Fed reaffirms that gradual adjustments in Fed rate is a sensible route, a balance sheet normalization program will be implemented this year, provided that the economy evolves broadly as anticipated.
In view of current US labor market condition and inflation, we expect two more rate hikes in 2H17 and commencement of downsizing the balance sheet in 4Q17.





June 8,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Hong Kong economic recovery on track despite headwinds


Entering into 2017, HK economy regains traction after experiencing a slower growth of 2% in 2016. The economy enjoyed an upswing of 4.3% YoY during 1Q17 driven by strong-than-expected growth in consumption, investment and exports. Inflation pressure remained mild as composite CPI for 4M17 dropped further to 0.9% from 1Q17's 1.4% while the labor market remained resilient with the seasonally adjusted unemployment rate standing at 3.2%.
For 2H17, we expect to see a continuing buoyant growth despite overhangs. HK's economic recovery remains intact where the theme for 2H17 will be the shift to the balance of growth drivers, with more consumption contributing to economic growth. However, with more expected U.S rate hikes and the possible move to shrink its balance sheet in 2H17, HK's overheated property market is likely to cool down, which will exert some downward pressures on HK economy.
With potential threats, we remain cautiously optimistic towards HK GDP growth given a robust performance in 1H17. For 2017 as a whole, we forecast HK economy to grow by 2.7%.





June 6,2017
Economic Acumen
Commentary by CEBI Research Team

Sector initiation - China banks


The 1Q17 results confirm our views that China banks will pick up their growth momentum this year as both margin contraction and asset quality problem have been stabilized for most lenders. While the deleveraging theme still weigh on their valuation, policies impact may have been exaggerated, especially for those funded by sticky low-cost deposit. That leads to our preference for banks with strong deposit franchise and more capital buffer. BUY: CRCB (3618 HK), CCB (939 HK) and BOC (3988 HK).





June 1,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Stablization of Renminbi in sight


In 2016, China's dismal economy, weakening global economic outlook and strong dollar gave rise to the volatility of renminbi with depreciation around 7%, raising concerns over the continuation of depreciation in 2017. However, since entering 1H17, the PBOC's moves to curb capital outflow and stronger-than-expected China's economic activities have resulted in a modest rebound of renminbi by almost 2%.
We expect further liberalization of exchange rate will increase the role of market forces in both the currency and capital markets. China's economy has shown signs of stabilization, and renminbi will receive more support from the acceleration in economic activities in 2H17.
With more US rate hikes ahead, continued divergence in credit loosening of major economies, and surging momentum of China's economic recovery, we forecast that renminbi will fluctuate by 2.0% from its current level (CNY 6.8170 per USD) between CNY 6.6807 and CNY 6.9533 per USD by end-2017.





May 25,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Global market: A promising prospect amidst heightened economic and political risks


In 1H2017, global economic growth is skewed to the high side and a better-than-expected global growth outlook comes with heightened political risk. This comes not only from the outcome of 2016's shocks (Trump's victory and the Brexit), but also from growing breadth of Eurozone recovery after Macron win. Buoyant financial markets, the cyclical recovery in external trade and rebound in commodities prices have edged down fears of deflation, thus elevating growth momentum.
For 2H2017, navigating the maze of economic and political risks in global economy remains as the biggest challenge. Credit expansion continues to be the key to fuel economic growth but monetary stances of major central banks complicate the global liquidity flow.
Amid the continued mix of monetary policies, massive tax cuts in the US, political instability in the Korean Peninsula as well as Brexit talks, 2H2017 appears to embrace more volatilities in financial markets with continued acceleration of global economic activities.





May 16,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –One Belt, One Road: bracing for “project of the century”


On 14 May, President Xi delivered a keynote speech at the BRF for International Cooperation in Beijing, defining the Belt and Road as "project of the century" that should be built into a road of peace and prosperity, opening up innovation that connects different civilizations.
Countries from Asia-Pacific region and Eurasia can cooperate to seek ways to advance policy coordination, facilities connectivity, unimpeded trade, financial integration so as to achieve regional economic integration and promote prosperity of Asia and Europe. Chinese presence in regional economy and trade will be bulked up.
China will contribute an additional 100bn yuan to the Silk Road Fund to support the Initiative.
We expect that China will further support the Initiative, pursue deepen cooperation with more countries on a broader scale, and encourage further investment on the Initiative from multiple sectors such as banking, insurance, infrastructure and energy sectors.





May 11,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Proactive deleveraging to minimize financial risks


President Xi has determined to further elevate financial risk control by minimizing major symmetric risks. Six tasks have been listed to maintain financial security, portending a tightened regulation and de-leveraging in coming months.
A host of tightening measures rolled out to curb financial risks triggers the concerns regarding contraction of credit and market liquidity as SSE and SZSE declined by over 6.9% and 8.3% while the margin trading balance dropped by around 34.5bn to below 900 bn yuan last month.
Despite short-term growth is compromised, the effort to deleverage the financial system proactively and gradually will help curb asset bubbles, refuel the real economy and put the economy on a sounder footing longer-term.





May 4,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –The Fed held current rates steady


At the conclusion of its two-day meeting on May, The Fed has left the target range of the Fed fund rates unchanged within 0.75% and 1.00%. Fluctuating financial market, unequal pace of global economic recovery, mild inflation and recent slump in both economic and job growth have all prompted US government to hold on further normalization of monetary policy.
The Fed still sees that economic activity has been expanding moderately, while improved employment and rising inflation is becoming definitive signals to support the gradual rate hike.
In spite of short-term turbulence, growth momentum of US economy remains intact. The ongoing upbeat momentum, if with the stabilization of global economic recovery, may hint that Fed is on track for a rate increase in June.





April 27,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –China’s Payment Sector: Precision Marketing being a Future Trend


The third-party mobile payment is under an explosive growth with nearly RMB 39tr of transaction size in 2016. With increasingly advanced fintech and diversified offline payment scenarios, payment system has, to a certain extent, replaced our wallet.
Alibaba and Tencent account for 86% share jointly, dominating the third-party payment market. However, as the PBOC released regulation on QR code payment in June 2016, banks have strengthened deployment in mobile payment, which is likely to challenge the dominance of Alibaba and Tencent.
It is expected the payment sector consolidation will be accelerated due to the PBOC's centralized deposit policy of funds of pending payments of clients, pushing payment firms to convert into professional financial institutions through pursuing differentiated development and expanding precision marketing with the help of big data analysis.





April 18,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –A Good Start for China’s National Economy in 1Q17


China posted a solid GDP growth of 6.9% YoY for 1Q17 (up 1.3% QoQ), exceeding market consensus and the highest since 4Q15.
March's macro indicators rebounded across the board on higher-than-expected recovery in investment, consumption and external trade. The latest data for March support our view that China economic growth will stay on the path of recovery.
We believe more policies will be formulated to support economic growth, foster job creation, and enhance economic performance.
As economic policies would remain accommodative throughout 2017, and lagged impacts of previous stimulus measures on consumption and investment are likely to be seen in 2Q17 and 3Q17, we expect China's economic growth to improve going forward.





April 7,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –China’s property market under rebalancing


China's property market sees signs of stabilization with more curbs on house purchases and tightening mortgage rules. Deceleration in home prices growth largely reflects the mismatch between demand and supply.
Amid slowing growth prospects of residential property sales, growing inventory levels and tightening onshore liquidity, the downside risks of the sector are surging with further price correction around the corner.
We expect that the existing tightening measures in the sector may remain in force as China is seeking stable development in property market this year after the roller-coaster ride in 2016, and measures will be implemented to prevent price surges in metropolises and growing inventories in small cities.





March 29,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –China NEVs: long term growth momentum remains intact


China NEVs market realized rapid growth for the year of 2016. Total NEV production and sales reached 517k and 507k units, corresponding to a growth of 51.7% YoY and 53.0% YoY, respectively.
Subsidy cheating on NEVs has sparked tightening policy by government. Past development pattern of subsidy stimulus has shown its weakness.
Although subsidy cut can be painful in the short term, the improved regulatory system and the point-based system can be good to the future of the industry.
With the promulgation of access policy for NEVs and batteries, supply-side reform will push the industry to concentrate. Leading players can seize more market shares, while the overall growth momentum remains intact.





March 23,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Global economy: recovery with diverging policy outlook


The global economy is strengthening, though the recovery remains uneven. Ongoing divergence of recovery is contributing to marked variations in economic conditions and international monetary policies outlook across different economies.
More hikes will be considered by Fed. In contrast, the ECB is to keep policy rates at present or lower levels.
Although the world economy is stepping into tightening cycle, global liquidity maintains abundant amid strong economic growth in the U.S. and credit loosening in Eurozone and Japan.
With rising confidence driven by better growth prospects amid the pursuance of quality growth through more stimulus measures in China, investors will likely increase asset allocations within the China and Hong Kong markets.





March 16,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Fed’s 2017 rate hike: one down, three more to go


The Federal Reserve (Fed) has raised the benchmark short-term interest rate by 25 bps for the first time in 2017.
The Fed emphasizes a gradual route for rate hikes based on improvement in economic fundamentals of the economy.
The U.S. economy has been reviving swiftly. Based on the current development, we expect three more rate hikes in 2017.





March 6,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –China’s NPC: focusing on long-term gains


Premier Li Keqiang sets GDP growth target for 2017 at 6.5%, slightly lower than the 6.5%-7% in 2016.
The Chinese government will revitalize growth through quality instead of quantity and ensure that benefits of economic growth will be shared by a larger population.
China's efforts to build a moderately prosperous society, promote social and economic development, enhance economic stability at home, deepen economic structural reforms, ameliorate social inequality and effectively strengthen environmental protection would become the major agendas in 2017.





March 2,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Proactive fiscal policies crucial to growth


China is likely to broaden policy actions on the fiscal front to stabilize growth.
More fiscal stimulus packages will be introduced in 2017 to support agendas improving the general livelihood of the citizenry, accelerating urbanization, and facilitating the "ecological" programs spanning across social housing, infrastructure FAI, education, healthcare, and environmental protection.
Entering 2017, proactive fiscal programs to support domestic demand and the 13th FYP to transform China into a "moderately prosperous society" will be the keys to revive growth via structure reforms and more sustainable economic growth.





February 23,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –China’s 2017 NPC conference preview: more structural reforms on the way


he fifth Session of the 12th National People's Congress (NPC) is scheduled to be convened in Beijing on March 5, 2017.
We believe the annual government report will address strategic economic topics, provide guidance for future policy orientation and lay out more extensive reforms in economic structure.
The government will proceed with further economic rebalancing; much emphasis will be placed on deepening supply-side reforms, strengthening environmental protection and promoting PPP projects. A balanced and sustainable economic growth is prioritized, with which China's GDP growth for 2017 is expected to be 6.5%.





January 25,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Robust growth for environmental protection and alternative energy sectors in 2016-20


China’s economy has been developing swiftly since the reform and opening-up policy in late-1970s, but it came at the price of environmental pollution.
Although investment in environmental protection has constituted 1-2% of China’s GDP since 2000, quality of environment was not satisfactory. In 2H16, the 13th Five-Year Plan (FYP, 2016-20) for environmental protection (EP) and alternative energy sector were promulgated. In 2017, we expect these policies to be gradually implemented.
With more public-private partnership (PPP) projects in place, we expect investment in China’s EP sector to grow at a CAGR of 18.0% from RMB 1,355.9bn in 2016E to RMB 2,628.8bn in 2020E.
We believe non-fossil energy will account for 15% of China’s primary energy consumption by 2020F. Total installed capacity of renewable energy power plants will reach 680 GW, generating 1.9m GWH of power to account for 27% of total national power generation.





January 20,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –As expected, China’s growth slowed in 2016


In 2016, China extended further into the "new normal" of slower economic growth. China's GDP growth in 4Q16 and 2016 was 6.8% and 6.7% YoY, as compared to 6.9% in 2015.
FAI, retail sales, and external trade demonstrated a slowdown to varying degrees.
China is committed to pursuing reforms for a more sustainable future; meanwhile, stimulus measures are launched to reinstate momentum. China's push for pervasive changes in the social and economic realms will replace growth engines with new ones while alleviating the country's long-standing overcapacity issues.
Overall, China's economic growth has stabilized and the forward-looking economic indicators point to a sustainable growth in domestic demand. We reassert our view that China's GDP growth will reach 6.5% YoY for 2017E.





January 6,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –2017 China property market outlook:slower growth in property market expected


The year of 2016 was a fruitful year for the property developers on surging sales and prices. However, tightening policies launched since September and CEWC’s emphasis on the residential use rather than speculative buying in the property market have marked the beginning of a new tightening cycle.
With the expectations of slower residential property sales, high inventory levels, and tighter onshore liquidity, the downside risks of the sector are rising and further price correction will soon occur. While we expect existing tightening measures in the sector to remain in place, the government may roll out short- term, fine-tuning policies to ensure a soft landing in the property sector.
Considering the effect of decreasing investment in the property sector, we set our forecast for China’s 2017E GDP at 6.5%.





January 5,2017
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –2017 China’s economy and market prospect


We expect China's 2016E GDP growth to be 6.7%. For 2017E, we expect growth to slow to 6.5% to reflect the impacts of structural reforms and monetary normalization in the U.S.
We believe the government will continue its ambitious reforms in 2017 to transform China into a "moderately prosperous society". An accommodative stance in fiscal and monetary measures will be maintained.
The Hong Kong market has been downgraded partly on slower EPS growth in 2016. With the market concerns diminishing and corporate earnings improving in 2017, we estimate the HSI and HSCEI to reach 24,138 and 10,238 by end-2017E, equivalent to a 12.0x and 8.0x 2017E P/E.





CEB International Research
2017
Market and Investment Outlook

2017 Market and Investment Outlook - Entering a new era of investment cycle


The world and China are confronted with by a series of challenges in 2016 including stagnant growth in economy, Brexit, election of the new U.S’s Republican President, and depreciation of RMB. Impact of tighter U.S. monetary policy as well as other administrative measures will toughen the global business conditions in 2017. However, we expect the Chinese economy to turn more stable after the economic cycle had bottomed in 3Q16.
In 2017, economic recovery across the global economy will be uneven, with Europe and Japan lagging behind and the U.S. enjoying a stable improvement. Emerging Asia markets will focus on structural reforms and cultivating growth potential. We expect the emerging markets will continue to demonstrate below-trend growth as more structural reforms take place.
For China, maintaining a “new norm” of high-quality growth through comprehensive economic structural reforms will be the emphasis of 2017. We expect more accommodative stimulus will be implemented to support recovery in consumption and investment. China’s economy is expected to maintain a healthy growth of 6.7% and 6.5% in 2016E and 2017E.
Although the U.S is ready for further rate hikes, the continuous credit loosening by Eurozone and Japan has caused a flood of liquidity that will likely enter the Hong Kong market. With continued strength of USD-pegged HKD, surging market liquidity in the Hong Kong capital market will be the major driver of the stock market. In general, we remain bullish on China and Hong Kong’s equity markets in 2017.





December 15,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Finally, the Fed raises rate


As expected, the Federal Reserve (Fed) raised the benchmark short-term interest rate by 25 bps for the first time in almost a year. With the U.S. economy reviving in a solid pace, we forecast four 25-bps rate hikes in 2017F.
The U.S. economy has been recovering steadily in 2016. The U.S. GDP grew at an annualized rate of 3.2% QoQ and 1.4% QoQ in 3Q16 and 2Q16. We believe the Fed will take the opportunity to increase interest rate in 2017 to maintain its economic recovery.
Expectation of the U.S. rate increase has already driven up the USD, accentuating the depreciative pressure on RMB. While the government is facilitating structural reforms, we expect PBOC to ease liquidity further and formulate more aggressive stimulus. China would maintain a stable growth in 4Q16 and 2017.





December 8,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Stepid growth on persisting political and economic fragmentation


The "no" vote in Italian constitutional reform referendum is a fresh blow to the European Union (EU). We believe it may trigger short-term volatility in the financial sector but not another European banking crisis.
Political and fiscal fragmentations, as well as an ailing banking sector, have been dragging down the Eurozone; uneven growth among member countries also reflects a fragile recovery.
Eurozone's growth was steady at an annual rate of 1.7% in 3Q16; also unemployment has just fallen below 10% for the first time since 2009. However, unresolved issues over European banking sector and fiscal integration among member states will remain headwinds to further recovery. Hence, we project Eurozone's GDP to expand by 1.5% YoY for 2017F.





December 1,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Shenzhen-Hong Kong Stock Connect to promote a more integrated stock market


The Shenzhen-Hong Kong Stock Connect, to be launched on December 5, 2016, is another milestone of China's further liberalization of its capital market and an important step in the country's financial market reform.
Along with the Shanghai-Hong Kong Stock Connect commenced in 2014, the mutual stock market access creates bilateral access to the stock market in Shanghai, Shenzhen and Hong Kong, allowing foreign investors to participate in PRC's A-share market and PRC investors to trade in the Hong Kong market.
For southbound trading, PRC investors will select stocks in technology, gambling, brokers, and conglomerates with international business exposure.
For northbound trading, overseas investors will prefer mid-/large-caps in fast-growth sectors including telecommunication, high-technology, food & beverages, and healthcare.





November 25,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Stimulating growth through FAI


In the midst of an economic rebalancing, China will rely on investment to stabilize growth. Continuous urbanization and improving investment efficiency through high value-added investments will be the key drivers of the economy in 2017.
A combination of accommodative monetary and expansionary fiscal policies will help promote investment-led growth. China's economy will gather momentum and forward-looking economic indicators point to a modest acceleration in domestic demand.
FAI growth would stabilize between 9.0% and 11.0% in the coming quarters, provided that approved projects would commence on schedule and ongoing projects would proceed without major disruptions. With improved financing and supportive government policies, we believe 2016F/17F FAI growth would reach 9.0% and 10.2%.





November 18,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –China to fine-tune economic policies in 2017


China will continue to fine-tune its macroeconomic policies in 2017. Concurring with the country's structural rebalancing objectives, China's policy is characterized by prudent monetary easing and aggressive fiscal expansion.
Given the depreciation pressure of RMB and the need to revive economic momentum, PBOC is likely to maintain an accommodative stance by injecting more liquidity into the interbank market through reverse repo and medium-term lending facility (MLF) instead of employing radical interest rate and RRR cuts.
A proactive fiscal policy with an emphasis on stimulating domestic demand will be crucial for growth in 2017. Entering the second year of China's 13th Five-Year plan (2016- 2010), we expect the central government to ramp up infrastructure investments.





November 10,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen –Trump’s victory implies a new economic order


Trump's victory represents the desire for a non-status-quo economic and foreign policies. With Trump's various controversial proposals and unsure of the consequences of such policies, investor confidence has taken a dive, as reflected by turbulence across the financial market in Asia, Europe and the U.S. Similar to the Brexit vote in June, the election's impact on the financial market would be one-off.
The role of USD and strength of the U.S would come into question. We believe the USD index would stay volatile in medium-to-short term.
China would face unprecedented challenges in sustaining economic and trade ties with the U.S. Nonetheless, we believe direction of the bilateral trade relationship would stay unchanged in the short term.





November 3,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen – U.S. rate hike on hold


he Fed has kept the target range of the Fed fund rates between 0.25% and 0.5% in the latest meeting.
Concerns over financial market volatility, uneven global economic recovery, mild pricing pressures and the upcoming U.S. presidential election have delayed the rate hike.
A low interest rate environment continues to direct liquidity and capital flow into the Asian economies, supporting performance of their capital markets.
China’s economy will rebound further with the extended period of low interest rates. With China’s accommodative economic policies and impacts of credit-loosening measures on consumption and investment to be realized in 2H16, we expect economic growth to improve going forward.





October 28,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen – Navigating RMB’s “New Normal”


Persisting RMB weakness against the USD reflects divergence in monetary policies between the U.S. and other major economies, driving more investment to USD assets.
Brexit and upcoming U.S. presidential election, potential U.S. rate hike before year-end and continued liquidity injection by ECB and BOJ have sent the USD soaring and a host of other currencies tumbling.
Although bilateral CNY against the USD has been depreciating, RMB remains stable against a basket of global currencies. A wider and bidirectional floating range for RMB will become “new normal” in coming years. We believe gradual marketization RMB is an ongoing trend with wider range of fluctuation. Our year-end target for CNY is 6.82.





October 19,2016
Economic Acumen
Commentary by CEBI Research Team

Economic Acumen – ‘China economy to stay upbeat in 3Q16’


China’s macro indicators for 3Q16 improved across the board on recovery in domestic demand.
China’s economy will continue to strengthen on a QoQ basis due to the delayed effects of loosening measures.
Economic policies in China will remain accommodative in 4Q16 and 1H17. More monetary easing through Reverse-repo, Medium-term Lending Facility (MLF), and proactive fiscal stimulus can be expected.
We expect China’s economic growth to remain stable in 2016/17.