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December 15, 2020
Economic Acumen
CEBI Research

China’s economy gathering upbeat momentum in November

The recovery strength of China’s economy continue to gain tractions as economic indicators demonstrated upbeat growth momentum in November.
China’s success to emerge from coronavirus-induced dive accelerated the pace of recovery as the fixed asset investment, industrial production, retail sales and external trade strengthened in varying degree. November urban unemployment rate dropped to 5.2% from October’s 5.3%, reflecting the continued improvement of jobs losses in manufacturing and services sector.
China is firmly on a robust recovery path by broadening economic growth in the second half of 2020. China’s economy will maintain the momentum of sound development by leveraging the fundamental role of domestic demand in promoting economic growth. The revival of growth momentum still emerges to be the major agenda of China in 2021.
Although China’s economy is expected to grow at its weakest pace in over four decades in 2020 amid temporary disruptions of economic activities caused by the pandemic, the prompt recovery through pickups in investment, consumption and exports will prop up economic growth of China above 8% in 2021.

December 10, 2020
Economic Acumen
CEBI Research

Navigating global economic recovery in post-pandemic world

In the wake of the prolonged coronavirus pandemic across the world, the global economy continues to face a loss of growth momentum in 2020. Resurgence in infected cases of coronavirus during 4Q2020 causes slowdown in rebound of economic activities, thus lending weak support to the revival of sustainable economic growth. Global growth is projected to have a contraction of more than 4% in 2020.
Looking ahead to 2021, global economic growth is expected to rebound from 2020’s trough at an uneven momentum across different countries due to varying health, economic and political environment in different continents.
Prolonged uncertainties regarding the control of the coronavirus epidemic through injection of effective vaccines and cities’ lockdown still weigh on growth recovery momentum. In sum, the chances of a more lifting of activity restrictions in some advanced economies increase on earlier access to vaccines, potentially leading to better economic performance in the second half of 2021.

December 4, 2020
Economic Acumen
CEBI Research

Hong Kong economy facing uncertain path of economic turnaround

In the wake of coronavirus-related economic disruptions and heightened geopolitical tensions, Hong Kong economy faced severe economic fallout in the first nine months of 2020 with GDP growth declining by 7.2% YoY. On adjusted quarter-to-quarter basis, HK’s economy in the third quarter rebounded by 2.8% on improvement of the local epidemic situation, indicating that economic slump has hit the bottom in 1H2020. Nevertheless, the level of economic activities was still notably below the pre-pandemic level.
The major growth drivers including consumption, investment and service trade were still embedded into dramatic declines driven by economic shocks arising from stoppage of domestic and cross-border activities while moderated year-on-year decline in external trade of goods reflected that production normalization in China triggered a pick-up in re-exports and imports of HK.
The pandemic strikes a severe blow to consumption-and tourism-related sectors as well as external trade sector. We forecast that an abrupt deterioration of economic activities are slamming HK’s economic momentum and GDP will contract by 6.1% in 2020.

November 23, 2020
Economic Acumen
CEBI Research

Biden’s victory embracing a new era of global economic order

Joe Biden’s victory in several battleground states finally put him over the threshold of 270 Electoral College votes to clinch the U.S. presidency, electing as the 46th U.S. President. He pledges to tackle the pandemic and restore a spirit of national unity after four years of raucous populism and administrative turmoil under Donald Trump.
The U.S presidential election ended with a widely expected outcome with which Biden’s victory represents the desire for reverting Trump’s non-status-quo economic and foreign policies.
Major tasks of Biden focus on unifying the country, battling the coronavirus pandemic, rebuilding economic prosperity, securing health care for American families and rooting out systemic racism.
Multiple overlapping crises at home and abroad provide room for the newly-elected U.S President to lay out a bold vision and lead a renewal of values by rebuilding a nation that can meet the challenges and leverage the opportunities. With cooperation and determination, the U.S and other nations can recover from crisis and revitalize peace and prosperity.

November 11, 2020
Economic Acumen
CEBI Research

China’s overseas shipments embracing stable recovery momentum in October

China’s October exports extended an upward trend on the back of consumption rebound of major trading partners, demonstrating an upbeat momentum at 7.6% YoY in Yuan terms. As western nations lifted containment measures of coronavirus and prepared to stock up consumer goods for upcoming holiday seasons, their demand for Chinese products was picking up in October.
October’s imports, however, cooled to mild rise of 0.9% YoY after a surge of 11.6% in September. The deceleration of imports was mainly due to the long holidays in early October.
The new round of coronavirus pandemic continues to depress travel, spending, investment, foreign demand for Chinese products and consumer confidence. Major cities re-imposing lockdown measures to fight against the spread of coronavirus may not only hit the demand for China's goods, but also damage the supply of raw materials and intermediate components.
We are of the view that shipments of healthcare and electronic products are likely to stay strong in coming months, which help sustain the low single-digit growth of China’s trade in 2020.

November 3, 2020
Economic Acumen
CEBI Research

China unveiling the blueprint for 14th Five-Year plan and economic targets through 2035

The fifth plenum of the Chinese Communist Party (CCP)’s 19th Central Committee concluded in Beijing on 29th October after a four-day meeting. The primary agenda of the meeting is to set the blueprint for the 14th Five-Year Plan (FYP) from 2021 to 2025 while establishing nations’ goals through 2035.
The 14th FYP hinges on “dual circulation,” amid the economic shocks of coronavirus and the increasingly hostile economic competition with the U.S. The plan calls for forming a powerful domestic market and establishing a new growth model.
The long-range objectives of China rest on strengthening economic power through more domestic consumption and self-reliance in science and technology, pulling GDP per capita level up to that of the middle level of developed economies by 2035.
China’s policy makers set sweeping social and economic development goals for the next five to fifteen years to build the nation into a modern socialist power. China will nurture a strong domestic market and establish a new development model, thus ensuring the reinforcement of domestic and international circulations, striving for leadership in technological advances and spurring overall demand.

October 28, 2020
Economic Acumen
CEBI Research

Resurgence of coronavirus impairing economic recovery of Eurozone

Coronavirus pandemic has ripped through the world, thus creating devastating chaos on Eurozone. The economies of Eurozone are among the developed nations that have suffered the most damages.
Amid the flattening of coronavirus curve in 3Q2020, Eurozone’s nations eased lockdowns and restored partial reopening of work and consumption. Economic indicators demonstrated signs of rebound. However, the resurgence in coronavirus cases during the beginning of 4Q2020 becomes the biggest threat to the recovering Eurozone.
The new wave of coronavirus outbreak hampers the pace of activities normalization. We are of the view that Eurozone will face economic stagnation in 4Q2020 amid a potential wave of new infections, surging unemployment and corporate insolvencies, as well as the absence of an EU-UK Brexit trade deal.
Economies of Eurozone continue to operate below pre-pandemic level in most sectors. The prolonged period of economic weakness constitutes a strong headwind for the global economic recovery.

October 20, 2020
Economic Acumen
CEBI Research

China's economy embracing upbeat recovery momentum in 3Q2020

China’s economy embedded into strong recovery strengths in 3Q2020 with which economic indicators demonstrated signs of upbeat growth. GDP growth surged to 4.9% YoY in 3Q2020, which stayed below the consensus estimate of 5.5% but higher than 2Q2020’s 3.2%. China emerged out of pandemic shocks by undergoing a V-shape rebound through the robust pickups in both manufacturing activities and consumption.
However, the economic outlook is still clouded by resurgence of coronavirus infections in many parts of the world and escalating US-China tensions. We are of the view that China’s policy makers will ensure economic stability as the top priority by upholding the policy framework of stable macroeconomic policies and flexible microeconomic policies which are to be fine-tuned in line with economic conditions.
Acceleration of economic activities will alleviate the downside risks and stimulate growth, thus ensuring a sustainable recovery of economic strengths.
We forecast that China will encounter stronger growth of economic activities between 5.0% and 5.5% in 4Q2020. China’s real GDP growth for 2020 will stand at 2.0%.

October 5, 2020
Strategy Outlook
CEBI Research

4Q2020 Market and Investment Outlook
Navigating market volatilities and opportunities

Third-quarter of 2020 witnessed ups and downs in financial markets. As the coronavirus infection curve showed signs of flattening, growing risk appetite triggered the bull run of global stock markets. However, easing of lockdowns and social distancing rules re-amplifies health risks again. Along with September massive sell-off of technology stocks, global equity markets drifted lower and lost spectacular gains over the past several months. In sum, after months of economic shutdowns, re-openings and relapse around the world, the global economy still stays away from a sustainable recovery.
Heading into fourth-quarter of 2020, global business and consumer confidence continue to recover at a slowing pace. The mounted health, economic and geopolitical risks embrace growth uncertainties that threaten financial stability. Previous economic shocks has put the global economy embedded into economic stagnation, adding urgency for the implementation of more macroeconomic measures to rekindle growth momentum. The continued complication of global economy paves the way for sluggish growth recovery and more turbulences in financial markets.
In general, investors are encountering a market environment of low growth, low inflation and low yields. Although economic cycle outlook is improving with marginal pick-up in economic activities, the sustainability of recovery growth momentum remains uncertain. We are of the view that equity markets remain volatile in the U.S. amid relative expensive valuations, renewed health crisis, President’s health conditions and upcoming Presidential election while Hong Kong (HK) and China equity markets continue to gain traction on acceleration of China’s domestic demand-led recovery. Fixed income market benefits from excess global liquidity. Forex market embraces weak U.S. dollar amid gloomy U.S. economic outlook, swelling debt level and rising geopolitical tensions.

September 28, 2020
Economic Acumen
CEBI Research

Uneven growth recovery with diverging policy outlook

Softening global growth rebound expectations are escalating amid heightened market uncertainties including a new wave of coronavirus outbreak, ongoing US-China tensions, mounted geopolitical risks, and fluctuation of commodities prices.
Entering into the second half of 2020, the global economy shows signs of strengthening, though the recovery remains uneven across different economies.
The Fed, ECB and BOJ maintain ultra-loose monetary policy stance to boost growth momentum while the PBOC maintain prudent stance, guiding the monetary policy to return to a "normal" status as China’s recovery momentum is on track.
The global economic recovery embraces growth uncertainties with which diverging trends of growth momentum in different economies become more apparent. Volatilities of global financial markets are skewed to the high side and a clouding global growth outlook comes with elevated economic and political risks as well as diverging policy outlook.
The continued complication of worldwide business environment could lead to a strong likelihood of sluggish global growth recovery for the rest of 2020.

September 23, 2020
China SaaS Industry
CEBI Research

Sector report : China SaaS industry

Software as a Service (SaaS), is the service model in which the supplier put the standard application software on the server, and the customer orders and pays from the supplier on demand. The SaaS provider takes the role of the platform, connects PaaS, IaaS, and directly provides one-stop service for customers. Under the SaaS subscription model, vendors directly provide software to users through cloud services. In other words, the software provided is based on the Internet for customers.
SaaS application can help to reduce operating cost. By comparing traditional software building and SaaS model, SaaS adopts a subscription model and does not need to configure hardware. Secondly, it reduces hardware expenditure and operation and maintenance costs. Thirdly, enterprises can reduce the expenditure of hiring IT personnel for operation, management and maintenance of the software. Meanwhile, multi-tenant structure also helps in continuous unified update and running.
China SaaS market is still under development. China corporate's investment in IT spending is low compared to GDP level. In 2018, China’s GDP accounted for 15.9% of total GDP in the world, but Chinese companies’ IT spending only accounted for 3.7% of total IT spending in the world. SaaS market has the potential for rapid development in the future, especially after Covid-19 pandemic. Compared with the developed SaaS application market abroad, the Chinese SaaS market is still in its early stage. Meanwhile, thanks to the supportive policies and various incentives in China, the market size of SaaS market is increasing in the past few years. It is expected that market size of China SaaS industry to increase to RMB47.4 billion in 2020, and account for 9.3% of the total SaaS market in 2020.
SaaS sector performed well YTD. Serval SaaS related companies listed in Hong Kong, including Kingdee International (268 HK), Kingsoft (3888 HK), Weimob (2013 HK), Yeahka (9923 HK), Huifu (1806 HK), Duiba (1753 HK), Vobile (3738 HK). They performed well YTD. The sector is trading at 71.5x 2021E P/E and 38.4X 2021E EV/EBITDA.

September 21, 2020
Economic Acumen
CEBI Research

The Fed prolonging ultra-low interest rate environment to boost economic momentum

The U.S. Federal Reserve (the Fed) maintained their dovish stance to leave the target range of the benchmark Federal fund rates (FFR) (0% to 0.25%) unchanged at the conclusion of the latest Federal Open Markets Committee (FOMC) policy meeting.
The latest Fed’s move signaled that the pandemic escalates health risks and threatens global growth momentum. Softening global growth rebound expectations are driven by market uncertainties including a new wave of coronavirus outbreak, escalating US-China tension, mounted geo-political risks and fluctuation of commodities prices.
Heightened downside risks of global economy and mild inflation leave more room for the Fed to maintain loosening stance in monetary policy.
We are of the view that the Fed will continue to maintain the current stance of monetary policy in the next three years with the aim to strike a balance between solid economic recovery and surging price level.

September 15, 2020
Economic Acumen
CEBI Research

China’s economy embracing stronger recovery momentum in August

The recovery strength of China’s economy is gaining tractions as economic indicators demonstrated upbeat growth momentum in August.
China’s success to emerge from coronavirus economic shocks accelerated the pace of recovery as the fixed asset investment (FAI), industrial production and retail sales strengthened in varying degree. August survey-based urban unemployment rate dropped to 5.6% from July’s 5.7%, reflecting the continued improvement of jobs losses in manufacturing and services sector.
We are of the view that China’s economy will maintain the momentum of stable and sound development by leveraging the fundamental role of domestic demand in promoting economic growth. Pickups in industrial production and consumption, coupled with stronger business and consumer confidence, lend great support to the recovery.
Continued activities’ normalization and macroeconomic policy support will help China attain a sustainable path of economic growth in 2H2020.

September 7, 2020
Economic Acumen
CEBI Research

Technology stocks sell-off to weight on global equity markets

Entering into the first week of September, global equity markets drifted lower and lost spectacular gains over the past several months as massive sell-off of high-flying technology stocks kept the bulls out of the market and weighted on the investment sentiment. Nasdaq Composite, an index benchmarking global technology stocks, dropped 5.0% and 1.3% on 3rd and 4th September respectively.
The coronavirus-led recession has led to the revolution of technology sector which enhances the use of technological knowhow to tackle economic disruptions from lockdowns and social distancing rules. Growing optimism on the earning prospect of technology fields along with the support of massive liquidity from loose monetary policy trigger excessive buying interests of technology stocks.
The sudden correction signals overvaluation of technology sector, setting the stage for market consolidation. The amplifying downside risks on the rotation of technology stocks have added anxiety and confusion to the market that threatens financial stability. Investors turn to be more cautious about market outlook and volatile swings in the index are expected in the remaining months of 2020.

August 27, 2020
Economic Acumen
CEBI Research

The dollar losing tractions

The global coronavirus pandemic has caused the deepest economic contraction in modern history. Although aggressive central bank policy action combined with extensive fiscal easing globally could help the global economy out of the pandemic, the health conditions still lie in greater uncertainty about how quickly the virus can be eliminated and life can get back to normal with which soaring health risks continue to slow the pace of recovery.
Given no improvement in recovery momentum, growth headwinds impose mounting downward pressure on the U.S. dollar (USD) as it has plunged 4.5% against a basket of currencies since the beginning of the second half.
Deterioration in US-China relations, uncertain outcome of upcoming the U.S. Presidential election, swelling balance sheet of the Federal Reserves and fiscal deficit, surging commodities prices and supportive strengths for risk assets all set to remain intact in 2020, thus undermining the proper U.S. recovery hopes and extending the softening trend of the USD.

August 19, 2020
Economic Acumen
CEBI Research

Hong Kong economy embracing delay in economic turnaround

Amid large-scale coronavirus-related economic disruptions and heightened geopolitical tensions, Hong Kong economy faced severe economic fallout in the second quarter of 2020 with GDP growth declining by 9.0% YoY.
The consumption, investment and service trade still embedded into double-digit dramatic declines driven by economic shocks arising from stoppage of all types of activities while the moderated year-on-year decline in external trade of goods reflected that gradual resumption of production in China triggered a pick-up in re-exports and imports.
Hong Kong economy embraces uncertainties in 2H2020 that could plunge the economy deeper in the recession. The pandemic confronts HK with worsening conditions in labor market with which HK is facing a drop in output unprecedented in its breadth and intensity.
We forecast that Hong Kong economy will slump by 4.4% in 2H2020 with 2020’s drop of total output reaching 6.7%.

August 18, 2020
Initiation report
Company Research

Vobile Group Limited (3738.HK)
Undervalued SaaS sevices provider

Vobile offers SaaS solutions to global firm studios. Vobile, as a company that owns the largest market share in the global content protection industry, offers SaaS solutions to many of the world’s largest film studios, TV studios, TV networks, and many other content owners to help them reduce infringement-induced revenue loss.
Benefits from the growth in the global online video market. The global online video market is experiencing an enormous growth. The size of global online video entertainment market is expected to lift from USD 54 billion in 2018 to USD 87 billion in 2021.Vobile’s future plans could help content provider of short videos to benefit from the growth in the global online video market. In addition, the Company acquired Channel ID and Rights ID last year, which could transform the Company to leading content monetization platforms such as YouTube and Facebook, such that the Company can benefit from the growth in the global online video market.
The popularization of DTC platform would be another catalyst. The content protection SaaS industry benefits from the reform of DTC (a.k.a Direct to Consumer) platform. In the past, more and more consumers switch to online entertainment platform, leading to a gaining prevalence of Netflix, as well as an escalating demand for online content protection services. However, several film studios have launched their self-established DTC platform recently, leading to extra demand for content protection services.
Investment in Foundation in the Greater Bay Area can boost the investors’ confidence. According to the notice dated 29 June 2020, the Company issue convertible bonds with a principal amount of HKD 100 million. After Acquisition, the Greater Bay Area Homeland Youth Community Foundation holds 8.15% of the shareholder rights. We expect the investment from the mainland investors can boost the overall investors’ confidence in Mainland China.
Initiated at Buy with a Target Price of HKD6.8. We expect that the revenue of Vobile Gorup to reach USD 55.7 million in 2020 with a YoY growth of 197%. We also expect the Company can turn around this year and record net profit of USD 3.58 million. We expect the revenue in 2021 to reach USD 81.2 million with a YoY growth of 46% and profit to reach USD 8.89 million. We initiated at Buy with a Target Price of HKD 6.8, based on 28x EV/EBITDA, which is 30% discounts of peers, and also representing 42.8x 2021E PE and 4.7x 2021E PS ratio.
Risk factors: 1) High concentration in the U.S. market, 2) Inability to expand to the Chinese market, 3) The pressure for lower gross profit margin is higher than our expectation, 4) More fierce competition in the industry

August 14, 2020
Economic Acumen
CEBI Research

China’s economy encountering stable recovery momentum in July

The first month of the second half demonstrated stable recovery of China’s economy with which July economic indicators pointed to strengthening momentum. China’s success in flattening the curve of coronavirus infection reduces the spillovers effects as the drop of fixed asset investment (FAI) and retail sales narrowed in varying degree.
July survey-based urban unemployment rate remained stable at 5.7%, reflecting the improvement of jobs losses in manufacturing and services sector.
China has restored growth momentum in 2Q2020 due to early exit of pandemic and re-opening of economic activities backed by countercyclical stimulus measures to spur growth in industrial production and services. We are of the view that the pick-up in pace of activities normalization along with macroeconomic policy support will help stimulate growth rebound, thus attaining a more sustainable path of economic recovery in 2H2020.

August 11, 2020
Initiation report
Company Research

Redsun Services Group Limited (1971.HK)
Sailing with the wind

Well-recognized comprehensive community service provider in Jiangsu province. Redsun Services Group Limited (“Redsun Services Group” or “the Company”, is a well-recognized comprehensive community service provider in Jiangsu province, China, with strong and balance property management abilities in the management of residential and commercial properties. The company ranked 35th among the 2019 Top 100 Property Management Companies in terms of overall strength.
Backed by Rapid growth of Redsun Properties Group. Redsun Service Group has been providing community services in China for over 15 years with a regional focus on the Yangtze River Delta. It is believe that Redsun Service Group is backed by rapid growth of Redsun Properties Group, through several circumstances. We expect the total GFA managed by Redsun Service Group will increase to from approximately 9.1 million sq. m. in 2017, to 40.6 million sq.m. in 2021.
Higher contribution from value added services to improve overall GPM. Redsun Services Group provides a wide range of value-added services, to both non-property owners, and property owners and residents. Value-added services to non-property owners would help to enlarge the company’s revenue base, while community value-added services can help to improve Redsun Services Group overall GPM.
Potential acquisition plan in the future. The company currently expect capital expenditures for 2020 to be RMB28.6 million, which will be used mainly for potential acquisition of other property management companies.
Initiated at Buy; with TP of $9.35. We project its 2020E and 2021E profit attributable to equity holder to be RMB60.2mn (+1.9% YoY) and RMB152.2mn (+152.9% YoY). If we exclude one-off items, we project its 2020E and 2021E profit attributable to equity holder to be RMB84.2mn (+42.5% YoY) and RMB152.2mn (+80.8% YoY).Property services sector is trading at 24.6x 2021E PE, and 0.67x 2021E PEG. We initiated at Buy rating on Redsun Services Group Limited, with a TP of $9.35, representing 23x 2021E PE, which is based on 0.35x 2021E PEG.
Risk factors: 1) Risks associated with the outbreak of COVID-19, 2) Operating in a highly competitive industry, 3) Higher-than-expected increase in staff costs, 4) Highly concentrated in Jiangsu province.

August 6, 2020
Economic Acumen
CEBI Research

Navigating upbeat momentum of gold

The new wave of coronavirus infection is spreading fast and wide as the pandemic rapidly intensifies in a number of emerging market and developed economies, necessitating re-launch of stringent lockdowns and tightened social distancing rules.
Under the environment of severe economic fallout, risk sentiments soar on longer-than-expected slump in economic growth, which prompts investors to turn to gold as both “safe haven” investment and collateral. Entering into August, gold prices have crossed USD $2000 per ounce threshold and soared to a record high.
Looking ahead, record-low interest rates, deterioration in US-China relations, a sinking U.S. dollar (USD), upward inflationary expectation, volatile fluctuation in stock markets and gloomy global economic outlook all set to remain in 2020, thus favoring the exposure to gold to manage the risks.

July 22, 2020
Economic Acumen
CEBI Research

HK’s third wave of pandemic deepening economic recession

Hong Kong (HK) is in the midst of a new round of coronavirus outbreak as a third wave of locally transmitted infections broke out in early July.
Amid the pandemic disrupting economic activities, HK economy has embedded into deep contraction, thus posing broader risks to growth outlook and endangering the stability of job market. The latest unemployment rate between April and June has climbed for nine straight months to its highest level at 6.2% in more than 15 years, reflecting that HK’s economy suffered from huge economic shocks.
The novel coronavirus infection has taken a heavy toll on HK’s consumption and tourism sectors in 1H2020, impacting both domestic private expenditure and inbound tourism due to the restriction of local and cross-border mobility of people.
Heading into 2H2020, HK’s economic outlook embraces mounting uncertainties as the serious pandemic situations in certain parts of the world, renewed surge in local cases and escalating US-China tensions could plunge the embattled economy deeper and harder in the recession.
We are of the view that the economic momentum is still fragile on rising unemployment rate, heightened fluctuation of financial markets as well as lack of business and consumer confidence with which economic contraction remains intact in 2H2020.

July 9, 2020
Economic Acumen
CEBI Research

China’s inflation softening in 2Q2020

China's consumer inflation edged up higher at 2.5 % YoY (-0.1% MoM) in June, which was in line with the consensus estimate but slightly higher than May’s 2.4%. The flattening of coronavirus infection curve pointed to restoration of economic activities, which supported the stable rise in general prices.
June producers’ prices dropped by 3.0% YoY (+0.4% MoM), staying better than the consensus estimate of -3.2% and May’s -3.7%. The first-time month-to-month rise in PPI since the coronavirus outbreak reflected that demand for industrial products has demonstrated a recovering trend.
During the first half of 2020, the CPI inflation fluctuated between 2.4% and 5.4%, with year-to-date inflation at 3.8%, exceeding the official target of 3.5% and 2019’s 2.9% while the PPI contracted by 1.9% YoY, significantly lower than 2019’s +0.3%.
Looking forward, the economic and social devastation wreaked by the pandemic and cooling inflation prompt China’s policy makers to launch more stimulus measures in reviving economic momentum and maintaining stable inflation in 2020.

July 3, 2020
Economic Acumen
CEBI Research

China Economic Outlook for 2H2020: economic recovery on track

In the wake of coronavirus outbreak, China’s economy faces massive economic shocks by disrupting global supply chain, shutting down industrial production and limiting day-to-day activities of people.
In order to further cushion the shocks and stimulate the growth of activities, China’s policy makers have launched sizable stimulus measures to provide relief to citizens and enterprises.
The Central Government will increase spending, tax relief and subsidies for virus-hit sectors while the People’s Bank of China (PBOC) will maintain ample liquidity in the financial system to spur bank lending and relieve financial burden of enterprises.
We are of the view that the forward-looking economic indicators point to a solid growth in domestic demand in 2H2020. China will cushion itself from the weakening external trade by relying more on domestic growth drivers. Economic activities are expected to rebound strongly in 2H2020 with year-to-year GDP growth at 5.0%.

June 15, 2020
Economic Acumen
CEBI Research

China’s economy showing signs of stabilization in May

China’s May economic indicators demonstrated stable recovery from the drop in output and employment during the first four months of 2020. The macroeconomic spillovers effects of coronavirus pandemic continue to fade away in May as the contraction of fixed asset investment (FAI) and retail sales has narrowed in varying degree.
May’s survey-based urban unemployment rate reduced to 5.9% from April’s 6.0%, reflecting the improvement in jobs losses from manufacturing and services sector.
China’s policy makers are still cautious about the new coronavirus cases and re-infections by taking gradual approach to resume work and consumption, which will result in steady economic growth in 2Q2020.
Looking forward, we are of the view that the pick-up in pace of economic activities normalization along with macroeconomic policy support will alleviate the downside risks and stimulate growth rebound in 2H2020, thus ensuring a more sustainable recovery of economic strengths.

June 9, 2020
Economic Acumen
CEBI Research

Oil markets embracing upbeat momentum

The upheaval in the crude oil markets reflects the significance of coronarvirus shocks in driving the rebalancing of global oil consumption.
Since the end of April, crude oil prices have demonstrated signs of recovery as WTI and Brent oil futures climb 102.7% and 61.5% respectively. Easing out of pandemic lockdown with partial reopening of economic activities in global economy and deeper production cuts are lending buoyancy to prices. The future oil market movement will coincide with the speed of global economic recovery.
We are of the view that crude oil prices enter into a period of stabilization as the extension of production cuts is matching the reduction of demand erosion during the pandemic outbreak to reach a rebalancing in oil markets. Supported by global monetary easing and expected recovery of economic activities, we expect oil prices will rise to USD$40-USD$50 in coming months.

June 1, 2020
Economic Acumen
CEBI Research

The U.S. striping away HK’s preferential economic and trade status

U.S. President Donald Trump announced that he would begin to revoke Hong Kong’s (HK) preferential treatment as a separate customs and travel territory from the rest of China.
The latest escalation of US-China tensions threatens HK as a global financial hub and as a critical business gateway between China and the U.S. As one of the most open and free economies in the world, HK is highly reliant on consumption, trade and investment flows from China and the rest of the world to maintain its economic strengths.
We are of the view that the removal of HK's special privileges will shake business confidence and create pessimistic market sentiment in short run only.
The continued complication of worldwide economic and political environment will push forward the rebalancing of HK economy, thus paving the way for a new era of development to ride out the economic storm as well as maintain the prosperity and stability.

May 25, 2020
Economic Acumen
CEBI Research

China’s 2020 NPC: stabilizing employment and ensuring people’s livelihood

After a 78-day delay due to the outbreak of coronavirus, the third annual session of China’s 13th National People's Congress (NPC) was finally held in Beijing. The main emphasis of the NPC is to prioritize job creation and ensure living standards while maintaining effective epidemic control.
Although growth target for 2020 has not been set in the Government Work Report, China will ensure achieving the development goals against poverty and completing the building of a moderately prosperous society in all respects.
We are of the view that China’s economic growth has shown signs of stabilization in 2Q2020 and the forward-looking economic indicators point to a solid growth in domestic demand.
Economic activities are expected to rebound strongly in 2H2020 and we forecast that GDP growth will reach 2.0% in 2020.

May 18, 2020
Economic Acumen
CEBI Research

China’s financial regulators unveiling guidelines to connect financial markets and services in “Greater Bay Area”

China’s financial regulators, namely PBOC, CBIRC, CSRC and SAFE, jointly unveiled guidelines to facilitate cross-border services, transactions and investment between Hong Kong, Macau and nine cities in Guangdong province, thus developing the“Greater Bay Area” into a new economic hub.
The guidelines cover four major principles and twenty-six specific measures to promote cross-border trade, facilitate investment and financing, expand the opening-up of the financial sector, enhance the connectivity of financial markets and financial infrastructure, boost innovation of the financial services, and prevent cross-border financial risks.
With the objective of enhancing economic integration, the GBA initiative will link the cities by leveraging their collective strengths through coordinated efforts for economic cooperation and financial support to build a dynamic and internationally competitive first-class bay area, thus generating a new era of China’s economic development.

April 20, 2020
Economic Acumen
CEBI Research

China’s economy embracing sharp contraction in 1Q2020

The widespread lockdown across China to contain the spread of coronavirus put the economy embedded into an unprecedented contraction of 6.8% YoY during 1Q2020, staying worse than the consensus estimate of -6.0%.
China’s economic indicators showed a downtrend notably in 1Q2020, with growth of fixed asset investment (FAI), industrial production, retail sales and external trade declining at the fastest pace in vary degrees. Job market showed slight improvement from partial resumption of work.
Looking forward, the pick-up pace of normalizing work and consumption along with macroeconomic policy support will stimulate growth in coming quarters, thus ensuring a more sustainable recovery of economic strengths.
We forecast that China will restore positive growth in 2Q2020, followed by strong rebound of economic activities in 2H2020. For 2020, China’s real GDP growth will stand only at 2.0% in 2020, compared with 6.1% in 2019.

April 14, 2020
Economic Acumen
CEBI Research

China’s first-quarter external trade encountering deterioration on coronavirus outbreak

China’s external trade showed signs of improvement in March as exports demonstrated a less-than-expected slump at 3.5% YoY in Yuan terms, staying above the consensus estimate of -12.8% and Jan-Feb’s -15.9% while imports expanded by 2.4% YoY, which were above the consensus estimate of -7.0% and Jan-Feb’s -2.4%. Total trade growth contracted by 0.8% YoY, against Jan-Feb’s -9.6% YoY with which trade surplus reached RMB 139.4bn.
For 1Q2020, China’s total trade embraced deterioration as exports and imports fell by 11.4% and 0.7% respectively, below 4Q2019’s +5.0% and +1.6% while total trade growth contracted by 6.4% YoY against 4Q2019’s +4.6%.
In sum, improvement in March’s exports and imports was mainly due to late overseas shipment when factories were reopened. We are of the view that overseas new orders of the Chinese products remain stagnant in 2Q2020, which will extend contraction of external trade in 2Q2020.

Apr 6,2020
Economic Acumen
CEBI Research

The PBOC unleashing 400bn to cushion the blow of coronavirus on China

The People’s Bank of China (PBOC) announced a cut of reserve requirement ratio (RRR) for small banks by 100 basis points (bps) in two phases. The latest RRR cut was the third one in 2020 and RMB 400 billion potential credits will be released into the economy to reduce the real cost of financing.
The PBOC reduces the excess deposit reserve interest rate of financial institutions from 0.71% to 0.35%, with the aim to boost the efficiency for banks’ usage of funds and better serve small and medium-sized enterprises (SMEs).
The amplifying health and economic risks surrounding China’s economy embrace growth uncertainties that threaten financial stability.
The PBOC’s latest countercyclical monetary policy will inject trillions of liquidity into the financial system to spur bank lending and lower borrowing costs for enterprises, thus alleviating the downside risks and cultivating a stable monetary and financial environment for China’s economy.

Mar 31,2020
Economic Acumen
CEBI Research

2Q2020 Market and Investment Outlook
Heightened market fears on global pandemic

First-quarter of 2020 witnessed mounting volatilities across global financial markets driven by the rapid spread of coronarvirus rampaging multiple continents. Increasing number of infected cases and countries’ isolation against virus threat caused market panic with major index of global equity markets and oil prices slumping more than 20% and 60%.
In response to the headwinds, global central banks and governments pursue aggressive monetary easing and fiscal measures to prevent deceleration of economic growth. Coordinated policy actions become the key policy tool to restore growth momentum and the easing cycle may turn out to be longer and deeper.
The investment theme shaping financial markets for 2Q2020 hinges on balancing the risks and opportunities regarding the global containment of coronavirus. The outbreak has been brutal for global economy as quarantines carry a cost with severe economic and market dislocation. Markets have priced in some containment costs in 1Q2020 but fading global growth momentum remains as the major uncertain factor affecting investment sentiment and corporate earnings.
In general, 2Q2020 will be a challenging quarter for investors, with health concerns creating continued waves of volatility in financial markets. Virus containment remains as the main catalyst to prop up market sentiment.
We believe that equity markets remain volatile in the U.S. and Europe with possible gathering of clouds for a correction while Hong Kong (HK) and China equity markets are gradually recovering due to falling infected cases, supportive stimulus measures and attractive valuations. Fixed income market continues to absorb excess liquidity from central banks’ pivot towards lower interest rates and quantitative easing (QE) programs while forex market still favors USD amid market turbulence.

Mar 26,2020
Economic Acumen
CEBI Research

Oil market meltdown causing tension and uncertainty for the global economy

Amid the ongoing spread of coronavirus, economies of multiple continents have ground to a halt as quarantines shut down factories and cut the demand for products and services. Weaker global demand and over-supply of oil point to normal price correction.
Saudi Arabia and Russia flood the world with more supply of oil along with massive discounts, pushing down the oil prices substantially by more than 40%.The sharp drop of oil prices creates a new wave of economic shocks to the global economy. Oil market dislocation adds the economic strain on enterprises and results in extended periods of market volatilities and uncertainties.
We are of the view that oil markets are seen to remain in a period of a severe supply-demand imbalance due to weak global demand from depressing travel, spending, and corporate investment with which oil prices will stay between US$20/barrel and US$30/barrel in the first half. Supported by global monetary easing and expected recovery of economic activities, oil prices will recover and return to above US$40 in the second half.

Mar 16,2020
Economic Acumen
CEBI Research

The Fed slashing rate to near zero and re-launching $700 bn QE program

After launching the first emergency rate cut of 50 bps since 2008 financial crisis two week ago, the U.S. Federal Reserve (the Fed) announced the second emergency rate cut of 100 bps, reducing the target range of the Fed fund rates (FFR) from 1.0%~1.25% to 0%~0.25%.
In addition to rate cut, the Fed restarted quantitative easing (QE) program by purchasing treasury securities by at least $500 billion and agency mortgage-backed securities by at least $200 billion.
The Fed aims at taking more pre-emptive actions to alleviate economic pressures driven by potential damages of coronavirus. Looking forward, softening global growth expectations continue to be driven by fears over the impact of coronavirus. Mounting downside risks of the U.S. economy and mild inflation leave more room for the Fed to maintain loosening stance in monetary policy.
We are of the view that the Fed will avoid negative interest rate policy by continued injection of liquidity in 2Q2020 through QE program rather than FFR cut.

Mar 16,2020
Economic Acumen
CEBI Research

The novel coronavirus outbreak shrinking China’s economic activities during the first two-month of 2020

The novel coronavirus outbreak hit China’s economy since the beginning of the year as major economic indicators for the first two months of 2020 embedded into an unprecedented contraction, with growth of external trade, fixed asset investment (FAI), property investment, industrial production, and retail sales tumbling in vary degrees.
In the face of economic downturn, the People’s Bank of China (PBOC) announced a targeted cut in required reserve ratio (RRR) by 50-100 basis points (bps) for banks that have met inclusive financing targets, effective on 16th March 2020.
China will leverage the fundamental role of domestic demand in promoting economic growth and macroeconomic policy support will help alleviate the downside risks of the economy and strengthen the growth momentum.
We are of the view that China will suffer growth deceleration in 1Q2020, followed by slight improvement of economic activities in 2Q2020 and rebound of growth momentum in 2H2020.

Mar 9,2020
Economic Acumen
CEBI Research

Heightened epidemic risks prolonging global economic stagnation

The coronavirus epidemic continues to rampage not only China, but also multiple continents. Italy, South Korea, Japan, the U.S. and some other countries have seen surging infected cases.
Although quarantines have been imposed to prohibit the spread of deadly virus, they carry a cost with severe economic and market dislocation, thus disrupting supply chains and operation of enterprises along with shrinking consumer expenditures.
The economic stagnation is compounding global economic woes and triggering a severe blow to different sectors of the economies. Looking ahead, the amplifying health and economic risks surrounding the global economy embrace growth uncertainties that threaten financial stability.
In sum, the continued complication of worldwide health and economic environment will weaken global trade, consumption and investment, paving the way for sluggish global growth and more short-term turbulences in financial markets for the first half of 2020.

Mar 5,2020
Economic Acumen
CEBI Research

The Fed slashing interest rate to combat coronavirus epidemic

In the wake of the fears over the impact of coronavirus, the U.S. Federal Reserve (the Fed) announced the first emergency rate cut of 50 bps since 2008 financial crisis, reducing the target range of the Fed fund rates (FFR) from 1.5%~1.75% to 1.0%~1.25%.
The Fed’s statement indicated that the coronavirus outbreak has increased risks to the U.S. economic outlook with which monetary easing helps protect the economic expansion of the U.S. economy. In sum, the Fed’s surprise rate cut signals that the virus outbreak, which may swell to pandemic status, is a potential threat to hinder global growth.
Mounting downside risks of the U.S. economy and mild inflation leave more room for the Fed to maintain loosening stance in monetary policy. As the spread of coronavirus disrupts global supply chain and triggers economic shocks on the global economy, we are of the view that the Fed will lower interest rate again in 2Q2020.

Feb 27,2020
Economic Acumen
CEBI Research

HK’s huge budget deficit for FY 2020/21 to relieve burden on individuals and enterprises

With the economic challenges from global and domestic uncertainties as well as the outbreak of coronavirus, Hong Kong (HK) Government makes use of ample fiscal reserves to cushion the blow to the economy by relieving the people's burden, supporting enterprises, safeguarding jobs and stimulating economic activities.
Looking forward into FY 2020/21, HK continues to suffer the prolonged disruption from the outbreak of infected virus which exerts downturn on HK economy. In respond to economic recession, HK Government pledges to roll out relief measures worth more than HK$120 billion to support the economy.
Expansionary countercyclical measures result in an estimated HK $139.1 billion budget deficit for FY 2020/21, reducing fiscal reserves to HK$99.4 billion. Although the relief measures shrink HK’s fiscal reserves by more than HK$170 billion, HK’s strong fiscal position remains intact, which is capable of affording one-off relief measures.

Feb 20,2020
Economic Acumen
CEBI Research

HK’s economy facing deeper deterioration on the outbreak of coronavirus

HK’s GDP growth for the fourth quarter and whole year of 2019 contracted by 2.9% and 1.2%, reflecting that HK’s economy shrank for the first time in a decade.
Entering into 2020, HK is facing the novel coronavirus infection. In respond to the heightened health risks, HK Government restricts majority of local and cross-border mobility of people in an attempt to prohibit the spread of deadly virus.
Although there are signs of slowdown on the number of the infected cases, the stagnation of economic activities is compounding HK's economic woes and triggering a severe blow to retail, catering, tourism and mass transportation.
With economic risks plunged deeper and harder in the recession, we forecast HK’s economic growth will drop by 4.9% in the first quarter while whole year of 2020 will contract by 2.0%.

Feb 12,2020
Economic Acumen
CEBI Research

China’s economy embracing temporary disruption on the outbreak of coronavirus

The outbreak of rampaging coronavirus threatens not only the lives of human beings, but also economic stability of global economy. In the face of containing the spread of coronavirus epidemic, China has imposed tough measures to undermine the movement of people, consumption, production and trading activities.
Temporary suspension of economic activities is expected to have a devastating impact on China’s first-quarter growth. As China plays a key role in the global supply chain of goods and services, fears over the impact of the virus have rippled around the world with which the current stagnant stance of manufacturing activities will weigh on global growth.
In order to cushion the economic shocks from the outbreak of coronavirus, Central Government increases spending, tax relief and subsidies for virus-hit sectors, concentrating on the retail, catering, logistics, transportation and tourism sectors, which are especially vulnerable to job losses while the People’s Bank of China (PBOC) injects trillions of RMB into the financial system to spur bank lending and lower borrowing costs for enterprises.
In general, we are of the view that China’s economic growth will decelerate to 4.5% in 1Q2020, followed by slight improvement in 2Q2020 and rebound of growth momentum in 2H2020. We forecast that GDP growth will slow to 5.4% in 2020.

Feb 3,2020
Economic Acumen
CEBI Research

The Fed holding the rate unchanged

After conducting three rate cuts in 2019, the U.S. Federal Reserve (the Fed) left the target range of the benchmark Federal fund rates (FFR) (1.5% to 1.75%) unchanged at the conclusion of the first Federal Open Markets Committee (FOMC) policy meeting in 2020.
The Fed’s Chairman, Jerome Powell, said developments in the global economy since the last FOMC meeting, namely threats posed by the coronavirus outbreak, have not changed the Fed's wait-and-see approach.
In general, softening global growth expectations are driven by market uncertainties including outbreak of coronavirus, unresolved US-China trade disputes, Brexit, mounted geo-political risks and fluctuation of oil prices. Heightened downside risks of global economy and mild inflation leave more room for the Fed to maintain loosening stance in monetary policy.
We are of the view that the Fed will continue to maintain the current stance of monetary policy in 2020 with the aim to strike a balance between solid economic growth and surging price level.

Jan 20,2020
Economic Acumen
CEBI Research

China’s economy embedded into softening growth in 2019

China’s economic activities experienced cooling strengths in 2019 as the economy embedded into slower growth of 6.1%, below the consensus estimate of 6.2% and 2018’s 6.6%. For 4Q2019, China’s economic growth grew by 6.0% YoY.
Major economic indicators braced for downward trend, with growth of fixed asset investment (FAI), industrial production, retail sales and external trade decelerating in varying degrees.
In general, despite prolonged trade tensions and complicated global economic environment, China still maintained a medium-high growth rate, indicating that the counter-cyclical measures help revive growth momentum and enhance growth quality and efficiency.
We are of the view that macroeconomic policy support will stimulate the pick-up in overall demand of goods and services, thus ensuring stable growth of China’s economy. China’s macroeconomic conditions remain sound and we forecast China’s GDP growth will reach 6.0% YoY in 2020.

Jan 16,2020
Economic Acumen
CEBI Research

Phase-one US-China trade deal signaling a temporary relief of trade tensions

The U.S. and China formally signed the initial trade agreement, thus achieving a truce in an ongoing trade conflicts.
China was committed to purchase U.S. goods and services by US$200 billion over the next two years. The agreement makes progress on intellectual property, forced technology transfer, agriculture, financial services and currency
The deal cancels planned US tariffs on Chinese-made cellphones, toys and laptop computers and halves the tariff rate to 7.5% on about US$120bn worth of other Chinese goods, including flat panel televisions, Bluetooth headphones and footwear. But it will leave in place 25% tariffs on US$250bn worth of Chinese industrial goods and components used by U.S. manufacturers until a second phase of the deal is signed.
We are of the view that the deal lends weak support to the rebound of overseas demand for the U.S. and Chinese products, which in turn undermines growth momentum of the two biggest economies of the world in 2020.

Jan 6,2020
Economic Acumen
CEBI Research

Equity markets carrying new highs in 2020

2019 was a year of harvest in the global stock market. Dow, S&P 500, NASDAQ and Nikkei posted YoY growth of 22.3%, 28.9%, 35.2% and 18.2%, demonstrating a strong rebound from 2018’s drop. Shanghai composite index and Shenzhen component index outperformed by soaring 22.3% and 44.1% while Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) jumped 9.1% and 10.3%.
Entering 2020, upside momentum of global stock markets remain intact on the loosening stance of central banks staving off short-term recession fears and signing of US-China phase-one trade deal removing partial tariffs’ threat.
In sum, the global softening growth of economic activities remains synchronized across major economies. Prolonged period of low interest rate and economic stimulus help fuel the momentum of global growth.
We are of the view that the global economic recovery is gaining more traction to enhance investors’ optimism, thus extending equity market rally in 2020.

Jan 2,2020
Economic Acumen
CEBI Research

The PBOC’s first RRR cut in 2020

The People’s Bank of China (PBOC) announced a cut of 50bp in the required reserve ratio (RRR) for all banks, effective 6th January, 2020. Around RMB 800 billion potential credits will be injected in the economy to reduce the real cost of social financing.
Even though the U.S. and China reached phase-one trade agreement, the economic uncertainties driven by the global cyclical slowdown and unresolved trade disputes continue to cloud the growth outlook of China’s economy.
The latest RRR cut along with the previous RRR cuts in 2018 and 2019 which unleashed trillions of liquidity in the market, will further enhance counter-cyclical adjustments and maintain abundant liquidity in the economy, thus strengthening growth momentum of China’s economy.
A prudent and neutral monetary stance of the PBOC remains intact, thus avoiding excessive stimulus and cultivating a stable monetary and financial environment for China’s economy.

CEBI Research
2020
Market and Investment Outlook

2020 Market and Investment Outlook - Global growth momentum tumbling towards downside

Prolonged trade tensions exacerbate the cyclical slowdown in the global economy. The softening momentum has been characterized by dipping productivity growth and inflation.
Slowdown in investment, external trading activities, and industrial production, coupled with falling business and consumer confidence, lend weak support to the economic growth.
Softening economic activities of developed and emerging worlds attract the attention of global central banks to watch out liquidity conditions with which eased monetary policy becomes their major tool to revive growth momentum.
In general, global growth is projected to have modest pickup in 2020 amid weak global manufacturing activities on the back of declining global investment as well as policy and political uncertainties on account of the trade tensions between the U.S. and China and Brexit.