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China Strategy Monthly - Dec 2010
Equity Strategy
Investment Strategy | China | Multiple
31 December 2010
What happened in Dec and market outlook
In Dec, HSCEI and SHCOMP declined by 1% and 0.4% respectively as the
market continued to struggle with inflation and tightening fears. Over the next few
months, we remain cautious on both A and H - the market doesn't normally do
well under the threat of loan control ("A short history of inflation and the market",
Nov 18). Our key overweights are consumer, insurance and telcos; key
underweights are banks, property and investment driven sectors such as steel,
cement, resources and contractors.
Important Dec data points
Macro (for Nov unless specified): CPI jumped to 5.1% (from 4.4% in Oct); urea
prices rose by 24% YoY; auto sales up 29% YoY (27% in Oct); cement price rose
by 15% over the past six months; barley price rose by 17% YoY (8% in Oct);
steel inventory continued to decline; jewelry sales jumped by 82% YoY (65% in
Oct); medicine sales jumped by 41% YoY (36% in Oct); Commodities futures
prices generally rebounded significantly in December after the November
crackdown, with some items reaching new highs.
2010 market moving events
Key market moving events in 2010 are marked on Chart 1 on page 6. Top market
moving themes were Inflation, property crackdown, LGFV loan, monetary
tightening (loan control, rate & RRR hikes); the banking sector’s fund raising
activities, European debt crisis, the US Fed’s QE2, and domestic labor cost
pressure. RMB appreciation also drove market performance from time to time.
2010 performance review
The year 2010 ended with HSCEI lost 0.8% and SHCOMP lost 14%. HSCEI
largely range traded between 11,000 and 14,000. SHCOMP experienced a bear
market early in the year but recovered moderately in second half. At the sector
level, performance diverged greatly. Those that did well include broad
consumption themes (high-end and low-end consumption did very well, but midend
was lukewarm), some strategic industries (e.g. nuclear and high-end
equipment) and cement (economic housing, tight capacity). Poorly performed
sectors include steel (margin pressure), property (policy crackdowns), banks (bad
debt concerns and fund raising activities), IPPs (margin squeeze), shipping (over
capacity) and construction (growth slowdown and margin pressure). Commodities
stocks performed decently but lagged behind the physical market. Defensive
sectors, including telcos, generally outperformed.
目录 Contents
Key issues summary 3
Key performance 4
Major events 6
2010 review 7
Sector recommendations 10
BofA ML strategy reports 11
Valuations of BofAML China Universe 12
Macro data 16
Market 19
Agriculture 20
Automobile 25
Consumer 32
Energy 39
Financial 42
Internet/Telecom 44
Property 47
Transportation 49
Railway 51
Utility 53
O ther analyst reports during the month 55
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