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雷达卡
Executive Summary
Recent economic data paint a picture of a turnaround in China’s economy that is
gathering momentum as a result of a cyclical improvement in investment and
manufacturing activity. Evidence of broad economic improvement can be found
in November’s flash reading for the Markit manufacturing PMI, which moved
above the expansionary threshold, and a pick up in industrial electricity
consumption to 5.9% YoY growth in October from an alarmingly subdued level of
0.9% in September. As a result, industrial profits were surprisingly strong in
October, increasing 20.5% YoY during the month from 7.8% in September. As
companies restock input materials at lower prices, profit margins have also
expanded to the highest level this year, at 6.3% in October. Despite this recent
spate of positive economic news, A-share market performance has remained
lackluster, with the Shanghai Composite Index falling to the lowest level since
2009. What are the reasons for this disconnect?
China’s equity markets have long been treated as a funding channel for SOEs,
with excessive IPOs, lack of transparency and a poor track record of dividend
payments favoring equity issuers instead of secondary market investors. For
such reasons, many Chinese retail investors lack confidence in the market and
have never made a profit in their limited stock investing experience. Notably, the
performance of Chinese A shares has decoupled in recent months from the
performance of Chinese companies listed in Hong Kong. In the following report
we examine the factors underpinning the disappointing performance in China’s
A-share market and potential catalysts.
I. Improving outlook for corporate earnings makes valuations more
attractive. Industrial profits were surprisingly strong in October, registering
20.5% YoY, lifting the year to date profit growth to 0.5%, the first positive
reading this year. As companies restock input materials at lower prices,
profit margins have also expanded to the highest level this year, at 6.3% in
October. The earnings outlook for the coming year has also improved, as
Bloomberg consensus forward EPS for the Shanghai Composite Index has
improved 0.6% in recent weeks.
II. Pronounced A-share discounts may provide attractive entry points vs.
H shares. As a result of the A-share market’s underperformance, the drop in
the Hang Seng China AH Premium Index from 111.8 at end-2011 to 96.95
(as of November 22), may give rise to attractive opportunities to invest in
stocks exhibiting large valuation discounts. Dual-listed A-shares are trading
at the most pronounced discount to H shares in the financials sector.
2012-11-29_J.P摩根证券亚洲_China’s A-share Market： A Troubled Barometer.pdf
(653.9 KB)
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