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雷达卡
We think Corporate China can handle the three challenges
including: 1) a US recession and export slowdown; 2) domestic
asset prices deflation; 3) monetary tightening and austerity
controls, well through 2008.
• We favor domestic consumer demand-driven growth in 2008, when
exporters, energy and material sectors are exposed to US
recession risk. We continue to overweight the consumer
products, telecom and retail sectors and to underweight the asset
price sensitive sectors, including banks, insurance and real estate
for their exposures to tightening risks, which could impact
properties and A-share prices.
• In both the “imported soft-landing” (60% probability) and the
“policy induced soft-landing” (10% probability) scenarios, we
expect 24% MSCI China EPS growth and 20x 2008e P/E, which
imply 15% MSCI China upside for the “imported soft-landing”
scenario in 2008 (assuming 8% Rmb appreciation), and 25% for the
“policy induced soft-landing” scenario (18% Rmb appreciation).
• In an overheating scenario (25% probability), we could see 50%
MSCI China upside fueled by both multiple expansion and
earnings revisions.
• We see little likelihood (5% probability) for the combination of both
a China over-tightening and a synchronized global slowdown
materializing, in which MSCI China could see 30% downside.
• Our view on China’s domestic A-share market remains bearish for
2008 despite the 15.3% pullback from the peak so far, because of
our concerns on earnings quality, valuation and further regulatory
tightening against domestic asset prices in 2008.
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