1。 US Ｅｃｏｎｏｍｉｃｓ Ａｎａｌｙｓｔ
Credit Likely to Crunch Nonresidential Construction
! .Nonresidential construction. includes
several highly distinct subsectors, each of
which marches to its own drummer. For
instance, overall GDP growth plays a large
role in the decision whether or not to build
a new strip mall, while the price of oil is
important for the building of new offshore
platforms.yet both count as
nonresidential structures investment.
.Nonresidential construction. includes
several highly distinct subsectors, each of
which marches to its own drummer. For
instance, overall GDP growth plays a large
role in the decision whether or not to build
a new strip mall, while the price of oil is
important for the building of new offshore
platforms.yet both count as
nonresidential structures investment.
! To account for this heterogeneity, we
construct separate models for the different
subsectors of nonresidential construction.
Our results show that the credit crunch is
likely to weigh heavily on commercial and
office construction over the next year,
while power and mining construction are
likely to continue growing. In aggregate,
our results are consistent with a drop of
5%-10% in real terms over the next year.
To account for this heterogeneity, we
construct separate models for the different
subsectors of nonresidential construction.
Our results show that the credit crunch is
likely to weigh heavily on commercial and
office construction over the next year,
while power and mining construction are
likely to continue growing. In aggregate,
our results are consistent with a drop of
5%-10% in real terms over the next year.
! Unfortunately, our uncertainty is relatively
high, especially regarding the timing of the
downturn. This is because the lags are
long and our data on credit conditions.
the most important driver of nonresidential
structures investment.stretches back less
than 20 years, limiting the power of our
statistical results.
Unfortunately, our uncertainty is relatively
high, especially regarding the timing of the
downturn. This is because the lags are
long and our data on credit conditions.
the most important driver of nonresidential
structures investment.stretches back less
than 20 years, limiting the power of our
statistical results.
! We disagree with the FOMC.s statement
that the risk of a .substantial downturn.
has diminished over the past six weeks.
Although the GDP numbers continue to
look a bit better than expected, a range of
other indicators have worsened sharply.
We disagree with the FOMC.s statement
that the risk of a .substantial downturn.
has diminished over the past six weeks.
Although the GDP numbers continue to
look a bit better than expected, a range of
other indicators have worsened sharply.
.substantial downturn.
has diminished over the past six weeks.
Although the GDP numbers continue to
look a bit better than expected, a range of
other indicators have worsened sharply.
! First, stress levels in the financial markets
are rising anew, and financial conditions
are now tighter than at the time of the Bear
Stearns/JP Morgan Chase deal. Second,
consumer confidence measures continue to
plumb new lows; for the first time in at
least 40 years, a plurality of households
now expect their (nominal) income to
contract. Third, the factory sector may be
on the verge of a significant contraction.
First, stress levels in the financial markets
are rising anew, and financial conditions
are now tighter than at the time of the Bear
Stearns/JP Morgan Chase deal. Second,
consumer confidence measures continue to
plumb new lows; for the first time in at
least 40 years, a plurality of households
now expect their (nominal) income to
contract. Third, the factory sector may be
on the verge of a significant contraction.
２． China: Portfolio Strategy
China Stance-at-a-Glance
July 2008: Headwinds remain, but value starting to surface
Worsening growth/inflation mix, heightened policy and
earnings risks, and surging commodity prices continue to
weigh on the equity market. Current H- and A-share prices
seem to have priced in a fair amount of cyclicality/earnings
risk and present long-term value to investors, in our view.
We stress the importance of making careful entry points.
H-share market: Value emerging as trading range bottoms
A deteriorating macro backdrop, together with concerns about domestic
policy risks, disappointing earnings news and rising commodity prices,
continues to weigh on investor sentiment toward the H shares. HSCEI lost
11.5% in June as risk appetite further declined. We see value emerging, as
the index is now close to the lower end of our expected trading spectrum
of 14,800 to 12,000. We are lowering our 12-m index target for HSCEI to
14,800 from 15,800 to discount downside EPS risks. We would look to
accumulate positions if market weakness extends and would proactively
engage in a potentially range-trading market to gain directional beta.
A-share market: Back to reality
After correcting over 49% from last year’s peak and 44% ytd, A-share
valuations have become reasonable, in our view, at 17.3X consensus 08E
EPS. We have lowered our 12-m index target for CSI 300 to 2820 from 4700
to reflect our cautious earnings outlook for A shares amid a challenging
business environment. We think current prices represent good long-term
buying opportunities for investors who can tolerate short-term volatility.
Performance
In June 2008, our buy stocks lost 12.9% and our funding stocks fell 11.8%,
resulting in a negative spread of 117 basis points (bp) in local currency
total return terms. Ytd, our buy/funding spread is -1.1 pp. Since inception
(April 2005), our buy/funding spread has been 190.9 pp.
3. Asia Pafici: Portfolio Strategy
Still Wary; prefer "Tai-rea"
Back at 1Q lows: what's priced in?
With Asian equities back at 1Q lows, the key questions are (a) how
much macro risk is priced in, and (b) will fundamental risks rise? To
address this, we examine regional valuations in terms of historical
ranges, DDM fair value, and versus inflation and earnings.
Valuations should be low in current conditions
Valuations are not yet at levels that indicate risks have been fully
priced, particularly since central banks are behind the curve, oil prices
and inflation are rising, and corporate profit forecasts are likely to fall.
Lower risk/reward estimates; still cautious
We lower our index price targets and assess near-term downside risk of
approximately 10-15%. We estimate12m total return upside potential to
be low-teens. We retain our cautious stance and continue to prefer
northern Asian markets to India and ASEAN.
"Tai-rea"; tactical asymmetric China exposure
Country allocations may not be the best way to think about Korea and
Taiwan now. We favor domestic demand stocks in Taiwan and
exporters in Korea over Taiwan’s external sector (mainly tech) and
Korean domestic demand. Use HSCEI options for a potential tactical
4.
4.Asia Pacific Morning Summary 6-30
Focus Items
Asia Pacific: Portfolio Strategy: Still wary; prefer "Tai-rea" 1
1
China Stance-at-a-Glance: July 2008: Headwinds remain, but value starting to
surface 2
2
Far Eastern Department Stores (2903.TW) Buy: Consumer revival + China
contribution take-off; initiate with Buy 3
3
Reliance Communications (RLCM.BO): Removed from Conviction Buy; maintain
Buy, TP cut to Rs678 4
4
India: Real Estate Developers: Stress test remedies for the party hangover 5
5
ASEAN: Multi-Industry: Conglomerate-Diversified: Shares may have retreated too
much, orderbook/oil px staying high 6
6
Philippine Long Distance (TEL.PS): Macro concerns overshadow a solid
company; D/G to Neutral 7
7
Key Data Changes
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