Table of contents
2009 outlook: Crisis presents opportunities 3
Crisis could create opportunities 5
Total return expectations: 58% for H and 14% for A 7
Macro: A cyclical, not structural, downturn 9
Earnings: Imminent downside risk 17
Valuations: Long-term compelling 25
Liquidity and sentiment: Likely to improve 31
Currency: Upside risk to bearish market expectations 34
Sector strategy: 1H consumer; 2H cyclicals 35
Key theme for 2009: The rise of the cash premium 39
Implementation ideas: GS/GH top ten H-share picks for 2009 42
GS/GH top ten H-share picks 44
GS/GH top ten A-share picks 48
Style-oriented H-share stock screens 52
Style-oriented A-share stock screens 53
2009 sector scorecard 54
Airlines: Demand deterioration 56
Alternative Energy: Weathering the storm – financials important 57
China Banks: More macro, NIM and NPL headwinds for 2009 58
China Brokers: Stimulus package may lead to trading opportunities 59
Branded consumer: Cash rich; valuation low; earnings risks rising 60
Chemicals: Remain cautious on commodity & positive on fertilizers 61
Conglomerates: A lack of near-term catalysts 62
Consumer Discretionary: Outlook slowing, but many cheap stocks 63
Food and Beverages: Outlook less robust, but remain defensive 64
Insurance: Earnings headwinds despite better regulatory landscape 65
Internet: Secular growth drivers to largely outpace cyclical factors 66
Machinery and Construction: Beneficiary of government capex 67
Media: Media somewhat cyclical, education likely defensive 68
Metals & Mining: Down cycle could be extended 69
Oil & Gas: Weak 2009 oil outlook; improved China refining margins 70
Pharmaceuticals: Leveraging of China’s healthcare reforms 71
Port: ST earnings risk overshadows LT cash flow generating ability 72
Power Equipment: Off-peak outlook appears increasingly gloomy 73
China Property: Downward trajectory for another 2 selling seasons 74
Railroads: Relatively more resilient 75
Shipping: Commodities, consumption, and capacity 76
China IT Services/Tel. Equip’t/Semis: China IT Services should continue to deliver high growth in 2009 77
Telecoms: Tariff and subsidy wars to start; regulation is key 78
Toll roads: Not all expressways are defensive 79
Utilities: Turnaround of IPPs and stagnation of water utilities 80
Performance summary 81
A-H premium 84
Goldman Sachs, Gao Hua Securities China coverage 86
Disclosures 93