AHEAD_OF_THE_CURVE:MARKET_REVIEW-2013-01-15.pdf
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1、 Ahead of the Curve January 14, 2013 Http:/ Http:/ SWS Research CO., LTD No.99 Nanjing Rd. (E) Shanghai China Market Review Analyst Wang Sheng A0230511060001 Tel: 86-21-23297307 Translator Jiang Dengfu Tel: 86-21-54046675 The dog can become tired and may need a break The dog runs farther and farth
2、er. Regarding the relationship between the fundamentals and stock prices, we are all familiar with the classic analogy of dog and its master. The master (the economy) takes a leisurely walk while the dog (the stock market) runs along, sometimes too far ahead and has to come back. The economy has reb
3、ounded since 12M12 and is still in weak recovery, but the markets risk appetite has risen significantly. There are three factors behind the large drop in the risk premium as the dog runs farther and farther away toward a possible bone ahead: 1) After the economys potential growth rate slides for a w
4、hile and a bottom has clearly surfaced, the reduction in the uncertainty has led to a significant rise in the markets risk appetite; 2) The governments firm stance on reform after the 18th Party Congress has led to investor optimism about long-term economic prospects; 3) The QFII-led overseas funds
5、are now more confident about Chinas economy, so the premium for the China country risk in the global investment portfolio has fallen, and these marginal incremental funds have great influence. The dog can become tired and may need a break. This weeks index has also run into a consolidating period. S
6、ome 12M12 economic data were released this week with few overall surprises. While exports were above expectations, the CPI reached 2.5%, and the potential risk of inflation has brought hard constraints on a sustained economic recovery. When expectations deviate further and further from short-term fu
7、ndamentals, a phase of market consolidation becomes expected, hence the reason why we warned against the risk of “the weather turning cold again after suddenly getting warmer“ in our monthly report. While resting, the dog may also joyfully wag its tail. The market may maintain a certain degree of ac
8、tivity driven by the growth in consumption, so our views on “shifting the battleground to consumption“ in our monthly report have been proved right. When for the time being there is no wall (which cannot be ruled out by any pre-3M13 data suggesting a recover) forcing the dog to return, and the bone
9、is still looming ahead (there has been no reverse for the time being on the three factors causing a rise in the risk appetite), the dog will continue to wag its tail at the same spot, and growth and consumption are at their best shining moments. That is why we suggested “shifting the battleground to
10、 consumption“ by adding retail and F 2) how date changes (e.g. cement and steel prices - you may wish to take a look at our weekly released database); 3) how local governments implement investments; and 4) the tolerance by the central government for rising real estate prices. Capital Flow Expectatio
11、n The market slightly dropped as capitals flowed into biopharmaceutical, machinery equipment and food 2) Property market continues to show warm winter picture and post dual increases in volume and price. Sales in some second-tier cities also remained high. Property developers saw apparent improvemen
12、ts in both financial position and earnings; 3) In fact, there is no obviously tightening real estate policy imposed by central government. In December, sales area in major cities slightly grew. The turnovers in the first-tier cities are obviously higher than those of the second- and third-tier citie
13、s. We expect the sales will drop a bit due to coming low season in January and end of explosive growth at the year end. In December, sales area in 31 large cities covered by SWS totaled 22.02M square meters, up 3.5% MoM, basically in line with our expectation. Of which the growth in the first- on th
14、e other hand, local governments increased their land sale efforts in order to achieve whole year target. SWS Research Equity Research Page3 Analyst Wang Siyu A0230511040048 Tel: 86-21-23297473 Translator Jiang Dengfu Tel: 86-21-54046675 With coming low season of property market, short-term risk fa
15、ctor decreased, real estate sector will still outperform the market. In December monthly report, we clearly pointed out that because of warm winter of property market, real estate stocks show a clear relative return. Its performance since December is in line with our former expectation. We believe w
16、ith coming low season of property market and few short-term risk factors, real estate stocks will still outperform the market. Leading developers will become more competitive. We suggest investor continue to pay attention to two types of investment opportunities we had mentioned before: 1) Trend-bas
17、ed opportunities stemming from continual improvements in fundamentals. The companies which sell marketable products and pursue turnovers are expected to expand and their earnings will increase in market downturn. They include: Poly Real Estate (600048), China Vanke A (000002), China Merchants Proper
18、ty Development (000024), RiseSun Real Estate Development (002146), Jiangsu Zhongnan Construction (000961); 2) Theme-based opportunities coming from land reform, urbanization policy, the companies with clear-cut business model, more pre-receivables, quick sale and is in line with the direction of new
19、 urbanization will outperform. They include: China Fortune Land Development (industrial property)(600340), Wuhan Langold Real Estate (commercial property) (002305), Jinke Property Group (the third- by the end of 2015, 20% of urban new buildings will have met the requirements of green building standa
20、rds; during the “12th Five-Year Plan” period, for the energy-saving retrofit of existing buildings, over 0.4B square meters of the heat supply metering and energy-saving retrofit of existing residential buildings will be completed in northern heating regions, 50M square meters of the energy-saving r
21、etrofit of existing residential buildings will be completed in the regions where are hot in summer and cold in winter, 120M square meters of the energy-saving retrofit of public buildings and office buildings for public authorities and organizations will be completed, and renovation of dilapidated h
22、ouses will be implemented to 400,000 houses as energy-saving model. By the end of 2020, the energy-saving retrofit will have basically completed in the urban residential buildings which are valuable for retrofit in northern heating regions. Pay attention to the release of compulsory policy as the st
23、rategic objective of green buildings is quantified. The Action Program of Green Buildings has proposed that the quantified objective is a landmark step for the green action of newly-built buildings and existing building areas during the “12th Five-Year Plan”. Statistics shows that China currently ha
24、s areas rated for green building not more than 40M square meters. So for inventory, the 1B square meters planning has huge development space. Therefore, we estimate that the program will make the green building market increase in about RMB 70-100 B. At the same time, the program will expressly give
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