全球-股票策略-中国：继续小心

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1、18July2018GlobalEquityResearchInvestmentStrategyGlobalEquityStrategySTRATEGYChina:ContinuetobecarefulWethinkconsensuswasfartoocomplacentonChinainH1,foracountrythathasaccountedfor36%ofglobalgrowthoverthepastfiveyears.However,recentweekshaveseentheflowofinvestorquestionspi

2、ckupsignificantly,andinthatcontextwerevisitChina'smacrooutlookandthelistedChinaplays.RiskofGDPdisappointing:OurhouseviewisthatGDPgrowthslowsfromhere,to6.5%forthefullyearafter6.8%inthefirsthalf.However,weworrythat:i)creditgrowthisatanall-timelowandleadsmacromomentum;ii)ag

3、gregatedemandproxiesareclosetoall-timelows(andtheareasthathavebeenstrong–exportsandrealestate–looklikelytoslow);andiii)supplyproxies(IP,PMIs)haveshownlittleweakness,andthusweseedownsideriskfromhere.Chinahasonlyjuststartedwhatislikelytobealengthyperiodofeconomicrebalancin

4、g.Weseelittleriskofahardlandinggivenpolicyweaponsandthedomesticnatureofdebt,butwiththeleadershipfocussedonthequalityandnotthequantityofGDPgrowth,easingremainsselective.WethinkanydeclineintheRMBshouldbeorderly.WedowngradeMiningtounderweight(havingreducedtobenchmarkinour20

5、18Outlook):i)MiningisdiscountingPMIsof53,whiletheShanghaicompositeisimplyingasub-50outturn;ii)Chinesemonetaryaggregatesandfloorspacegrowthareconsistentwithfurthercommoditypriceweakness.ArebalancingChineseeconomywouldleavetrendFAIgrowthatjust2%;iii)supplysidedisciplinemay

6、beexaggerated,withsteelproductionup9%overthelastyeardespitethepledgetocut3%ofcapacity);iv)valuationsarejustmiddling.FCFfallstoanaverageof3.4%ifweusetruemaintenancecapexandpushprices10%belowtheCSbasecase;v)historically,whenminingunderperformsitdoessobynearly30%onaverageve

7、rsusc.12%sofar;andvi)netbuyrecommendationsareextreme.WestayunderweightofChina-relatedcapitalgoods(SKF)andminingequipment.CapitalgoodsisstillthethirdmostexpensivesectorinEurope.OtherChinaplays:Staybenchmarkluxury.Thelong-termfundamentalslookverystrongwitharecord80%ofChine

8、segrowthconsumer-led,andwebelieveChinesenominalconsumptioncangrowataCAGRof10%,evenifGDPgrowthwerejust4%