中国股票策略：继续小心

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

2、nvestorquestionspickupsignificantly,andinthatcontextwerevisitChina'smacrooutlookandthelistedChinaplays.RiskofGDPdisappointing:OurhouseviewisthatGDPgrowthslowsfromhere,to6.5%forthefullyearafter6.8%inthefirsthalf.However,weworrythat:i)creditgrowthisatanal

3、l-timelowandleadsmacromomentum;ii)aggregatedemandproxiesareclosetoall-timelows(andtheareasthathavebeenstrong–exportsandrealestate–looklikelytoslow);andiii)supplyproxies(IP,PMIs)haveshownlittleweakness,andthusweseedownsideriskfromhere.Chinahasonlyjuststa

4、rtedwhatislikelytobealengthyperiodofeconomicrebalancing.Weseelittleriskofahardlandinggivenpolicyweaponsandthedomesticnatureofdebt,butwiththeleadershipfocussedonthequalityandnotthequantityofGDPgrowth,easingremainsselective.WethinkanydeclineintheRMBshould

5、beorderly.WedowngradeMiningtounderweight(havingreducedtobenchmarkinour2018Outlook):i)MiningisdiscountingPMIsof53,whiletheShanghaicompositeisimplyingasub-50outturn;ii)Chinesemonetaryaggregatesandfloorspacegrowthareconsistentwithfurthercommoditypriceweakn

6、ess.ArebalancingChineseeconomywouldleavetrendFAIgrowthatjust2%;iii)supplysidedisciplinemaybeexaggerated,withsteelproductionup9%overthelastyeardespitethepledgetocut3%ofcapacity);iv)valuationsarejustmiddling.FCFfallstoanaverageof3.4%ifweusetruemaintenance

7、capexandpushprices10%belowtheCSbasecase;v)historically,whenminingunderperformsitdoessobynearly30%onaverageversusc.12%sofar;andvi)netbuyrecommendationsareextreme.WestayunderweightofChina-relatedcapitalgoods(SKF)andminingequipment.Capitalgoodsisstilltheth

8、irdmostexpensivesectorinEurope.OtherChinaplays:Staybenchmarkluxury.Thelong-termfundamentalslookverystrongwitharecord80%ofChinesegrowthconsumer-led,andwebelieveChinesenominalconsumptioncangrowataCAGRof10%,evenifGDPgrowthwerejust4%