期待2018，前景展望和组合策略

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1、Lookingto2018PerspectivesandPortfolios–LiteItistimetothinkabout2018EPS.Our2016endofPPIdeflationthemecalledforarecoveryinEPSafterafive-yearrecession.PositiveEPSrevisionshavecontinuedthisyear(2017EPSinteger+11%YTD),resultingin2017EPSgrowthof21%.AswematurefromtherecoverytothethirdyearofEPSgrowth,i

2、tisunlikelythatEPSrevisionswillremainaspositive.Thisisduetoincreasedconfidenceinthesustainabilityofgrowthbeingreflectedinforecastsandalessfavorablebaseeffect.Thedriverfortherallyis2018’s10%EPSgrowthandre-rating.There-ratingisdrivenbyahigherdiscounttoUSequitiesandtheabilitytosustainpremiumEPSgrow

3、thinAPxJthanDM.Thisreportreviewsthedriversof10%EPSgrowthfor2018.Table4,Table7andTable8summarizethecountry,sectorandmajorcountrysectordriversof2018.SectorandcountryconcentrationtoEPSgrowthishigh;IT,financials,CDandRE=75%ofEPSgrowthandChina,Korea,IndiaandTaiwan=78%of2018EEPSgrowth.Thereportthengo

4、esontodescribeEPStrendsforeachcountry.OurstylepreferenceisEPSrevisionscombinedwithforwardP/E.WeareaddingEPSmomentumintothethirdyearofEPSgrowth.FreecashflowisanotherimportantthemelinkedtoChina'sovercapacityindustry/SoEreform.ThisdrivesOWsinTaiwanandKoreanmaterialsplusChinesefinancials.Wemonitor

5、ourinvestmentsusingthekeycountryandsectortables(Table30toTable32).ThisyearEPSrevisionsandrelativeperformancearecorrelatedwithafewexceptions.WeareconcernedthatEPSrevisionsinIndiaarenegativeacrossmostsectors(weareUWIndianIT,healthcareandstaples).Themarkethasbeensupportedbyboththelocalsavingspoolan

6、dpriceinsensitivepassivebuying.TheAustralianUWisconsistentwithnegativeEPSrevisions.Wemodestlyincreasedourend2017MSCIAustraliaindextargetto1215from1175(seepage16)butstillexpectthismarkettounderperformtheregion.APxJisup28%YTD,butthree-yeartotalreturnCAGRisjust5%.ButChinaITisup60%YTDandthree-yearC

7、AGRis24%.WeusethecountryandsectortablestomonitorP/EandP/Brelativetotheir10-yearhistorywithstatisticallyhighvaluationshighlightedinred.Country/sectorassetallocation:OW:ChinaandKorea–IT,financialsandmaterialsUW:Australia,Singa