20160106-大华银行-Regional_Morning_Notes_24页_1mb

Regional Morning Notes Summary

Date: Wednesday, 06 January 2016

Core Content Overview

This document provides a comprehensive analysis of key sectors and market updates across several Asian countries, with a focus on China and other regional markets. It outlines the introduction of the Macro Prudential Assessment (MPA) in China, the outlook for railway investment, and updates on specific companies in the banking and infrastructure sectors.

Main Points

China: Banking Sector

• Macro Prudential Assessment (MPA) Introduction:

  • The PBOC is introducing a new MPA mechanism to replace the previous differentiated RRR + loan quota system.
  • MPA evaluates banks based on capital adequacy ratio (CAR), balance sheet items, liquidity, pricing behavior, foreign debt risk, and asset quality.
  • The mechanism aims to discourage interbank innovation and ensure smoother implementation of interest rate deregulation.
  • Large banks with strong capital positions and lower exposure to risky financial activities are likely to benefit more from the MPA.

• Key Implications:

  • The PBOC will monitor these metrics quarterly and provide monthly guidance to financial institutions.
  • Banks with weaker capital positions and higher exposure to non-standard credit assets may face stricter regulations.
  • The MPA is expected to align with international standards and reduce the incentives for banks to misclassify loans to bypass regulations.

• Top Picks:

  • ICBC (1398 HK): BUY, Target Price HK$7.60, Current Price HK$4.48
  • CCB (939 HK): BUY, Target Price HK$8.70, Current Price HK$5.14

China: Railway Sector

• Railway Investment Outlook:

  • China is expected to maintain resilient growth in railway investment at mid-teens levels in 2016.
  • Railway equipment procurement may experience a mild slowdown due to reduced demand from flight cargo and locomotives.
  • The "One Belt, One Road" (OBOR) and Urban Railway Transit (URT) strategies are expected to support growth in new orders.

• New Orders Expectations:

  • Major railway companies are projected to see single-digit growth in new orders in 2016.
  • CRRC is expected to post flat growth in new orders compared to a 10% growth in 2015, but it may still benefit from margin expansion.
  • The NDRC has approved numerous infrastructure projects, including new railway lines and URT expansions, which are expected to drive construction activity.

• Top Pick:

  • CRCC (1186 HK): BUY, Target Price HK$14.90, Current Price HK$8.77

Other Markets

Indonesia: Banking Sector

• Potential issues affecting the banking sector in 2016 include regulatory uncertainty and macroeconomic risks.

Malaysia: MISC (MISC MK)

• The stock is rated HOLD, with a target price of RM9.95 and a current price of RM9.24.
• The stock is expected to benefit from improved market sentiment due to the US crude exports starting in 2016.

Singapore: Aviation Sector

• The aviation sector is positioned for growth and is maintained at MARKET WEIGHT.

Thailand: Advanced Info Service (ADVANC TB)

• Expected to report stronger QoQ results in 4Q15 due to reduced depreciation expenses.
• Target price is Bt170.00, with a current price of Bt131.00.

Thailand: Kasikorn Bank (KBANK TB)

• Expected to report weak results in 4Q15 due to higher credit costs and one-off impairment expenses.
• Target price is Bt192.00, with a current price of Bt145.50.

Key Indices and Commodities

Corporate Events

Key Assumptions

Sector Catalysts

• Major new orders from CRC and overseas markets.
• PPP progress expected to improve with supportive government policies.
• China's continued infrastructure investment at a high level.

Risks

• Slower-than-expected government spending on infrastructure and railway.
• Potential slowdown in railway equipment procurement in 2016.
• Uncertainty in the implementation of MPA and its long-term impact on the banking sector.

Conclusion

The document highlights that the introduction of MPA in China is expected to promote stability and reduce risks in the banking sector, with a focus on large banks. The railway sector is also expected to maintain resilient growth in investment, driven by the OBOR and URT strategies. Key companies such as ICBC, CCB, and CRCC are recommended as top picks. The outlook for infrastructure investment is positive, supported by new projects and policy initiatives.