20181224-招商证券_香港_-Global_markets_fall_amid_US_market_sell-off_19页_2mb

CMS Strategy Weekly Summary (24 Dec 2018)

Core Content

• Global Market Overview: Global markets experienced a decline due to a significant US market sell-off, driven by the Federal Reserve's less dovish stance on future rate hikes, the continuation of the US-China trade war, and uncertainty surrounding the White House's personnel changes and potential government shutdown.

• China's Macroeconomic Data:

  • Real GDP growth for 3Q18 was revised down to 6.5% YoY, slightly below expectations.
  • CPI increased to 2.5% YoY, while PPI decreased to 3.3% YoY.
  • PMI data showed a slight decline in both manufacturing and non-manufacturing sectors, indicating a slowing economy.
  • Trade surplus remained strong at USD 44.8 billion for 3Q18.
  • M2 money supply growth was stable at 8.0% YoY, while M1 growth slowed to 1.5% YoY.
  • Fiscal data showed a decrease in both revenue and expenditure growth.

• US Macroeconomic Data:

  • 3Q18 US GDP growth was revised down to 3.4% QoQ, slightly below the estimate.
  • Durable goods orders declined by 0.8% MoM, with a decrease in the non-transportation category.
  • The US Dollar Index rose to 97.1, showing a strengthening USD.
  • The Fed's balance sheet normalization program remains unchanged, contributing to market volatility.

• Stock Market Update:

  • The Hang Seng Index (HSI), MSCI China Index (MXCN), and CSI 300 all saw corrections of 1.3%, 4.3%, and 4.3% respectively over the past week.
  • In the US, the S&P 500 fell by 7.1% in the last week.
  • Within China, Communication Services outperformed, while Consumer Discretionary and Energy lagged.
  • In Hong Kong, Utilities outperformed, while Health Care and Insurance lagged.

• Stock Market Valuations:

  • The forward P/E ratios for HSI, MXCN, and CSI300 were 10.8x, 11.2x, and 10.8x respectively, all below the 5-year median.
  • The report also highlighted the impact of the GICS reclassification implemented by MSCI on sectors like Telecommunication, Information Technology, and Consumer Discretionary.

Key Views and Outlook

• 2019 Outlook: The firm maintains its view that the market will rebound in the next year due to favorable policy.
• Uncertainty Factors:
  • A potential pullback in the US market.
  • Re-escalation of the US-China trade war if no deal is reached by early March.
  • Tighter-than-expected policy measures.
  • A stronger-than-expected USD.
• Catalysts for Recovery:
  • Introduction of more easing policies in China.
  • A bilateral solution between the US and China.
  • Weakening of the USD.

Key Publications and Notes

• The Central Economic Work Conference (CEWC) was held, setting the policy direction for 2019 and confirming a proactive fiscal policy and prudent monetary policy.
• The People's Bank of China (PBOC) introduced the Targeted Medium-term Lending Facility (TMLF), offering a 0.15% lower interest rate than the MLF.
• A regulatory official announced the resumption of video game approvals, lifting investor sentiment.
• The US Justice Department accused two Chinese nationals of espionage, introducing uncertainty into trade negotiations.
• The GICS reclassification will significantly affect the performance of certain sectors, including Telecommunication, Information Technology, and Consumer Discretionary.

Investment Insights

• The report includes a list of top picks and investment ratings.
• Key sectors for performance were highlighted, with Communication Services and Utilities showing positive movements, while Health Care and Consumer Discretionary lagged.
• The report also includes data on stock connect flows, foreign fund inflows to Asia EM ex.China equities, and earnings revisions.

Conclusion

The report provides a comprehensive analysis of the global and China/HK markets, highlighting key macroeconomic data, stock performance, and valuations. It underscores the ongoing challenges in the US-China trade war and the Fed's stance on monetary policy, while maintaining a positive outlook for the Chinese market due to favorable policy measures. Investors are advised to monitor key risks and watch for potential catalysts that may drive market recovery.