China Content Hub APAC Equity Research Reports

APAC Equity Research Reports

Original research on over 1,300 companies, with a total market capitalization of USD 17.16 trillion, including over 400 Chinese-listed stocks. It provides thought-provoking thematic analysis, differentiated trading ideas and coordinated global views.

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November 22, 2021

APAC Quantitative & Systematic Strategy: China onshore mutual fund positioning: latest crowded stocks and ‘Under the Radar’ names.

The rise of domestic institutional investors in onshore China is leading to a new regime in Chinese stocks. We recommend paying particular attention to crowding risk in A-shares. After record new launches in 4Q20/1Q21, the pace of launches has normalised. At the same time, mutual fund crowding risks associated with domestic mutual funds remain elevated, a key risk in a downturn. As highlighted in our domestic fund deep dive, stocks with crowding risk see significantly larger drawdowns relative to the market.

November 10, 2021

China Aesthetics Sector: Deep dive into China’s booming aesthetics market – Expert call takeaways (Vol 1).

At our first expert call of ‘Deep dive into China’s booming aesthetics market’ series on 10-Nov, the speaker, Dr Li, said the execution of the ongoing inspection (Jun-Dec-2021) of the MA industry seems much stricter than before. The regulation tightening and new guidance on advertising will inevitably lead to disruption in customer acquisition and sell-through. They observed stricter-than-before execution already, same with what we expected. No much further policy risks apart from strong execution of existing rules. Dr Li also flagged that large-scale off-label treatment might be a potential risk for some companies.

November 8, 2021

China Market Strategy: China Investment Conference wrap-up – Changing gears.

Among 115 covered companies by CS, technology, consumer, healthcare, utilities and industrial sectors dominated discussions during the CIC this year, where investors focused on technology, consumer, utilities, industrial and healthcare sectors. 28% corporates held a neutral tone, having doubled from 14% in 2020. Management tone for materials, travel & transportation and utilities sectors was relatively more optimistic, while property and consumer sectors turned more cautious. The change in management tone reflects challenges arising from COVID-19 resurgence, commodity price hike, and remarkable changes in the regulatory landscape. However, most of our macro experts believe China’s economy will recover in 2022.

November 1, 2021

China Aesthetics Sector: Aesthetics in the limelight.

China's medical aesthetics sector has gained significant market attention in recent years, underpinned by higher affordability, a favourable change in mentality, and lower penetration. We estimate total market size would see 13% CAGR in 2020-30E (vs 19% CAGR in 2016-20), driven by a robust demand growth (19% CAGR) offsetting a 5% CAGR ASP decline. Leading domestic players should benefit from continuous replacement of smuggled products and international brands. In our view, BTX and collagen stimulator should see the biggest upside among all products. We expect the BTX market size to reach Rmb29 bn in 2030 (+22% CAGR), driven by surging anti-aging demand. We also see a big potential in collagen stimulator as the first batch of NMPA-approved products just entered the market in 2H21, although ramp-up may be slower than expected.

October 25, 2021

China Property: Faster-than-expected progress in property tax pilot leads to more uncertainties ahead.

The Standing Committee of the National People's Congress has authorised the State Council to pilot property tax in selected regions, as announced on 23 October. While the pilot details remain unknown, the progress is much earlier than market expectations, especially after senior officials' relaxation tones indications on property financing since 29 September. We expect more communications on the framework of the pilot scheme in 4Q21 whereas it would likely take a bit longer for the pilot cities to roll out execution details. January in 2022 would be the earliest window with the next one in late March or early April after the "two sessions" meetings conclude.

October 25, 2021

China Healthcare Sector - China PD-(L)1 on the move: Picking long-term winners in a competitive race

PD-(L)1 drugs have become the most important drug class in China, with a combined sales of ~Rmb11-12 bn in 2020. There are 10 existing players in China. We believe the China PD-1 market could reach Rmb40-45 bn peak sales by 2030E, given the large cancer patient population, PD-1's fundamental roles and a long-term annual pricing of ≥Rmb30k, which corresponds to ~1.3 mn patients on PD-1 at peak.

October 12, 2021

Asia Semiconductor Sector - 4Q21 company outlook: foundry and fabless track higher, memory/back-end trimmed

Semi structural outlook positive, cyclical concerns to continue. We stay positive on structural content gains and good secular demand drivers in the coming years. We expect tightness to ease through 2022, and see two adjustments, a modest one from near-term inventory mismatch and potentially again late in 2022. We see foundry showing better pricing and sustainability over back-end and fabless product cycles can overshadow some semis cyclicality.

October 7, 2021

China Communication Infrastructure Sector: Accelerating capex ramp in 2H21-1H22

We expect 2H21 capex to pick up post a slow 1H21, given the: (1) announcement of 5G tenders; (2) easing of supply constraints; and (3) stabilising of the regulatory environment. The three telcos/BAT had only completed 37%/45% of their FY21E capex in 1H21; the expected acceleration in capex should be a core earnings improvement driver for the communication infrastructure supply chain.

October 7, 2021

China Telecom Sector: The overlooked 'new infrastructure' gems

We adjust our capex and BTS estimates, incorporating peak 5G capex in 2022, the extensive co-build, co-share arrangements among operators and government support of flexible use of spectrum, which lowers the number of BTS required to achieve national coverage. We estimate operators' capex to grow by 2/1/-5% YoY in 2021/22/23E (0/2/4% below consensus) to reflect our latest 5G BTS estimate of 1.4/2.1/2.7 mn in 2021/22/2023E.

October 7, 2021

China Healthcare Sector: To GPO or not GPO, that is the question: Is GPO spilling over in healthcare and beyond?

As the State Council reaffirms its plan to continue drug and device GPOs in the first five-year plan for public medical insurance, we believe the scope of future national GPOs would expand beyond generic drugs and high-value medical consumables, given that a number of provinces have conducted or plan to conduct GPOs for the non-drug/non-medical consumable healthcare product categories.

October 4, 2021

China Market Strategy: Power shortage tends to be short lived when administrative measures step in

Power shortages in factories, and even some homes in north-eastern China, are mainly due to resilient demand and tight supply. Industrial electricity consumption has increased due to strong export orders, while safety production and environmental protection requirements have slowed the pace of domestic coal production and coal imports have also been dampened due to geopolitical tensions.

September 27, 2021

China Auto Sector: Robotaxi: A disruptive force for car autonomy

A Robotaxi is a driverless taxi based on high-level autonomous driving (level 4/5), which will slash transportation costs. We estimate the Robotaxi fleet to reach ~200k/1.4 mn units by 2025/2030, as Robotaxi services penetrate into lower-tier areas (like Tier 3/4/5 cities) with falling mobility price. We see Robotaxi as the best testing tool for driving-autonomy R&D because it generally deals with more complicated urban-area traffic scenarios and longer operation hours than private cars. With the knowhow from Robotaxi operations, we expect China's high-level autonomous driving vehicle sales to reach 1.0 mn/6.0 mn units by 2025/2030, achieving penetration rate of 23%.

September 23, 2021

China Market Strategy: Concerning but no need to panic

To gauge the magnitude of total debts of Chinese major developers, we assessed items both on and off balance sheet and found developers' debts on balance sheet have been lowered from the peak in 2019, but off balance sheet items are still a big concern, in addition to increasing accounts payable to suppliers and wealth management products used as alternative financing channel. Chinese banks that grant about 27% of their RMB loans to property will be under pressure.

September 15, 2021

China Market Strategy: Embracing carbon neutrality

After decades of successful reforms and opening-up, it is the right time for China to seek to achieve high-quality development in a greener and more sustainable way. Carbon neutrality offers such a pathway to sustainability. Following years of regional pilot projects, China's first national carbon market—a key policy instrument to achieve the nation's ambitious goal of carbon neutrality—started trading in July. Currently only covering power companies, the market is likely to expand trading activities to more sectors such as auto and cement. Riding on the super trend. NEV and renewable energy are the major beneficiaries from the replacement of ICE cars and fossil fuels.

September 14, 2021

Global Healthcare Sector: AI, Blockchain, Cloud and Data Analytics: Transforming healthcare landscape

ABCD technologies are transforming the way healthcare is imparted. The market is growing rapidly and is expected to reach US$180bn in 2028 (CY20-28: 28% CAGR). The use of ABCD has resulted in increased shift of medical care into patients' homes, improved medical services and supply chain efficiencies, enabled better utilisation of healthcare plans, and tapped a large wellness segment (in addition to illness). In particular, we outline five key themes: (a) improving access to care, (b) care management, (c) reducing fraud, waste and abuse, (d) optimising supply chain, and (e) driving employee/consumer engagement.

September 14, 2021

China Internet Sector: Live-streaming e-commerce becoming a norm

While China online retail growth has slowed amid soft consumption and tightening regulation, we expect live streaming e-commerce (“LS e-commerce”) to post a 70% 2020-23E CAGR to Rmb4.7 tn, as penetration increases to 27% (2020: 8%). With regulations in place to crack down on non-compliant behaviour, such as fake transaction data and false advertising, a healthy environment would be developed, supporting sustainable growth of the industry. LS e-commerce reshapes the market in terms of creating demand (customers' discretionary demand attracted by KOLs) and supply (new channels for merchants) while also offering more opportunities to emerging brands.

September 9, 2021

China Healthcare Sector: ESMO 2021: China pharma/biotech abstracts to watch for potential catalysts

ESMO congress is one of the biggest annual events for oncology stocks. To help investors track ESMO 2021 online sessions, we have summarised abstract titles from the companies under our coverage as well as from other China/ex-China pharma/biotech companies with products of interest. The companies under our coverage include BeiGene, Hengrui, Everest, Innovent, Junshi, ZaiLab, Harbour Biomed (HBM), Sino Biopharma (SBP), CSPC, and Luye. Other Chinese biotechs/pharmas include Akeso, HutchMed, Innocare, Carsgen, Cstone, Genor, Alphamab, I-Mab, Betta, Kelun, and Hansoh.

September 7, 2021

China Insurance Sector: 1H21 results wrap and 2H21 outlook

The sector VNB dipped 14% YoY in 1H, on both tepid NB sales and margin contraction. FYP slid 3.6% on: (1) shrinking agency force, (2) unrecovered long-term insurance demand, (3) likely competition with HMB. Group/life EV growth slowed to +3~7%/+4~7% HoH, partly due to deteriorated experience variance. In tandem, life operating RoEV moderated to 5.8~7.4%. 13M persistency slid 1-9 pp YoY. We expect VNB pressure to stay in 2H on persisting NB sales headwinds and COVID resurgence. Insurers have: (1) ramped up agency incentive, (2) focused on agency productivity, and (3) launched simple, easy-to-sell products.

September 6, 2021

China Market Strategy: How to trade on accelerating FAI

We expect the government to accelerate issuance of local special bonds in the remaining months of the year, making infrastructure FAI the major driver to stabilise the economy. For the construction sector that is valued at low-single-digit P/E, the business is improving, or at least stabilising. With this, the sector is simply too inexpensive to ignore, and an accelerating FAI is expected to be marginally helpful for construction machinery demand. In the materials space, the demand increase and tight supply are expected to create a favourable supply-demand dynamic for steel and cement sectors, boding well for prices and profitability.

September 1, 2021

APAC Quantitative & Systematic Strategy: Southbound Sentiment Tracker: Outflow slows down amidst regulatory repositioning

After the record outflow in July, August sees SB selling pressure easing. August records a relatively mild total outflow of US$1.7 bn with continued rotation out of "traditional favourites" into lower policy risk stocks, especially Auto names. For the past month, we see SB investors buying Communication Services and Real Estate, while selling Financials and Consumer Discretionary. Utilities sees the largest percentage increase compared to holdings one month ago. For the last month, our max-return implementation and balanced-risk implementation have returned 8.4% and 7.3%, whilst the overall market was -2%. Selection effect and factor tilting have contributed to the outperformance.

August 26, 2021

Global Themes Monitor: Cloud Computing: Investor jitters; but outlook remains robust

"The cloud is all pervasive", this comment from the CEO of one of the leading Indian IT services companies highlights the ongoing transition that many companies have undertaken in the wake of the pandemic. CS research teams have continued to explore this theme. Among the leaders, fabless and PCB/Substrates segments performed the best. On the other hand, Memory and Conglomerates lagged as compared to other segments. Cloud computing theme-exposed tech supply chain companies continue to see strong positive EPS revisions over the past three months, with only three of the top 20 market cap names seeing modest EPS cuts.

August 24, 2021

Asia Pacific Thematic Strategy: Logistical disruptions pushed apparent demand away from real demand: some bullwhips now unwinding

The freight rate spike CYTD (spot rates up 6- 8x on some routes) has created an impression of strong demand. Container freight is the most stressed: containers are in shortage and container-ship-building orders are growing. However, as growth in shipping volumes is broadly in line with trend, the tightness has two reasons, in our view. First, port closures and Covid-related regulations have raised turnaround times, cutting the number of trips a ship can make in a year. Second, growth in global freight is concentrated on a few routes (e.g., from East Asia to the US west coast), pressuring some ports.

August 20, 2021

APAC Quantitative & Systematic Strategy: China regulatory re-alignment: VIEs, POEs and regulatory volatility

The State Council's recent five-year blueprint and the accelerating pace of announcements may suggest that the ongoing regulatory risks could be a medium-to-longer-term overhang for Chinese stocks broadly. In order to help investors monitor/hedge risks associated with continued regulatory momentum, we have divided up the liquid Chinese universe (MXCN+HSCI ex HK) across a number of top-down cohorts: SOEs vs POEs, VIEs vs Non-VIEs and sub-industries with positive, neutral and negative regulatory trends. We have created tradable baskets on each. We estimate that 44% of MSCI China weight is in sub-industries with negative regulatory momentum.

August 13, 2021

China Market Strategy: Push and pull factors to accelerate home market listing

US-listed Chinese companies are caught in a bind, with tightening regulation both at home and abroad. We expect China to set up a cybersecurity pre-clearance process for foreign listings, which could increase the review time and costs for future platform operators' listings in the US. Authorities are also likely to include VIE structure into a unified regulatory framework for overseas listings. We believe more Chinese ADRs will accelerate home market listing. Quality unicorns may favour Hong Kong over the US as their listing venue over the long run. HKEx is well positioned to ride the ADR home-coming trend.

August 10, 2021

China Banks Sector: Picking up gems amidst profitability recovery

JSBs and regional banks recover better this year as they have less national services responsibility and a stronger urge for profit to replenish capital. The ones with geographic focus, strong wealth business and good asset quality are even more advantaged. We see high certainty in banks' recovery in FY21 supported by steady loan growth, resilient NIM, lower credit cost, and growing wealth business. Risks in property and LGFVs on the rise, but we do not see systematic risks. Recent concern is overdone. 1H results could boost confidence.

August 9, 2021

APAC Quantitative & Systematic Strategy: Northbound positioning monitor: moderate inflow amidst heightened market volatility

Northbound inflow has remained steady since 2H21 amidst heightened market volatility, with July contributing US$1.7 bn. We estimate year-to-date inflow has reached US$37 bn, exceeding the full-year total inflow of US$30 bn in 2020. For the past month, NB investors have been buying IT (US$2.1 bn) and Consumer Discretionary (US$820 mn), while selling Financials (US$460 mn) and Real Estate (US$200 mn). Since June, the long-only implementation of our strategy has returned flat, and the market neutral implementations have returned 4.8% (vs CSI300) and 14% (vs A50). The outperformance has been driven by style and industry tilting.

August 2, 2021

China Automation Sector: Our take on 2Q automation data: Market share gain story continued amid upbeat market

China automation market grew 32.4% YoY in 2Q21, implying a 17% QoQ growth, similar to historical seasonality. China OEM automation grew 28% YoY in 2Q21, implying a 21% 2-Y CAGR. This is mainly driven by rising demand from industrial robot, battery, and semi. Servo/LV inverter/small PLC market grew 36%/19%/32% YoY to Rmb6.3 bn/8.3 bn/2.2 bn in 2Q21. Domestic players continue to gain market shares in those sub-segments, while mid and large PLC markets remain under-penetrated by local brands. China industrial robot market grew 72% YoY to 73k units in 2Q21, driven by demand from electronics, metal, and auto parts sectors.

August 2, 2021

APAC Quantitative & Systematic Strategy: Southbound sentiment tracker: sector rotation accelerated amidst record monthly outflow

The recent regulatory tightening targeting the education sector has triggered an acceleration of re-positioning within the Southbound universe, a trend which we first noticed since early June. It appears that the SB investors have been increasingly rotating into industries with lower perceived policy risk. Such rotation has kept Southbound gross impact high at 30% of total HK cash turnover. For the past month, we see Southbound investors buying Health Care (US$600 mn) and Materials (US$580 mn), while selling Communication Services (US$4.6 bn) and Financials (US$1.6 bn). Materials also sees the largest percentage increase (6.7%) compared to holdings one-month ago.

July 30, 2021

China xEV Battery Value Chain: Top players to benefit from rising prosperity

We expect rising xEV penetration would continue to lend support to xEV battery and value chain demand. We estimate China xEV sales volume to reach ~6 mn units by 2025, or a +33% CAGR. EV demand growth would also boost demand for middle stream and upstream sectors including battery cathode (42% CAGR) and lithium (36% CAGR) producers. We expect battery upstream sectors (both battery materials and minerals) to see similar 30-40% demand CAGRs through 2023E. That said, we expect most of the profit to be gained by upstream minerals companies, given their better supply-demand dynamics.

July 20, 2021

China Healthcare Sector: 2H21 Outlook: Sector fundamentals remain strong, quantifying company catalysts

We expect policies that have a sector impact to continue to roll out in 2H21, but we do not see heightened risks. We see the main policy themes in 2H21 being the continuation of prior cost-control measures, including NRDL negotiation and orthopedic device GPO. In addition, we would keep an eye on potential domestic or global catalysts currently under the radar, such as DRG/DIP, the US-China relationship and COVID-19 variants. As for the CDE guidance on cancer drug development, we believe it could optimise the pharma/biotech industry's resource allocation in the long run.

July 19, 2021

China Market Strategy - 2H21 Outlook: Beyond normalisation and regulation

The strong economic rebound since 2H20 continued its momentum in 1H21, but in a divergent fashion. We expect continued recovery in 2H21, but slower given the higher base. As economic normalisation nears an end, we see early signs of less aggressive tightening or even moderate easing but no U turn in policy. Regulatory changes would definitely promote competition, leading to more innovation in the long run, despite generating short-term uncertainty, in our view. We expect China's equity market to remain resilient on the back of recovering economy, lower tightening and more reasonable valuation, despite uncertainty in variant development, regulations, and geopolitical tension.

July 14, 2021

Asia Technology Strategy - 2H21 performance should catch up with strong fundamentals

Most key tech end products' demand is tracking better than year-start expectations, with consumer notebooks tracking substantially better, servers and TVs tracking slightly better and smartphones broadly in line. Automotive tech demand is further adding to the strength. AxJ tech earnings are forecast to grow at a 23% CAGR over 2020-23 (30% CAGR over the next two years). In addition, earnings estimates have been seeing sustained EPS revisions throughout this year. We expect the long-held relationship between EPS revisions and stock performance will reassert itself in 2021 again. We retain our positive view on semis with still-solid demand drivers and supply also capped through 2H21.

July 14, 2021

Global Tech Supply Chain - iPhone evolution continues to drive opportunities

We project stable iPhone replacement rates at 4.3 years to drive 234/237/249 mn units over 2021-23, as 5G shifts to more mainstream, driving Apple hardware TAM to grow to US$300 bn by 2023. Near-term upgrades will be evolutionary but still improve the camera (image stabilisation, larger sensors, improved wide angle), display (faster refresh), processor (enabling AI, multimedia/graphics, and app development), and RF (more mmWave, Wifi 6E), and smaller notch. Apple has brought in more suppliers in hardware keeping focus on share gainers or areas of better barriers. In silicon, it has developed more internal silicon, raised content at TSMC, and created new SiP content.

July 12, 2021

China Construction Machinery Sector: Domestic demand peaked, but not overseas

Replacement cycle comes to an end. After over four years of growth, China domestic excavator sales softened in recent months, along with other machinery. Operating data also weakened. Despite being triggered by unfavourable macro conditions which could improve in 2H, excavator sales are unlikely to go back to an uptrend. We do not expect a sharp fall in sales as in the last downturn, and expect domestic excavator demand to see 5%/-17%/-12% YoY growth in 2021-23. We expect tower crane sales to keep growing; loader and pump truck should see a much milder decline than excavator and truck crane.

July 8, 2021

China Internet: Platform regulation—navigating the competitive landscape

For China's internet sector, the heightened scrutiny, increasing new laws and rules as well as coordinated actions among regulators have been the key focus this year. We take a deep-dive of anti-monopoly and data regulation, the two key areas that affect every internet platform, as well as subsector specific regulation to help investors get perspective of regulatory moves. We expect regulatory overhang for the sector to remain. The government, in our view, hopes to safeguard data security, promote fair competition and social consideration, while continuing to encourage innovation. The regulatory uncertainty may drag valuation multiple, and operational change and social responsibility may affect earnings.

June 30, 2021

APAC Quantitative & Systematic Strategy: Southbound sentiment tracker: Rotation to Consumer/Healthcare from Financials/Tech

Southbound aggregate net flow stayed relatively flat in June vs historical levels, with an estimated US$700 mn of inflow, driving YTD total inflow to US$59 bn. While the net flow was lacklustre relative to recent months, we saw significant sector rotation, with gross turnover impact in June staying high at 30% of the value traded. Southbound investors now hold a free-float stake of 12%, close to the all-time-high level. For the past month, we see Southbound investors rotating to Consumer Discretionary (US$2.9 bn) and Healthcare (US$1.9 bn) stocks, while selling Financials (US$1.9 bn) and Communication Services (US$1.6 bn), traditional favourites.

June 29, 2021

China Oil & Gas Sector: Life after US$70: Revising our pecking order

Our positive stance as illustrated in our APAC O&G Sector report back in April has played out. The recent Covid-19 resurgence in Asia has had muted effect on global oil demand recovery, and with a synchronised OPEC+ effort in putting barrels back to the market plus a more subdued response from US shale oil producers, global oil S/D balance continues to improve – as evidenced by the eight consecutive weeks of US crude inventory drawdown. The CS Global Energy Team forecasts US$70/bbl Brent for 2H21, but risk is skewed to the upside as we head into the summer peak demand season.

June 28, 2021

China Communication Infrastructure Sector: Investment ideas from 'New Infrastructure'

China's 'New Infrastructure' is one of the key initiatives in the National 14th Five Year Plan. China 5G capex is controlled, up just 5% YoY in 2021, but 5G's prevalence has been a driving factor for cloud penetration and edge computing. China tier 1 hyperscale capex rebounded by 14% YoY in 2020 and is expected to maintain 14%/13% YoY growth in 2021/22E, driven by China's migration to cloud, booming data traffic demand and digitalisation. We expect more detailed policies to accelerate developments by providing incentives, and enterprises will also drive their initiatives to support the national missions.

June 21, 2021

China Software and IT Service Sector: Key takeaways from China Cloud Day

We hosted our China Cloud Day on 16-17 June by virtual conferences, and met with various companies in the China cloud sector value chain, including PaaS, IaaS, SaaS, DaaS, IT service and IDC players. We see digitisation demand remains sticky across industries post pandemic, demonstrated by social e-commerce and ERP. As a result of solid SaaS growth expectation, SaaS/subscription revenue should gradually take an increasing share among total revenue. Attendee companies see regulatory environment changes led to different levels of impact, but mostly manageable.

June 17, 2021

China Auto LiDAR industry: A promising sensor for vehicle autonomy

LiDAR, or light detection and ranging, is an active remote sensing method that uses light emission and return data for measuring objects' exact distance, thus, forming high-resolution 3D 'point cloud' without substantial backend processing. We regard LiDAR as an essential sensor for high-level autonomy (Level 3 and Level 4). We are bullish on LiDAR sensors' structural growth. We believe two drivers – increasing high-level vehicle autonomy penetration and falling LiDAR price – will notably boost LiDAR's demand in China. Given Chinese LiDAR suppliers' faster mass producing along with mature scanning technology, Chinese smart EV makers could solidify their leading position in high-level autonomy.

June 16, 2021

China Market Strategy: Revisit after census release: how to position for China's demographic changes

Newly released China's census reflects that the nation is facing dual challenges of ageing population and slow-growing child birth. As the continuing most populous country globally, China has a rapidly ageing population, with new births and total fertility rate falling dramatically. Credit Suisse CQi's yearly survey of maternity hospital doctors across China in Nov-2020 provided a rare snapshot of new birth number in the nation and revealed the fading effect of the two-child policy. Against the backdrop of China's demographic changes, we expect to see a broad set of structural changes in the medium to long term.

June 9, 2021

Asia Pacific Thematic Strategy: Leisure: Resuming the 150-year trend

A steady rise in leisure time is one of the longest running themes in human history, with work hours falling for 150+ years due to regulations, negotiations and rising productivity. All time saved by automation has not gone into leisure, but that is changing too. An equally important trend is the growing commercialisation of leisure, helped by a growing global middle-class and technology-driven cost cuts making leisure more affordable: it is no longer a preserve of the ultra-rich. Leisure's share of consumption is rising across economies.

June 8, 2021

China Medtech Sector: Transcatheter heart valve market marching to a new beat

Transcatheter valve surgery has changed how structural heart diseases are treated. TAVR was the first to be commercialised, and TMV surgeries are currently the next focus due to their large medical need. We estimate that by 2025, we could see ~45,000 TAVR annual operations in China. Looking at the future competition landscape of the second generation TAVR market, in this report, we have analysed the domestic players. The TMVr/TMVI markets are large potential markets. We share our market model for TMV in this report, and expect the combined TMVr/TMVI market to exceed +Rmb10 bn by 2029E and reach ~Rmb7 bn and Rmb4 bn, respectively.

June 3, 2021

China Healthcare Sector: ASCO 2021 calendar: China biotech presentations to watch

ASCO is one of the biggest events of the year for oncology stocks. The conference will run online from 4-8 June 2021. Late breaking abstracts will be released at 5 am (HKT), 4 June the day before the meeting gets under way. Other live sessions will be livestreamed as scheduled and be available online until 6 July. To facilitate investors to watch ASCO'21 online sessions, we have created an ASCO'21 calendar to summarise 50+ key posters and oral presentations from companies under our coverage as well as from other China/ex-China pharma/biotech companies with products of interest.

June 1, 2021

Asia Oil & Refining Sector: Speed bumps along the recovery pathway

The recent COVID-19 variant has led to a number of countries re-imposing semi-lockdowns, bringing back memories of the demand destruction a year ago; but the destruction is not likely to be as severe this time, given that governments are now fully aware that a complete lockdown is not feasible. Latest mobility data indicates that current activity levels are only 28% below pre-COVID levels vs a 51% decline in Apr-2020. At the same time, the positive mobility trends in the West heading into summer, and better vaccination rates, should mitigate the near-term setback in Asia.

May 31, 2021

Asia Technology Strategy: Soft patch does not derail the 5G ramp

We maintain smartphone units growing +8.7%/+4.4% to 1.39 bn/1.45 bn in CY21/22 netting a stronger 1Q21 and weaker 2Q21 with a potential 2H21 pick-up from easing Asian COVID-19 restrictions, normalising China from low 2Q base, and re-opening in US/Europe which shifts screen time from PCs/laptops toward mobile devices and could refresh to capture more experiences. We maintain 5G units growing from 255mn in 2020 to 551mn/707mn in 2021/22 and 1.3 bn by 2025. 5G in 1Q21 paced above our estimate at 125 mn vs prior 110 mn, driven by China, as MIIT reported 80% of devices built as 5G.

May 14, 2021

China Market Strategy: How to trade on reflation?

Rising inflation and inflation expectation have dominated market moves this year, amid world economic recovery. Divergence between PPI and CPI is gaining traction in China. Commodities prices have experienced strong growth over the past 3-5 months, driven by recovering downstream demand and tight supply amid environmental protection and safety- related policies. Our global team revised up its metal prices forecasts to reflect the positive outlook for aluminum and copper. Our sensitivity analysis suggests that producers of commodities like aluminum, copper and oil are likely to be the major beneficiaries, while other sectors will face cost pressure with varied ability to pass-through to downstream.

May 14, 2021

China Metals & Mining: Bullish in longer term despite short-term fluctuation

China demand remains very solid and overseas demand is expected to add fuel. We perceive investors are skeptical on China's macro turnaround and presumably demand slowing down. We argue demand is resilient in China. With easing liquidity in developed countries, we believe copper and aluminium prices are most geared to the upside and supply constraints to further add fuels to rising prices. Supply constraints will benefit copper upstream and aluminium middle stream. Aluminum smelters' margins at Rmb5,000-6,000/t given strong demand, capped supply (45mtpa) and weak alumina prices. Our global team revised up 2021E copper/aluminium prices 16%/18% to US$9,200/2,339/t and 2022E price 6%/39% to US$7,500/2,640/t.

May 13, 2021

China Online Healthcare Sector: The force awakening: Online healthcare growth accelerating

Online healthcare's weight in the total China healthcare market increased from 1.6% in 2015 to 2.7% in 2019 and is expected to reach ~19% in 2030, at a CAGR of ~30% in the next 10 years. The COVID-19 pandemic in 2020 has fueled online healthcare growth and left a sustained impact. For online pharmacy, we had estimated a higher-than-market total GMV of Rmb340 bn in 2020, and it could reach ~Rmb2 tn by 2030, at a CAGR of >19% over 2020-30. We think CDSS is close to the point of being commercially deployed at a large scale.

May 11, 2021

APAC Quantitative & Systematic Strategy: The state of play in "A" Part 1: China onshore mutual fund positioning.

Onshore Chinese mutual funds are increasingly driving the A-share market. We estimate that onshore mutual funds now hold nearly Rmb9 tn worth of A-shares, representing 35% of A-share's free float market cap. Weakening onshore sentiment likely led to a significant reversal of mutual fund inflows following Lunar New Year. More recently, we have seen mutual funds unwinding "crowded" stocks. We highlight the different types of funds, AUM trends, and take a detailed look into different funds' holdings. We also assess the interconnectedness of onshore funds to identify potential crowding risks.

May 5, 2021

Global Themes Monitor: Alternative Energy (Vol. 2): Hydrogen, Decarbonisation and Renewables

The themes of climate change, clean energy, and decarbonisation continue to gain traction with various stakeholders across the world. In this second edition of the Global Themes Monitor on Alternative Energy, we highlight recent CS research reports on the theme. During the recently held 'Leaders' Summit on Climate', hosted by the US, several countries raised their 2030 greenhouse gas (GHG) emission reduction targets. The US clearly aspires to regain its prominent position in efforts towards handling climate change. CS US ESG research team has analysed various pieces of the puzzle, which need to fall in place for the US to reach its ~50% GHG reduction target. The US Utilities team estimates a sharp rise in renewables/storage capex to meet carbon reduction targets.

May 3, 2021

China Semiconductor Sector: China semis' better growth re-accelerated in 1Q21, leading to sub-seasonal inventory

We update our tracker of 49 listed China semiconductor companies' revenue and inventory to 1Q21. China fabless, IDM/foundry, and OSAT (outsourced semiconductor assembly & testing) sectors all witnessed above-seasonal growth in 1Q21 exiting the quarter with sub-seasonal inventory days. Notably, the China fabless sector had sub-seasonal inventory for three quarters (3Q20-1Q21) and inventory exiting 1Q21 was 34 days below three-year seasonality. This is positive for foundries and OSATs.

May 3, 2021

APAC Quantitative & Systematic Strategy: Southbound sentiment tracker: net inflow continues, Consumer preferred over Financials

Year-to-date, Southbound investors have posted net inflow of nearly US$53 bn. The month of April has seen net inflow of US$5.6 bn, ranking as the second-highest April flows to date, after the US$6.8 bn in April 2015. Gross turnover impact has reverted back from 30%+ levels seen in March towards the longer term average of 25%. Southbound investors now hold a free-float stake of 12%, close to the all-time-high level. For the past month, we see Southbound investors buying Consumer Discretionary (US$2.7 bn) and Communication Services (US$2.2 bn) stocks, while selling Financials (US$1 bn).

April 29, 2021

China Market Strategy: Ride on strong May holiday, with 200 mn people on the move.

The domestic travel market for the upcoming 5-day Labour Day holiday is set to see a strong rebound as 200 mn people are expected to be on the move, according to Advanced booking data demonstrates a full recovery of domestic tourism, even stronger than that in 2019. We see the spike in the both volume and ticket prices, consistent with the robust sequential recovery trend seen post Chinese New Year. With the domestic outbreak well under control, we stay positive on domestic travel demand normalisation to drive revenue recovery for travel agencies and airlines in China this year. Vaccination is pushing forward globally but still with uncertainties given increasing variants.

April 20, 2021

Macau Gaming Sector: Structural constraints to cap upside

While gaming revenue (GGR) has been tracking way below expectation on regulatory controls, sentiment is positive on hope of a recovery. Structural headwinds that prevent the stocks from rerating include: Slower top-line growth as a result of: (1) ongoing regulatory measures that permanently impair top player demand, and (2) player-mix shifting towards mid-tier and leisure players; lower margin due to (3) elevated business acquisition cost and reduced quota for non local labour structurally; and valuation multiple being dragged by (4) weaker FCF flow through, together with (5) license renewal uncertainty.

April 14, 2021

China Sportswear Sector: March 2021 online sales +25% YoY; domestic brands growth outpace foreign brands

In Mar, the overall online sportswear industry grew 25% YoY on Tmall/Taobao, a slowdown from the high growth in Feb due to a low base and the CNY. This brings 1Q21 to +37% YoY growth, which we deem as healthy demand. Mar was a volatile month, given the Xinjiang cotton issue, and we saw divergence in the overall growth trends between foreign and domestic brands. Distributor expects foreign brands to decline 20% in May, -10-20% in 3Q21, before achieving a flat growth in 4Q. In 2021, the distributor now sees 20-30% decline for foreign brands.

April 12, 2021

APAC Oil & Gas Sector: Raising oil price forecast: Staying bullish

We continue to expect a favourable global oil S/D balance for 2021, which should be supportive to the oil price recovery as seen YTD. Global oil demand should see an extended recovery as we head towards summer, and global supply remains synchronised, with US producers showing a more disciplined manner towards increasing output in this upcycle. CS raises 2021/22 Brent forecast to US$66.5/US$68 (from US$59/US$63), as we now expect a quicker normalisation of global crude inventories by 2Q21 (vs 4Q21 previously). Despite the encouraging macro condition, APAC Oils have underperformed oil prices YTD and are still trading at below-historical multiples.

April 12, 2021

China Market Strategy: Ride on domestic recovery and resilient export.

The combined economic figures for January and February 2021 reflect that China's economic recovery continues to gain momentum. We analysed two-year CAGR for major economic indicators and found an uneven recovery, with exports and industrial production leading the recovery versus less impressive FAI and retail sales. We expect China to have a sustainable economic recovery on the back of gradual domestic recovery and resilient export on improving global economy. Our FY20 results review of China/HK companies covered by us suggests a strong pick-up momentum of corporate earnings.

April 6, 2021

Asia Semiconductor Sector: Consolidating landscape and solid demand support price recovery

We update our raw wafer supply/demand model, and maintain the supply side expectation for global 12" raw wafer capacity growth slowing down from an 8% CAGR in 2017-19 to a 3% CAGR in 2020-22. However, we are lifting 12" wafer demand from 1% CAGR in 2017-19 to 10% CAGR in 2020-22 on the back of product drivers including the 5G smartphone ramp, continued WFH demand, data centre investment reacceleration, and now supplemented by improving auto/industrial demand recovery. We expect 12" raw wafer utilisation to improve from 80-85% in 2019/20 to 92%/97% in 2021/22. For the mature nodes, 8" raw wafer utilisation should be at 95% while 6" at 80-85%.

March 25, 2021

China Internet Sector: Emerging Consumer Survey 2021 deep dive

As the Credit Suisse Research Institute publishes the 2021 edition of the Emerging Consumer Survey, we take a deep-dive into China's internet space. For this sector, the increased adoption of online services across almost all categories has been the trend during the pandemic and is here to stay, reflecting the structural changes and the lasting effects COVID -19 has brought to consumer behaviours. We discover structural changes including rise of e–grocery, growing popularity of online games and increased acceptance of online education.

March 22, 2021

APAC Quantitative & Systematic Strategy: Enhancing China exposure with A/H aware portfolios

As onshore China's importance grows, allocating between on- and offshore is an increasingly critical decision. The markets have different underlying dynamics, sentiment and correlation profiles. A common strategy looks to exploit the A/H differential by favouring the "cheaper" line. Such a strategy has generally underperformed. Our China Strategy team has shown that the equity risk premium (ERP) spread can help reconcile the price targets of A/H shares (link). Over a shorter time horizon, we identify mean reversion and the average A/H level as the two most important drivers from a time-series perspective. We create an optimised signal for predicting moves in individual A/H pairs.

March 22, 2021

China Market Strategy: Dual Circulation 2.0: Energy security and revolution (能源安全与变革)

The security of China's strategic resources and energy has become more important than ever before. Against this backdrop, in 2020 China's top leaders introduced two high-level strategies, the 'Dual Circulation' development model and the target of net-zero carbon emission by 2060, underscoring its focus on domestic energy security and energy self-dependency and greener development. The carbon neutrality goal, together with peaking emission target by 2030, is the nation's first long-term climate goal. China needs to drastically shift from fossil fuel to renewable energy to achieve this. In this third part of our Dual Circulation series, we deep dive into China's energy security and revolution roadmap to achieve carbon neutrality by 2060.

March 15, 2021

China New Energy – Hydrogen: How best to play the China hydrogen theme

In our second Hydrogen series in APAC, we deep dive into China's hydrogen market and focus on the demand side of the value chain. We identify the transportation market as presenting the largest near-term opportunity, within which FCEV heavy-duty trucks stand out. We believe demand inflection point could be sooner than expected – our TCO analysis suggests an inflection point by 2024 as we expect FCEV heavy-duty trucks to reach parity with ICEVs, driven by: (1) lower energy module cost; (2) favourable subsidy scheme. Moreover, a lower supply cost should drive grey/brown hydrogen price parity. By 2025, we expect hydrogen pump price to be competitive vs diesel at US$60/bbl oil thanks to lower distribution cost, offering consumers a more compelling case to switch to FCEVs.

March 15, 2021

China Metals and Mining Sector: Positive drivers remain intact despite rising volatility

Higher demand and low inventory support copper and aluminium prices. With global easing liquidity, we expect copper and aluminium demand to edge higher in 2021, mainly supported by the ex-China economic recovery. We forecast China demand to grow 2.5% YoY for copper and 4.1% YoY for aluminium in 2021. With relative tight supply of copper scrap, we forecast copper price to remain above US$3/lb in 2021 as a result of resilient demand and very low inventory. Within the industry chain, upstream copper concentrate producers are in a dominant position and take majority of the industry's profits, given the sub-US$50/t TC price. For aluminium, due to improving pricing power, downstream aluminium manufacturers should enjoy much higher profitability amid potential newly added-in capacity to cap upstream alumina price hike.

March 10, 2021

China Utilities and Renewables Sectors: What to expect over the next five years

2021 marks the beginning year of 14th Five-year Plan (2021-25) in China, and major policies for the utilities and renewables sector are likely to be set this year. We believe energy mix improvement would be the key driver behind all subsector demand-supply changes, with clean energy the key winner. Based on our projection, renewables (solar and wind) as a percentage of China's energy mix (~5% in 2020E) is set to double in 14th FYP (10%) and triple in 15th FYP (16%). Natural gas remains a clean energy solution and should expand further in the medium term (13% by 2030E per CSe), while other traditional fuel types (coal-fired power, etc.) may see continuing drops in % contributions. With solar currently at grid parity, we raise China solar demand to 103GW per year on average in 14th FYP (previous forecast: 67GW), meaningfully higher than 42GW per year in the 13th FYP.

March 2, 2021

Themes Monitor: Electric Vehicles: Strong momentum carrying forward into 2021

Norway is a good example of how govt. policies can encourage faster transition to electric vehicles - 2020 marked another milestone in the journey as battery EV volumes crossed 50% of annual PV sales for the first time. In 2020, European regulations accelerated the sales of EVs, reflected in more than doubling of volumes over 2019 – the trend continued in January as well, despite ~25% decline in overall PV sales (lockdowns). In China, strong demand for SGMW's Mini EV demonstrates the large potential of mass market EV models. These developments augur well for the entire value chain including battery makers and mineral producers. Rise in lithium prices over past few months has encouraged mineral companies to move ahead with capex decisions.

March 1, 2021

China Communication Infrastructure Sector: MWC Shanghai 2021 key takeaways: 5G ecosystem to take shape

By end-2020, China had built 718k 5G BTS (70% of the global), covering more than 300 cities and all the prefecture-level cities. Industry participants expect more than 1.0 mn 5G BTS to be built in 2021, in line with CSe. China Mobile's 700MHz and China Unicom's 2.1GHz tenders are believed to take place possibly in Mar/Apr, while China Telecom should also launch its tender in 1H21. The penetration of 5G smartphones exceeded 70% by end-2020, with approx 90% penetration in the Rmb2,000+ segment. China Mobile expects more than 200 mn units of 5G smartphones and 100 mn other smart connected device shipments in 2021.

March 1, 2021

APAC Quantitative & Systematic Strategy: Southbound sentiment tracker: Record outflow likely driven by mutual fund redemption

YTD, Southbound (SB) investors have posted net inflow of US$50 bn, representing nearly 60% of the full-year inflow in 2020. The recent sharp reversal may hint a slowdown of inflow going forward. The monthly gross turnover impact has stayed above 40% and the free float stake has remained at 12.5%, close to the all-time high level. The outflow on 24-Feb-2021 reached US$2.6 bn, the largest one-day outflow since the beginning of the programme and representing a 3-sigma move. By cross-referencing the outflow composition by stocks and the onshore mutual fund holdings, we believe the outflow is likely driven by fund redemption. Onshore mutual funds have become a key marginal buyer within the SB community since 2020.

February 26, 2021

China Healthcare Sector: FY20 earnings preview: Buy the dip as we maintain our positive view

China healthcare stocks have seen pressure recently, but we do not think there are fundamental issues and remain positive as we see this as sector rotation. Based on 10-Feb price, stock prices are down 14% for CS covered biotech stocks on average, 16% for CRO, 14% for devices, 16% for pharma, and 9% for other covered names. We maintain our highest conviction in biotech, CRO, and innovative device with an average 36%, 25%, and 15% upside implied by our target price, respectively. Within our healthcare coverage, our top picks as per each of our preferred subsectors include Zai Lab in the biotech space, Wuxi Bio in the CRO space, and Venus Medtech in the innovative medical device space.

February 23, 2021

China Cosmetics Sector: Online cosmetics sales in Jan-2021 grew 41% YoY

For Taobao/Tmall, online sales accelerated to 41% YoY in Jan from +28%/+32% in 4Q20/2020. Overall skincare (excluding 'medicinal') growth increased to 54% YoY, while colour cosmetics growth declined to 20% YoY. 'Medicinal' skincare also outpaced overall industry growth at +51% YoY in Jan. Our positive view on the cosmetics industry remains unchanged on increasing penetration levels among consumers, the trend of "medicinal" products, and premiumisation. The story of the leading domestic brands gaining market share is also playing out, as seen on the Taobao/Tmall platforms. Among the stocks we cover, our top pick is Proya, on its strong brand momentum in the 'Proya' and 'Timage' brands to gain market share, strength in online channel, and brand premiumisation.

February 19, 2021

Global Themes Monitor: Alternative energy: Hydrogen, Offshore wind, EV batteries

There is a growing global focus on sustainable development, particularly in the post- COVID19 world. Europe has been leading the path for a while now and in September 2020, China, for the first time, announced a fixed timeline to have CO2 emissions peak (2030) and achieve net-zero emissions (2060). President Biden announced US is rejoining the 2015 Paris Agreement on Climate Change and subsequent announcements from the White House clearly show the intent that US wishes to play a prominent role on this front.

February 18, 2021

China Sportswear Sector: Jan-2021 online sales +29% YoY; improving discounts levels with more premium products launched

Jan-2021 discounts are still +4 pp YoY steeper at 24% but have narrowed from +6 pp in Dec 2020. We expect brands' inventory levels to continue improving into 2021 (currently still 1-2 months higher vs normal levels).  Narrowing discounts and new product launches at premium pricing support our positive view on the sportswear sector. While growth moderated in January, we believe it to be more of a seasonal impact and expect demand in 2021 to remain strong on recovery of sports events, increasing health consciousness and DTC channel shifts.

February 16, 2021

China Property Management: Growth of top players remains intact

We estimate the scale expansion of the top-100 players will remain intact at a five-year CAGR of 22%. With a 21% CAGR in traditional property segments (i.e., residential/office/ retail properties), new property segments like industrial parks, schools, and hospitals will serve as additional growth engine and we estimate the fee CAGR at 27% over 2020-25E for the top-100 players. On the community VAS, we expect the revenue to grow by 37% p.a. for the top-100 players on the back of more diversified services and continued expansion on the customer base, The monetisation ratio (i.e., community VAS revenue-to-basic services revenue) will expand by 1.5 pp p.a. and reach 17.5% in 2025 (vs. 10% in 2020)

February 10, 2021

China Market Strategy: Dual Circulation 1.5: Technology self reliance (自力更生) – switching power

China's IGBT (insulated gate bipolar transistor) development serves a good purpose – "Dual Circulation" in a greener world. Known as the "heart" of power semiconductor devices, IGBT is the core device widely used in areas such as new-energy vehicles, railways, smart grids, renewable power inverters, and home appliances. China has seen explosive growth in demand over the years but still has low self-sufficiency, resulting in a key technology bottleneck. We believe IGBT will play a critical role in China's energy-mix shift towards renewable energy, import substitution, and consumption upgrade, in line with the goals of the "Dual Circulation" strategy.

February 8, 2021

China Healthcare Sector: China's vaccination roadmap: Deep-dive into clinical data and market potential

We discuss China-developed COVID-19 vaccines' technology platforms and clinical data, and their commercial prospects, including capacity, pricing, and potential role in overseas supply. By YE21, we estimate the total capacity of China COVID-19 vaccines could exceed 2.5 bn doses, and China has ~500 mn doses of overseas orders. Logistics-wise, inactivated vaccines have an advantage as they can be stored in 2-8ºC temperature. The Chinese government is offering a free vaccination programme and we believe it has strong determination in getting people vaccinated. Note we only consider the domestic market for China-developed vaccines here. Additionally, our model suggests China COVID-19 vaccine sales could be ~US$14/12/9 bn in our blue sky/base case/grey sky scenarios in 2021.

February 5, 2021

China TMT Sector: How to invest in China's cloud

China's cloud migration will accelerate on digitisation/domestic substitution. China's 2021 IT budget recovery (7.2% YoY), 5G proliferation and favourable policies support faster conversion. Key themes: (1) Robust demand in China IaaS market driven by Internet/enterprise applications and multi-cloud adoption, public/private cloud approach converge among peers. (2) IDC benefits from rapid data volume growth with 16.7%/29.2% CAGR (2019-24) from carrier-neutral/hyperscale datacentres. (3) Fragmented SaaS market will benefit from fast penetrating IaaS and a wide adoption of cloud native tech, ERP/e-commerce SaaS will enjoy fast growth due to high standardisation and customer value-added.

February 2, 2021

Global Telecoms Sector: Broadband: Wiring up the world

Our Global Telecoms team unveils aggressive forecasts for fixed broadband growth. Due to COVID-19, politicians and regulators are encouraging investment to bridge the 'digital divide', and we expect total high-speed broadband subscribers to reach 1.0 bn by 2023. Due to COVID-19, fixed broadband access has become a necessity, highlighting the 'digital divide' to politicians. For broadband providers, our analysis shows incremental ROIC from fixed broadband access is above cost of capital in most markets in our coverage universe (though China is an exception).

February 1, 2021

APAC Quantitative & Systematic Strategy: Southbound sentiment tracker: Record inflows in Jan with IPOs set to receive a boost from SB

YTD, Southbound investors have posted net inflow of US$37 bn, representing more than 40% of the full-year inflow in 2020. History suggests that significant increase in net flow is likely to be followed by additional inflow in the short term. Communication Services see the bulk of the sector inflow (US$17 bn), driven by inflow to Telecom (US$6.6 bn) and Media & Entertainment (US$11 bn). Tencent is the most bought name, with US$10 bn inflow. Our Southbound strategy has returned flat YTD.

January 28, 2021

China Cosmetics Sector: Online tracker suggests leading domestic Chinese brands are gaining share

Overall online cosmetics grew by 32% YoY in 2020, albeit slowing down from 49% YoY in 2019 on Tmall/Taobao. Overall skincare ex "medicinal" growth slowed down to 31% YoY (2019: 57%), while colour cosmetics growth was roughly stable at 32% YoY. Leading domestic brands market share increased 4.1pp to 15.8%. Remain positive on cosmetics sector; top pick Proya. Our view of leading domestic brands gaining market share is also seen on Taobao/Tmall platforms. Proya remains our top pick on strong brand momentum, strength in online channel and brand premiumisation.

January 20, 2021

Global Semiconductors Sector - The uneven rise of China's IC industry

In a follow-on to our China semiconductor reports, including China's ascent and supply chain localisation, this report updates on the US-China policy implications, China's manufacturing, design and tech supply chain, and the fabless industry map. Leveraging our full global semis team, we also take an in-depth look at equipment, materials, RF, Power, CPU, national IC fund investments, China fab projects, and profile 21 covered and Not Covered China IC companies' business overview, drivers, near-term outlook, and valuation. The US is looking to protect its leading 48% share consisting of its leading IDMs, fabless, equipment and EDA/IP, while China is looking to gain self-sufficiency and increase its 5% share, which lags its 20-25% share of tech demand and 30-40% hardware share.

January 20, 2021

China Market Strategy - Dual Circulation (part 1): Technology self-reliance (自力更生)

Faced with the unprecedented global pandemic and heightened geopolitical tensions, China introduced the "Dual Circulation" model as the guideline for next phase of development, to strategically rebalance the economy and aim to achieve a more sustainable development ultimately. We expect "Dual Circulation" will focus on technology self-reliance, import/supply-chain substitution and domestic demand expansion. It's also the right timing to roll out this strategy given China's significant domestic demand upgrade and readiness of hard and soft infrastructure. We expect China's technology self-reliance initiatives to bring profound changes along with associated investment opportunities. We pick the long-term winners with focus on technology competitiveness, R&D capacity, product design/development sophistication, import replacement potential, and management capability over valuation.

January 20, 2021

China Industrial Machinery - Riding the capex upcycle and benefiting from localisation

As China's economy further gains momentum in 2021 and overseas economies are likely to restart helped by vaccines, we are optimistic on China's manufacturing capex and industrial machinery demand, thanks to an industrial profit rebound and high capacity utilisation rates. CS analysts in tech, auto, renewables and consumer goods are positive on their sectors, supporting our view. We expect manufacturing upgrades and technology progress to drive advanced machinery to further proliferate among various industries. Localisation is a multi-year trend in advanced industrial machinery markets and domestic companies would benefit more from the upcycle. Among sectors, we prefer automation, laser equipment and PIMM (plastic injection moulding machines).

January 18, 2021

APAC Quantitative & Systematic Strategy - The Realignment – the changing mix of China's equity capital markets

China's equity capital markets are undergoing a significant re-alignment. The key trend is a "return home" with increased listings occurring on the STAR board and a dramatic increase of large IPOs and secondary listings in Hong Kong. We expect this trend to continue. At the same time, recent announcements such as QFII/RQFII reform should further expand the depth of China's onshore markets. The increasingly tense Sino-US backdrop is likely to drive further "secondary" listings in Hong Kong and more CDR/STAR board listings. Longer-term, we expect these trends to continue to drive Southbound and Northbound Stock Connect usage and promote a more robust China capital market.

January 15, 2021

China Consumer Sector: 2021 Outlook: Out-of-home consumption to gain steam

Despite near-term headwinds from COVID-19 resurgence, normalising consumer behaviour should lead to a strong rebound in out-of-home spend vs the fading at-home consumption, while some behaviour (e-tailing) might linger for longer. Inflationary pressure manageable for leading players with strong brand equity and supply chain, given the more favourable competitive dynamics. Chinese brands to further gain share (especially in sportswear and cosmetics). Rotating to discretionary sectors that are attractively valued. We upgrade sportswear to our top pick among sectors, as we see secular trends post COVID. We remain positive on restaurants and white goods, but turning slightly less constructive on baijiu and beer. Small appliances and supermarkets are our least preferred sub-sectors. We prefer post-COVID recovery plays with secular growth and reasonable valuation and suggest investors accumulate on near-term pullback.

January 15, 2021

China Sportswear Sector: From a jog to a sprint 

We turn bullish on the sportswear sector, on secular trends such as increasing health consciousness among consumers and accelerated DTC channel shifts by brands post COVID. Moreover, sports events are likely to restart in 2021. We expect the sector to recover from low-mid single-digit growth in 3Q20 to 8-10% growth in 4Q20, followed by growth of 20-25% in 2021 on a low base. While brands have sharply discounted their products to clear inventory, and we expect discounts to be higher YoY into 2021, we expect the market to overlook this, should growth improve sequentially. COVID has accelerated brands' shift towards the DTC channel, particularly on the e-commerce platforms, and we expect this trend to continue. We estimate that well-managed direct retail stores and e-commerce platforms should have a higher operating margin profit of 2-3 pp than the wholesale channel. As such, an increase in e-commerce contribution would be a long-term positive.

January 11, 2021

Asia Technology Strategy: CS Greater China Tech Conference

Credit Suisse's Virtual Greater China Tech Conference over 6-8 January featured record 72 corporates split between hardware/semiconductors and Internet, four expert speakers, and over 700 registered investors for a look into 2021 business trends. Our report includes takeaways from 37 of the 45 hardware/semiconductor companies and 11 Internet companies. The conference tone was uniformly positive. Companies are upbeat on demand, with COVID-19 second-wave stay-at-home demand, online education and supply constraints keeping PC and home consumer orders healthy, supplemented by 1H21 recovery in hyperscale/cloud, expected doubling of 5G units to over 500 mn, and improving auto/EV/industrial as the vaccine rolls out. Offsets include FX appreciation and higher component costs, though most companies are reporting a sellers' market to start the year.

January 8, 2021

China Healthcare Sector: 2021 outlook: Strong growth ahead, especially for CRO, biotech, and medical devices

Whilst we have a positive view on the sector, post the strong outperformance of the sector (rallied ~55/70% in A-/H-share in 2020), our sector and stock selections are based on clear growth profile and identified catalysts. We are most bullish on the biotech, contract research organisation (CRO), and medical device subsectors on their potential for continued innovation and relatively low policy exposure risk. We estimate innovative drug sales in China could grow at CAGR of ~18% over 2021-23, outpacing the overall drug market growth.

January 7, 2021

China Passenger Vehicle Sector: 2021 outlook

We expect China passenger vehicle demand to increase 15% YoY in 2021, well above auto makers and industry associations' relatively conservative forecast of 7.5-9% YoY growth. Key drivers are (a) cyclical demand recovery after three years of continuous volume decline in 2018-20, which is estimated to boost 2021 PV annual demand by ~6 pp. (b) low-base effect amid COVID-19 – volume down 45% YoY in 1Q20, which stand-alone offers ~12 pp annual growth for full year 2021.

January 7, 2021

China Insurance Sector: 2021 Outlook: An uneven recovery

We remain constructive about long-term fundamentals of the insurance sector, but anticipate an uneven recovery in 2021 following severe disruption of sales by COVID-19. For most life insurers, 'open-year' sales of 1Q21 are likely to surprise the market on the upside, driven by healthy demand of saving-type insurance post COVID-19, falling attractiveness of competing products, early and proactive preparation by insurers, and low base. On bond yield, we estimate China's 10Y government bond yield to sustain at a healthy level of over 3.1%, supported by robust outlook of economic recovery, but partially offset by reduced issuance of local government bonds.

January 6, 2021

China Internet Sector: 2021 outlook: Structural growth versus regulatory uncertainty

We see a lifted growth ceiling for the online games, food delivery, and e-commerce segments post COVID. With more offline businesses shifting online and enhanced algorithm boosting ROI, the ad market is likely to continue to see solid growth in 2021. Despite tough comps for game revenue next year, we believe that industry's APRU/paying ratio are structurally higher post COVID, supported by a perception change towards online game and good IPs.

January 5, 2021

China LED Sector: Mini LED not yet mainstream but triggers capex buy

We attended GGLED (a Chinese LED research institute) conference in December 2020. GGLED expects the global market value of mini/micro LEDs to reach Rmb8.9 bn/Rmb8 bn in 2022, with 2021-22 CAGR of 53%/138%. From a capex perspective, mini/micro LED display is definitely the next driver for the China LED sector. According to GGLED, there were nine major new mini/micro LED projects announced in China in 2020, with a total investment of Rmb17 bn.

January 5, 2021

Asia Technology Strategy: 2021: Growth outlook remains robust

Despite significant negative impact of COVID-19 on economic growth, surprisingly, overall tech demand held up quite well in 2020, with demand for notebooks globally and 5G phones in China particularly strong. Our underlying structural positive view on tech has been anchored on two key product cycles – 5G and cloud/datacentre (and related AI/ML and data analytics applications). Demand for both these themes turned out quite robust even in 2020 (over the year we raised our 5G unit forecasts for 2020/21 by 4-5% to 257 mn/528 mn), and we expect these two themes to stay strong throughout 2021 and beyond.

December 18, 2020

China Technology Sector: Outlook 2021 – A bright year ahead with multi-structural themes

After a 7% decline in 2020, we estimate smartphone growth of 9% YoY for 2021 with higher 5G penetration (38%), and with Apple and OVX unit growth offsetting Huawei declines. (We expect Huawei to be constrained on mobile 5G chips but not 5G BTS chips as it has stocked up for 2021). We are most positive on camera upgrade on 6P/48-64MP migration but cautious on pricing pressure in other specs. Despite recent pullback in the Apple supply chain due to a reset on AirPods (revised down to 120 mn 2021) and 1H21 order expectations, the Chinese supply chain would benefit from vertical integration.

December 18, 2020

China e-commerce and Consumer Sectors: Framing the impact from the rise of e-grocery

The online habit cultivated post COVID, improved fulfilment infrastructure, new distribution channels percolating lower tiers (community group purchase) and brands shifting online has set e-grocery to accelerate starting 2021, propelling online penetration to reach 33% in 2025E from 10% in 2019. Community group purchase (Rmb1.5 tn) will be a major industry disrupter by best satisfying consumers' pursuit of value-for-money products, but with limited SKUs (stock keeping unit). Traditional e-commerce (Rmb2.4 tn) and supermarket would remain important channels carrying wider selection. Omni-channel and front-end warehouses (Rmb320 bn) offer on-demand delivery with best user experience.

December 17, 2020

China Alcoholic Beverages Sector: 2021 outlook: Riding the higher premiumisation trend

We expect the fundamental backdrop for premium brands to remain strong in 2021, underpinned by continued demand recovery and tight demand-supply dynamics. As 2021 marks the first year of the 14th Five-Year Plan (14th FYP), we expect the premium brands, most of which are SOEs, to unveil an encouraging five-year plan. We expect the premium segment to continue with its fastest volume growth at a CAGR of 7.1% over 2021-25, outgrowing the industry at -0.8%.

December 16, 2020

China Market Strategy: China Outlook 2021: Year of normalisations

We continue to see strong momentum in 4Q20, evidenced in expansionary PMI, recovering retail sales and a positive surprise in exports, and confirmed by CQi's key indicators updates. Looking forward to 2021, Compared to gradually improving infrastructure and unexciting property investment, consumption should become a major driver of economic growth, in line with government policy. A global economic recovery, with assistance of vaccines, would help support China exports.

December 15, 2020

China Consumer Sector: The rise of the Chinese brands

From a top-down approach, considering industry growth, landscape, and penetration levels in China vs other markets, we see potential in six consumer sub-sectors – infant milk formula, colour cosmetics, snacks, condiments, skincare, and soft drinks for the Chinese brands. These six sub-sectors have penetration gap of 25-38 pp against comparable markets (Japan, Korea, and the US) and local brands have also displayed potential to gain market share. While the remaining sub-sectors have achieved comparatively high penetration rates, as we dig deeper, we find that there are still one or two brands in these sub-sectors that we think have the potential.

December 9, 2020

Hydrogen: A new frontier: Part 2: A primer on the APAC value chain

Hydrogen is set to become one of the most important and fast-growing low-carbon energy sources in the next 30 years, accounting for 18% of primary energy consumption by 2050 (vs ~0% currently), according to BP Energy Outlook. This represents a US$2.5 tn addressable market that spans the value chain. China, the #1 energy consumer globally that accounts for one quarter of world consumption, shocked the market when it announced its target to reach net-zero by 2060. Hydrogen will play an important role in achieving this target, in our view.

December 8, 2020

China Healthcare and Insurance Sectors: Prime time is coming for commercial health insurance

The commercial health insurance premium would exceed Rmb1.9 tn by 2025E, implying an 18% CAGR under our base case, driven by (1) continued growth of healthcare expenditure, (2) rising funding contribution from commercial health insurance to total healthcare expenditure, and (3) government policy direction to lower out-of-pocket healthcare expenses. Our bull case, based on accelerated growth of healthcare expenditure and health insurance funding, suggests that health insurance premium would amount to Rmb2.3 tn by 2025E, implying a 22% CAGR.

December 1, 2020

Asia Pacific Thematic Strategy: RCEP First Take: Impact likely to be slow and incremental

The Regional Comprehensive Economic Partnership (RCEP) signed on 15-Nov will come into effect 60 days after at least 6 ASEAN and 3 non-ASEAN members get local approvals and notify the ASEAN Secretariat. In the current environment, this is likely to take time. Once ratified it would represent the world's largest trading bloc (12% of global trade). It includes commitments in goods, services, investment, intellectual property rights, competition, etc., but in this note, we focus on goods. As tariffs were negotiated bilaterally (incl. for countries within ASEAN), these run into thousands of pages. Here we focus on China (CN).

November 26, 2020

Asia Pacific Strategy: 2021 outlook: The start of an earnings super-cycle

AxJ is exiting a badly disappointing decade with just 6.5% in compound annual total returns and a 4.7% CAGR in EPS, but we believe that the region is entering a new earnings super-cycle. After losing shares to workers and SMEs in the past decade, we expect large corporates to take a bigger slice of the GDP pie. Stabilisation of nominal GDP growth should help margins and deleveraging should be less of a drag. The rise in effective tax rates may end soon. We expect earnings growth in the teens for several years or more even after the big 2021 post-COVID-19 bounce back.

November 25, 2020

China Semiconductor Sector: Shanghai semiconductor tour takeaways

We held a Shanghai semiconductor tour on 24 November and visited five semis across fabless, IP, foundry and equipment. Most companies noted positive progress on product roll-out and solid demand outlook. Key takeaways: (1) Tight foundry and substrate supply may impact revenue growth in next few quarters; (2) China's localisation remains a key driver for most companies; (3) Will Semi to introduce multiple high-pixel CIS in 2021; (4) Huahong expects better demand in 2021 from automotive, 5G, IoT, power and domestic market; (5) Espressif aims to meet full-year revenue target but noted uncertainty; (6) VeriSilicon expects growth across business in 4Q; and (7) Kingstone has good progress with logic and memory customers in both domestic and overseas markets.

November 17, 2020

APAC Quantitative & Systematic Strategy: US / China market tension steps up a notch (for now)

US President Donald Trump signed a presidential executive order imposing restrictions on US persons from holding securities issued by a list of 31 Chinese companies that the US has identified as having links to the Chinese military. Based on our reading of the order, sanctions are set to go into effect for buying on 11 Jan 2021 and holdings are meant to be divested by 11 Nov 2021. Short-term price action has seen underperformance in directly referenced names, as well some indirectly held associates. While we think there is a significant likelihood that these measures could be rolled back or watered down by a Biden administration, there is concern that anti-China measures are increasingly bi-partisan in nature.

November 17, 2020

Global xEV Battery Sector: Reaching the next inflection point

Taking into account CS Auto team's raised expectations about xEV penetration rates (57% in 2030E vs. previous 45% – on tightening CO2 emission regulations) and assuming higher energy density/unit (72kWh/unit vs. previous 62kWh – led by battery technology upgrade), we raise our 2030E xEV battery demand forecast to 1.8TWh (previous 1.5TWh), implying a 30% CAGR. Technology and capacity leadership helps battery makers' bargaining power. While concerns have risen since Tesla's Battery Day, we believe xEV demand growth is still at an early stage and leaves enough room for quality battery cell makers to grow, even if some OEMs were to insource battery production.

November 6, 2020

China Market Strategy: China Investment Conference wrap-up: Great Expectations II

Over 150 companies attended our 11th China Investment Conference. It was dominated by companies from the technology, consumer, industrials, healthcare, and property sectors. In terms of market capitalisation, technology, consumer, property, utilities, and industrials were better represented. We invited Dr. Zhu Min and Professor Huang Qifan as our keynote speakers, to attend our CIC this year and discuss China's post-pandemic macro policies, China's 14th Five-year plan, and the economic implications of the 'Dual Circulation' development model. The topics included macro outlook, the 'Dual circulation' role in the 14th FYP, supply chain security, technological initiatives, regulation, and globalisation.

November 2, 2020

Global Offshore Wind: Investing across the supply chain

We believe the offshore wind segment will require €350bn of cumulative capex across the decade to 2030. While we keep our 2020-25 aggregate installation forecasts unchanged at 36GW, our new forecasts post-2025 increase from 6.5GW p.a. to 11.6GW p.a., reflecting growth in new markets. We are c25% below government/industry targets in 2030E, pricing in planning delays and limited seabed rights; We expect developers to consolidate. We cannot rule out pricing power in the turbine and cable supply chain, albeit our base case is that in turbines, only SGRE is profitable to 2025E; We estimate IRRs for developers of current 'fixed bottom' foundation projects are c5-6% post-tax nominal, often with developers taking power price risk. We now see 'floating' offshore as the place for pioneer profits.

November 2, 2020

China Unicorns: Riding high

China is the second-largest source of "unicorns" in the world. Against the backdrop of the 'Dual Circulation' model – with focus on quality amid a still- challenging international environment – we see opportunities for unicorns to grow, especially those satisfying people's consumption demands and closing gaps in key technologies. New regimes introduced by SSE, HKEx and SZSE have yielded positive results. Our sector analysts update the key trends of the five major sectors: Internet, Technology, Auto, Healthcare and FinTech.

October 29, 2020

China Restaurants and Condiments Sectors: A bigger bite of China

We expect restaurant sales in China to see an accelerating recovery into 2021 along with the fade-away of COVID19, and healthy growth over 2019-24E, supported by multiple secular drivers including increasing disposable income and urbanisation, faster pace of lifestyle and the changes in social and demographic structure. In our view, food delivery, supply chain and digital are the three key drivers for chain restaurants to adapt to evolving consumer preferences, improve operationally and to rapidly scale up. We project condiment sales in the restaurant channel to deliver 8.5% CAGR over 2019-24E, faster than 6.7% in retail and 7.5% overall.

October 28, 2020

China Cosmetics Sector: Ascent of C-beauty brands

China is the second largest cosmetics market in the world, and is set to deliver a 16% CAGR from 2021-23E (2016-20E: 12%) driven by (1) GDP growth in China; (2) increasing penetration among young consumers; and (3) premiumisation trend to drive ASP hikes. We expect Chinese brands to gain market share, particularly in the mass segment, as domestic brands are gaining popularity. Assuming that domestic brands' penetration levels reaches ~60% in five years, comparable to the Korea/Japan markets, we expect domestic skincare/colour cosmetics brands to deliver 19.3%/33.7% CAGR.

October 14, 2020

China Chemical Sector: Polyester filament yarns: Consolidating into a new era

We expect polyester margins to bottom out and continue to expand due to reaccelerated demand growth, industry consolidation and increasing raw material supplies post COVID-19. We expect global/domestic polyester demand growth to re-accelerate to 4%/5% CAGRs in 2021-22, driven by 7%/11% CAGRs in global/domestic sportswear demand. With an estimated 4% CAGR in global capacity for 2020-22, global supply-demand should be largely balanced.

October 12, 2020

Global Telecoms Sector: 5G: Huawei uncertainty triggers capex cuts

The 5G iPhone launch is set to be a key catalyst for 5G uptake, particularly in the US. While applications are potentially exciting, there is no 5G 'killer app' for mass-market consumers as yet, in the way that streaming media was for 4G uptake. As a result, our global team finds that most 5G launches so far have focused on high-volume data bundles and 5G handsets, rather than apps, limiting expected FY19- 24 revenue growth to just 1.3% p.a. Generating a return on over US$958 bn in capex is, therefore, a challenge and helps explain the sector's poor YTD share price performance.

September 30, 2020

China Steel Sector: Margins squeezed on higher iron ore prices

Thanks to government stimulus in reaction to COVID-19, China's construction activities continued to surprise the market on the upside. As a result, we revise up steel consumption. That said, China steel demand is expected to further increase. With a highly fragmented market, China steel industry still faces weak pricing power over global iron ore producers. China steel mills are likely to continue running at very low margin to breakeven level in coming 6-12 months, in our view.

September 17, 2020

China Auto Parts Sector: Valuing the Tesla supply chain

Tesla has become the largest automaker by market cap. Investors appreciate its technology leadership in electrification and autonomous driving. After the CS US auto team recently provided an update on Tesla, in this Connection Series report, the CS China auto team, together with the CS China Industrial team, CS China Tech team and CS China Material team, provide a deep-dive analysis of business upsides for Chinese suppliers of Tesla expected to benefit from Tesla's 116% 2020-22 sales CAGR in China. We see a golden opportunity for Chinese auto parts suppliers supplying Tesla and prefer those with higher content per vehicle.

September 14, 2020

China Online Games Sector: Four key trends continue to drive growth

1H20 has seen an acceleration in mobile gamer base expansion as the lockdown has helped reactivate dormant players. Mobile game revenue growth stayed strong at +28% YoY in 2Q, despite traffic normalisation post work/school resumption, suggesting not only an expanded gamer base but also an improved engagement level and paying penetration. We remain positive on the sector, thanks to the structural tailwinds on expanding gamer base and engagement levels, with medium-term upside from the further monetisation of popular IPs.

September 8, 2020

China Market Strategy: China Back to Spend 3: On the road again!

We observe a clear trend of recovery in consumption, despite a certain level of moderation in the short term. We remain confident that the recovery trajectory in 2H20 is intact. Sporadic virus outbreaks may make investors concerned about potential disruption, but improved testing infrastructure along with concerted administrative measures can contain contamination quickly.

September 1, 2020

APAC Quantitative & Systematic Strategy: Southbound sentiment tracker: Consumer favoured over IT, with Meituan in focus

The opening of China's capital markets represents a generational structural shift for international capital flows. We believe it is amongst the most important long-term themes in the region. The first testing ground of this trend is the Stock Connect program: Southbound flows have reignited liquidity in Hong Kong and are now the key marginal driver of stock prices. We also believe they are a more 'informed' investor group – stocks with outsized flow show idiosyncratic outperformance.

August 26, 2020

APAC Quantitative & Systematic Strategy: Thematic baskets – Capitalise on the retirement of China's baby boom generation

The next decade will see the largest cohort of retirees in history. China's baby boom generation, 245 mn+ people, will represent a formidable group of consumers as they enter retirement age. Credit Suisse's CQi team has conducted a comprehensive survey to understand the implications of this shift: their interests, preferences and consumption habits are markedly different than the current generation of seniors. This trend will have profound implications for listed stocks that are penetrating the wallets of Chinese boomers.

August 25, 2020

China Market Strategy: Capitalise on 245 mn retiring baby boomers

While population ageing is well understood globally, the pace at which it is going to unfold in China is probably not as well understood by the market. Our China Quantitative Insights (CQi) study leverages on a comprehensive survey of 1,500 middle-aged and elderly consumers and focuses on this generation. Our analysts from China, as well as from relevant global sectors, take this CQi study into consideration and discuss the most important issues related to this theme for their respective sectors and identify key investment themes.

August 17, 2020

China Optical Communication Sector: Prefer transceivers over optical fibre

We estimate the global datacom transceiver market to grow by 24%/26%/22% in 2020/21/22, reaching US$6.4 bn in 2022, primarily driven by expected top-tier hyperscale capex growth of 16%/18%/8% over the same period. Specification upgrades to 400G (142% 2019-22E CAGR) and 100G recovery (8% CAGR) are expected to be the primary drivers. We also expect about 60 new builds of hyperscale datacentres each year in 2020/21, as well as the transition to universal spine-leaf architecture to drive the demand for optical modules.

July 21, 2020

Global Technology: Cloud computing – The next frontier

While a solid 26% CAGR for data cited by Cisco is an old theme, what is new is our ability to monetise data, with AI and Machine Learning being the first technology to lower analytics costs, potentially unlocking the potential for 99.5% of data that has remained dark, leading to an accelerating application workload growth and an accelerating compute TAM. Cloud IT infrastructure spending is delivering a 10% CAGR, vs -1.2% CAGR for traditional IT infrastructure, driven by the rising number of connected devices and video applications, proliferation of cloud services for enterprise and consumer, and accelerating AI data analytics.

July 16, 2020

China Components Sector: PCB leaders rise on 5G and Datacom cycle

We estimate PCB (printed circuit board) content to be almost 5x in 5G BTS vs 4G, besides an enlarged volume on higher coverage density. We estimate the total addressable market in access and transmission network will reach Rmb84 bn/Rmb168 bn in China/worldwide. Assuming that CCL (copper clad laminate, the base material of PCB) accounts for 24% of PCB market value, CCL demand in telecom could reach Rmb20 bn/Rmb40 bn in China/global, among which, high-frequency CCL will likely reach Rmb6 bn/Rmb12 bn and high-speed CCL could reach Rmb10 bn/Rmb20 bn in China/global.

June 26, 2020

China Insurance Sector: Beneficiaries of a healthier bond yield

Concerns have mounted over insurers' investment outlooks and the potential 'spread loss' of insurance portfolios due to bond yield weakness early this year. Even with the bond yield recently recovering to 2.9%, market confidence remains low, as seen in the H-share valuation of 0.64x P/EV (12M forward). At such a depressed valuation, we believe concerns over both asset and liability are overdone. We revise up our base-case long-term investment return under EV to 4.75% from 4.5%, driven by the recent recovery of the 10Y CGB – to 2.9% from the trough of 2.5%.

June 15, 2020

China Consumer Appliances and ecommerce Sectors: Beyond the pandemic: Winners and losers in the decade of disruptive channel shifts

We believe e-commerce platforms would be the biggest winners, with their share of China home appliance retail sales rising to 65% in 2030E (2019: 41%) at the expense of standalone stores and distributors. Omni-channel/channel penetration are key drivers for e-tailing to expand the total addressable market and capture consumer demand in a versatile manner, while brands with self-developed distribution network are quickly adapting to avoid becoming obsolete. We prefer JD, Midea and Xiaomi as the biggest winners and downgrade Gree/Robam to NEUTRAL/UNDERPERFORM.

May 26, 2020

China Market Strategy: Road-mapping the return of Chinese ADRs

It is natural to look for the alternatives out of the US markets, given escalating tensions between US and China over finance and investment recently. The infrastructure back in China and Hong Kong is actually ready to welcome them back, after a two-year reform in both stock exchanges and regulators. Opening up and reform on China and Hong Kong stock markets has created a positive feedback loop with increasing activities on both primary and secondary markets. STAR Board in Shanghai had 94 IPOs that raised Rmb112 bn with higher valuation multiples when the listing regime reform in Hong Kong resulted in 17 companies raising HK$117.3 bn.

May 15, 2020

China Market Strategy: China A-share conference wrap-up – Brighter outlook but overseas demand at risk

Among the 60-plus companies that attended our China A-share conference, 37 were under our coverage. Companies from technology, industrials, consumer and auto sectors dominated. A majority of corporates (57%) held a positive tone, while the remaining 14% held a neutral tone. Half of the companies estimated an improvement in 2Q20 vs 1Q20, with 30% expecting worse performance in 2Q20. The outlook appears better into 2H20, with 75% of companies foreseeing a bright outlook with business improvement into 2H20, and only 3% anticipating deterioration. Overseas demand (59% of total) was the most frequently mentioned risk by corporates as a result of potentially worse global recession for longer, well above domestic risk (18%) and competition (19%).

May 4, 2020

China Unicorns: Emerging from the stables

China is the second-largest source of unicorns. Compared to the US, China's unicorns are more driven by business model innovation which takes advantage of the large, fast-growing but fragmented consumer market. Due to the lower investment in R&D, fewer China unicorns are in AI/big data/robotics/software and healthcare. The increased R&D spending may boost the unicorns in those sectors in the future. China and Hong Kong adapted themselves to companies with innovative businesses. In China, STAR Board was launched in June 2019 as a testing field with a completely new design, introducing IPO registration system, new company thresholds, new financial tests, and welcoming weighted voting rights and red chips.

April 21, 2020

China Market Strategy: China Back to Spend 2: Recovery in better shape

The gradual recovery of China consumption is on track, although there are still uncertainties related to the pandemic. Despite a weak print in 1Q20, some key economic indicators showed a gradual recovery in March. China has come up with plenty of stimulus packages to boost consumption at both the central and local levels, with more to come. E-commerce space has seen a strong recovery in March, with MAUs on all major platforms exceeding Dec-2019's level amid an impressive rebound in parcel volume growth. Delivery user traffic is now back to 75-80% of the pre-outbreak level, with order demand expected to fully recover by May. 

April 3, 2020

Asia Pacific Thematic Strategy: A boon to energy consumers

Of the >US$1 tn in income shift from oil producers to consumers, US$500 bn moves between countries and US$550 bn within them. Of the loss to net exporters, ~85% is in RU, SA, IQ, the UAE, KW, and IR. Governments lose mostly, and may borrow more. ~84% of savings could end up with consumers, offsetting some of the pressure due to the virus-linked lockdowns, particularly KR, CN, and IN. Better affordability helps poorer economies, as dense energy helps productivity.

March 18, 2020

China Banks Sector: Be very selective in a challenging year

Most factors would otherwise have been stable for China banks in 2020, except for pressure from narrowed NIM. However, with the COVID-19 outbreak, CS has revised down 2020 GDP forecast from 5.9% to 5.5%. We see further downside risks. The unfavourable macro environment will put further pressure on various aspects of the banking business. It will be a challenging year. With the outbreak getting under control in China, stable economic growth is gaining higher priority on government agenda.

March 13, 2020

Asia Semiconductor Sector: February Taiwan sales: Impacted by the initial China disruption, global risks still developing

Taiwan tech well behind due to China's virus control measures. February sales for the Taiwan chain brought QTD sales down 37% QoQ. EMS and PC/NB ODMs underperformed while semis kept orders intact. Our team's checks suggest downstream utilization is recovering though may lag full production into 2Q. Across our CS coverage, 26% of companies were above, 4% in line and 70% below street expectations QTD due to China's containment efforts. 

March 12, 2020

China Property Management: High growth + high visibility + high quality

We initiate coverage of the China property management sector with an Overweight rating, given the (1) strong earnings growth, (2) high visibility on sufficient pipeline, and (3) good quality with positive FCFF. We believe the strong share price momentum should continue, driven by: (1) resilient margin, (2) more government support post COVID-19, and (3) more fund flows after stock connect inclusion. We believe the basic services segment will benefit from the property completion upcycle and the leading players are better positioned to reap more upside. We prefer players with (1) high growth visibility, (2) strong execution capability, and (3) a quality client base for community VAS.

March 12, 2020

Asia Oil & Gas Sector: Just when you thought you've seen it all – Cutting oil price forecasts

CS Global Energy Team cuts Brent oil price forecast to US$42/$50 for 2020/21 (from US$63/$65), and expects oil prices to remain under pressure next several quarters. We see risk of oil prices to temporarily approach low-$20s in the near term.

March 5, 2020

Asia Oil & Refining Sector: From bad to worse 2.0: A deeper demand disruption from extended coronavirus outbreak

The coronavirus outbreak has worsened outside China since our last assessment on 5 Feb, with 65% of Asia oil demand countries now affected. We now forecast 1.4mb/d of demand loss in 1Q20 (vs 0.65mb/d previously). For the full year we forecast 570kb/d loss (vs 270kb/d previously), resulting in a 110kb/d YoY decline in Asia oil demand – the first YoY decline since 2008 GFC. We expect GRM recovery to be slower than our previous forecast given wider and deeper demand disruption. We cut our 2020 product spread forecast by 21% on average, and believe the GRM rebound in February could be short-lived. Chinese refiners' run rates have likely reached a bottom, and with increasing destocking pressure, product exports out of China could pick up in the coming months.

March 4, 2020

Asia Technology Strategy: Smartphones: Modest negative demand impact likely; 5G largely on track in China

Better-than-expected growth outside of China and for overall iPhone units in 2019 would have called for a positive revision to our global smartphone units estimates for 2020.

March 3, 2020

China Market Strategy: Work from home: A new secular trend; how to position

This is probably the largest scale of WFH in recorded history, with ~200 mn office workers in China stuck in their homes.The central and local governments had to take rigorous quarantine measures and encourage people to stay at home due to COVID-19 outbreak.

February 25, 2020

China Market Strategy: China back to work (week 3): On the road to recovery; high-frequency data need to catch up

Work resumption status reported by the local media this week demonstrates noticeable improvement, with average rate at the provincial level increasing from 38.9% to 61.9%.

February 20, 2020

China Market Strategy: China back to work (week 2): Moderate recovery

The COVID-19 is gradually getting under control in China, excluding Hubei. In addition to fighting the outbreak, the central and local governments are trying to stabilise the economy, with work resumption as top priority.

January 21, 2020

China Market Strategy: Wuhan pneumonia outbreak - lessons learnt during SARS in 2003

Looking at the Wuhan pneumonia outbreak, we would draw on some experiences from SARS in 2003 in terms of the possible impact on the China/HK economy and markets in coming months. Based on the trajectory in 2003, we believe the stock market will be negatively affected in the short term, but, if the government can ensure that information releases are reliable and updated, the market will likely be less volatile and should start to bottom out once new cases start declining.

January 15, 2020

China Consumer Sector: 2020 outlook: Finding alpha in a less volatile world

For 2020, we expect overall consumption sentiment to remain at a high level, which should support a more stable retail sales (at ~8% YoY), with mild recovery in large-ticket items. We reckon some near-term headwinds such as calendar-shift of the Chinese New Year and diminishing impact of last year's tax cut, but expect consumption to be remarkably resilient this year, supported by secular drivers and a less volatile macro environment.

January 9, 2020

China Technology Sector: Hardware outlook 2020

We anticipate 2020 to be the key inflection point for 5G where capex is expected to recover in China by 16%. Our CS tech strategist forecasts global 5G smartphone shipments to be 250 mn/500 mn in 2020/21E, 121 mn/208 mn units to ship in China (48%/42% of total shipment). We see 5G as key to driving the replacement cycle for China's smartphone market.

January 6, 2020

China Internet Sector: 2020 outlook

E-commerce and education are likely to continue to outperform in 2020. Following the two subsectors' 83%/64% share price rally in 2019, they are again expected to see the fastest growth profile among sub-sectors. We see secular drivers, including lower-tier city penetration, offline share gain and further monetisation as support. In other subsectors, we see a brighter outlook for local consumption but a relatively neutral outlook for game as growth may slow down. Online entertainment, advertising and verticals remain our least preferred sectors on increasing market competition and persistent share gain from private names despite a decent industry growth.

October 23, 2019

Macau Gaming Sector: The odds are improving

The combination of a new Baccarat bet option and rising adoption of non-commission Baccarat tables should lead to better margin both for casinos and junkets. We consider the sector under-owned and see gaming revenue increases through 2020. We also see more positive policies in support of Macau, both from the new Chief Executive and infrastructure.

October 3, 2019

Asia Pacific Thematic Strategy: A half-trillion dollar shift

To understand implications of the US-China trade war on manufacturing locations, we surveyed 100 companies (global sales US$1tn) and dived deep into trade flows, sectoral trends as well as macro-economic drivers. In this Connections Series report, Credit Suisse concludes ~US$350-550 bn of exports are expected to move out of China that in five years. 

July 17, 2019

China Internet Sector: Picking winners amidst a demographic shift

Our analysis shows 200mn untapped users, over the existing 830mn internet users, and the pace to acquire the last batch will be very fast. More than half of China's population still generates GDP per capita <US$10,000; we see accelerating urbanisation driving a consumption upgrade and thus better monetisation by leading players.

July 10, 2019

China Sportswear Sector: A fashion for fitness

We expect China sportswear to deliver the highest growth within the apparel industry, underpinned by: athleisure; personalization and customization; and e-commerce and social media. Can Chinese brands be fashionable? Yes – our analysis shows Chinese consumer perception has evolved on foreign brands, backed up by CS's Emerging Consumer survey 2019.