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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Report

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.