March 2017 Asia Pacific Equity Strategy Trump vs best ROE ......March 2017 Research Analyst, + 65...
48
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURES, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Asia Pacific Equity Strategy Trump vs best ROE fundamentals in six years March 2017 Research Analyst, + 65 6212 3027, [email protected] Sakthi Siva, Head of Asia Pacific Equity Strategy
Transcript of March 2017 Asia Pacific Equity Strategy Trump vs best ROE ......March 2017 Research Analyst, + 65...
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURES, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Asia Pacific Equity Strategy Trump vs best ROE fundamentals in six years
March 2017
Research Analyst, + 65 6212 3027, [email protected]
Sakthi Siva, Head of Asia Pacific Equity Strategy
Trump vs best ROE fundamentals in six years
We are starting the year with 2017E consensus EPS upgrades
Asia Pacific ex-Japan ROE bottoming after declining for six years
Adding six ASEAN cyclicals
Overweight Financials
Underweight Expensive 4
2
Trump vs best ROE fundamentals in six years
IBES looking for 15.1% EPS growth in 2017E vs 2.3% on average over the last three years
EPS growth (YoY %)
2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E
Asia ex-Jp 23.3 36.1 -1.3 3.8 7.8 4.5 0.4 2.2 15.1 10.1
Consumer Discretionary 52.1 41.3 -6.7 9.7 9.1 -7.2 -11.5 -2.7 18.9 14.0
Consumer Staples 14.7 14.9 2.8 -3.6 -6.1 1.1 10.4 15.4 7.6 10.9
Energy 0.5 37.9 18.3 -12.7 -6.7 -19.4 -27.8 -0.7 43.8 14.3
Financials 10.7 26.0 17.5 6.8 9.5 11.6 5.3 -3.2 6.4 8.7
Health Care 38.2 26.6 17.7 20.2 13.9 10.1 20.3 10.4 21.8 20.2
Industrials 24.9 81.4 -11.5 -20.0 -25.6 0.0 12.6 -7.0 14.9 9.6
Information Technology 137.4 54.9 -28.9 43.7 30.0 9.8 -4.7 12.7 28.4 11.0
Materials 10.9 44.5 -9.9 -34.9 -3.6 -12.0 -0.5 46.8 18.1 7.8
Telecommunication Services -2.7 -1.4 1.6 0.6 0.2 -1.7 1.7 -4.9 6.4 8.5
Utilities 46.3 17.2 -27.0 43.3 31.5 19.7 50.6 -16.8 -0.7 5.8
Real Estate -7.4 30.0 22.0 -3.3 17.9 4.7 -12.0 8.6 6.8 8.7
Source: IBES
3
Trump vs best ROE fundamentals in six years
Starting 2017E with consensus EPS Upgrades. Best year for EPS revisions since 2010
Source: IBES
80
85
90
95
100
105
110
115
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2010
2017E
MXASJ
70
80
90
100
110
120
130
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
20102017E
Korea
4
Trump vs best ROE fundamentals in six years
Starting 2017E with consensus EPS Upgrades. Best year for EPS revisions since 2010
Source: IBES
60
70
80
90
100
110
120
130
140
150
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E EPS12E EPS11E
2017ESamsung Electronics
40
60
80
100
120
140
160
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E +20.6%
NJA Tech
5
Trump vs best ROE fundamentals in six years
For Materials and Energy, 2017E Consensus EPS revisions are BEST (data starts in 2009)
70
80
90
100
110
120
130
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E +18.6%
NJA Materials
50
60
70
80
90
100
110
120
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E +13.5%
NJA Energy
6
Source: IBES
Trump vs best ROE fundamentals in six years Broad based EPS upgrades with Korea, Australia, China, Hong Kong and Taiwan leading
80
85
90
95
100
105
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E
China
7
84
89
94
99
104
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E
Hong Kong
40
50
60
70
80
90
100
110
120
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
Taiwan
2017E
80
85
90
95
100
105
110
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E
Australia
Source: Thomson Reuters, Credit Suisse Research
Trump vs best ROE fundamentals in six years
Asia Pacific ex-Japan ROE bottoming after declining for 6 years
Source: MSCI, company data, Credit Suisse Research
2%
4%
6%
8%
10%
12%
14%
16%
18%
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Asia Pac ex-JP - ROE
10.2% now
Peak 13.6%Dec 2010
Low 10%
6%
7%
8%
9%
10%
11%
12%
13%
14%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
MSCI World ROE
10.5% 6 months ago
10.3%
8
Trump vs best ROE fundamentals in six years Beating global ROE after six years
Source: MSCI, company data, Credit Suisse Research
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
MSCI USA ROE
12.5%
9
7%
8%
9%
10%
11%
12%
13%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
MSCI Europe ROE
8.4%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
MSCI Japan ROE
7.9%
3.4%
7.6% Apr 20118.6% Aug 2014
Trump vs best ROE fundamentals in six years Korea, India and Australia ROEs have been rising
2%
4%
6%
8%
10%
12%
14%
16%
18%
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Korea - ROE
9.3% now
low 7.9%in Dec 14
low 7.6% in 2009
10
10%
12%
14%
16%
18%
20%
22%
24%
Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16
India - ROE
13.2% now
19.8% in Mar 06
16% in 2009
11.6% in Mar 16
5%
7%
9%
11%
13%
15%
17%
19%
21%
23%
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Australia - ROE
11.1% now
5.8% in 2009
10.3% in Jun 16
Source: Company data, Thomson Reuters, Credit Suisse Research
Trump vs best ROE fundamentals in six years The rise in Korea’s ROE broad-based, not just SEC
Source: Company data, Thomson Reuters, Credit Suisse Research
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Korean Industrial - ROE
4.3% now
-28.8% in Dec 15
11
0%
5%
10%
15%
20%
25%
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Korean Materials - ROE
7.1% now
2.9% in Dec 14
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Korean Financial - ROE
7.5% now
2.8% in Dec 03
4.8% in Dec 03
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15 Dec-17
Samsung Elec - ROE
15.7% now
10.6% in Dec 15
17% in Dec 03
9.6% in Dec 0811.9% in Dec 11
Trump vs best ROE fundamentals in six years EBIT margins and top line starting to recover in Korea and India
Source: Company data, Thomson Reuters, Credit Suisse Research
4%
5%
6%
7%
8%
9%
10%
11%
12%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
Korea - EBIT margin
2015: 8.7%2016E: 8.5%2017E: 11%
12
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
Korea - Sales growth
7%
9%
11%
13%
15%
17%
19%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
India - EBIT margin
2015: 11.4%2016E: 12.3%2017E: 12.7%
-10%
0%
10%
20%
30%
40%
50%
60%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
India - Sales growth
Trump vs best ROE fundamentals in six years We believe Taiwan’s 12-month forward consensus EPS leads Taiwan’s ROE by 6-9 months
Source: Company data, Credit Suisse Research
5.0
10.0
15.0
20.0
25.0
30.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14
12m
fwd
EP
S
RO
E (
%)
MSCI Taiwan - ROE (%) MSCI Taiwan - 12m fwd EPS
May 1999
Dec 1998 Jan 2002
May 2016
1.1% in Oct 2002 Feb 20090.5% in Sep 2009
11.5% now
8.2% in Oct 12
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
-5.0
0.0
5.0
10.0
15.0
20.0
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
12m
fwd
EP
S
RO
E (
%)
Taiwan Information Technology - ROE (%) Taiwan Information Technology - 12m fwd EPS
13
Trump vs best ROE fundamentals in six years CS looking for a pick-up in both Taiwan’s EBIT margins and top line sales growth
Source: Company data, Credit Suisse Research
0%
2%
4%
6%
8%
10%
12%
14%
16%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
Taiwan - EBIT margin
2015: 6.3%2016E: 6.7%2017E: 7.4%
-20%
-10%
0%
10%
20%
30%
40%
50%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
Taiwan - Sales growth
14
Trump vs best ROE fundamentals in six years China PPI leads ROE. Pick-up in MSCI China ROE ex Financials.
Source: MSCI, Bloomberg, Credit Suisse Research
6%
8%
10%
12%
14%
16%
18%
20%
-10
-5
0
5
10
15
Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16
MSC
I Chi
na -
ROE
Chin
a PP
I YoY
%
China PPI YoY% MSCI China - ROE
15
5%
7%
9%
11%
13%
15%
17%
19%
-10
-5
0
5
10
15
Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16
ROE
Chin
a PP
I YoY
%
China PPI YoY% MSCI China ex Financials - ROE
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
-10
-5
0
5
10
15
Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16
ROE
Chin
a PP
I YoY
%
China PPI YoY% MSCI China ex Financials & Energy - ROE
Trump vs best ROE fundamentals in six years For HK-listed China’s ROE to bottom, we need a bottoming in commodity prices as there is a 2% gap
between headline ROE and ROE ex-Energy and Materials
8%
10%
12%
14%
16%
18%
20%
2005 2007 2009 2011 2013 2015E 2017E
China - ROE
16
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
2005 2007 2009 2011 2013 2015E 2017E
China - ROE China ex-Energy and Materials - ROE
10.6% in 2016E
12.5% in 2016E
5%
10%
15%
20%
25%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
China (HK Listed) - EBIT margin
High 22.8% in 2004
-20%
-10%
0%
10%
20%
30%
40%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017E
China (HK Listed) - Sales growth
2015: -10.3%2016E: -1.5%2017E: 8.2%
Source: Company data, Credit Suisse Research
Trump vs best ROE fundamentals in six years Commodity prices are above 2015 and 2016 averages
30
50
70
90
110
130
150
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Iron Ore delivered to Qingdao China - 62% Ferrous Content - USD/tonne
2015 avg: 55.57
2016 avg: 58.31
85.0 now2014 avg: 97.06
17
50
100
150
200
250
300
350
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Premium Hard Coking Coal Australia Export (FOB East Coast port) USD/tonne
2015 avg: 90
2016 avg: 142
150.4 now
2014 avg: 117
1800
2200
2600
3000
3400
3800
4200
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
China Domestic Steel Rebar 25
2015 avg: 2324
2016 avg: 2611
3948.0 now
2014 avg: 3158
20
30
40
50
60
70
80
90
100
110
120
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Crude Oil-WTI Near Month FOB U$/BBL
2015 avg: 48.67
2016 avg: 43.29
47.3 now
2014 avg: 92.95
Source: Bloomberg, Thomson Reuters
Trump vs best ROE fundamentals in six years
The key concern though is Trump’s protectionist policies – hide in domestically driven markets?
Source: MSCI, OCED-WTO TiVA, Credit Suisse Research
China
Hong Kong
India
Indonesia
Korea
Malaysia
Philippines
Singapore
Taiwan
Thailand
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
10.0 20.0 30.0 40.0 50.0 60.0
PB
(x)
Exports of Value Added to the World (% of GDP)
China
Hong Kong
India
Indonesia
Korea
Malaysia
Philippines
Singapore
TaiwanThailand
Asia ex-Jp
0.50
1.00
1.50
2.00
2.50
3.00
3.50
-5.0 0.0 5.0 10.0 15.0 20.0 25.0
curr
ent P
B
Current account balance (% of GDP) 2016E
18
Trump vs best ROE fundamentals in six years While the consensus view is to hide in domestically driven markets, we continue to Overweight exporters
given low P/B
Source: OECD-WTO Trade in Value Added, MSCI, Credit Suisse estimates
China
Indonesia
India
Korea
Malaysia
Philippines
Singapore
ThailandTaiwan
Asia ex-Jp
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
curr
ent P
B
% share of value added goods exports (adjusted by import price elasticities)
China
Indonesia
India
Korea
Malaysia
Philippines
Singapore
ThailandTaiwan
Asia ex-Jp
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9%
curr
ent P
B
% of GDP (adjusted by import price elasticities)
19
Trump vs best ROE fundamentals in six years
Another concern is the stronger USD
Source: MSCI, Stock exchanges of India, Indonesia, Korea, Philippines, Taiwan, Thailand, Malaysia, Thomson Reuters, Bloomberg
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
400
450
500
550
600
650
Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
net f
orei
gn b
uyin
g (U
S$b
n)
MS
CI
Inde
x (U
S$)
EM Asia ex-China - net foreign buying (US$bn) MXASJ
100
200
300
400
500
600
700
70
80
90
100
110
120
130
Dec-87 Dec-91 Dec-95 Dec-99 Dec-03 Dec-07 Dec-11 Dec-15
MX
AS
J
DX
Y I
ndex
DXY Index MXASJ
1998
2008
2011
20
Trump vs best ROE fundamentals in six years The concern is whether a stronger USD will keep foreign investors away
Source: Stock exchanges of India, Indonesia, Korea, Philippines, Taiwan, Thailand Malaysia, Singapore and Japan.
21
Total foreigners' net purchases (US$m)
Institution Net Buy
Monthly Data India Indonesia Korea Philippines Taiwan Thailand Malaysia EM Asia ex-China Japan Singapore
Sep-15 -978 -498 -1,622 -706 -36 -587 -533 -4,961 -21,436
Oct-15 1,023 -342 20 -67 2,106 6 141 2,887 3,846
Nov-15 -1,071 -240 -1,484 -158 -1,096 -495 -185 -4,730 5,265
Dec-15 -419 -102 -2,549 -86 -826 -903 -280 -5,165 270
Jan-16 -1,647 -167 -2,330 -43 -1,783 -220 -207 -6,398 -8,675 -954
Feb-16 -809 304 -26 -85 1,564 14 120 1,082 -17,321 -240
Mar-16 3,157 175 3,140 204 5,104 751 1,500 14,031 -17,433 -223
Apr-16 1,267 22 1,824 -33 728 -160 128 3,776 7,777 200
May-16 380 -14 86 285 -2,075 134 -1,063 -2,267 -2,920 206
Jun-16 555 675 683 312 2,587 522 -441 4,892 -7,459 145
Jul-16 1,578 904 3,659 418 5,371 1,265 249 13,443 1,487 -198
Aug-16 1,357 978 1,058 -32 2,393 990 406 7,150 -4,489 -352
Sep-16 1,567 -251 1,331 -270 405 496 -70 3,209 -11,023 0
Oct-16 -644 -176 257 -95 -68 -516 -105 -1,345 4,581 -399
Nov-16 -2,689 -928 -419 -383 -3,245 -1,044 -904 -9,611 14,256 124
Dec-16 -1,203 -271 1,128 -191 -4 13 -216 -744 4,100 -399
Jan-17 -173 -72 1,266 5 1,447 181 94 2,749 361 53
Feb-17 1,475 -60 392 -103 1,581 -107 215 3,392 -2,342 -110
Mar-17 3,162 556 3,090 -89 1,395 -350 656 8,421
Annual Data
2017 (YTD) 4,464 424 4,748 -187 4,423 -275 965 14,562 -1,982 -57
2016 2,869 1,251 10,390 89 10,977 2,244 -604 27,217 -37,119 -2,089
2015 -5 -2,704 -3,597 -1,185 3,211 -4,473 -4,990 -13,743 -2,566
Last update: 22 Mar 17
Trump vs best ROE fundamentals in six years
Other concerns are the rise in bond yields. But the rise of 107 bp is consistent with 2004 and 2013
Source: MSCI, Thomson Reuters, Bloomberg
0
1
2
3
4
5
6
7
8
9
-9m -6m -3m 0m +3m +6m +9m +12m +15m +18m +21m +24m
Feb-94 Jun-04 May-13 current
US Bond Yield (%)+2.87%
+1.18%+1.34%
+1.07%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
2.2%
2.4%
2.6%
2.8%
3.0%
-9m -6m -3m 0m +3m +6m +9m +12m +15m +18m +21m +24m
Feb-94 Jun-04 May-13 current
US core PCE (YoY%)
1.5% now
22
Trump vs best ROE fundamentals in six years
Historically, MXASJ rallies ended when the real Fed funds rate was positive 2-3%. Today -0.5%
Source: MSCI, Thomson Reuters, Bloomberg
-2%
-1%
0%
1%
2%
3%
4%
5%
-9m -6m -3m 0m +3m +6m +9m +12m +15m +18m +21m +24m
Feb-94 Jun-04 May-13 current
Fed Funds rate less PCE (YoY%)
-0.5% now
MXASJ cyclicals peaked in 2004MXASJ peaked in 1994
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
-9m -6m -3m 0m +3m +6m +9m +12m +15m +18m +21m +24m
Feb-94 Jun-04 May-13 current
US ECI YoY%
2.2% now
23
Adding Six ASEAN cyclicals Rising bond yields, ISM and China PMI (Caixin) support cyclicals over defensives
1.0
2.0
3.0
4.0
5.0
6.0
60
70
80
90
100
110
120
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
US T
reas
.Ben
chm
ark
Bond
10
Yr (%
)
Cycli
cals
vs D
efen
sives
Asia ex-JP Cyclicals vs Defensives US Treas.Benchmark Bond 10 Yr (%)
+25.2% since Aug 15
24
20
30
40
50
60
70
80
60
70
80
90
100
110
120
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
US IS
M N
ew O
rder
s
Cycli
cals
vs D
efen
sives
Asia ex-JP Cyclicals vs Defensives US ISM New Orders
+25.2% since Aug 15
40
45
50
55
60
65
60
70
80
90
100
110
120
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15Ch
ina
Caixi
n PM
I
Cycli
cals
vs D
efen
sives
Asia ex-JP Cyclicals vs Defensives Caixin China Manufacturing PMI
+25.2% since Aug 15
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
60
70
80
90
100
110
120
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
ROE:
Cyc
lical
s le
ss D
efen
sives
Cycli
cals
vs D
efen
sives
Asia ex-JP Cyclicals vs Defensives Asia ex-JP ROE - Cyclicals less Defensives
Source: MSCI, Bloomberg, Datastream, ISM, CEIC, Credit Suisse Research
Adding six ASEAN cyclicals North Asian cyclicals outperformed defensives by 34% vs just 11% for ASEAN
Source: MSCI, Credit Suisse Research
60
70
80
90
100
110
120
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
Cycli
cals
vs D
efen
sives
Asia ex-JP Cyclicals vs Defensives
+25.2% since Aug 15
25
60
70
80
90
100
110
120
130
140
Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
North Asia Cyclicals vs Defensives
+33.8%
60
70
80
90
100
110
120
Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
Asean Cyclicals vs Defensives
+11.0%
Adding six ASEAN cyclicals ASEAN cyclicals to defensives P/B gap of -0.88x is much bigger than historical average
of -0.64x. North Asia’s P/B gap now 0.11x (and smaller than the historical average)
Source: MSCI, Credit Suisse Research
-1.4
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
Asean Trailing PB - Cyclicals less Defensives
-0.88x nowaverage: -0.64x
-0.84x
-1.2x -1.2x-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
North Asia Trailing PB - Cyclicals less Defensives average
0.11x now
average: -0.22x
-0.62x
-0.52x
0.32x
26
Adding six ASEAN cyclicals
We are trimming cyclicals in North Asia and Tech
Source: MSCI, Credit Suisse Research
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
NJA Info Tech less Defensives - Trailing PB
-0.93x
0.42x now
-0.51x
Historic average: -0.11x
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
Asia ex-JP Trailing PB - Cyclicals (ex Tech) less Defensives
-0.75 Dec 2008
-0.77x now
-1.09x
Historic average: -0.54x
-1.07x
27
Overweight Financials MXASJ Banks P/B of 1.07x still the lowest of all the sectors. Ex-Chinese banks, P/B still low at 1.24x
(second-lowest after Energy)
Source: MSCI, Credit Suisse Research
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
NJA Financials (Banks) - Trailing PB
1.07x now
1.05x in Feb 09
1.44x in Sep 01
0.87x in Aug 98
1.3x in Mar 03
0.86x in Feb 16
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
NJA Banks ex Chinese Banks - Trailing PB
1.24x now
1.3x in Dec11
0.91x in Feb 09
1.27x in Aug 13
1.02x in Feb 16
28
Overweight Financials Banks, Energy, Industrials, Materials have lowest P/B of all the sectors
Source: MSCI
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
NJA Energy - Trailing PB
1.18x now
0.83x in Sep 151.41x in Feb 09
1.18x in Oct 021.14x in Nov 01
0.88x in May 00
29
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
NJA Industrials - Trailing PB
1.26x now
1.22x in Sep 11
1.02x in Feb 090.87x in Sep 020.91x in Sep 010.63x in
Jun 98
1.55x in May 10
1.14x in Jun 16
0.4
0.8
1.2
1.6
2.0
2.4
2.8
3.2
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
NJA Materials - Trailing PB
1.30x now
1.19x in Jun 131.06x in Oct 08
1.04x in Sep 02
0.76x in Sep 010.85x in Aug 98
1.29x in Aug 12
0.99x in Sep15
1.08x in Jun 16
Overweight Financials
Healthcare and Staples P/B have de-rated, but we believe there is more to go
Source: MSCI, Credit Suisse Research
0.2
1.2
2.2
3.2
4.2
5.2
6.2
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
NJA Health Care - Trailing PB
4.12x now
3.1x in Dec 11
2.15x in Feb 091.65x in
Jun 02
2.51x in May 00
1.63x in Aug 98
4.25x in Jun 16average 3.70x
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
NJA Consumer Staples - Trailing PB
3.19x now
2.53x in Mar 09
1.67x in Mar 03
2.76x in Aug 98
average 2.97x
30
Overweight Financials
Cyclicals are beating, while defensives are seeing some of the biggest EPS downgrades in years
Source: IBES
84
89
94
99
104
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E -8%
NJA Telcos
88
90
92
94
96
98
100
102
104
106
108
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
EPS17E EPS16E EPS15E EPS14E EPS13E
EPS12E EPS11E EPS10E EPS09E
2017E -10%
NJA Utilities
31
Overweight Financials
Korean Banks have a good fit with rising US bond yields and 13% EPS upgrades
Source: MSCI, IBES, Credit Suisse Research
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
40
60
80
100
120
140
160
180
Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15
US
Bon
d Y
ield
(%
)
Kor
ea B
anks
vs
MX
AS
J
Korea Banks vs MXASJ US Bond Yield (%)
94
96
98
100
102
104
106
108
110
112
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Korea Banks - EPS17
+0.5% in Mar-17
+13% since Feb lows
32
Overweight Financials Of the four “losers” in 2016, Industrials appear to be mean reverting. 2017E consensus EPS
downgrades slowed to just 0% in March
Source: MSCI, IBES, Credit Suisse Research
MSCI Sector indices (from worst to best)—2016 and 2017
2016 2017 (YTD)
Health Care -13% Staples 6%
Industrials -8% Health Care 7%
Utilities -5% Utilities 9%
Telcos -5% Energy 9%
Staples -2% Telcos 10%
Discretionary -2% Financials 12%
Financials 1% Industrials 13%
Info Tech 15% Materials 14%
Materials 16% Discretionary 14%
Energy 17% Info Tech 18%
84
86
88
90
92
94
96
98
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
NJA Industrials - EPS17
+0.0% in Mar-17
-15.2% since Dec 15
33
Overweight Financials Industrials in Japan and MSCI China associated with EPS upgrades
Source: IBES, Thomson Reuters
86
88
90
92
94
96
98
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Malaysia Industrials - EPS 17E
-0.3% in Mar-17
-11.7% since Dec 15
34
86
88
90
92
94
96
98
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Japan Industrials - EPS17E
+1.1% in Mar-17
-3.5% since Dec 15
82
84
86
88
90
92
94
96
98
100
102
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
China Industrials - EPS 17E
+0.2% in Mar-17
-16.2% since Dec 15
60
65
70
75
80
85
90
95
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Singapore Industrials - EPS 17E
-0.5% in Mar-17
-35.8% since Dec 15
Country Strategy: Underweight Expensive 4 Expensive 4 basket: India, Indonesia, Australia and the Philippines
Source: MSCI, IBES, Credit Suisse Research
-30%
-10%
10%
30%
50%
Kor
ea
MS
CI C
hina
Sin
gapo
re
Thai
land
Hon
g K
ong
Taiw
an
Japa
n
Mal
aysi
a
Phi
lippi
nes
Aus
tralia
Indo
nesi
a
Indi
a
PB less ROE rel to Asia Pac ex-JP
Overweighting cheapest 4 countries 3 months 6 months 12 months
Number of episodes with outperformance 50 48 54
Number of episodes with underperformance 18 19 12
% of episodes with outperformance 74% 72% 82%
Average outperformance 2.1% 3.3% 5.6%
35
Country Strategy: Underweight Expensive 4 Expensive 4 underperformed MXASJ by 4.2% in 2016. YTD 2017 -3.4%.
Source: MSCI, company data, Credit Suisse Research
36
P/BV vs ROE Absolute Performance Relative Performance
Dec-15 rel to APxJ 3 mths 6 mths 12mths 3 mths 6 mths 12mths
India 51.5% -2.9% 0.3% -2.8% -4.3% -0.4% -6.3%
Philippines 51.2% 6.4% 12.2% -7.7% 4.9% 11.4% -11.0%
Malaysia 32.8% 12.5% 4.9% -6.7% 11.0% 4.2% -10.1%
Indonesia 25.0% 11.0% 14.0% 14.8% 9.5% 13.2% 10.7%
Average 6.7% 7.9% -0.6% 5.3% 7.1% -4.2%
Mar-16 3 mths 6 mths since Mar-16 3 mths 6 mths since Mar-16
India 53.1% 3.3% 9.0% 14.0% 4.0% 0.8% -0.4%
Philippines 51.4% 5.5% -0.4% -8.9% 6.2% -7.9% -20.4%
Indonesia 44.2% 2.7% 12.3% 10.2% 3.4% 3.9% -3.7%
Malaysia 38.6% -6.7% -8.8% -10.6% -6.1% -15.7% -21.8%
Average 1.2% 3.0% 1.2% 1.9% -4.7% -11.6%
Jun-16 3 mths 6 mths since Jun-16 3 mths 6 mths since Jun-16
Philippines 56.9% -5.6% -17.7% -13.6% -13.2% -20.1% -25.0%
India 56.2% 5.5% -3.1% 10.4% -3.1% -5.9% -4.2%
Indonesia 46.9% 9.4% 0.8% 7.3% 0.5% -2.2% -6.9%
Malaysia 28.6% -2.3% -11.1% -4.1% -10.2% -13.7% -16.8%
Average 1.8% -7.8% 0.0% -6.5% -10.5% -13.2%
Sep-16 3 mths since Sep-16 3 mths since Sep-16
India 54.3% -8.2% 4.6% -2.9% -1.2%
Indonesia 46.4% -7.9% -1.9% -2.7% -7.4%
Philippines 35.0% -12.9% -8.5% -7.9% -13.6%
Australia 18.2% -0.3% 6.4% 5.4% 0.5%
Average -7.3% 0.2% -2.0% -5.4%
Dec-16 QTD QTD
India 50.9% 13.9% 1.8%
Indonesia 36.9% 6.5% -4.8%
Australia 23.2% 6.7% -4.6%
Philippines 19.9% 5.0% -6.1%
Average 8.0% -3.4%
Country Strategy: Overweight Cheapest 4 Cheapest 4 outperformed MXASJ by 0.7% in 2016. YTD 2017 +1.7%
Source: MSCI, Company data, Credit Suisse Research
37
P/BV vs ROE Absolute Performance Relative Performance
Dec-15 rel to APxJ 3 mths 6 mths since Dec-15 3 mths 6 mths since Dec-15
China -30.0% -4.8% -6.4% -1.4% -6.1% -7.1% -5.0%
Korea -18.8% 4.8% 3.4% 7.0% 3.4% 2.7% 3.1%
Taiwan -0.9% 7.7% 7.2% 14.8% 6.2% 6.4% 10.7%
Singapore 2.3% 4.8% 3.6% -2.6% 3.4% 2.8% -6.1%
Average 3.1% 1.9% 4.5% 1.7% 1.2% 0.7%
Mar-16 3 mths 6 mths since Mar-16 3 mths 6 mths since Mar-16
China -35.3% -1.7% 11.5% 18.2% -1.1% 3.1% 3.3%
Korea -11.3% -1.3% 9.5% 19.7% -0.7% 1.3% 4.6%
Hong Kong -1.1% -0.6% 10.3% 12.7% 0.0% 2.1% -1.5%
Singapore 3.0% -1.2% -3.0% 3.1% -0.5% -10.3% -9.9%
Average -1.2% 7.1% 13.4% -0.5% -0.9% -0.9%
Jun-16 3 mths 6 mths since Jun-16 3 mths 6 mths since Jun-16
China -33.1% 13.4% 5.4% 20.3% 4.2% 2.3% 4.4%
Korea -16.7% 11.0% 3.4% 21.3% 2.0% 0.4% 5.3%
Hong Kong -2.0% 11.0% 0.7% 13.4% 2.0% -2.2% -1.6%
Singapore 0.4% -1.9% -5.9% 4.4% -9.8% -8.6% -9.4%
Average 8.4% 0.9% 14.8% -0.4% -2.0% -0.3%
Sep-16 3 mths since Sep-16 3 mths since Sep-16
China -26.5% -7.1% 6.0% -1.8% 0.2%
Korea -22.6% -6.8% 9.3% -1.5% 3.2%
Singapore -5.7% -4.1% 6.4% 1.3% 0.5%
Hong Kong 3.7% -9.3% 2.1% -4.2% -3.5%
Average -6.8% 6.0% -1.5% 0.1%
Dec-16 Absolute Performance Relative Performance
Dec-16 QTD QTD
Korea -26.3% 17.3% 4.8%
China -25.5% 14.2% 2.0%
Singapore -2.5% 10.9% -0.8%
Hong Kong 5.8% 12.6% 0.7%
Average 13.8% 1.7%
Underweight Expensive 4 We estimate implied ROE for India and Indonesia to be a 18-19%
38
10%
12%
14%
16%
18%
20%
22%
24%
26%
Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16
India - ROE
13.2% now
Implied ROE: 18.9%
19.8% in Mar 06
16% in 2009
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
India - PB vs ROE rel to region
Previous highs were 54% in Mar 2006 and 49% in Dec 2007
56.4% now
53% in Jan 1561% in Sep 15
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Indonesia - ROE
15.3% now
Implied ROE: 18.0%
-180%
-130%
-80%
-30%
20%
70%
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Indonesia - PB vs ROE rel to region
64% premium in 2013
26.7% now
11.8% in Nov 13
Source: Company data, Credit Suisse Research
Underweight Expensive 4 India associated with biggest downgrades to 2017E consensus EPS
39
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
Oz Korea APxJ AxJ China HK Indo Thai S'pore Taiwan Phils
2017E consensus EPS revision in Mar (by country)
82
84
86
88
90
92
94
96
98
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
India - EPS17
-1.0% in Mar-17
-15.8% since Dec 15
93
94
95
96
97
98
99
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Indonesia - EPS17
+0.2% in Mar-17
-5.8% since Dec 15
90
91
92
93
94
95
96
97
98
99
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Asia ex-Jp - EPS17
+0.3% in Mar-17-5.3% since Dec 15
Source: IBES
Underweight Expensive 4 Of the four “losers” in 2016, India appears to be mean reverting
40
MSCI country indices (from worst to best)—2016 and 2017
2016 2017 (YTD)
Philippines -8% Philippines 5%
Malaysia -7% Japan 5%
India -3% Thailand 6%
Singapore -3% Indonesia 6%
China -1% Australia 7%
Hong Kong -1% Malaysia 8%
Japan 0% Singapore 11%
Australia 7% Hong Kong 13%
Korea 7% Taiwan 13%
Taiwan 15% India 14%
Indonesia 15% China 14%
Thailand 23% Korea 17%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
India - PB vs ROE rel to region
Previous highs were 54% in Mar 2006 and 49% in Dec 2007
56.4% now
53% in Jan 1561% in Sep 15
82
84
86
88
90
92
94
96
98
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
India - EPS17
-1.0% in Mar-17
-15.8% since Dec 15
84
86
88
90
92
94
96
98
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Singapore - EPS17
-0.1% in Mar-17
-14.8% since Dec 15
Source: IBES, MSCI, company data, Credit Suisse Research
Country/sector tilts, model portfolio
Our biggest Overweights are Taiwan and Korea
Source: Credit Suisse estimates
41
Aust / NZ
India
Japan
Malaysia
Indonesia
Thailand
Philippines
Singapore
Hong Kong
China
Korea
Taiwan
-4% -3% -2% -1% 0% 1% 2% 3% 4%
Tilt sizeUnderweight Overweight
Health Care
Industrials
Consumer Staples
Telcos
Utilities
Discretionary
Energy
Materials
Real estate
Information Technology
Financials
-8% -6% -4% -2% 0% 2% 4% 6% 8% 10%
Tilt sizeUnderweight Overweight
Country/sector tilts, model portfolio Our biggest Overweights are Taiwan and Korea
Source: Credit Suisse estimates
42
China Hong Kong Korea Taiw an India Aust / NZ Asean Japan Total Rel.
Consumer Great Wall Motor 1.0% Hy undai Motors 0.5% Fuji Heav y Inds 3.0% 12.5% -0.7%
Discretionary Hy undai Mobis 1.0% Toy ota 5.0%
Aisin Seiki 2.0%
Consumer LG Household 0.5% Kose 3.0% 3.5% -2.9%
Staples
Energy FPCC 1.5% Inpex 2.0% 3.5% 0.6%
Financials Bank of China 5.0% Shinhan 1.0% Cathay 0.7% CBA 2.5% DBS 2.5% Sumitomo Mitsui 5.0% 29.4% 7.2%
Ping An 2.0% KB Financial 1.0% Fubon 0.7% ANZ 3.0% Dai-ichi Life 6.0%
Health Care 0.0% -5.2%
Industrials Goldw ind 0.6% CKH Holdings 2.7% Hy undai Dev 0.5% United Tractors 0.3% Sumitomo Elec 4.0% 8.7% -4.2%
Gamuda 0.3%
IJM 0.3%
Information Alibaba 3.0% SEC 3.5% TSMC 5.8% HCL Tech 0.6% Sony 5.5% 21.0% 4.2%
Technology SK Hy nix 1.0% Hon Hai 1.6%
Materials Angang Steel 1.5% POSCO 2.0% Hindalco 1.3% Rio 3.0% Semen Indonesia0.3% 8.6% 2.0%
PTTGC 0.5%
Real estate COLI 0.5% CK Property 1.0% AREIT 0.5% Mitsui Fudosan 4.4% 9.5% 3.8%
SHKP 3.1%
Telcos China Mobile 2.5% 2.5% -2.7%
Utilities AGL Energy 0.8% 0.8% -2.1%
Total 16.1% 6.8% 11.0% 10.3% 1.9% 9.3% 4.7% 39.9% 100.0%
Rel. to MSCI AC APAC 1.3% 1.0% 3.2% 3.6% -2.5% -3.5% -2.1% -1.1% 0.0%
Appendix 1 MSCI China Staples – are EPS downgrades slowing?
43
86
88
90
92
94
96
98
100
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
NJA Consumer Staples - EPS17
-0.3% in Mar-17
-8.9% since Dec 15
75
80
85
90
95
100
Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
China Consumer Staples - EPS 17E
0.0% in Mar-17
-20.6% since Dec 15
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15 Dec-17
Hengan PB rel less ROE rel to APxJ average: 119.5%
40.0% now
-200%
-100%
0%
100%
200%
300%
400%
500%
Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15 Dec-17
LG Household PB rel less ROE rel to APxJ average: 146.1%
91.5% now
Source: Company data, Thomson Reuters, Credit Suisse estimates
Appendix 2 MSCI Korea: Second year of outperformance?
44
96
98
100
102
104
106
108
110
112
114
Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
MSCI Korea vs Japan (in US$)
outperform 19% since Dec 15
YTD out-performance11.7%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Korea - PB Japan - PB
1.07x now
1.37x now
-4%
0%
4%
8%
12%
16%
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Korea - ROE Japan - ROE
9.3% now
7.9% now
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13 Dec-16
Japan - ROE
7.9% now
Implied ROE: 8.9%
Source: MSCI, company data, Thomson Reuters, Credit Suisse estimates
45
Companies Mentioned (Price as of 22-Mar-2017)
AGL Energy (AGL.AX, A$25.55) ANZ Banking Group (ANZ.AX, A$30.76) Aisin Seiki (7259.T, ¥5,400) Alibaba Group Holding Limited (BABA.N, $106.09) Angang Steel Company Ltd (0347.HK, HK$5.67) Ascendas REIT (AEMN.SI, S$2.5) Bank of China Ltd (3988.HK, HK$3.93) CK Hutchison Holdings Limited (0001.HK, HK$96.45)
COLI (0688.HK, HK$24.35) Cathay Financial Holding (2882.TW, NT$50.1) Cheung Kong Property (1113.HK, HK$53.0) China Mobile Limited (0941.HK, HK$90.35) Commonwealth Bank Australia (CBA.AX, A$82.71) DBS Group Holdings Ltd (DBSM.SI, S$18.67) Dai-ichi Life (8750.T, ¥2,054) Formosa Petrochemical (6505.TW, NT$106.5) Fubon Financial Holding (2881.TW, NT$52.4) Fuji Heavy Industries (7270.T, ¥4,120) Gamuda (GAMU.KL, RM5.15) Great Wall Motor (2333.HK, HK$8.81) HCL Technologies (HCLT.BO, Rs872.35) Hengan International Holdings Ltd (1044.HK, HK$60.0) Hindalco Industries Ltd (HALC.BO, Rs193.35) Hon Hai Precision (2317.TW, NT$91.5) Hyundai Development (012630.KS, W40,850) Hyundai Mobis (012330.KS, W255,500) Hyundai Motor Company (005380.KS, W170,000) IJM Corporation Berhad (IJMS.KL, RM3.52) INPEX Corp (1605.T, ¥1,083) KB Financial Group (105560.KS, W49,700) KOSE (4922.T, ¥10,030) LG Household & Healthcare (051900.KS, W805,000) Mitsui Fudosan (8801.T, ¥2,413) POSCO (005490.KS, W280,500) PT United Tractors Tbk (UNTR.JK, Rp27,800) PTT Global Chemical (PTTGC.BK, Bt71.75) Ping An (2318.HK, HK$43.25) Rio Tinto (RIO.AX, A$60.0) SK Hynix Inc. (000660.KS, W48,650) Samsung Electronics (005930.KS, W2,123,000) Semen Indonesia (SMGR.JK, Rp9,225) Shinhan Financial Group (055550.KS, W47,750) Sony (6758.T, ¥3,553) Sumitomo Electric Industries (5802.T, ¥1,842) Sumitomo Mitsui Financial Group (8316.T, ¥4,150) Sun Hung Kai Properties (0016.HK, HK$114.9) Taiwan Semiconductor Manufacturing (2330.TW, NT$193.5) Toyota Motor (7203.T, ¥6,161) Xinjiang Goldwind Science & Technology Co., Ltd. (2208.HK, HK$12.92)
Disclosure Appendix
Analyst Certification
I, Sakthi Siva, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
3-Year Price and Rating History for Hyundai Development (012630.KS)
012630.KS Closing Price Target Price
Date (W) (W) Rating
23-Apr-14 30,500 35,000 O
25-Jul-14 37,100 45,000
23-Sep-14 45,400 52,000
09-Apr-15 56,900 70,000
10-Jul-15 70,200 87,000
26-Oct-15 53,500 70,000
27-Apr-16 46,150 65,000
26-Jul-16 44,000 62,000
29-Nov-16 41,850 54,000
01-Feb-17 44,900 53,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
3-Year Price and Rating History for Hyundai Mobis (012330.KS)
012330.KS Closing Price Target Price
Date (W) (W) Rating
28-Apr-14 301,500 374,000 O
26-Jul-14 281,500 365,000
24-Oct-14 241,000 358,000
03-Mar-15 256,000 NR *
21-Apr-15 238,000 300,000 O *
09-Jun-15 206,500 270,000
27-Jul-15 214,000 240,000
16-Oct-15 234,000 280,000
28-Jan-16 271,000 300,000
27-Apr-16 252,500 320,000
21-Sep-16 281,500 360,000
26-Jan-17 266,000 345,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
N O T RA T ED
3-Year Price and Rating History for Hyundai Motor Company (005380.KS)
005380.KS Closing Price Target Price
Date (W) (W) Rating
24-Apr-14 242,000 294,000 O
24-Jul-14 229,000 287,000
23-Oct-14 171,000 252,000
03-Mar-15 166,500 NR
21-Apr-15 171,000 170,000 N *
10-Jun-15 134,500 150,000
14-Jul-15 125,500 137,000
08-Sep-15 156,500 150,000
27-Jan-16 137,000 145,000
29-Feb-16 147,500 190,000 O
18-Jul-16 132,000 175,000
05-Oct-16 140,000 168,000
25-Jan-17 142,000 163,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
N O T RA T ED
N EU T RA L
3-Year Price and Rating History for KB Financial Group (105560.KS)
105560.KS Closing Price Target Price
Date (W) (W) Rating
28-Apr-14 35,050 45,000 O
28-Jul-14 38,600 43,000
16-Oct-14 37,900 46,000
29-May-15 40,250 55,000
07-Dec-15 34,450 R
02-Feb-16 29,350 46,000 O
20-Oct-16 41,700 50,000
02-Jan-17 42,600 55,000
13-Mar-17 50,700 63,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
REST RICT ED
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3-Year Price and Rating History for LG Household & Healthcare (051900.KS)
051900.KS Closing Price Target Price
Date (W) (W) Rating
24-Apr-14 487,000 640,000 O
18-Nov-14 609,000 720,000
09-Mar-15 655,000 900,000
21-Apr-15 933,000 1,080,000
27-Jan-16 990,000 1,140,000
26-Apr-16 1,004,000 1,260,000
26-Jul-16 1,092,000 1,300,000
25-Aug-16 928,000 1,200,000
24-Oct-16 923,000 1,150,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
3-Year Price and Rating History for POSCO (005490.KS)
005490.KS Closing Price Target Price
Date (W) (W) Rating
28-Mar-14 294,000 330,000 N
25-Jul-14 326,000 350,000
12-Aug-14 325,500 400,000 O
05-Feb-15 262,000 330,000
21-Apr-15 253,000 300,000
15-Jul-15 209,000 270,000
20-Oct-15 179,500 240,000
15-Jan-16 161,500 210,000
02-Mar-16 211,500 240,000
21-Apr-16 248,500 280,000
26-Oct-16 248,000 300,000
22-Nov-16 258,500 320,000
06-Mar-17 288,500 350,000
* Asterisk signifies initiation or assumption of coverage.
N EU T RA L
O U T PERFO RM
3-Year Price and Rating History for SK Hynix Inc. (000660.KS)
000660.KS Closing Price Target Price
Date (W) (W) Rating
25-Apr-14 40,750 49,000 O
23-Jun-14 48,900 64,000
29-May-15 51,100 R
01-Jun-15 51,100 64,000 O
06-Jul-15 40,750 59,000
23-Jul-15 39,000 57,000
19-Aug-15 33,000 56,000
22-Oct-15 31,950 49,000
26-Jan-16 27,850 45,000
26-Apr-16 29,150 42,000
20-Sep-16 39,250 46,000
03-Oct-16 40,200 55,000
13-Jan-17 50,300 65,000
26-Jan-17 53,300 71,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
REST RICT ED
3-Year Price and Rating History for Samsung Electronics (005930.KS)
005930.KS Closing Price Target Price
Date (W) (W) Rating
06-May-14 1,346,000 1,760,000 O
07-Jul-14 1,292,000 1,740,000
08-Jul-14 1,295,000 1,720,000
28-Aug-14 1,242,000 1,700,000
07-Oct-14 1,162,000 1,680,000
03-Sep-15 1,122,000 1,630,000
29-Oct-15 1,325,000 1,785,000
11-Jan-16 1,152,000 1,690,000
28-Jan-16 1,145,000 1,550,000
01-Jun-16 1,333,000 1,702,000
28-Jul-16 1,507,000 1,790,000
15-Dec-16 1,759,000 2,400,000
24-Jan-17 1,908,000 2,650,000
09-Mar-17 2,010,000 2,900,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
3-Year Price and Rating History for Shinhan Financial Group (055550.KS)
055550.KS Closing Price Target Price
Date (W) (W) Rating
29-Apr-14 44,500 53,000 O
01-Jul-14 46,300 56,000
22-Aug-14 51,800 60,000
04-Feb-15 45,700 57,000
29-May-15 41,900 60,000
22-Jan-16 37,550 52,000
* Asterisk signifies initiation or assumption of coverage.
O U T PERFO RM
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
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Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe whi ch consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.
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Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
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*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
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Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 45% (64% banking clients)
Neutral/Hold* 38% (61% banking clients)
Underperform/Sell* 14% (53% banking clients)
Restricted 2%
*For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, a nd Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other indivi dual factors.
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See the Companies Mentioned section for full company names
The subject company (005490.KS, 2208.HK, 2330.TW, IJMS.KL, ANZ.AX, 012630.KS, 105560.KS, HCLT.BO, 8750.T, 000660.KS, 3988.HK, 7203.T, 1044.HK, 051900.KS, 0688.HK, 8316.T, AEMN.SI, RIO.AX, 0347.HK, 2317.TW, 0016.HK, 005930.KS, 012330.KS, HALC.BO, SMGR.JK, 055550.KS, 1113.HK, 005380.KS, CBA.AX, 6758.T, 2881.TW, BABA.N, 2882.TW, DBSM.SI, 2318.HK, PTTGC.BK, 0001.HK, 4922.T) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (ANZ.AX, 012630.KS, 3988.HK, 051900.KS, RIO.AX, 0347.HK, 2317.TW, 005930.KS, 012330.KS, HALC.BO, SMGR.JK, 005380.KS, CBA.AX, BABA.N, 2882.TW, 2318.HK) within the past 12 months.
Credit Suisse provided non-investment banking services to the subject company (ANZ.AX, 8750.T, 3988.HK, 8316.T, 055550.KS, CBA.AX) within the past 12 months
Credit Suisse has managed or co-managed a public offering of securities for the subject company (ANZ.AX, SMGR.JK, CBA.AX) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (ANZ.AX, 012630.KS, 3988.HK, 051900.KS, RIO.AX, 0347.HK, 2317.TW, 005930.KS, 012330.KS, HALC.BO, SMGR.JK, 005380.KS, CBA.AX, BABA.N, 2882.TW, 2318.HK) within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (005490.KS, 2208.HK, 2330.TW, IJMS.KL, ANZ.AX, 012630.KS, 105560.KS, HCLT.BO, 8750.T, 000660.KS, 3988.HK, 7203.T, 1044.HK, 051900.KS, 0688.HK, 8316.T, AEMN.SI, RIO.AX, 0347.HK, 2317.TW, 0016.HK, 005930.KS, 012330.KS, HALC.BO, 2333.HK, SMGR.JK, 055550.KS, 1113.HK, 005380.KS, CBA.AX, 6758.T, 2881.TW, BABA.N, 2882.TW, DBSM.SI, 2318.HK, PTTGC.BK, 0001.HK, 4922.T, AGL.AX) within the next 3 months.
Credit Suisse has received compensation for products and services other than investment banking services from the subject company (ANZ.AX, 8750.T, 3988.HK, 8316.T, 055550.KS, CBA.AX) within the past 12 months
Credit Suisse may have interest in (IJMS.KL, GAMU.KL)
Please visit https://credit-suisse.com/in/researchdisclosure for additional disclosures mandated vide Securities And Exchange Board of India (Research Analysts) Regulations, 2014
Credit Suisse may have interest in (HCLT.BO, HALC.BO)
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (051900.KS, RIO.AX, 2317.TW, 2333.HK, 2318.HK).
Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (005490.KS, 012630.KS, 105560.KS, 000660.KS, 051900.KS, 005930.KS, 012330.KS, 055550.KS, 005380.KS).
Credit Suisse has a material conflict of interest with the subject company (AGL.AX) . Peter Wilson has approx. A$1,000 worth of AGL shares as part of an employee share purchase plan. They won’t become unrestricted for 3 years.
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This research report is authored by:
Credit Suisse AG, Singapore Branch ...................................................................................................................................................... Sakthi Siva
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Credit Suisse AG, Singapore Branch ...................................................................................................................................................... Sakthi Siva
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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.
When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only
