From the category archives:

China

China: Takeaways from the Premier’s Press Conference

15 March 2010

The annual NPC meeting concluded on Mar 15 with no surprises. The meeting affirmed policy continuity and made no substantive progress on structural reforms. Three hot issues that had been highlighted in official speeches and debates among delegates were property price bubbles, RMB appreciation and income redistribution. We expect that some progress (e.g., individual income tax cut) will likely be made in the near future. In the press conference after the NPC meeting, Premier Wen Jiabao said that this year will be a complicated year for Chinese policy-makers There are lots of uncertainties inside and outside of China, and a second dip in the global economy cannot be ruled out completely. He reckoned that economic fluctuation could hurt the Chinese economy badly, and therefore future policy changes will be prudent and flexible.

China Property: Fundamentals Look Better Than Expected

15 March 2010

We visited Guangzhou, Changsha and Wuhan and returned with a cautiously optimistic view on the outlook for the China property market: Prices remain solid but volumes are under pressure; In our view, 2010 fundamentals look better than the market expects; most commercial banks have been tightening terms for mortgage loans but many banks are still flexible in home mortgage loan applications; Stick to quality names; our top picks are Shimao, COLI, Poly HK

China: No Quick Exit for UDIVs

14 March 2010

The urban development investment vehicles (UDIVs) leverage against public resources and implicit guarantees from local government and fund local projects not necessarily limited by its name. China’s stimulus could hardly succeed without such an institutional innovation, but it does come at a cost: (i) The UDIVs were roughly solvent by the end of 2009; (ii) UDIVs don’t stop borrowing; (iii) Non-performing loans would be inevitable.

China’s Inflation Pressures Building Amid Goldilocks Economy

11 March 2010

China’s growth data continued to outpace expectations and history in the first two months of 2010. Inflation remains subdued for now, which is unlikely to provoke intensified tightening immediately. However, pressures are building on multiple fronts, supporting our view that higher inflation would likely bring rate hikes later on.

China: Feb Trade Data Stronger Than Expected

10 March 2010

Despite the Chinese New Year effect, China’s export growth surged to 45.7% yoy in February, much stronger than the market and we had expected. Import growth slowed to 44.7% yoy due to a base effect, but still 6.7ppts above market consensus. If we pool the Jan and Feb data to erase the seasonal effect, China’s exports and imports grew 31.4% yoy and 63.6% yoy, respectively. Compared with Jan-Feb in 2008, exports grew 3.5% and imports 7.8%, suggesting that the effects of the crisis are fading. Export growth will likely stay elevated in 1H10, but could slow in 2H due to disappearing base effects and probably weaker external demand.

China Autos Feb. 10: Heavy Duty Truck (HDT) Sales Rebounded 140% YoY

9 March 2010

We estimate Feb. HDT sales rebounded 140% YoY to 71,223 units according to China Auto Market (CAM). This reflects weak HDT sales in 1Q09 driven by slower economic growth and robust demand in Feb. 10 driven by economic growth recovery. HDT sales dropped 9% MoM underperforming the 2000 to 2009 average Feb. MoM jump of 42% reflecting fewer working days in Feb. due to Chinese New Year.

China Preliminary Feb-10 Car Sales +46% YoY

5 March 2010

China Feb-10 car sales were up 46% YoY to about 623,791 units according to China Auto Market. Car sales declined 33% MoM, which is weaker than 02 to 09 average Feb seasonality of -14% MoM growth. We believe weaker than seasonality MoM decline is driven by fewer working days in Feb-10 due to Chinese New Year and an unseasonally strong Jan-10 (i.e. Jan-10 sales was +13% MoM versus 02 to 09 average Jan seasonality of -8% MoM).

China: National People’s Congress Sets Modest Goals for the Year

5 March 2010

On Day 1 of the National People’s Congress, Premier Wen Jiabao reiterated the intention to maintain appropriately easy monetary policy and proactive fiscal policy. He also revealed major economic targets for this year: (i) Inflation target 3%, GDP growth target 8%; (ii) New lending target 7.5 trillion, M2 growth 17%; (iii) 9 million new urban jobs and 4.6% urban unemployment rate target; (iv) RMB policy stable; (v) Budget deficit of 850 billion, plus 200 billion bond issue on local gov behalf; and (vi) Investment growth target at 20% and property investment at 18%.

China: Sector Impacts of Policy Unwind

4 March 2010

China’s economic recovery was driven by two separate forces: The credit and investment stimulus. However, the PMI data reveal that the side effects of the stimulus continue to influence sector business conditions: (i) SOEs and large firms enjoy more favorable conditions than private and SMEs; (ii) Inland regions beat coastal areas and (iii) Investment related industries better than consumer and export industries. The effects of the lopsided stimulus program last year are unlikely to dissipate quickly.

China Insurance’s January Premium Growth: Off to a Good Start in 2010

4 March 2010

China Life and CPIC have released January 2010 life premium figures under the Old GAAP standards. China Life reported life premiums of Rmb41.8bn, up 14% yoy, and notably better than the 0% growth in FY09. CPIC reported life premiums of Rmb10.3bn, representing robust 47% yoy growth, also significantly better than the 2% growth in FY09. Meanwhile, both CPIC and Ping An have released life premium figures under New GAAP for January 2010. CPIC reported Rmb8.9bn (up 27% yoy) and Ping An Rmb21.6bn (up 58% yoy). The good life premium growth in January 2010 affirms our view of continued good NBV growth for 2010. We expect life premium growth to accelerate in 2010, off a low base in 2009 as we move into the second year of sector-wide business mix restructuring.

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