Multi-baggers riding on China’slong-term structural changes
Changes in next ten years may be even more amazingthan in the past two decades
Key long-term winners: Alternative energy,Commodity, Consumption, Construction, Education,Equipment manufacturers, Financials, Healthcare, Hi-tech manufacturers, Housing, Leisure, Airlines andRailways
Short-term, Hang Seng Index will remain highlyvolatile and range bound (19,000-23,000). Stockvaluations are no longer cheap, whilst policy risks anduncertainty on the global macro front will continue tolimit material upside.
China has evolved from a supplierof cheap manufacturing labour to a1.3bn strong marketdriven by a rising middle class, rapid urbanisation,resulting in rising demand for housing and autos etc.Major infrastructure projects, eg high-speed railways, areseen everywhere.
Sit tight, more to come.
China is becoming animportant consumer market for the rest of the world. It ismoving towards making the RMB an internationalcurrency. This will in turn create huge opportunities forHong Kong and Shanghai as its financial centres.Healthcare, environmental and alternative energy sectorswill continue to enjoy favourable policies in view of agingpopulation. Rising affluence will create demand for ahealthier environment, better education and more leisureoptions including air travel. As reflected in its strongmarket share on telecom equipment and high-speed trainsplus its success in the space industry, China will becomeincreasingly competitive on exports of hi-tech and high-value-added products. We believe China will remain amega construction site for at least another decade,meaning the commodity cycle uptrend remains intact.
Key long-term winners.
Air China (753), China HighSpeed Transmission (658), Brilliance (1114), MaanshanIron (323), China Merchant Bank (3968), Ping AnInsurance (2318), China Resource Land (1109), ChinaRailway Construction (1186), Golden Eagle (3308), Li Ning(2331), China Yurun (1068), Tingyi (322), BeijingEnterprise Water (371), China South Locomotive (1766),Comba (2342), Jiangsu Expressway (177).
Derek Cheung· (852) 2971 1703 ·email@example.com
Current-1 Mth %
Hang Seng Index
HS Large Cap
HS Mid Cap
HS Small Cap
HS China Aff
HS China Ent
Key IndicesMarket Key Data
HSI12.623.014.72.93.13.4HSCCI (Red)10.920.011.11.71.92.1HSCEI (H)25.327.618.104.22.168.1
HSI17.414.112.39.07.46.7HSCCI (Red)19.716.414.8n.a.n.a.n.a.HSCEI (H)15.612.210.4n.a.n.a.n.a.
Source: Bloomberg, DBS Vickers Based on closing prices as at 7 Sep 2010
9 September 2010
China / Hong Kong Market Focus