1、Asia China Strategy Update 19 February 2010 China Macro Strategy Q2 export growth to surge to 35-40% yoy Jun Ma, Ph.D Chief Economist (+852) 2203 8308 Wenjie Lu Research Analyst (+852) 2203 6187 Deutsche Bank AG/Hong Kong All prices are those current at the end of the previous trading session unle
2、ss otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the fir
3、m 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. Independent, third-party research (IR) on certain companies covered by DBSIs research is available to customers of DB
4、SI in the United States at no cost. Customers can access IR at http:/ or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 106/05/2009 Related recent research DateThemes and Strategy for 2010 Jun Ma, Wenjie Lu, Fred Lam 5 Jan 2010Further upside to e
5、xports Jun Ma, Wenjie Lu 20 Aug 2009Exports to outperform FAI Jun Ma, Wenjie Lu 29 Jun 2009Company Global Markets Research We sharply revised up our China nominal export growth forecast this year to 30% from 16% (vs. consensus of 15%), and expect a peak quarterly export growth rate of 36% in 2Q. The
6、 main reasons include stronger US economic leading indicators, the momentum of sequential recovery in Chinese exports, a rapid rise in capacity utilization in export manufacturing, and the emergence of pricing power of Chinese exporters. As a result of the export forecast revision, we also raised ou
7、r GDP growth forecast to 9.8% this year from the previous 9%. Given that Chinese exports to the fiscally troubled Euro area countries (Portugal, Ireland, Greece and Spain) account for only 2% of its total exports, and Europe explains only 5% of Chinas recent export growth, we think that the direct i
8、mpact of the sovereign debt problem in Europe on Chinese exports will be manageable. Our export forecast revision represents a 14ppt upside to revenue growth for export-related sectors and, given the historical correlation between revenue and profits, it implies an 18ppt upside to earnings growth in
9、 these sectors as a whole. Judging from the price declines during the recent crisis, we see the biggest earnings elasticity to revenue growth for container shipping, followed by electronics, textiles and ports. In light of the upside potential to export volume growth and price recovery, we reiterate
10、 our positive market view on container shipping, ports, electronics and textile companies for the next 3-4 months. If one takes into account the 18% EPS upside as discussed above, the 14 export-related companies listed in Figure 10 would be trading at an average PEG of about 0.6x. 19 February 2010 C
11、hina Macro Strategy Page 2 Deutsche Bank AG/Hong Kong We sharply revised up our 2010 export growth forecast to 30% from 16% We revised up our China nominal export growth forecast this year (measured in USD terms) to 30% from the previous 16% (vs. the consensus of 15%). As for the quarterly growth pr
12、ofile, our forecast shows that export growth will peak at 36% yoy in 2Q, before decelerating towards 24% in 4Q. On a monthly basis, the peak month (in May or June) will likely see export growth reach 40% yoy. For the annual average 30% export growth, we expect 21ppts to come from real volume growth,
13、 4ppts from RMB appreciation, and 5ppts from the increase in RMB prices. Another way to breakdown this 30% growth for the year is that 10ppts are explained by the base effect and 20ppts represent the “genuine” export recovery. The rest of this note highlights the following reasons for our forecast r
14、evisions: 1. The rapid rise in G3 leading indicators, such as US manufacturing ISM index, Chicago PMI and OECD Composite Leading Indicator, which are highly correlated with Chinas export growth with a lead time of 4-5 months. 2. Given that Chinese exports to fiscally troubled Euro area countries acc
15、ount for only 2% of its total exports, and Europe explains only 5% of Chinas recent export growth, the direct impact of the sovereign debt problem in Europe on Chinese exports should be manageable. 3. Strong sequential export growth momentum. Even if one assumes a qoq deceleration of Chinas export g
16、rowth in 1Q, which is conservative given the continued rise in US and G3 leading indicators, its yoy export growth should still trend towards 40% in 2Q. 4. Our recent company survey shows a rapid rise in capacity utilization rates in export-related sectors, suggesting that pricing power is reemergin
17、g. The recent data from the customs agency also confirms this trend. Figure 1: China export growth forecast, yoy % -30%-20%-10%0%10%20%30%40%50%Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10
18、Sep-10Oct-10Nov-10Dec-10Export, yoy% new forecast previous forecastSource: Deutsche Bank, CEIC Note: the Jan-Feb 2010 forecast is the average growth rate of these two months to avoid the distortion caused by the Chinese New Year 19 February 2010 China Macro Strategy Deutsche Bank AG/Hong Kong Page 3
19、 Figure 2: Quarterly yoy and qoq export growth forecast yoy % qoq %, saar1Q09 -20% -48%2Q09 -23% 1%3Q09 -20% 27%4Q09 0% 49%1Q10F 26% 36%2Q10F 36% 36%3Q10F 33% 14%4Q10F 24% 12%Source: Deutsche Bank, CEIC As a result of this export forecast revision, we also raised our GDP growth forecast for this yea
20、r to 9.8%. US ISM index implies Chinese export yoy growth may peak at 40% The US manufacturing ISM index surged to 58.4 in January, up sharply from 54.9 in December. This trend confirms the significant improvement in the Chicago PMI reported earlier, which also rose significantly to 61.5 in January.
21、 Historically, the US ISM has a strong predictive power on US GDP growth. Our US economist believes that if the January ISM level is held for the quarter, US GDP growth may rise to or above 6% (on seasonally adjusted annualised basis), up further from 4Qs 5.7%. The recent momentum of the strong US e
22、conomic recovery comes mainly from inventory restocking. However, this restocking process could be longer than market expectations, and thus provide a reasonably sustained growth driver for the coming year or so. This is because inventory continued to drop over the past six months (by 7% annualized
23、rate), and will likely pick up only from the current quarter. Based on historical experience, this inventory normalization process should easily last for another 3-4 quarters, after a five-quarter-long significant inventory decline. The employment index of the ISM report also shows significant impro
24、vement, rising to 53.3 in January from 50.2 in December. At this pace, the decline in the unemployment rate should be much faster than consensus. This should significantly help lift consumer sentiment in the US. The Conference Board has already reported a steady rise in the consumer confidence index
25、 over five consecutive months. With both inventory restocking and a recovery in consumer confidence, 4% GDP growth for the year looks achievable, even if one assumes a modest second dip in the 2H of this year (e.g., to 3% saar). A 4% increase in GDP is significantly above the historical potential of
26、 3-3.5%. It should also suggest a G3 GDP growth rate of about 3% vs. an historical average of about 2%. The US manufacturing ISM index is one of the best leading indicators for Chinas export growth. Historically, US ISM leads Chinas export growth by 4-5 months, with a correlation coefficient of 73%
27、(Figure 3). If one uses ISM as the single variable for predicting Chinas export performance, it is likely that in May or June Chinas yoy export growth will reach about 40%. Using the Chicago PMI or OECD composite leading indicator as the predictor, they point to very similar peak export growth rates
28、 in 2Q. 19 February 2010 China Macro Strategy Page 4 Deutsche Bank AG/Hong Kong Figure 3: China export growth vs. US ISM manufacturing index (led by 5 months) 303540455055606570-30%-20%-10%0%10%20%30%40%50%60%70%Jan-93Jul-93Jan-94Jul-94Jan-95Jul-95Jan-96Jul-96Jan-97Jul-97Jan-98Jul-98Jan-99Jul-99Jan-
29、00Jul-00Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10China export, yoy % 3mma (lhs) US ISM index, 5m leading (rhs)Source: Deutsche Bank, CEIC Figure 4: China export growth vs. OECD total composite leading indicator 96.597.598.599.5
30、100.5101.5102.5-30%-20%-10%0%10%20%30%40%50%60%70%Jan-93Jul-93Jan-94Jul-94Jan-95Jul-95Jan-96Jul-96Jan-97Jul-97Jan-98Jul-98Jan-99Jul-99Jan-00Jul-00Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10China export, yoy % 3mma (lhs)OECD Leadi
31、ng Indicator, 4m leading (rhs)Source: Deutsche Bank, OECD Compared with US, Europe is much less important to China export growth Many investors are legitimately worried about the potential negative impact of sovereign debt risk in the fiscally troubled Euro Area countries on Asia and Chinas export o
32、utlook. However, Figures 5 and 6 show that the direct impact of a weaker-than-expected growth rate in these countries or even Europe as a whole is very small. Figure 5 shows that these countries represent the destination of only 2% of Chinese exports. On the other hand, Asia excluding Japan accounts
33、 about 40% of total Chinese exports, followed by Europe excluding GrSpPorIre (20%) and the US (18%). Figure 6 shows that although the dollar amount of Chinese exports to Europe is similar to that for the US market, 19 February 2010 China Macro Strategy Deutsche Bank AG/Hong Kong Page 5 the European
34、contribution (including GrSpPorIre) to Chinese export growth over the past 12 months (yoy change in December 2009) was only 5%, less than a third of the significance of the US contribution. Figure 5: China exports by destination, 2009 US, 18%Europe excl. GrSpPorIre, 20%GrSpPorIre, 2%Hong Kong, 14%Ja
35、pan, 8%As i a excl . JP&HK, 25%Afri ca, Lati n Ameri ca & Oceania, 12%Source: Deutsche Bank, CIEC Figure 6: Contribution to Chinas export recovery, as percentage of Dec 2009 yoy export growth US, 16%Europe excl. GrSpPorIre, 3%GrSpPorIre, 2%Hong Kong, 25%Japan, 3%As i a excl . JP&HK, 39%Afri ca, Lati
36、 n Ameri ca & Oceania, 13%Source: Deutsche Bank, CEIC Sequential export growth momentum Chinas sequential (qoq seasonally adjusted annualised rate) export growth has recovered sharply to 49% in 4Q from 27% in 3Q and a trough of -48% in 1Q last year. Note that Chinas sequential export growth is highl
37、y correlated with US qoq GDP growth. Given the significant improvement in the US manufacturing PMI in January, there is a growing possibility that US 1Q GDP growth may be higher than that in 4Q (as discussed before). Also, Chinas manufacturing PMI report shows that the average 4Q export orders index
38、 (at 53.6) is higher 19 February 2010 China Macro Strategy Page 6 Deutsche Bank AG/Hong Kong than that of 3Q (52.5), suggesting a stronger momentum in export growth in 1Q this year. Nevertheless, we adopted a conservative forecast that Chinas sequential export growth would moderate to about 36% in 1
39、Q and 2Q. Even with these lower qoq figures, given the momentum in 4Q (i.e., a high base for qoq growth), we believe Chinas yoy export growth should still reach 36% in 2Q this year. Export sector is regaining pricing power We recently interviewed and/or collected estimates from analysts on 45 Chines
40、e companies in the manufacturing, marine and air transport sectors to find out their recent changes of capacity utilization rates. On average, these companies showed a very sharp recovery in utilization rate to 84% in January, up from the recent trough of 66% in 1Q09. Note the previous peak was 93%
41、in 1H08. In other words, over the past 12 months, capacity utilization has recouped about two-thirds of the loss during the crisis. At the current pace, utilization should return by 3Q this year to the recent peak of 93% seen in 1H08. With both export demand and capacity utilization returning to rea
42、ch new highs, these companies should regain a large part of the pricing power lost over the past one-and-a-half years. Figure 7: Average capacity utilization rate of export-related sectors Source: Deutsche Bank survey of 45 companies, including those in the export manufacturing, marine and air trans
43、port sectors. As for export prices, both the RMB and USD prices of Chinese export goods declined 10% between mid-2008 and mid-2009, when export volume dropped about 20%. In the last few months, we have begun to observe a sequential (mom) price recovery from data published by the Customs Agency. This
44、 trend is also confirmed in our recent interviews with companies. Just to be conservative (partly taking into account the likely RMB appreciation), we expect Chinese producers to regain half of the lost pricing power (in RMB terms) in the forthcoming recovery, and that should allow them to raise RMB
45、 selling prices by 5%. 19 February 2010 China Macro Strategy Deutsche Bank AG/Hong Kong Page 7 Figure 8: Export unit price index (in USD terms) -15%-10%-5%0%5%10%15%Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov
46、-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Export unit value, yoy% forecastSource: Customs Agency. 18% earnings upside for export sector The above forecast change suggests export growth will likely be 14ppts stronger than our earlier projection for this year. Pa
47、rt of this upside comes from stronger pricing power. Note that a 1ppt rise in pricing power for exporters will typically translate into a lot more earnings increase than a 1ppt rise in volume growth. Our regression analysis based on data from 21 Hong Kong listed companies in the export-related secto
48、rs, including exporters, shipping, ports and export services, shows that for each 1ppt rise in revenue, their earnings growth tends to increase 1.3ppts. Given the 14ppt upward revision to top-line growth in the export sector, it implies that earnings upside could be as much as 18ppts. In light of th
49、is and the fact that exports are largely immune to domestic policy tightening, we reiterate our positive market view on container shipping, ports, electronics and textile companies for the next 3-4 months. Ranking pricing upside by sub-sector Many investors are looking for further details that can shed light on relative upside earnings potential at the sub-sector level. One useful reference is the relative magnitudes of price decline between the recent peaks in
