《2010年高盛最新中国策略研究报告》 .ppt

October 29,2009China:Portfolio StrategyThemes for 2010:Follow the big trendsThematic investing makes senseThe risk/reward of engaging in theme-based investing seems favorable in2010 as the government is remolding Chinas growth orientation andsound investment opportunities usually emerge during a paradigm shift.Big trends:Reforms and integrationWe see the most compelling themes centering on what we believe aretwo secular trends in China:(1)Deepening reforms and(2)integration.Deepening reforms(Structural,financial,and fiscal support):-Health care reform:The government will spend Rmb850bn in the next 3years and deregulation could create long-term investment opportunities.-Inland vs.coastal:A more targeted way to trade Chinas robustdomestic demand against an anemic G3 growth recovery.-Chinese autos:Affordability has increased significantly,yet autopenetration in China remains very low in a global context.-A-share issuance US$40bn of new equity could hit the market in2010(1.5%of market cap).Brokers are likely to be the first to benefit.-A-share listing:Offshore-listed stocks could list domestically in 1Q10and they tend to perform well ahead of their A-share listing dates.Integration:-Shanghai World Expo:May attract 70mn visitors to the city and theinfrastructure work should bode well for future growth.-Cross-strait development:Closer ties across the strait may benefit allconcerned.Buy Chinese IT and Fujian-based firms.Our recommended themes for 2010,China:Portfolio StrategyThomas Deng,CFA+852-2978-1062|Goldman Sachs(Asia)L.L.C.Kinger Lau,CFA+852-2978-1224|Goldman Sachs(Asia)L.L.C.Kenneth Kok,CFA+852-2978-0960|Goldman Sachs(Asia)L.L.C.Sunil Koul(212)934-6971|Goldman Sachs India SPL,Policyobjectives,Rebalance+sustain GROWTH,Deepeningreforms,Further integration,FinancialGEM,StructuralHealthcare+education,FiscalInland vs.coastal,WTOBRICS,Bonds,Rates,Intlboard,Unleashing domestic consumption,2008 BeijingOlympics,A-sharebrokers,Red-chiplistings,Healthcarereform,Go West,Chineseautos,WorldExpo,Cross strait,Source:GS Global ECS Research.The Goldman Sachs Group,Inc.does and seeks to do business with companies covered in its research reports.As a result,investorsshould be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider thisreport as only a single factor in making their investment decision.For Reg AC certification,see the end of the text.Other importantdisclosures follow the Reg AC certification,or go to Analysts employed by non-US affiliates are notregistered/qualified as research analysts with FINRA in the U.S.This report is intended for distribution to GS institutional clients only.,The Goldman Sachs Group,Inc.Goldman Sachs Global Economics,Commodities and Strategy Research,Goldman Sachs Global Economics,Commodities and Strategy Research1,Jun-00,Jul-06,Jun-07,Jan-00,Aug-05,Jan-07,Oct-02,Jun-08,Feb-05,Dec-00,Sep-03,Sep-04,Feb-06,May-01,May-02,Dec-07,Mar-04,1995,1996,1997,1998,1999,2000,2001,2002,2003,2004,2005,2006,2007,2008,2009,May-09,Nov-01,Nov-08,Oct-09,Apr-03,30,25,2,October 29,2009,China:Portfolio Strategy,Themes for 2010:Follow the big trendsMarket setup:Favorable for thematic investingWe believe investment strategies revolving around thematic investing and proactive sectorstrategies,as opposed to an outright market beta,could reward investors well in 2010.Our arguments are backed up by the following shift in policy setup and market dynamics:China needs to boost domestic consumption to sustain growth,as the growthmomentum from trade and investment is likely to moderate on an anemic G3 recoveryand a high-base effect,respectively.We expect government policies to be increasinglyskewed towards the promotion of domestic consumption and attractive long-terminvestment opportunities usually arise during a paradigm shift,just like they did inChinas 11th five-year plan period(2006-2010).A significant portion of market returns in 2009 have so far been propelled by valuationnormalization off a low base(Exhibit 1).Although we argue that current marketvaluations are largely fair(14.8X versus our target multiple of 15X for H shares),webelieve that fundamentals(EPS growth)will,once again,become the primary returnsdriver in 2010.Rolling returns dispersion has normalized but is not at stretched levels,especially inthe A-share market.We believe active sector management approaches make sense(Exhibit 2).Aggregating our top-down analysis,sector dynamics,and our sector analystsfundamental views,we see two secular trends Deepening reforms and integration towhich several compelling investment themes are linked.We summarize the themes,theirthematic appeal,and the investment implications in Exhibit 3.For our recommended sector and pair-trade strategies,please see China Strategy:2010outlook:Fostering the roots of growth,October 29.,Exhibit 1:Returns in 2009 have been largely driven byvaluation normalizationMSCI China forward P/E,EPS index,and price index,Exhibit 2:Sector returns dispersion is still at historicallylow levels for A sharesStandard deviation of 12-month rolling returns,GICS level 2sector,MSCI China offshore,and A shares,Forward P/E(X),Indexed price and EPS level,Index level,MXCN 12M forward EPS(right)MXCN 12M forward P/EMSCI China(right),MSCI ChinaIndex LevelFwd PE(X),Change(%)sinceOct 31,20086773,24.2X,250200,160%140%120%,Disperson of GICS-II 12-mo rolling returns(RHS)-MXCNDisperson of GICS-II 12-mo rolling returns(RHS)-MSCI China A,20,Fwd EPS,(4),150,100%80%,15,13.6X,100,60%,40%,105,500,20%0%,Source:Factset,I/B/E/S,MSCI,GS Global ECS Research.Goldman Sachs Global Economics,Commodities and Strategy Research,Deepeningreforms,Further,integration,3,October 29,2009Exhibit 3:We think these investment themes could generate alpha for investors in 2010Our recommended themes for 2010 at a glance,China:Portfolio Strategy,ThemesHealthcare reform,Thematic appealA secular theme.Healthcare spending:China is low on a globalbasis and the government is committed to broadening anddeepening healthcare coverage.The sector only accounts for 0.2%and 2.7%of market cap in the H-and A-share market,respectively.Similar to that of the property sector 10 years ago.Separating strong domestic demand growth factors from anemic,Stock/sector implicationsA-Share healthcare LiquidSector:GSGHHEAL,Inland vs.coastal,external demand.Stocks with higher business exposure in the Refreshed Go West CAT:inland regions have performed well over the past four years and we GSSZCNG2expect this trend to continue.,Chinese autosA-share equity issuanceA-share listing,Autos penetration rate in China is very low in a global context andaffordability is rising on the back of increased income per capitaand low auto prices.A heavy equity issuance pipeline(new IPOs,the return of Hshares/Red Chips,GEM,and the International board)and theproliferation of financial products are positive to A-share brokersearnings growth.An increasing number of Hong Kong-listed Chinese firms haveshown interest in listing on the A-share market for financial,liquidity,and strategic reasons.Empirical evidence indicates thatH shares tend to generate positive returns before their A-sharelisting dates.,SEHK-listed China Autos CAT:GSSZCNAUA-Share Brokers Liquid Sector-GSGHSECUPotential A-Share Listing CAT:GSSZCNAL,Closer economic ties across the straits could create a win-winCross-strait development situation for both parties.Chinese IT firms and Fujian-basedcompanies could benefit the most,in our view.,Selected Chinese IT firms andFujian basket:GSEHFUJI,Shanghai World Expo,The government estimates that the Shanghai World Expo mayattract 70mn visitors to the city.Infrastructure investment shouldbode well for the citys long-term growth prospects and lay a solidfoundation for the city to become a global financial center.,Shanghai-based propertycompanies:GSSZCNWE andGSSZCWEA,Note:The ability to trade this basket will depend upon market conditions,including liquidity and borrow constraints at the time oftrade.Source:GS Global ECS Research.Goldman Sachs Global Economics,Commodities and Strategy Research,HK),4,October 29,2009Exhibit 4:These stocks could generate thematic alpha for investors,in our viewStocks that belong to each of our highlighted thematic CATs,China:Portfolio Strategy,Deepening reforms,A-share equity,Further integrationCross-strait,Healthcare reform,Inland vs.coastal,Chinese autos,issuance,A-share listing,development,Shanghai World Expo,CATs/baskets,A-Share healthcareLiquid Sector,Refreshed Go WestCAT,SEHK-listed ChinaAutos CAT,A-Share BrokersLiquid Sector,GS Potential A-ShareListing CAT,A-Share FujianBasket,Shanghai World ExpoCATs,Bloomberg ticker,GSGHHEAL,GSSZCNG2,GSSZCNAU,GSGHSECU,GSSZCNAL,GSEHFUJI,GSSZCNWE,Constituents,Jilin Aodong Medicine,China Life Insurance,Haitong Sec(600837,Yanlord Land(YLLG,Ind(000623 CS),(H)(2628 HK),Byd(1211 HK),CG),China Mobile(941 HK),Ind Bank(601166 CG),SP),Shanghai Fosun,Dongfeng Motor(489,Citichamp Dartong,Pharma(600196 CG)Zhejiang Medicine,Tencent(700 HK),Geely Automobile(175,Citic Sec(600030 CG)Hong Yuan Sec,CNOOC(883 HK),(600067 CG)Fuyao Glass Ind,Shimao Prop(813 HK),(600216 CG)Shandong Dong-E E-Jiao(000423 CS),COLI(688 HK)C Intl(ADR)(CTRP UW),HK)Denway Motors(203HK),(000562 CS)Northeast Sec(000686CS),COLI(688 HK)China Telecom(728HK),(600660 CG)Xiamen Tungsten(600549 CG),Shui On Land(272 HK)Franshion Prop China(817 HK),North China Pharm,China Mengniu Dairy,Changjiang Sec,China Comm Constr,Xiamen C&D(600153 Shanghai Forte Land,(600812 CG),(2319 HK),Xinyi Glass(868 HK),(000783 CS),(1800 HK),CG),(2337 HK),Sanjiu Medical&,Tianneng Power Intl,AnXin Trust&Inv,Xiamen Intl Trade,Pharma(000999 CS)Searainbow(000503,Hengan Intl(1044 HK),(819 HK)Brilliance China,(600816 CG)Pacific Sec(601099,Lenovo(992 HK)China Resources,(600755 CG)Xiamen King Long,CS),Sina(SINA UW),Automotive(1114 HK),CG),Power(836 HK),Motor(600686 CG),GSSZCNWEA,Beijing Tiantan,Biological Products,Tingyi Cayman Islands,AviChina Ind&Tech,Fujian Newland,Shanghai AJ(600643,(600161 CG),(322 HK),(2357 HK),Citic Pacific(267 HK),Computer(000997 CS),CG),Shanghai Zhangjiang,Northeast Pharma,China Dongxiang,China Resources Ent,Fujian Longking,Hi-Tech Park(600895,(000597 CS),(3818 HK),Minth(425 HK),(291 HK),(600388 CG),CG),Tonghua Dongbao,Shanghai Lujiazui,Medicines(600867CG),Sichuan Expressway(107 HK),Great Wall Motor(2333 HK),Beijing Enterprises(392 HK),Fujian ExpresswayDev(600033 CG),Finance&Trade(A)(600663 CG),Zhejiang NHU(002001CS)Tianjin TianyaoPharma(600488 CG)Shanghai FudanForward S&T(600624CG),Xiamen Prosolar RealEstate(600193 CG)Fujian Cement(600802 CG)Fujian Longxi Bearing(600592 CG),Shanghai Ind Dev(600748 CG)Shanghai JinqiaoExport Processing(A)(600639 CG),Xiamen EnggMachinery(600815CG)Fujian Septwolves Ind(002029 CS)Sansteel Minguang(002110 CS)Xiamen Port Dev(000905 CS)Fujian Sanmu(000632CS)Xiamen Faratronic(600563 CG)Xiamen Xindeco(000701 CS)China Wuyi(000797CS)Fujian Dongbai(600693 CG)Xiamen Intl Airport(600897 CG)Fujian Zhangzhou Dev(000753 CS)Source:Bloomberg,GS Global ECS Research.Goldman Sachs Global Economics,Commodities and Strategy Research,Sectorweighting,10,000,15,000,20,000,25,000,30,000,35,000,40,000,45,000,50,000,55,000,60,000,70,000,1,500,3,000,5,000,GSrating,Weight,(%),5,October 29,2009,China:Portfolio Strategy,(1)Healthcare reform:A secular themeThe healthcare sector accounts for a negligible 0.2%and 2.7%of the MSCI China andCSI300 universe,respectively but we believe it could offer significant investmentopportunities for long-term oriented investors for the following reasons:In January 2009,the state council announced that it will spend Rmb850bn(US$124bn)onimproving Chinas healthcare system from 2009 to 2011(Exhibit 5).In addition,it wasrecently reported by the media(e.g.HKTD,July 1)that the NDRC has submitted aproposal(20 policies)aimed at lowering entry barriers for a select group of monopolisticindustries and encourage private sector investment to the State Council for approval.Healthcare-related companies could benefit from further deregulation,in our view.Healthcare-related spending,in both GDP and per capita terms,is low in a globalcontext amid an aging population(Exhibit 6).Chinas growth secular potentials imply that the importance of the healthcare sector inthe equity market could be much larger in the future,based on the evolution of cross-country market composition(Exhibit 7).We compile a list of solid healthcare companies based on our analysts input and show ourA-Share healthcare Liquid Sector in Exhibit 8.,Exhibit 5:Healthcare reform is ongoing in ChinaSummary table of healthcare reforms in China,Exhibit 6:Spending on healthcare is low in ChinaHealthcare spending,%of GDP and per capita,2006,Healthcare reform summary1)Accelerate the formulation of a basic medical insurance system,0%,2%,4%,6%,8%,10%,12%,14%,16%,18%,Basic medical insurance coverage to reach 390 million,ensuring at least 90%of the rural populationis covered by 2009.80 yuan subsidy to residents by 2009,increasing to 120 yuan by 2010.2)Build a basic medicine system A list of basic medicines added to the national insurance coverage to keep the cost of medicines lowand increase the claim ratio.30%of cities with a centralized purchase,delivery,allocation,and retail of basic medicines.3)Improve medical services in less-developed areas,IndiaChinaRussian FederationBrazil,2994367427,3.6%4.6%5.3%,7.5%,Standarize the construction of primary healthcare facilities and build 2,000 country hospitals and29,000 town hospitals by 2011.,Republic of Korea,1168,6.4%,360,000 town hospital health officers,160,000 community medical officers,and 1.37 million villagehealth officers to be created by 2011.4)Gradually provide the same public health services in rural and urban areas Establish citizen health profiles coverage aims to reach 30%of cities and 5%of remote towns by Provide vaccinations,medical supplements,and surgeries for those in need and establish a healthservice charge at not less than 20 yuan by 2011.,JapanAustraliaUnited Kingdom,275933023332,8.1%8.7%8.2%,5)Launch a pilot program starting from 2009 to reform public hospitals A pilot reform program in about 100 state-run hospitals by the end of 2009 to draw experience from,Germany,3718,10.6%,trial projects.Gradually abolish extra service charges on medicine and recalibrate the medication fee from public,United States of America,6719,15.3%,hospitals.,0,1000,2000,3000,4000,5000,6000,7000,8000,Per capita total expenditure on health at average exchange rate(US$)2006Total expenditure on health as%of gross domestic product 2006(top),Exhibit 7:The weighting of the Chinese healthcaresector could increase as the economy growsSector weighting for MSCI market at different GDP/capita,Exhibit 8:These companies could benefit from the highgrowth potential of the healthcare sectorBuy or Neutral-rated stocks under China healthcare coverage,100%,Utilities,CY10E,90%,TelecommunicationServices,Ticker,Stock name,Price(Quoted)6M GSL