Asia Pacific Equity Research 8 September 2014
Asia Pacific Strategy Dashboards Asia Pacific Strategy Team
Country Recommendation
Adrian MowatAC
Asian and Emerging Markets Equity Strategist
[email protected]
(852) 2800 - 8599
J.P. Morgan Securities (Asia Pacific ) Limited
Robert Smith Jahangir Aziz Bert Gochet
Quantitative Strategist Economic and Policy Research Emerging Asia, Rates and Forex Strategy
[email protected] [email protected] [email protected]
(852) 2800 8569 (1-202) 585 -1254 (852) 2800 - 8325
J.P. Morgan Securities (Asia Pacific ) Limited J.P. Morgan Securities LLC J.P. Morgan Securities (Asia Pacific ) Limited
Rajiv Batra
Asian and Emerging Markets Equity Strategy
[email protected]
(91-22) 6157-3568
J.P. Morgan India Private Limited
Kevyn Kadakia
Asian and Emerging Markets Equity Strategy
[email protected]
(91-22) 6157-3250
J.P. Morgan India Private Limited
Overweight Japan, India, Taiwan, Thailand, Indonesia Underweight Korea, Australia, Malaysia, Hong Kong and Singapore
Key Changes Market performance to 5 September 2014
Headline inflation data published since the last publication:
• Week: MSCI Asia Pacific ex Japan 0.4% outperformed MSCI World by 0.2%
• Korea: CPI 1.4%oya (J.P. Morgan 1.7%, Consensus 1.6%) • Philippines: CPI 4.9%oya (J.P. Morgan 5.0%, Consensus 5.0%) • Thailand: CPI 2.1%oya (J.P. Morgan 2.3%, Consensus 2.3%) • Taiwan: CPI 2.1%oya (J.P. Morgan 1.8%, Consensus 1.8%)
• Top three markets during the week: Philippines 3.3%, China 2.9% and Indonesia 2.1% • Bottom three markets during the week: Korea -1.7%, Australia -0.5% and Singapore 0% • YTD Performance: MSCI Asia Pacific ex Japan 9.6% outperformed MSCI World by 3.8%
J.P. Morgan's revisions to 2014 GDP forecasts
• YTD Top three markets in US$: Indonesia, India and Philippines
• Negative: Korea 3.6% [3.7%]
• Positive: Australia 3.1% [3.0%]
• YTD Bottom three markets in US$: Korea, Malaysia and Singapore J.P. Morgan's revisions to 2015 GDP forecasts
Table of Contents
Page #
Regional Summary
2
Market Performance
3
Liquidity Monitor
4
Monitoring Inflation
5
Market Drivers Earnings Revisions
6 7,8
Cross-section Earnings Growth
9
Market Implied Growth Rates
10
Sector-Country PE Matrix
11
• Week: MSCI APxJ Telecoms 1.8% outperformed MSCI APxJ by 1.4%
Valuation Distribution
12
• Week: MSCI APxJ Consumer Discretionary -2.4% underperformed MSCI APxJ by 2.8%
Demand Classification
13
• Top three key sectors during the week in US$: China Financials 4%, China Telecommunication Services 3.7% and India Information Technology 3.4%
Currency Forecasts
14
Economic Momentum
15
Interest Rate Trend
16
Asia in Perspective
17
Sector performance
• Positive: Australia 3.3% [3.2%]
• Bottom three key sectors during the week in US$: Korea Consumer Discretionary 5.6%, Korea Information Technology -4.2% and Hong Kong Consumer Discretionary 2.7% • YTD Top three key sectors in US$: India Financials 34.4%, China Information Technology 26.7% and India Energy 25.1%
Asian Balance Sheets
18
Index Weightings
19
• YTD Bottom three key sectors in US$: Hong Kong Consumer Discretionary -17.7%, China Consumer Staples -13.4% and Korea Information Technology -4.1% Demand classification sector performance • YTD: Domestic Demand 13.2%, Global Price Takers 8.3%, Global Capex 7.7% and Global Consumer 7.5%
Please see Rotation Riders: Perspectives and Portfolios, Mowat et al, 14 August 2014, for our latest Asian equity strategy
See page 20 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan 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.
www.jpmorganmarkets.com
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Summary: Regional, Country and Sector Valuations Global* USA* Europe* Asia Pacific* Asia Pacific ex-Japan Pacific ex-Japan EMF Asia Japan* Australia China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand
5-Sep-14 MSCI Index 471 1921 1413 128 512 414 743 791 1144 68 14547 1016 6147 580 660 1239 378 343 553
Hist.^ P/EPS Trough (Trend) 9.4 15.6 11.6 17.7 9.8 12.5 12.8 11.8 11.4 11.8 5.2 12.7 10.3 13.7 11.5 26.8 11.3 14.9 7.2 8.3 10.8 18.5 9.6 18.4 4.8 15.5 7.7 9.3 10.3 17.1 8.8 29.7 9.3 12.0 12.1 16.6 7.7 10.4
Current Trailing 16.0 17.7 15.5 13.6 13.9 15.7 12.8 15.0 16.4 10.4 15.1 19.4 16.3 11.5 16.5 21.4 15.0 15.3 14.9
P/E (x) 12m Fwd 14.6 16.1 14.0 12.5 12.6 14.6 11.4 13.8 15.4 9.4 14.9 16.7 14.6 9.9 15.3 19.2 13.8 13.7 13.1
Current Trailing 14.4 17.5 27.4 12.9 24.5 27.1 12.1 11.7 17.5 15.4
P/E (x) 12m Fwd 11.9 13.9 14.1 11.6 20.7 23.2 11.0 11.8 18.6 5.6
2013 16.8 18.5 16.2 14.4 15.1 16.5 13.8 27.0 17.0 11.1 17.5 21.3 17.7 12.7 17.3 22.2 15.8 17.4 16.2
Prospective 2014E 15.7 17.4 15.3 13.3 13.4 15.3 12.3 15.4 16.1 10.1 14.2 18.7 15.8 11.0 16.2 21.1 14.6 14.4 14.4
2013 13.6 15.8 23.7 13.6 24.4 30.4 12.8 14.6 17.6 18.5
Prospective 2014E 12.6 14.7 18.0 12.4 22.2 26.1 11.7 13.0 18.2 10.8
2015E 14.1 15.5 13.5 12.2 12.3 14.3 11.1 14.5 15.0 9.0 15.3 15.9 14.1 9.4 14.9 18.4 13.4 13.4 12.6
Hist.^ Peak 4.1 4.0 6.1 3.3 4.9 5.7 3.4 3.0 6.7 5.7 5.7 2.6 5.9 2.9 5.1 4.9 5.9 7.8 5.9
Div. Yield (%) Current Prospective Trailing 2014E 2015E 2.6 2.6 2.8 2.0 2.1 2.2 3.5 3.6 3.9 2.7 2.7 2.9 3.0 3.0 3.3 4.0 4.0 4.3 2.4 2.5 2.7 1.7 2.1 2.3 4.3 4.4 4.7 3.2 3.2 3.5 2.7 2.7 2.9 1.4 1.5 1.6 2.4 2.5 2.7 1.2 1.3 1.4 3.2 3.2 3.4 2.1 2.1 2.4 3.5 3.5 3.7 2.9 2.9 3.3 3.0 3.0 3.3
2015E 11.0 13.0 14.6 10.8 19.9 22.3 10.9 11.7 17.2 13.9
Hist.^ Peak 6.5 4.8 4.4 5.0 4.0 2.8 6.3 4.5 6.0 4.7
Div. Yield (%) Current Prospective Trailing 2014E 2015E 3.0 3.4 3.7 2.8 3.1 3.3 2.4 2.5 2.7 2.3 2.0 2.2 2.8 2.7 3.0 1.4 1.4 1.5 3.7 3.9 4.2 1.8 1.8 2.0 3.5 3.5 3.6 2.9 2.9 3.2
P/BV (x) Hist.^ Current Prospective Trough Trailing 2014E 2015E 1.3 1.9 1.9 1.8 1.4 2.5 2.4 2.2 1.1 1.7 1.7 1.6 1.2 1.5 1.4 1.3 1.2 1.7 1.6 1.5 1.3 1.7 1.7 1.6 1.0 1.6 1.6 1.5 0.9 1.4 1.2 1.1 1.3 2.1 2.0 1.9 0.5 1.5 1.5 1.3 0.9 1.4 1.3 1.3 1.4 3.0 2.9 2.6 0.9 3.4 3.3 2.9 0.5 1.1 1.1 1.0 0.6 2.1 2.1 1.9 0.9 3.1 3.0 2.8 0.9 1.4 1.4 1.3 1.2 1.9 1.9 1.7 0.6 2.2 2.1 1.9
Earnings growth (%) 2012 0.7 5.3 (3.3) 9.1 1.6 (2.9) 5.6 (14.0) (3.4) 1.4 (11.6) 10.0 13.7 7.7 15.6 9.1 6.9 3.9 16.3
2013 8.0 8.0 (5.9) 23.5 4.9 4.0 7.5 10.9 (2.6) 10.9 11.1 7.1 3.6 (5.9) 0.3 8.8 (4.0) 36.9 7.4
2014E 7.1 6.6 6.1 8.1 12.0 7.3 12.7 75.7 5.3 9.6 23.4 13.9 12.2 15.2 7.1 5.6 8.2 21.0 12.5
ROE (%) 2015E 11.3 11.7 12.8 9.5 9.7 7.2 11.2 6.3 7.4 11.7 (6.9) 17.6 11.4 17.0 8.8 14.3 8.6 7.7 14.0
2013 12.5 14.7 11.0 11.1 11.9 11.0 12.8 NM 12.7 14.8 8.3 16.5 22.2 9.4 12.8 15.6 9.3 12.1 15.4
2014E 12.4 14.3 11.2 11.0 12.6 11.4 13.3 7.9 13.0 15.2 9.6 16.5 22.2 10.1 13.2 15.0 9.6 13.5 15.6
2015E 13.0 14.9 12.2 11.4 12.8 11.8 13.7 7.8 13.3 15.4 8.5 17.1 21.7 10.9 13.3 15.6 9.9 13.3 15.9
Asia Pacific ex-Japan Sector Valuations
Energy Materials Industrials Cons Disc Cons Staples Healthcare Financials Info Tech Telecoms Utilities
5-Sep-14 MSCI Index 658 334 159 365 353 814 241 332 127 239
# Hist.^ # Trough 6.1 7.9 11.8 9.5 14.8 19.1 9.1 10.3 10.8 9.9
P/EPS (Trend) 7.0 8.9 16.7 14.4 19.0 25.5 12.4 16.3 16.2 18.1
Hist.^ Trough 1.0 1.0 0.9 1.1 1.9 1.7 0.9 1.4 1.9 0.9
P/BV (x) Current Prospective Trailing 2014E 2015E 1.6 1.4 1.3 1.6 1.5 1.4 1.4 1.4 1.3 1.8 1.8 1.6 3.0 2.8 2.6 5.0 4.8 4.2 1.4 1.4 1.3 2.1 2.0 1.8 2.5 2.4 2.3 1.6 1.5 1.5
Earnings growth (%) 2012 17.8 16.5 (9.3) (6.1) 5.0 5.6 14.0 (28.7) (0.3) (23.0)
2013 (9.2) (26.8) (17.1) 7.8 (1.8) 10.8 5.0 43.2 0.3 37.2
2014E (8.2) (15.8) (22.8) 7.2 (0.7) 16.1 7.7 29.8 1.4 25.0
ROE (%) 2015E 7.9 7.9 31.6 9.7 9.9 16.4 9.0 13.0 (3.2) 71.5
Source: I/B/E/S, MSCI, J.P. Morgan estimates. * Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. US trailing PE is calculated as per reported earnings For all other markets and sectors, forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and I/B/E/S estimates for the rest. Companies with different yearends are calendarised to December yearends and are free float adjusted for aggregation. Historical numbers are from MSCI. Hist.^ refers to the historically lowest valuation of the MSCI indices since Jan 1991. Trough PE represents the lowest 12 month trailing PE. For dividend yield the highest values are taken to represent the best multiple. USA, Europe and Japan PE are I/B/E/S aggregate estimates. Japan Valuation estimates are for the financial year ending March. P / EPS (Trend) uses the trend EPS for the indices calculated by the linear regression on the natural log of trailing EPS. For more, please refer to 'Mayday call for the shorts - Perspectives and Portfolios', 5 May 2009, Mowat et al. P / EPE (Trend)' is NM for indices where the modeled relationship is weak with a less than 0.50 R-square. The start dates China and Singapore models are modified to make them more relevant. Sector indices inputs have not been altered.
2
2013 11.1 10.2 6.2 15.9 12.1 17.6 11.9 16.9 13.8 9.2
2014E 11.7 10.7 7.8 15.4 13.0 19.1 12.2 16.8 13.2 14.8
Updated as of 05-Sep-2014
2015E 12.6 11.3 9.3 15.7 13.6 20.1 12.3 16.4 13.5 10.8
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
13.5%
33.2% 12.7% 8.8%
-1.4%
2.5%
-0.5%
0.0%
-17.7% 16.8% 5.5% 24.8%
0.0% -0.4%
35.4% 13.8% 22.8% 32.1% 35.7% 41.7% 13.2% 27.8% 6.2% 17.8% 24.3%
-3.5% 4.1%
2.3%
4.7% 1.3%
0.3% 3.4% 3.0% 2.1% -0.6%
-1.1% -2.5% -20.4% -2.3% 29.5% 2.7%
16.3% 16.5% 19.6% 33.7% 34.4% 18.4%
2.3% -1.7% 5.7% 2.0% -0.2%
24.9% 6.1% 6.7% 36.2% 69.9% 34.3%
3.5%
-4.5% 3.3% 1.6% -1.1%
17.7% 28.1% 33.5% 25.2%
1.2% 15.8% 31.2% 20.0%
0.7%
2.9%
3.5%
2.2%
6.0%
Philippines
Indonesia
0.3% -0.2% -0.3% 0.4% -1.0%
Thailand
Malaysia
Singapore 0.5%
-0.2% -0.3% 2.1% 3.9% 2.0% 0.9%
7.0% 2.8% 4.6%
0.3% 2.7% 3.3% -0.1%
Philippines
-4.3% 5.6% -7.2% 7.8% -28.9% 1.0% 24.0% -3.2% -2.4%
0.1%
0.0% 2.4% 3.0% 3.1% 1.2% -1.3%
Thailand
-0.7% 28.1% 2.5% 22.8% 11.3% 7.8%
-0.8% 24.4% -34.0% 7.6% 5.2% -3.6% -6.6% -5.3% 16.8% 15.2% -1.6%
-0.2%
-0.3% 0.4% 1.2% 0.3% 2.5% 1.4%
Indonesia
3.5% -12.0% 14.8% 0.6%
Source: Bloomberg, MSCI. Notes: (1) Country headings sorted left to right according to relative weight within the MSCI. (2) Indices: Regions in US$ and countries in local currency. Local currency movements against the dollar : appreciation / (depreciation) (3) Country and sector cross sections in italic blue have outperformed their indices by more than 2%. Shaded areas have underperformed their indices by more than 2%.
3
1.1% 2.3% 1.3% 0.0%
-0.1% 0.1%
Malaysia
5.2%
2.5% 0.4%
India
Korea
0.2%
Hong Kong
China
3.7% 1.3% 9.9% 6.8% 8.7% 10.1% 7.6% -4.7% 7.2% 9.0% 4.6%
Taiwan
Australia
-3.5% 7.6% 3.6% -11.7% 7.5% 3.1% 4.8% 0.3% -7.2% -5.7% -1.8%
1.9%
-0.1% -0.8% 2.5% 0.2% 1.9% 1.4% 3.2% 1.9% 3.9% 2.7% 1.6% 0.2%
Singapore
6.0% 8.1% 10.6% 9.8% 27.4% 5.1% 13.2% 2.1% 17.1% 14.1% 10.2%
0.0% -0.1%
-2.7%
India
-10.9% 6.1% 15.1% 12.4% 13.3% 8.2% 11.3% 0.1% 12.9% 13.1% 8.7%
0.0% -1.5% 0.5% 1.1% -1.8% 0.6% -0.1% 0.1% -2.6%
Hong Kong
0.5% 7.3% 11.6% 11.3% 20.2% 6.5% 13.2% 1.0% 16.0% 13.7% 9.6%
-4.7% 0.4% -2.2% 0.7% 2.6% 0.1% -3.3% 1.2% 5.9% 0.1% -1.7% -1.0%
Taiwan
-2.0% 7.5% 10.8% 4.6% 12.1% 4.5% 10.5% 0.8% 5.9% 7.0% 5.0%
1.2% 1.0% 2.2% 3.9% 4.8% 2.8% 1.5% 4.2% 3.7% 2.6% 2.9% 0.0%
Korea
-4.9% 0.4% 0.4% -1.6% 8.0% -6.2% -4.1% -1.1% -5.8% 11.7% -0.6%
-0.6% 0.9% 1.0% -0.3% -0.8% 0.3% -0.6% -2.7% 1.4% -0.9% -0.5% 0.4%
8 September 2014
China
4.0% 6.1% 10.2% 7.0% 15.4% 3.1% 13.5% 9.4% 3.1% 13.7% 8.9%
1.9% 0.1% 0.1% 1.6% -1.1% 1.2% 2.3% 1.4% 0.4% 2.3% 1.3% -1.0%
Australia
EMF Asia
1.1% 4.1% 8.0% 4.6% 13.1% 1.0% 11.7% 2.7% 1.7% 11.9% 5.8%
Japan
Pacific x J
-2.6% 0.1% 1.9% 2.1% 2.8% 0.9% -0.9% 1.0% 2.0% 1.3% 0.6%
Japan
Asia Pac exJapan
-1.9% 1.0% 1.2% 0.4% -0.7% 0.8% -1.2% -2.4% 1.1% 1.5% 0.1%
EMF Asia
Asia Pacific
-2.4% 0.5% 1.8% 1.1% 1.1% 0.8% -0.9% -0.8% 1.8% 1.4% 0.4%
Pacific x J
Europe
-0.3% 0.0% 1.5% 1.0% -0.9% 0.5% -0.2% -0.4% 0.9% 1.4% 0.4%
Asia Pac exJapan
North America
0.8% -0.1% -0.5% 0.9% -0.2% -0.1% -0.3% -0.7% -1.1% 1.3% 0.1%
Asia Pacific
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Region / Country Benchmark Change vs dollar
0.6% 0.9% -1.5% 0.4% 0.4% 0.5% 0.0% -0.7% 0.5% 0.7% 0.2%
Europe
YTD Performance
0.4% 0.3% -1.0% 0.7% 0.2% 0.4% 0.0% -0.7% 0.5% 1.0% 0.2%
North America
Consumer Discretionary Consumer Staples Energy Financials Healthcare Industrials Information Technology Materials Telecommunication Services Utilities Regional benchmark Change vs dollar
Global
1-week Performance
Global
Market Performance: MSCI AC Performance by Region, Country and Sector
11.3% 27.6% 17.6% 23.5% 24.8% 24.3% 1.7%
updated as of 05-Sep-2014
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected] 8 September 2014
Equity Markets Liquidity Monitor Country
Stock Exchange
FF Mkt Cap (US$ Bn)
Daily Trading Value (US$ bn) 1 Wk Avg 3 MMA 13 Avg
Daily Velocity Ratio (%) 1 Wk Avg 3M Avg 13 Avg
Developed Markets
BRIC Trading value (US$ bn, 3MMA) 40
China (LHS)
India
Brazil
8
Russia
US
NYSE + NASDAQ + AMEX
22,665
37
42
38
0.16
0.19
0.20
35
7
UK
London Stk Exchange
3,757
7.3
7.2
6.5
0.19
0.19
0.19
30
6
0.75
25
5
0.32
20
4
0.28
15
3
10
2
5
1
Japan Australia HK Singapore
Tokyo Stk Exchange ASX HKSE SSE
3,558 1,453 2,488 365
17 4.9 7.7 0.8
18 4.1 5.9 0.8
25 4.3 5.9 1.1
0.48 0.34 0.32 0.23
0.50 0.29 0.26 0.21
0.32
EM Asia China
0
Shanghai & Shenzhen A
2,003
31
24
21
1.57
1.33
1.27
India
BSE & NSE
476
3.6
3.5
2.3
0.77
0.77
0.68
Indonesia
JSE
183
0.6
0.5
0.6
0.34
0.30
0.33
Korea
KSE
849
4.0
3.8
3.6
0.47
0.46
0.49
Malaysia
Bursa Malaysia
235
0.8
0.7
0.6
0.34
0.28
Philippines
PSE
72
0.5
0.2
0.3
0.64
0.32
0.29 0.39
Taiwan
TWSE & OTC
745
3.6
4.3
3.2
0.48
0.58
0.52
Thailand
TSE
145
1.5
1.4
1.6
1.04
1.04
1.17
0 00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Korea, Taiwan, HK & Singapore Trading Value (US$ bn, 3MMA) 13 Korea
Taiwan
HK
Singapore
10 8
5 3
EMEA
Russia
RTS + MICEX + DR
283
1.3
1.3
1.5
0.48
0.42
0.46
South Africa
Johannesburg Stk Exchange
283
1.3
1.3
1.5
0.48
0.42
0.46
0 04
05
06
07
08
09
10
11
12
13
14
13
14
Emerging ASEAN Trading Value (US$ bn, 3MMA)
Turkey
Istanbul Stk Exchange
99
1.5
1.5
1.7
1.49
1.54
1.55
Poland
Warsaw Stk Exchange
101
0.7
0.7
0.7
0.70
0.69
0.76
Greece
Athens Stock Exchange
41
0.1
0.2
0.1
0.27
0.39
0.39
UAE
Abu Dhabi Securities Market
25
0.09
0.09
0.09
0.36
0.38
0.51
Qatar
Qatar Stock Exchange
26
0.21
0.14
0.07
0.84
0.61
0.38
1.5
Brazil
Bovespa + DR
607
6.8
4.7
4.8
1.11
0.83
0.84
1.0
Mexico
Mexico Stk Exchange + DR
311
2.1
1.3
1.7
0.69
0.44
0.55
Chile
Santiago Stk Exchange
101
0.14
0.10
0.18
0.13
0.10
0.14
Colombia
Bogota Stk Exchange
63
0.08
0.08
0.09
0.13
0.13
0.13
Peru
Lima Stk Exchange
38
0.02
0.02
0.02
0.06
0.06
0.06
2.5 Malaysia
Indonesia
Thailand
Philippines
2.0
LatAm
0.5
0.0 04
05
06
07
08
09
10
Source: Bloomberg, J.P. Morgan. Notes: Market cap uses all exchanges covered by Bloomberg for a specific country and primary security of company only.
11
12
Updated as of 5 September 2014
The latest one week average is red (grey box in B&W, dark blue in blue scale) if less than 90% of the three month average or blue (solid black box in B&W, light blue in blue scale) if greater than 110% of the three month average. To calculate the free float we use the MSCI free float factor for all markets except for Hong Kong, Russia and South Africa where we calculate the free float for the Hong Kong Composite Index, MICEX, and JSE. Trading value calculation for Russia, Mexico and Brazil, includes value of depository receipts traded (DR) along with local stock exchange turnover. South Africa and Australia market capitalisation and trading value includes only local listed portion of dual listed stocks.
Velocity Ratio = (Trading Value / Free float market cap) * 100 4
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Monitoring Inflation: The real threat to EM equities Inflation Rate
Country
CB Inflation Target (%)
JPM f'cast CY2014
CPI (YoY) Date
CPI (YoY) Previous Latest
CPI (%) MoM 3M ann
Food CPI (YoY) Previous Latest
Core CPI (%) YoY 3M ann
Policy Rate Current
Policy Rate Last Change
Policy Rate Next Change 3Q 15 (+25bp)
Developed Markets United States
Chained CPI
na
1.9
Jul-14
2.1
2.0
0.1
2.8
2.2
2.4
1.9
2.0
0.13
16 Dec 08 (-87.5bp)
US core PPI
Core PPI SA
na
na
Jul-14
1.9
1.8
0.1
1.5
-
-
-
-
-
-
-
US Unit Labor Cost
LC Nonfarm
na
na
Jun-14
2.5
1.7
NA
(0.1)
-
-
-
-
-
-
-
Euro Area
CPI
2%
0.6
Aug-14
0.4
0.3
0.1
(1.8)
(1.1)
(1.0)
0.9
(1.7)
0.05
4 Sep 14 (-10bp)
3Q 18 (+20bp)
Japan
CPI
na
2.9
Jul-14
3.6
3.4
0.0
1.2
5.2
4.5
2.3
0.0
0.05
5 Oct 10 (-5bp)
On hold
Australia
CPI
2-3
2.6
Jun-14
2.9
3.0
NA
1.9
2.2
2.5
na
na
2.50
6 Aug 13 (-25bp)
3Q 15 (+25bp)
Hong Kong
CPI
na
4.0
Jul-14
3.6
4.0
1.0
4.1
4.2
4.1
3.1
5.4
0.50
17 Dec 08 (-100bp)
3Q 15 (+25bp)
Singapore
CPI
na
1.5
Jul-14
2.5
1.2
(0.3)
(1.7)
3.1
3.0
0.7
(3.2)
-
-
-
EM Asia China
CPI
3.5%
2.2
Jul-14
2.3
2.3
0.6
2.9
3.7
3.6
1.7
1.4
6.00
7 Jul 12 (-31bp)
On hold
Korea
CPI
2.5 - 3.5%
1.5
Aug-14
1.6
1.4
0.2
0.8
1.1
(0.4)
2.3
1.5
2.25
14 Aug 14 (-25bp)
On hold
Indonesia
CPI
4.5 (±1)
5.7
Aug-14
4.5
4.0
0.5
7.6
-
2.3
5.5
4.8
7.50
12 Nov 13 (+25bp)
On hold
India
WPI
na
na
Jul-14
5.4
5.2
1.1
8.7
8.1
8.4
3.4
5.2
8.00
28 Jan 14 (+25bp)
4Q 14 (+25bp)
India
CPI
6%
10.5
Jul-14
8.3
8.0
1.1
8.7
8.1
8.4
3.4
5.2
8.00
28 Jan 14 (+25bp)
4Q 14 (+25bp)
Malaysia
CPI
na
2.7
Jul-14
3.3
3.2
0.1
1.5
3.5
3.1
2.6
1.1
3.25
10 Jul 14 (+25bp)
18 Sep 14 (+25bp)
Philippines
CPI
4.0 (±1)
4.2
Aug-14
4.9
4.9
0.3
5.3
4.6
4.0
2.5
1.2
3.75
31 Jul 14 (+25bp)
11 Sep 14 (+25bp)
Thailand
CPI
0.5 - 3.0
2.6
Aug-14
2.2
2.1
(0.1)
(1.1)
0.2
(0.6)
0.2
1.0
2.00
12 Mar 14 (-25bp)
1Q 15 (+25bp)
Taiwan
CPI
na
1.4
Aug-14
1.8
2.1
0.4
3.7
4.2
5.6
1.1
3.1
1.88
30 Jun 11 (+12.5bp)
1Q 15 (+12.5bp)
Latin America Argentina
CPI
na
34.0
Jul-14
-
-
1.4
-
7.8
9.3
na
na
-
-
-
Brazil
CPI IPCA
4.5 (±2)
6.3
Aug-14
6.5
6.5
0.3
2.7
7.7
7.5
6.7
7.2
11.00
2 Apr 14 (+25bp)
On hold
Colombia
CPI
3.0 (±1)
2.8
Aug-14
2.9
3.0
0.2
1.8
3.3
3.5
na
na
4.50
29 Aug 14 (+25bp)
4Q 14 (+25bp)
Mexico
CPI
3.0 (±1)
4.1
Jul-14
3.8
4.1
0.3
0.5
4.4
5.4
3.2
2.0
3.00
6 Jun 14 (-50bp)
4Q 15 (+25bp)
Peru
CPI
2.0 (±1)
3.0
Aug-14
3.3
2.7
(0.1)
2.1
4.0
3.6
2.7
2.0
3.75
10 Jul 14 (-25bp)
1Q 15 (+25bp)
Chile
CPI NSA
3.0 (±1)
4.0
Jul-14
4.8
4.5
0.2
2.5
5.7
6.3
4.2
3.2
3.50
14 Aug 14 (-25bp)
11 Sep 14 (-25bp) On hold
Europe, Middle East and Africa Czech Republic
CPI
2.0 (±1)
0.9
Jul-14
0.5
0.5
(0.5)
(1.5)
(1.3)
0.6
0.7
1.8
0.05
1 Nov 12 (-20bp)
Greece
CPI
2%
-
Jul-14
(1.1)
(0.7)
(1.2)
(5.5)
(3.0)
(2.7)
(1.1)
(5.2)
0.25
-
-
Hungary
CPI
3%
0.1
Jul-14
(0.3)
0.1
(2.4)
(10.2)
(1.1)
(0.3)
2.7
2.7
2.10
22 Jul 14 (-20bp)
4Q 15 (+20bp) 4Q 14 (-50bp)
Poland
CPI
1.5 - 3.5%
0.2
Jul-14
0.3
(0.2)
0.6
2.0
0.3
(0.4)
0.3
0.5
2.50
3 Jul 13 (-25bp)
Russia
CPI
5%
7.2
Aug-14
7.5
7.6
2.2
11.8
9.9
10.3
6.6
12.5
8.00
25 Jul 14 (+50bp)
1Q 15 (-25bp)
South Africa
CPI
3-6%
6.1
Jul-14
6.6
6.3
0.8
5.2
9.2
9.0
5.7
5.0
5.75
17 Jul 14 (+25bp)
18 Sep 14 (+25bp)
Turkey
CPI
5%
9.0
Aug-14
9.3
9.5
0.1
3.5
12.6
14.4
9.7
2.1
8.25
17 Jul 14 (-50bp)
On hold
Source: J.P. Morgan Economics, Bloomberg. Note: Current inflation data for countries which outside/above target range is highlighted. MoM and 3 month annualised data is calculated from inflation indices. # Countries where central banks target is not available. We have given J.P. Morgan Economic estimates. No target is available for China, but general expectation is that the Central Bank would continue raising rates when the headline CPI rises above 4.0 % In case of Taiwan, Estimate by DGBAS,CB targets M2 growth (2.5-6.5% for 2010) Russia's CBR is not yet in a full-fledged inflation targeting, so they can change the target during the year.
5
Updated as of 05-Sep-2014
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
Outlook: Market Drivers Global and developed market drivers
Country
Positive
8 September 2014
Negative
Global US Europe
Acceleration in DM growth Recovering housing market, fiscal drag easing Improving financing conditions, , Lower fiscal drag, falling EUR/USD, potentially more aggressive ECB
Bond yields grinding higher Higher bond yields. higher mortgage rates, declining NIMs Weak economy, deflation risk, weak credit backdrop
UK
Strong domestic recovery, unemployment rate going down
Political headwinds, potential earlier than expected start of monetary tightening cycle
Source: J.P. Morgan Asia Pacific Market Drivers Country Positive
Negative
Japan
New PM's pro-growth policy of fiscal boost and inflation targeting, more competitive Yen, QQE
Rising energy costs and fiscal sustainability worries
Australia
Low sovereign debt, monetary policy flexibility, high dividend yield market attracting local and global flows.
Risk to growth from capex/terms of trade downturn, potential currency fragility, high household debt levels, and exposure to growth risks in China.
Singapore
We expect a modest rebound in 2014 GDP growth expectations with general economic conditions starting to rebound against 2Q13 lows. General Ongoing foreign labor tightening is expected to structurally impact corporate earnings and GDP growth, with long-term GDP growth to moderate from a 10-year historical CAGR of 6.2% to 4.1% on our estimates. We also estimate Singapore to transition up to 172,000 jobs away from Manufacturing into Services while progressing into a productivity-led economic growth for 2014 is expected to benefit from low-base effects in 2013 (note that street has lowered GDP forecasts seven times since growth model, which would create long-term structural drag. January 2013).
Hong Kong
Stabilizing property price, slower land sales. DM economic recovery drives HK exports. Closer integration to Pearl River Delta is positive in the long run.
Vulnerable to the Fed’s policy normalization. Economic fundamentals remain weak with slowly recovering GDP. Credit risk from trade financing for banks.
China
Stabilizing growth prospects; valuations partly discounting fundamental weakness
Less policy flexibility, growth sectors expensive, excessive leverage
Korea
Recovery in domestic demand, benefitting from DM economic growth
Weakening of the JPY
Taiwan
Global economy is expected to see solid upturn in 2H14. Taiwan's export and industrial sectors should benefit from the solid demand in DM and Taiwan is vulnerable to the external environment. A series of civil disobedience started from end-March and the upcoming election at year end add up political risks. Cross-strait China. China-related sectors, Cement, Automation and Industrials, benefits from the improving macro. Easing concerns over China's asset quality development is now delayed due to people's opposition to the content and legislative procedure of the Trade in Service Agreement. also imposes less downside risks on Taiwan financial sector. Mayoral elections in year-end are likely to stimulate potential election rally in 2H14. Among technology sector, we forecast stronger growth profile for LED/Foundry/Display but muted for OSAT/mobile/PC.
India
Improved corporate and consumer confidence, Expectations on growth revival, Easy global liquidity helping lower cost of capital
Sticky core CPI inflation, slower-than-expected progress on key policy reforms, Weak investment cycle
Malaysia
Government fiscal consolidation gaining traction with subsidy cuts and GST implementation next year. Oil and gas/railway-related capex fueling domestic growth, CPO price rise on supply tightness/bio fuel blending requirements; recovering exports.
Diminishing current account surplus on imported capital equipment, property demand slowdown on cooling measures, moderating consumption growth on the back of subsidy cuts, 3-year peak in foreign ownership.
Indonesia
Healthy transmission of nominal GDP growth to EPS growth, Policy credibility improved with fuel price increases and recent BI actions, underweight investor positioning.
Financing persistent CA deficit, decelerating economic growth, Infrastructure bottlenecks, transmission of weaker Rupiah impact through the economy.
Thailand
Flexible monetary condition, healthy corporate balance sheet, strong FDI, better exports
Political uncertainties, low public spending, high household debt, negative EPS revision
Philippines
Rising investment spending, improving consumption driven by steady remittances flow, fast-growing non-electronics exports, positive CA position, Sharp increase in interest rates, upward inflation pressures, disruption to government infrastructure spending momentum, sharp currency weakness ample domestic liquidity Source: J.P. Morgan. Other emerging market drivers Country Positive Brazil Large and liquid market offering many bottom up options, large infrastructure investment program, labor market still sturdy
Negative Large share of commodity stocks in the index, government interventionism, high inflation/domestic monetary tightening, consensus earnings are too high, risk of sovereign debt downgrade, local currency weakness.
South Africa
SA Equities as consensus UW in local and offshore portfolios, commodity and currency support.
Russia
Rebound from trough valuations as macro stabilizes and risk premium eases on receding geopolitical risk. Exporters should benefit from the weak Tougher sanctions are still a threat. Slow growth, high inflation and hawkish CBR may weigh on the stock market ruble High correlation to US manufacturing recovery, undervalued FX, underpenetrated credit sector, internal economy picking up from government High valuations, earnings disappointment, no room for disappointment on economic growth, market depth. spending, reform agenda to boost growth, no inflation concerns.
Mexico
Policy paralysis, sluggish growth, weak consumer, rand wildcard.
Turkey
Keeps pace with firm EM rally. Next government likely to include old friends,Babacan & Simsek. Valuations near historical avg
Bond yields up nearly 100 bps in 6 weeks. Export markets at risk in MENA (ISIS) and Europe (slower growth)
Poland Greece
Strong pension fund uptake. Bond yields at new lows while 2014-5 GDP still likely to avg 3% Growth returning. Banks still look cheap v peers and 2Q earnings indicate no new capital needed.
More rate cuts will hurt bank NIMs. Tusk move to EU presidency introduces political risks High volatility from bond market and hedge fund-heavy investor base.
Qatar & UAE Czech Republic
Strong GDP growth, stable FX, high payout ratios, few problems Eurozone recovery. High payout ratios.
Valuations not yet attractive. Retail investors still skittish Small not very liquid stock market with limited choices
Hungary
Eurozone recovery. Current account now in surplus.
PM Orban’s long and consistent track record of high effective taxation. Low growth hurts.
Source: J.P. Morgan
Updated as of 05-Sep-2014 6
Asian Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Monitoring the Trend in Country EPS Forecasts (2014 and 2015) Asia Pacific ex-Japan 115
110
110
115
2015
2015
105
105
100
Aug 13
Feb 14
Aug 14
95 Feb 13
Aug 13
Feb 14 Taiwan
2015
115
90 Feb 13
Aug 14
110
100
100
105
90
95
100
105
90 Feb 13
2014
Aug 13
Feb 14
Aug 14
95 Feb 13
Thailand
Feb 14
Aug 14
2014
95
80 Aug 13
Feb 14
Aug 14
85 Feb 13
Aug 13
110
Feb 14
85 Feb 13
Aug 14
2014
90 Aug 13
Feb 14
Aug 14
80 Feb 13
Aug 13
Aug 14
Philippines
2015
110
2015
105
2014
2014
100
Aug 13
Feb 14
115
90
90
Aug 14
2015
120
100
95
2014
Feb 14
130
2014
100
100
90
Aug 13
India 2015
105 2015
95 Feb 13
140
Malaysia
115 105
Aug 14
Korea
110
110
100
70 Feb 13
Indonesia
2015
110
Feb 14
80
120
120
70 Feb 13
2014
Aug 13
Aug 13
110
2015
2014
100
120
120
110
105
2014
95
China 115
110
100
90
2015
2015
105
2014
95
85 Feb 13
115
110
2014
100
Hong Kong
Singapore
Australia
Feb 14
Aug 14
95 Feb 13
Aug 13
Feb 14
Aug 14
Updated as of 22 August 2014 Source: I/B/E/S Notes: All yearends are for December except Australia which is for June. EPS figures are normalized, starting at 100 on base date Feb 2013 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where changes are made for exceptional items. This dashboard aims to show changes in earnings expectations. Countries' earnings revisions are in local currency whereas APxJ regions' earnings revisions are in US $
7
Asian Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Monitoring the Trend in Sector EPS Forecasts (2014 and 2015) US 2015
2015
105 100
2014
100
100
Feb 14
Aug 14
85 Feb 13
Aug 13
Feb 14
95
75 Feb 13
Aug 13
Feb 14
Aug 14
90 Feb 13
Information Technology
2014
115
2015
110 105
90 Feb 13
115 105
100 2015
Aug 13
Feb 14
Aug 14
65 Feb 13
2014
75
Aug 13
Feb 14
Aug 14
65 Feb 13
Aug 13
Feb 14
80 Feb 13
Aug 14
Feb 14
Aug 14
Utilities 110
2015
2015
105
2014 100
2014
95
85 Aug 13
2014
90
75
Aug 14
2015
85
95
2014
85
95
105
Telecom 105
95
2014
100
90 Feb 13
Aug 14
Feb 14
95
100
Feb 14
Aug 13
Industrials
2015
95 Aug 13
70 Feb 13
115
Materials
120
Aug 14
105
95
80
Feb 14
110
100
85
Aug 13
115
105
2014
80
Health Care
2015
2015 2014
90
120
110
90
85 Feb 13
Aug 14
115
2015
100
100
2014
90
Financials
Energy 105
110
95
90 Aug 13
2015
105
2014
95
95
120
110
110
105
90 Feb 13
115
115
110
Consumer Staples
Consumer Discretionary
Asia Pacific ex-Japan
115
Aug 13
Feb 14
Aug 14
90 Feb 13
Aug 13
Feb 14
Aug 14
Updated as of 22 August 2014 Source: I/B/E/S Notes: All yearends are for December. EPS figures are normalized, starting at 100 on base date Feb 2013 for ease of comparison. These numbers are directly from IBES aggregate and may differ from those in the growth expectations pages where changes are made for exceptional items. This dashboard aims to show changes in earnings expectations. Countries' earnings revisions are in local currency whereas APxJ regions' earnings revisions is in US $
8
Asian Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Profit Outlook: Earnings Forecast Matrices for Countries and Sectors Asia Pacific ex-Japan Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Australia Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Hong Kong Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Singapore Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Weight (%) 100 7.6 6.2 6.0 36.6 2.5 7.9 15.8 8.3 5.6 3.4
Median 10.9 12.0 13.2 5.3 10.5 17.8 11.1 19.2 7.4 4.8 5.3
J.P. Morgan 2014 12.0 9.7 9.9 7.9 9.0 16.4 31.6 13.0 7.9 -3.2 71.5
Consensus 2014 10.6 6.9 11.1 9.0 8.0 17.3 30.1 7.7 7.8 -0.4 71.2
2015 8.9 12.8 12.9 12.0 7.6 16.2 23.6 9.4 12.7 8.2 -23.5
Korea
2015 9.7 15.2 11.7 15.0 8.1 17.0 23.7 11.0 12.8 6.2 -22.2
Median 11.5 10.9 14.3 8.3 11.0 17.8 10.8 18.7 9.0 6.4 10.5
Weight (%) 100 1.7 9.1 6.1 51.5 4.5 5.7 0.5 17.1 2.2 1.5
J.P. Morgan Median 2014 2015 6.8 5.3 7.4 14.8 11.8 NM 4.9 3.8 7.2 7.1 33.5 22.7 6.7 4.9 4.9 13.0 13.4 12.9 3.7 5.8 19.4 13.0 13.0 15.5 4.2 -1.4 6.2 17.0 8.7 13.3 -0.1 3.0 3.7
Median 8.2 8.6 5.7 26.4 5.6 14.6 14.0 8.2 5.3 12.8 6.6
Consensus 2014 2015 4.1 7.5 9.7 11.0 5.2 7.3 33.2 17.0 1.0 5.8 13.1 11.2 21.7 14.9 8.2 10.1 0.3 6.9 7.5 7.6 6.6 10.3
Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Weight (%) 100 15.0 0.0 0.0 61.6 0.0 9.6 0.6 0.0 1.4 11.8
J.P. Morgan Median 2014 2015 8.3 23.4 -6.9 17.3 22.8 21.1 NA NA NA NA NA NA 4.3 -0.7 8.7 NA NA NA 17.3 14.6 3.1 163.3 163.3 17.4 NA NA NA -4.1 -4.1 6.2 32.2 182.4 -60.6
Median 8.3 16.9 NA NA 7.2 NA 14.2 163.3 NA 16.7 10.9
Consensus 2014 2015 25.7 -7.4 11.8 17.4 NA NA NA NA 6.8 7.3 NA NA 9.2 11.3 NM NM NA NA 17.0 16.1 156.9 -61.4
Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Weight (%) 100 7.5 4.4 0.0 53.4 0.0 21.3 0.0 0.0 13.4 0.0
J.P. Morgan Median 2014 2015 6.5 8.2 8.6 -4.3 -0.3 8.6 5.0 -0.6 16.4 NA NA NA 8.1 11.3 7.7 NA NA NA 6.5 5.8 11.0 NA NA NA NA NA NA 0.9 5.1 6.4 NA NA NA
Median 5.8 0.8 24.3 NA 6.1 NA 4.5 NA NA 3.4 NA
Consensus 2014 2015 7.1 8.4 -2.7 10.0 5.8 18.9 NA NA 7.3 7.3 NA NA 10.3 9.9 NA NA NA NA 6.3 6.7 NA NA
Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Taiwan
China
India
Weight (%) 100 18.4 6.1 1.5 15.4 0.6 11.4 35.0 8.5 1.2 2.0
Median 16.3 11.8 24.1 -3.7 23.6 69.5 12.5 61.9 6.0 7.9 NM
J.P. Morgan 2014 2015 15.2 17.0 12.2 14.0 21.1 12.5 -3.9 31.3 39.6 8.7 73.4 33.3 NM 77.8 -5.4 8.4 36.9 32.6 -37.1 201.7 NM NM
Median 19.6 10.3 28.3 -14.4 34.2 69.5 17.1 35.9 6.6 -4.8 NM
Consensus 2014 2015 11.5 14.0 9.2 9.9 21.9 16.6 -15.1 64.6 50.2 8.8 73.4 33.3 NM 63.8 -11.3 4.3 38.2 35.4 -36.2 220.0 NM NM
Thailand Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Malaysia
Weight (%) 100 4.0 2.7 0.6 17.9 0.1 2.9 57.7 10.0 4.2 0.0
J.P. Morgan Median 2014 2015 13.6 21.0 7.7 10.8 -40.4 13.3 14.4 12.2 7.6 5.3 5.3 3.8 18.2 14.0 1.3 -23.8 -23.8 24.9 14.2 52.0 12.5 18.1 34.3 10.2 17.9 13.2 7.4 -2.4 -3.1 -4.9 NA NA NA
Consensus Median 2014 15.2 20.3 10.7 -42.5 14.4 12.2 8.3 8.3 15.2 11.9 -23.8 -23.8 28.6 30.2 18.7 35.1 16.5 12.5 -2.8 -3.4 NA NA
2015 8.0 12.2 7.6 6.6 -2.6 24.9 59.2 11.2 6.2 -2.2 NA
Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Weight (%) 100 5.3 4.8 14.5 35.6 1.9 6.2 13.2 2.8 11.9 3.9
J.P. Morgan Median 2014 2015 12.0 9.6 11.7 18.1 20.8 19.7 9.2 6.8 19.8 -3.8 1.3 12.2 11.4 9.8 10.0 16.1 10.3 15.0 10.5 17.5 15.3 53.8 53.8 29.7 8.5 23.5 19.8 12.8 -11.2 -1.2 NM NM NM
Consensus Median 2014 10.5 8.7 20.4 23.7 6.0 3.5 2.5 3.9 12.0 8.4 22.0 22.0 6.4 5.6 21.0 47.4 4.6 12.2 8.4 -6.3 NM NM
2015 10.5 17.5 21.6 7.2 8.8 19.4 18.2 30.1 20.2 1.8 NM
Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Weight (%) 100 6.7 11.0 12.6 18.8 8.9 5.7 21.8 7.5 2.9 4.0
J.P. Morgan Median 2014 2015 13.8 13.9 17.6 13.1 13.4 12.4 15.1 16.6 17.0 8.3 5.8 12.2 11.6 13.4 21.0 18.5 20.5 23.2 21.9 9.5 17.4 16.6 17.4 12.7 4.7 22.2 31.5 46.4 49.2 34.9 6.7 4.3 7.4
Consensus Median 2014 17.3 15.7 17.9 18.5 17.4 19.9 11.0 9.0 17.2 18.7 18.5 17.5 28.9 23.8 12.4 12.9 20.0 19.4 21.3 26.9 12.0 12.4
2015 16.1 15.7 16.9 15.3 18.0 20.8 17.3 12.9 16.3 19.0 10.3
Total Market Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Indonesia
Philippines
Weight (%) 100 4.3 9.2 19.9 36.4 3.5 5.1 0.0 10.3 9.7 1.5
Median 9.4 7.8 18.3 7.7 12.7 21.5 -0.9 NA 1.3 -1.0 0.4
2015 14.0 14.6 36.4 14.3 10.7 19.7 18.3 NA 12.1 20.6 3.4
Median 10.0 7.8 17.0 10.9 8.2 21.5 -2.4 NA -4.0 3.4 11.5
Consensus 2014 9.5 -1.9 109.5 6.4 7.8 21.4 -11.2 NA -2.1 44.7 11.5
2015 13.6 13.3 35.4 8.1 12.2 19.7 17.8 NA 16.4 27.4 1.0
Weight (%) 100 9.3 9.5 4.5 34.4 2.3 13.4 0.0 4.3 10.6 11.7
J.P. Morgan Median 2014 7.6 7.1 6.4 11.8 13.7 10.3 10.4 30.2 8.1 3.9 19.3 19.3 14.5 8.8 NA NA 6.6 11.0 -5.3 -1.1 0.5 8.3
2015 8.8 8.5 5.6 17.5 8.8 28.3 14.5 NA 4.6 3.8 5.2
Consensus Median 2014 2015 7.4 2.8 9.2 6.4 2.6 13.1 11.0 8.3 8.5 10.2 12.4 11.4 6.6 0.6 8.3 17.5 17.5 24.5 7.0 2.8 11.5 NA NA NA 4.6 7.7 9.2 1.0 4.0 8.2 -6.8 0.9 6.0
Weight (%) 100 17.7 12.3 3.3 35.2 2.7 3.8 0.0 6.5 13.4 5.0
J.P. Morgan Median 2014 13.0 12.2 35.5 11.5 19.1 17.1 -1.9 2.0 6.1 15.7 14.1 14.1 18.9 17.8 NA NA 10.2 10.2 6.1 4.1 4.3 4.3
2015 11.4 14.9 11.2 2.0 10.1 19.7 18.0 NA 13.0 8.8 14.0
Consensus Median 2014 2015 13.8 9.7 12.9 23.2 11.3 15.8 21.2 31.3 15.9 4.5 19.4 1.4 9.5 9.6 13.3 14.1 14.1 19.7 20.6 20.6 8.7 NA NA NA 9.1 9.2 10.7 5.7 3.8 13.9 -17.5 -17.5 6.1
Weight (%) 100 3.8 7.0 0.0 39.7 0.0 25.2 0.0 0.0 18.6 5.8
J.P. Morgan Median 2014 5.3 5.6 20.1 20.1 18.0 18.0 NA NA 10.4 4.5 NA NA 4.4 6.4 NA NA NA NA 4.9 5.0 0.2 0.1
2015 14.3 20.5 22.5 NA 15.5 NA 16.3 NA NA 6.0 15.1
Consensus Median 2014 2015 8.0 6.5 13.8 17.9 17.9 16.5 17.3 17.3 17.8 NA NA NA 5.3 7.5 15.4 NA NA NA 4.4 3.9 15.0 NA NA NA NA NA NA 8.0 3.8 4.5 10.4 9.5 23.8
Source: I/B/E/S, MSCI, J.P. Morgan estimates. Note: Average earnings growth calculated based on earnings aggregate of MSCI contituents. Consensus numbers are used for stocks not covered by J.P. Morgan under J.P. Morgan forecasts calculation. Median numbers are for the year 2014.
9
J.P. Morgan 2014 12.5 8.1 106.8 9.3 10.3 21.4 -11.4 NA 4.3 38.0 0.4
Updated as of 05-Sep-2014
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Value: Market Implied Growth Rates
Perpetual 3.6 4.4 2.3 3.9 4.4 2.9 5.2 2.4 3.0 4.3 3.2 11.0 7.5 5.8 4.4 7.9 2.9 2.4 4.7
10 year 3.7 4.9 -2.9 4.2 4.5 4.5 5.3 3.9 3.4 2.7 6.1 12.5 11.9 6.0 7.0 10.7 2.6 -0.5 3.7
10 Year Historic Nominal CAGR (%) EPS GDP 9.0 5.9 8.7 4.2 8.4 4.4 12.8 9.3 9.8 13.7 7.1 10.2 10.8 14.5 16.0 1.3 7.8 10.4 14.9 18.8 8.0 5.9 14.0 11.8 13.6 13.6 9.5 6.5 9.2 11.6 27.3 13.8 10.7 11.9 7.4 4.7 12.0 10.6
EPS Growth Forecasts 2013 2014E 8.0 7.1 8.0 6.6 -5.9 6.1 23.5 8.1 4.9 12.0 4.0 7.3 7.5 12.7 10.9 75.7 -2.6 5.3 10.9 9.6 11.1 23.4 7.1 13.9 3.6 12.2 -5.9 15.2 0.3 7.1 8.8 5.6 -4.0 8.2 36.9 21.0 7.4 12.5
2015E 11.3 11.7 12.8 9.5 9.7 7.2 11.2 6.3 7.4 11.7 -6.9 17.6 11.4 17.0 8.8 14.3 8.6 7.7 14.0
2013 16.8 18.5 16.2 14.4 15.1 16.5 13.8 27.0 17.0 11.1 17.5 21.3 17.7 12.7 17.3 22.2 15.8 17.4 16.2
Market Implied Earnings Growth 100% Payout Ratio
Global USA Europe Asia Pacific Asia Pacific ex-Japan Pacific x J EMF Asia Japan Australia China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand
Perpetual -0.2 0.7 -0.7 -0.9 0.0 0.4 -0.4 -2.0 1.2 -2.3 -1.1 7.2 3.6 -2.0 1.5 5.3 -0.5 -1.6 0.8
Global* USA* Europe* Asia Pacific* Asia Pacific ex-Japan Pacific x J EMF Asia Japan* Australia China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand
Long Term 10.5 11.3 10.0 10.7 11.3 11.0 13.8 9.6 7.0 14.7 8.8 15.7 12.0 13.2 11.1 13.1 10.0 14.0 9.4
10 year -3.5 -3.4 -13.6 -2.8 -2.2 -0.5 -2.2 -0.3 -1.3 -5.4 0.5 4.4 6.0 -4.3 2.0 5.4 -2.8 -5.4 -2.7
Historic Payout Ratio
J.P. Morgan Forecast of 10-year Potential Growth Range Nominal GDP1 (%)
EPS (%) Min 5 4 5 9 4 4 8 0 5 8 3 8 8 5 8 5 4 5 5
P/E Ratio 2014E 15.7 17.4 15.3 13.3 13.4 15.3 12.3 15.4 16.1 10.1 14.2 18.7 15.8 11.0 16.2 21.1 14.6 14.4 14.4
2015E 14.1 15.5 13.5 12.2 12.3 14.3 11.1 14.5 15.0 9.0 15.3 15.9 14.1 9.4 14.9 18.4 13.4 13.4 12.6
Max 10 10 13 17 14 10 15 10 7 16 9 15 15 15 15 25 10 15 15
JPM NA 5.4 NA 5.4 9.2 6.0 9.9 2.5 6.0 11.3 6.2 11.3 12.0 7.5 7.0 10.1 5.3 6.3 8.9
Consensus 4.6 5.1 3.0 4.2 8.5 5.7 9.2 0.8 6.0 9.4 4.6 11.8 12.4 8.0 7.8 5.7 6.5 6.0 7.8
10 Year Risk Free Rate
Payout Ratio 2014E
(%) 2.2 2.5 1.9 2.6 3.4 2.9 3.7 0.5 3.4 3.6 1.9 8.5 5.9 3.1 3.6 6 2.4 1.3 3.7
(%) 41 36 54 36 41 62 30 71 71 33 38 28 39 14 52 45 51 42 43
The objective of this table is to compare current market implied growth with: historical earnings and nominal GDP growth, the long term risk free rate, forecast earnings and nominal GDP growth. We use a dividend discount model based on expected payout ratios for 2011 as well as a modified one, which assumes a 100% payout ratio, compensating for different attitudes towards dividend distribution within Asia. Perpetual Implied Growth Rates based on the Gordon Growth Model: g = r - d/v. Key assumptions: • Equity risk premium of 4% • Expected payout ratios for 2010 sustained for dividend discount model • Terminal PE of 12 for all markets after 10 years Note: Risk free rates are 10-year benchmark or nearest equivalent. EPS historic growth rates based on MSCI data from 2001 to 2011.
Source : Bloomberg, Consensus Economics Inc, Datastream, I/B/E/S, MSCI, J.P. Morgan estimates Notes: 1. Nominal GDP growth forecast is based on the range of real GDP and inflation rate forecast over the next 10 years provided by Consensus Economics Inc and EIU for Phils, Global, US and Europe. Updated as of 5 September 2014 Notes to Earnings growth forecasts:* Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. For all other markets and sectors, forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and I/B/E/S estimates for the rest. Companies with different year ends are calendarised to December year ends and are free float adjusted for aggregation. 10-year CAGR from 2004-2014. Long term EPS Growth forecast is next 3-5 years IBES EPS growth expectation. 10
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Hong Kong
Singapore
Korea
Taiwan
China
India
Malaysia
Indonesia
Thailand
New Zealand
Philippines
Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities Market Aggregate Sector Neutral*
Australia
12-month forward PE
Asia Pacific ex-Japan
Value: PE Matrix for Countries and Sectors and change in Key Sectors' Forward PE in the past 12 months
11.6 20.7 11.9 11.0 23.2 14.1 11.8 13.9 18.6 5.6 12.6 12.6
16.0 17.0 11.3 13.9 19.3 19.6 17.3 12.7 14.2 15.1 15.4 14.9
12.2 NA NA 14.5 NA 12.6 14.7 NA 20.4 25.2 14.9 14.8
17.2 10.9 NA 11.7 NA 13.1 NA NA 15.2 NA 13.8 12.1
6.6 18.1 7.5 10.3 NA 6.0 7.4 9.9 -5.8 NM 9.9 10.1
NM 19.6 24.4 11.7 NA 21.5 11.6 17.6 19.5 NA 13.7 13.2
9.2 18.3 9.1 5.3 18.6 9.3 17.9 7.1 16.5 11.3 9.4 8.1
12.9 27.6 10.2 13.1 20.5 17.5 16.0 8.4 13.4 11.2 16.7 13.4
14.4 19.9 14.0 11.6 NA 13.1 NA 14.3 22.0 13.5 15.3 13.2
13.5 19.1 14.7 10.6 NA 12.0 NA 13.1 16.7 10.9 14.6 12.3
18.8 15.5 8.2 10.0 NA NA NA 9.9 19.1 15.6 13.1 11.7
NA NA NA NA NA 22.2 NA 12.3 15.7 16.9 16.9 12.8
26.6 NA NA 16.9 NA 14.5 NA NA 18.3 12.5 19.2 15.5
Source: IBES, MSCI, J.P. Morgan estimates. Note: PEs are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and IBES estimates for the rest.
Re/De-rating for Asia Pacific ex-Japan key sectors 6 4 2 0 -2
Source: IBES, MSCI. Note: Above chart shows change in 12-month forward PE estimates in past one year, positive change indicates rerating and negative change indicates derating of PE. *Sector neutral PE are calcuated by using sector weights of MSCI APXJ and sector PE of respective markets (MSCI APXJ sector PE used where country sector does not exist) 11
Hong Kong Utilities
Hong Kong Cons Discr
Taiwan Materials
China Cons Discr
China Financials
Australia Energy
Singapore Financials
China Cons Staples
Taiwan Financials
India IT
Australia Financials
Hong Kong Industrials
Taiwan
Hong Kong
Korea Cons Discr
China Industrials
China
Singapore
Taiwan IT
Australia
Malaysia Financials
Malaysia
Australia Cons Staples
Australia Materials
China Energy
Singapore Industrials
Philippines
Korea Financials
Korea
Korea Materials
India Energy
Hong Kong Financials
Korea IT
Indonesia
Thailand
China Telecom
China IT
Korea Industrials
Australia Industrials
India
New Zealand
-6
India Financials
-4
Updated as of 05-Sep-2014
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Value: Distribution Tables for PE, PBR, DY and RoE 2014E: Price to Earnings Ratio (x) Weighted Average Global 15.7 USA 17.4 Europe 15.3 Japan 15.4 Asia Pacific ex-Japan 13.4 Australia 16.1 China 10.1 Hong Kong 14.2 India 18.7 Indonesia 15.8 Korea 11.0 Malaysia 16.2 Philippines 21.1 Singapore 14.6 Taiwan 14.4 Thailand 14.4
2014E: Dividend Yield (%) Weighted Average Global 2.6 USA 2.1 Europe 3.6 Japan 2.1 Asia Pacific ex-Japan 3.0 Australia 4.4 China 3.2 Hong Kong 2.7 India 1.5 Indonesia 2.5 Korea 1.3 Malaysia 3.2 Philippines 2.1 Singapore 3.5 Taiwan 2.9 Thailand 3.0
Min 2.6 7.1 6.0 5.5 2.6 5.1 3.9 2.6 4.5 8.3 6.4 9.5 14.1 10.7 5.0 8.6
Min 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.5 0.8 0.0 0.0
Lower 12.7 14.3 12.9 12.4 12.1 15.1 8.8 13.0 13.8 13.9 11.6 12.9 16.1 13.4 13.1 11.6
Quartiles Median 16.1 17.1 16.0 15.7 16.2 17.6 12.3 15.7 18.6 16.2 15.6 17.1 20.6 16.6 15.6 16.9
Lower 1.2 0.6 2.1 1.2 1.3 3.1 1.3 2.4 0.6 1.4 0.4 2.1 0.9 2.4 2.1 1.4
Quartiles Median 2.2 1.7 3.1 1.7 2.4 4.5 2.5 3.1 1.2 2.0 1.1 2.7 1.6 3.2 3.4 2.8
Higher 21.0 21.8 19.9 21.1 22.4 22.1 18.4 19.7 29.4 24.0 24.0 22.4 26.5 22.4 21.0 31.9
Higher 3.6 2.8 4.3 2.4 3.8 5.0 3.9 4.1 1.9 2.8 1.7 3.7 1.9 4.3 4.5 3.8
Max 519 519 100 81 217 217 86 45.2 110 60.2 143.9 52.3 37.3 40.7 172 67.3
2014E: Price to Book Value Ratio (x) Weighted Average Global 1.9 USA 2.4 Europe 1.7 Japan 1.2 Asia Pacific ex-Japan 1.6 Australia 2.0 China 1.5 Hong Kong 1.3 India 2.9 Indonesia 3.3 Korea 1.1 Malaysia 2.1 Philippines 3.0 Singapore 1.4 Taiwan 1.9 Thailand 2.1
Min 0.1 0.3 0.1 0.5 0.3 0.7 0.3 0.4 0.6 1.1 0.4 0.7 1.3 0.6 0.7 0.9
Lower 1.2 1.6 1.2 0.9 1.1 1.4 1.0 0.8 1.4 2.4 0.9 1.5 2.1 1.0 1.2 1.4
Quartiles Median 1.9 2.7 2.0 1.3 1.7 1.9 1.3 1.2 2.9 3.5 1.1 2.0 2.9 1.3 1.6 2.2
Higher 3.2 4.3 3.2 1.7 3.0 2.6 2.4 2.9 5.3 4.5 1.7 2.7 4.0 1.9 2.6 5.0
Max 51 51 30 12 49 14.0 11.4 17.5 43.1 48.6 11.1 40.2 8.4 8.4 10.1 20.1
Max 12 11.5 11.5 4.3 9 6.6 9.2 5.8 5.0 6.6 6.9 7.5 5.0 7.4 8.6 6.2
2014E: Return on Equity (%) Weighted Average Global 12.4 USA 14.3 Europe 11.2 Japan 7.9 Asia Pacific ex-Japan 12.6 Australia 13.0 China 15.2 Hong Kong 9.6 India 16.5 Indonesia 22.2 Korea 10.1 Malaysia 13.2 Philippines 15.0 Singapore 9.6 Taiwan 13.5 Thailand 15.6
Min -65 0.6 1.5 1.3 -65 -5 -8.5 2.2 1.4 5.8 -65.2 3.3 7.3 2.3 -4.5 -5.5
Lower 7.9 9.6 8.2 6.2 7.3 7.1 8.9 4.8 10.7 16.4 4.8 9.4 11.3 5.8 7.3 11.5
Quartiles Median 12.3 15.4 12.7 8.4 12.0 10.8 12.7 8.8 15.7 21.8 7.6 12.6 14.3 8.6 10.6 15.2
Higher 18.5 21.9 18.3 10.8 17.5 16.9 17.1 16.3 21.7 24.5 11.9 14.5 18.7 12.7 16.9 19.3
Max 262 262 151 47 179 40 34 97 106 111 27.6 179 25.0 35.6 42.5 116
Source: Datastream, IBES, MSCI, J.P. Morgan. Note: Weighted average numbers based on aggregate of MSCI contituents. Consensus numbers are used for stocks not covered by J.P. Morgan.
For Japan, finanacial year ending march numbers are used
12
Updated as of 05-Sep-2014
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Australia
China
Hong Kong
India
Indonesia
Korea
Malaysia
New Zealand
Philippines
Singapore
Taiwan
Thailand
Total
Demand Classification: MSCI Asia Pacific ex-Japan Index Composition by Countries
17.5 0.2 0.2 6.9 24.9
15.4 0.4 0.4 2.8 19.0
6.7 0.0 1.9 0.8 9.3
3.3 1.5 0.1 1.7 6.6
2.4 0.0 0.1 0.1 2.5
5.8 2.6 4.4 1.5 14.2
2.8 0.1 0.1 0.6 3.7
0.3 0.0 0.0 0.1 0.4
1.1 0.0 0.0 0.1 1.1
3.3 0.7 0.0 0.5 4.6
3.9 3.3 3.3 1.0 11.5
1.7 0.0 0.0 0.5 2.2
64.2 8.8 10.4 16.6 100.0
MSCI AC Asia Pacific ex-Japan Weightings (%) Domestic Demand Global Capex Global Consumer Global Price Takers TOTAL
APXJ Global Capex Sector Absolute and relative (vs APxJ) Index
APXJ Domestic Demand Sector Absolute and relative (vs APxJ) Index 450 400
Relative to APxJ (rhs)
350 300 200
1200
95
1000
350
800
300
75
150
Absolute (lhs)
100
65 55
50 0 Jan 90
1400
105
85
250
Sep 95
May 01
Jan 07
Sep 12
45
Relative to APxJ (rhs)
900
Relative to APxJ (rhs)
800 700 600 500
Absolute (lhs)
400 300 200 100 0 Jan 90
Dec 96
Nov 03
Oct 10
450 400
250
600
200
Absolute (lhs)
400
150 100
200
50
0 Jan 90
Sep 96
APxJ Global Consumer Sector Absolute and relative (vs APxJ) Index 1000
500
115
May 03
Jan 10
0
APxJ Global Price Taker Sector Absolute and relative (vs APxJ) Index 325 300 275 250 225 200 175 150 125 100 75 50 25
800
200
Relative to APxJ (rhs)
700
175
600
150
500
125
400
100
300
75
Absolute (lhs)
200
50
100
25
0 Jan 90
Sep 96
May 03
Jan 10
Source: Datastream, MSCI. J.P. Morgan. MSCI Asia Pacific ex Japan companies have been classified in five categories. Namely Global Price takers, Global Capex, Global Consumer, Global Consumer/Capex and Domestic Demand. Of the five categories, In Global Consumer/Capex (Tech-Hardware) weighting is equally divided between Global consumer and Global Capex. The above table contains MSCI free float market capitalization as a percentage of MSCI APxJ market cap. Charts show the absolute and relative performance of Asia Pacific ex Japan sectors by demand classification.
13
0
Updated as of 05-Sep-2014
Asian Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599,
[email protected]
8 September 2014
Economic Forecasts: Currency Movements and Forecasts Euro (EUR) 1.66
Japansese Yen (JPY) 125 120 115 110 105 100 95 J.P. Morgan forecast: 90 end Sep 14: 102 85 end Dec 14: 106 80 end Mar 15: 107 75 70 65 Sep-04 Nov-06
J.P. Morgan forecast: end Sep 14: 1.34 end Dec 14: 1.30 end Mar 15: 1.28
1.56 1.46
J.P. Morgan
1.36
Consensus
1.26
Forward
1.16 Sep 04
Nov 06
Jan 09
Mar 11
May 13
Jun 15
Taiwan NT$ (TWD)
36 35 34 33
1,500 1,400 1,300
J.P. Morgan
32 30
1,100
29
1,000
28
Consensus Nov 06
Jan 09
Mar 11
May 13
Jun 15
900 Sep 04
J.P. Morgan
3.25
Consensus
J.P. Morgan forecast: end Sep 14: 3.17 end Dec 14: 3.20 end Mar 15: 3.23
Forward
Jan 09
Mar 11
Consensus
May 13
Jun 15
Jan-09
Mar-11
May-13
Jun-15
Nov 06
Nov 06
Jan 09
Mar 11
May 13
Jun 15
64 61 58 55
37
Forward
35
J.P. Morgan
33
May 13
27 Sep 04
Jun 15
11,000 J.P. Morgan
6.2
Nov 06
Mar 11
Jan 09
Mar 11
May 13
May 13
Jun 15
Forward Consensus
52
J.P. Morgan
49
Jun 15
40 37 Sep 04
Nov 06
Jan 09
57
J.P. Morgan forecast: end Sep 14: 11900 end Dec 14: 11900 end Mar 15: 12000
Mar 11
51
Consensus
45 42
Consensus
39 Jan 09
Mar 11
Jun 15
Forward
48
J.P. Morgan
Nov 06
May 13
J.P. Morgan forecast: end Sep 14: 43.50 end Dec 14: 44.00 end Mar 15: 44.25
54
Forward
9,000 8,000 Sep 04
Jun 15
May 13
Philippine Peso (PHP)
10,000
Forward
Consensus Jan 09
J.P. Morgan forecast: end Sep 14: 60.0 end Dec 14: 60.0 end Mar 15: 60.5
Indonesian Rupiah (IDR)
12,000
Mar 11
43
14,000 13,000
Jan 09
46
Consensus
29
7.0
Nov 06
J.P. Morgan Nov 06
Indian Rupee (INR) 67
J.P. Morgan forecast: end Sep 14: 32.00 end Dec 14: 32.50 end Mar 15: 33.00
39
J.P. Morgan forecast: end Sep 14: 6.20 end Dec 14: 6.15 end Mar 15: 6.15
6.6
1.10 Sep 04
Thai Baht (THB)
J.P. Morgan
Mar 11
Forward Consensus
1.40
1.20
41
Jan 09
1.60
1.30
43
Consensus
7.4
5.8 Sep 04
Forward
0.75
0.55 Sep 04
J.P. Morgan forecast: end Sep 14: 1.25 end Dec 14: 1.27 end Mar 15: 1.27
1.70
1.50
0.85
31
7.8 3.50
J.P. Morgan
0.65
Forward
8.2
Nov 06
Consensus Forward
J.P. Morgan forecast: end Sep 14: 0.92 end Dec 14: 0.91 end Mar 15: 0.90
Chinese Yuan (CNY)
3.75
2.75 Sep 04
1.05 0.95
J.P. Morgan forecast: end Sep 14: 1000 end Dec 14: 1000 end Mar 15: 995
Malaysian Ringgit (MYR)
3.00
J.P. Morgan
1,200
Forward
31
27 Sep 04
1.15
South Korea Won (KRW) 1,600
J.P. Morgan forecast: end Sep 14: 30.7 end Dec 14: 30.8 end Mar 15: 30.8
37
Singapore Dollar (SGD)
Australian Dollar (AUD)
May 13
Jun 15
36 Sep 04
J.P. Morgan Nov 06
Jan 09
Mar 11
May 13
Jun 15
Expected gains vs. USD from 12-month forwards TAIWDO$ JAPAYE$ SINGDO$ PHILPE$ THABAH$ HKD MYR AUSTDO$ CNY INDORU$ KORSWO$ INDRUP$
J.P. Morgan
-8%
-4%
0%
4%
Consensus
8%
Updated as of 05-Sep-2014
Source: Bloomberg, Datastream, Consensus Economics Inc., J.P. Morgan economics.
14
Asian Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Economic Forecasts: Changes in Real GDP Forecasts Real GDP Growth (%Y/Y) J.P. Morgan Consensus 2014E 2015E 2014E 2015E
Change in Forecasts Past 3 months (%) J.P. Morgan Consensus 2014E 2015E 2014E 2015E
Change in Consensus Forecasts for 2014 GDP over last 3 months (%)
Current J.P. Morgan vs. Consensus Forecasts for 2014 GDP (%)
2.1 0.8 0.9 3.1 3.2 7.3 2.0 5.3 4.9 3.6 5.8 6.0 3.3 3.8 1.1
US Euro Japan Australia New Zealand China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand
3.0 1.8 1.4 3.3 2.8 7.3 2.1 6.5 5.3 4.0 4.7 6.4 4.1 3.7 4.2
2.1 1.0 1.4 3.1 3.5 7.4 3.0 4.7 5.2 3.6 5.6 6.3 3.5 3.5 1.5
3.0 1.5 1.2 3.0 2.9 7.2 3.5 5.4 5.6 3.8 5.2 6.5 3.7 3.6 4.1
Malaysia Australia Taiwan New Zealand China
Thailand Singapore US Hong Kong 0.2
0.6
3.0 1.0 2.0 2.3 1.9 7.6 3.0 4.0 5.0 4.7 4.0 5.7 4.1 4.0 4.0
3.0 1.5 2.5 2.9 4.7 7.4 3.0 4.7 4.5 4.0 5.5 5.7 6.1 4.2 4.0
3.0 2.0 2.0 3.0 4.8 7.1 2.0 5.9 5.2 4.0 5.0 6.6 4.9 3.8 4.2
Inflation % Y/Y 2014E 2015E
1.9 0.6 2.9 2.6 1.6 2.2 4.0 8.5 5.7 1.5 2.7 4.2 1.5 1.4 2.6
1.9 0.9 2.0 2.4 1.9 3.1 4.1 7.5 5.6 2.4 4.0 3.8 2.0 1.6 3.3
US Consensus Economic Forecasts 3.5
2014E
2015E
Malaysia US
3.0
Korea China
Philippines
(0.1) 0.0 (0.1) 0.1 0.0 0.0 (0.3) 0.0 (0.2) 0.0 0.2 0.0 (0.3) 0.1 0.0
India
Korea
Euro
(0.5) (0.1) 0.0 0.3 0.3 0.1 (0.5) 0.0 (0.1) 0.0 0.4 (0.1) (0.3) 0.3 (0.2)
Taiwan
Australia
Indonesia
-0.2
0.1 (0.2) 0.0 0.3 (0.0) 0.1 (0.4) 0.0 (0.4) 0.1 (0.4) 0.0 (0.9) (0.1) 0.0
Japan India
-0.6
0.1 (0.4) (0.4) 0.3 0.3 0.1 (0.7) 0.0 (0.0) (0.3) 0.3 0.0 (1.2) 0.3 0.0
Economic Momentum GDP SAAR 3Q14E 4Q14E 1Q15E
Euro
2.5
Singapore Indonesia Philippines
2.0
New Zealand Thailand Japan Hong Kong -1.0
-0.6
Source: Bloomberg, Consensus Economics Inc, J.P. Morgan economics.
-0.2
0.2
0.6
1.5 Mar 13
Sep 13
Mar 14
Sep 14
Updated as of 05-Sep-2014
15
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Economic Forecasts: Policy Rate Trends and Forecasts United States United Kingdom Country USA
UK
EU
Japan
Australia
China
Hong Kong
India
Indonesia
Korea
Malaysia
Philippines
Singapore
Taiwan
Thailand
Fed Funds 3-month 10-year Repo rate 3-month 10-year Refi rate 3-month 10-year O/n call rate 3-month 10-year Cash Rate 3-month 10-year 1-yr working capital 7-day repo 10-year Discount window base 3-month 10-year Repo rate 3-month 10-year BI rate 3-month 10-year O/n call rate 3-month 10-year O/N call rate 3-month 10-year Reverse repo rate 3-month 10-year No policy rate 3-month 10-year Official discount rate 3-month 10-year 1-day repo rate 3-month 10-year
3Q'13 0.125 0.25 2.62 0.50 0.52 2.72 0.50 0.22 1.76 0.05 0.15 0.69 2.50 2.15 3.86 6.00 3.02 4.07 0.50 0.17 2.15 7.50 10.17 7.40 7.25 7.16 8.54 2.50 2.66 3.06 3.00 3.16 3.75 3.50 0.21 3.84 n.a. 0.32 2.36 1.875 0.88 1.71 2.50 2.61 3.89
4Q'13 0.125 0.25 3.01 0.50 0.53 3.03 0.25 0.28 1.94 0.05 0.15 0.74 2.50 2.41 4.27 6.00 3.66 4.62 0.50 0.14 2.30 7.75 8.99 7.40 7.50 7.84 8.57 2.50 2.66 3.23 3.00 3.19 4.12 3.50 0.25 4.12 n.a. 0.38 2.56 1.875 0.88 1.70 2.25 2.40 3.86
1Q'14 0.125 0.24 2.85 0.50 0.50 3.00 0.25 0.22 1.85 0.05 0.10 0.60 2.50 n.a. 4.25 6.00 3.50 3.60 0.50 0.25 2.34 8.00 8.15 8.75 7.50 8.13 9.00 2.50 2.65 3.60 3.00 3.21 4.15 3.50 1.07 3.90 n.a. 0.34 2.60 1.875 1.00 2.75 2.00 2.60 4.20
2Q'14 0.125 0.23 2.52 0.50 0.55 2.64 0.15 0.21 1.27 0.05 0.13 0.56 2.50 2.48 3.59 6.00 3.66 4.09 0.50 0.10 2.01 8.00 8.48 8.73 7.50 8.15 8.25 2.50 2.65 2.89 3.00 3.38 4.02 3.50 0.85 4.17 n.a. 0.34 2.33 1.880 0.88 1.63 2.00 2.18 3.81
Current 0.125 0.23 2.46 0.50 0.56 2.47 0.05 0.10 0.94 0.05 0.13 0.52 2.50 2.55 3.43 6.00 3.40 4.29 0.50 0.07 1.92 8.00 8.76 8.51 7.50 8.15 7.99 2.25 2.35 2.73 3.25 3.57 3.97 3.75 1.27 4.36 n.a. 0.00 2.35 1.88 0.87 1.62 2.00 2.18 3.71
3Q'14F 0.125 0.25 2.45 0.50 0.55 2.45 0.05 0.05 0.95 0.05 0.08 0.55 2.50 n.a. 3.65 6.00 3.50 4.20 0.50 0.37 2.10 8.00 8.62 8.50 7.50 8.30 2.25 2.43 3.00 3.50 3.87 4.20 4.00 4.25 n.a. 2.70 1.875 0.83 1.70 2.00 2.18 3.56
4Q'14F 0.125 0.25 2.70 0.50 0.60 2.75 0.05 0.05 1.20 0.05 0.08 0.55 2.50 n.a. 3.80 6.00 3.50 4.10 0.50 0.37 2.40 8.25 8.62 8.50 7.50 8.40 2.25 2.43 3.00 3.50 3.87 4.50 4.00 4.50 n.a. 3.00 1.875 0.83 2.00 2.00 2.18 3.66
1Q'15F 0.125 0.25 2.85 0.75 0.75 3.00 0.05 0.05 1.25 0.05 0.08 0.65 2.50 n.a. 4.00 6.00 3.50 4.00 0.50 0.37 2.50 8.25 8.62 8.50 7.50 8.50 2.25 2.43 3.00 3.50 3.87 4.60 4.00 4.75 n.a. 3.10 2.000 0.89 2.10 2.25 2.43 3.76
2Q'15F 0.125 0.35 3.00 1.00 1.00 3.20 0.05 0.05 1.35 0.05 0.08 0.70 2.50 n.a. 4.20 6.00 3.50 4.00 0.50 0.37 2.60 8.25 8.62 8.50 7.50 8.50 2.25 2.43 3.00 3.50 3.87 4.70 4.00 4.75 n.a. 3.20 2.00 0.89 2.20 2.50 2.68 3.86
Last Change 16 Dec 08 (-87.5bp)
Next Change 3Q 15 (+25bp)
5 Mar 09 (-50bp)
1Q 15 (+25bp)
4 Sep 14 (-10bp)
3Q 18 (+20bp)
5 Oct 10 (-5bp)
On hold
6 Aug 13 (-25bp)
3Q 15 (+25bp)
7 Jul 12 (-31bp)
On hold
17 Dec 08 (-100bp)
3Q 15 (+25bp)
28 Jan 14 (+25bp)
4Q 14 (+25bp)
12 Nov 13 (+25bp)
On hold
14 Aug 14 (-25bp)
On hold
10 Jul 14 (+25bp)
18 Sep 14 (+25bp)
31 Jul 14 (+25bp)
11 Sep 14 (+25bp)
n.a.
n.a.
30 Jun 11 (+12.5bp)
1Q 15 (+12.5bp)
12 Mar 14 (-25bp)
1Q 15 (+25bp)
16
India China Japan HK Malaysia Taiwan Korea Thailand EU Indonesia UK Australia Philippines USA
Change from 05-07 avg Forecast change till 4Q13
-525
-425
-325
-225
-125
-25
75
Source: J.P. Morgan Economics
Asia ex Japan policy rate 14 12 10 8
Nominal rate
6 4 2
Updated as of 05-Sep-2014 Source: Datastream, Bloomberg, J.P. Morgan Economics. Bold figures on next change column indicates tightening.
Change in policy rates
Real Rate
0 -2
98
02
Source: J.P. Morgan Economics
07
12
175
Asian Equity Strategy Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Perspective: Asian Balance Sheets Debt/Equity
0.89 0.56 0.67 0.34 1.02 0.39 0.28 0.63 0.72 0.46 0.41 0.78
Japan Australia China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand
Debt/Assets
0.33 0.27 0.28 0.23 0.37 0.22 0.17 0.31 0.32 0.25 0.21 0.35
Debt/Mkt. Cap
Asset Turnover
0.65 0.35 0.96 0.34 0.40 0.13 0.29 0.32 0.25 0.57 0.20 0.40
0.71 0.60 0.84 0.19 0.75 0.84 0.87 0.47 0.40 0.50 1.06 1.20
Debt to Equity Ratios Quartile Distribution Chart (x)
Current Ratio
1.35 1.11 1.04 2.03 1.23 1.88 1.37 2.08 1.40 1.69 1.21 1.28
Interest Coverage
Altman Z Score
9.73 7.81 7.54 5.89 4.73 14.45 10.76 6.35 5.14 5.48 13.61 8.31
4.0 3.9 2.9 3.4 5.7 7.6 4.7 4.7 3.7 2.6 5.0 4.7
Altman Z-Score Bankruptcy-Predictor Distribution Chart 8
4.0
7 3.0
6 5
2.0
4 3
1.0
2 1
0.0
0 -1
Source: Datastream, Bloomberg, J.P. Morgan. Note: All ratios are calculated from latest financial reports available ex Banks, Diversified financials and Insurance sectors and calculations are based on weighted average of companies in MSCI Asia Pacific universe. Each box indicates quartile levels and markets with values exceeding the scale are indicated by the open-ended top box. The diamond indicates weighted average for each market. The 3 horizontal lines on the Altman z-score chart are at 1.8, 2.7 and 3.0. Companies with scores of less than 1.8 indicates bankruptcy likely, between 1.8-2.7 bankruptcy likely within 2 years and more than 3 most likely safe from bankruptcy.
17
Data as of 30 January 2014
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
Perspective: Demographics and Key Economic Statistics Population and demographics Population*** Age 2013 Growth Dependency million %YoY Ratio Japan China India Australia Korea Indonesia Taiwan Thailand Malaysia Hong Kong Singapore Philippines New Zealand MSCI APxJ
127 1,361 1,267 23 49 248 23 70 30 7 5 98 5 3,187
Foreign reserves * (US$bil) Japan Australia New Zealand China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand
1212 28 17 3993 325 291 111 368 127 81 274 423 159
-0.5 0.5 1.4 1.3 0.1 1.2 0.3 0.6 2.0 0.7 1.5 1.8 1.0 1.0
0.5 0.4 0.6 0.5 0.4 0.5 0.4 0.4 0.6 0.4 0.3 0.6 0.5
Nominal GDP Gross Secondary School Enrollment (%)
102 81 63 131 97 81 na 78 69 80 na 85 119
External (2013) Current External debt account %GDP (US$bil) % GDP
0.7 (4.1) (1.6) 2.1 1.0 (1.7) (3.6) 6.1 3.8 4.5 18.3 11.3 (0.7)
na na na 765 na 422 257 413 63 60 51 137 89
na na na 8.3 na 22.5 29.6 31.7 20.1 22.2 17.2 27.8 22.7
2013 US$ billion
Per capita (US$)
4,799 9,252 1,823 1,459 1,207 842 491 390 310 280 296 290 177 16,818
37,869 6,801 1,440 62,622 24,614 3,393 20,987 5,543 10,337 38,587 55,595 2,951 39,308 5,278
1.3 18.8 11.8 10.4 6.5 13.6 4.7 10.6 11.6 5.9 11.9 13.8 8.2 13.7
1.3 18.2 10.1 8.8 6.2 12.4 4.3 9.8 9.6 5.1 9.0 11.8 7.0 12.6
Fiscal position Fiscal deficit Public sector debt 2013E 2014E 2013E 2014E %GDP %GDP %GDP %GDP
-8.9 -1.2 -2.0 -2.1 0.6 -4.6 -2.4 0.9 -4.0 -1.4 5.2 -1.8 -3.4
-8.1 -3.1 -0.9 -2.1 0.9 -4.1 -2.5 1.0 -3.5 -2.0 5.0 -2.0 -2.8
244 29 37 23 na 67 26 36 57 41 na 41 47
242 29 36 21 na 68 27 35 57 39 na 41 48
Source: CEIC, Datastream, Bloomberg, MSCI, World Bank, UNESCO, CIA, US Bureau of Statistics, IMF, J.P. Morgan estimates Notes: Age dependency ratio defined as dependents to working-age population. Data for Gross secondary school enrollment as of 2004 except for Singapore, Malaysia (2003) *Foreign reserves as of August 2014 or as of latest data available **10-year CAGR for period 2003-2013, in local currency. *** Population data from J.P. Morgan, IMF.
18
Real GDP 10 year CAGR** Personal Disposable Income Total Per capita 10 year YoY % (%) (%) (%) (%)
10 year CAGR** Total Per capita (%) (%)
0.8 10.2 7.7 2.9 3.6 5.8 3.9 3.8 5.0 4.5 5.9 5.3 1.9
Region
North America Developed Europe
0.9 9.6 6.2 1.4 3.4 4.6 3.5 3.0 3.1 3.7 3.2 3.5 0.8
0.0 12.6 12.8 5.7 8.7 na 4.4 na 8.4 na na 11.5 2.4
Asia In the World 2013 2013 Population GDP % total % total
-0.2 10.0 12.0 4.7 7.9 na 2.8 na 13.0 4.4 na 12.0 2.7
September 2014 Market Cap. % MSCI
5.0% 7.5%
24.5% 24.9%
52.6% 0.0%
Asia Australia China Japan
49.4% 0.3% 19.3% 1.8%
31.4% 2.0% 12.2% 8.4%
18.4% 2.9% 2.2% 7.2%
CEEMEA LatAm Others
4.9% 6.9% 26.3%
6.9% 7.0% 5.0%
1.9% 2.1% 0.0%
Global
100.0%
100.0%
100%
Updated as of 05-Sep-2014
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
8 September 2014
0.2 0.4 0.4 3.7
0.2 0.3 0.1 2.5
0.2 0.2 0.0 2.2
0.2 0.1 1.1
1.0
0.6 4.6
6.1
0.2 7.1 1.2 0.5
0.9 0.1
11.6
0.1 1.2 9.8
Thailand
2.2
0.5 0.6 0.9 1.3 0.5 0.4 1.5 0.5 0.2 0.3 6.7
Indonesia
18.5
1.4
Malaysia
0.2 0.3
Singapore
2.8 0.9 0.2 2.2 0.1 1.7 5.3 1.3 0.2 0.3 15.0
0.5 0.1 0.1 0.0 0.1 0.1 0.0 0.4
7.6 6.2 6.0 36.7 2.5 7.9 15.7 8.3 5.6 3.5 100.0
535 Companies, US$7104 billion total market capitalization
India
Taiwan
1.0 0.9 2.9 7.0 0.3 1.0 2.6 0.5 2.4
Hong Kong
Korea
Australia
0.5 2.4 1.6 13.7 1.2 1.5 0.1 4.5 0.6 0.4 26.6
China
Consumer Discretionary Consumer Staples Energy Financials Health care Industrials Information Technology Materials Telecommunication Services Utilities TOTAL
0.0 0.1
Total
0.3
2.4
New Zealand
0.1 0.2 0.4 0.8 0.1 0.1
Composition by Countries and Sectors - Daily Turnover > US$5 million
MSCI AC Asia Pacific ex-Japan Weightings (%)
Philippines
0.4 0.3 0.1 0.9 0.1 0.1
0.3 0.2
0.1 0.2 0.1 1.1 0.1 0.4
0.4 0.0 0.9 0.1 0.1
0.1 0.2 0.4 0.9 0.0 0.1
0.1 0.4 0.4 2.9
0.2 0.3 0.1 2.1
2.5
0.7 3.6
0.1 0.2 2.1
0.1 0.3 0.2
0.2 0.0 0.8
0.1 0.1 0.2
Total
0.1 1.1 9.3
0.3 0.3 0.2 1.3 0.1 0.5
New Zealand
0.9 0.1
0.3 0.2
Philippines
5.8
0.4 0.7 0.8 1.2 0.6 0.4 1.4 0.5 0.2 0.3 6.6
Thailand
11.5
1.4
Indonesia
0.5 0.3 0.1 2.1 0.0 0.3 6.6 1.2 0.5
Malaysia
2.6 0.9 0.2 2.2 0.1 1.6 5.0 1.2 0.2 0.3 14.2
678 Companies, US$7692 billion total market capitalization
Singapore
1.0 0.9 2.7 6.8 0.4 1.2 2.5 0.5 2.3 0.7 19.0
India
Taiwan
0.4 2.3 1.5 12.8 1.1 1.4 0.1 4.2 0.6 0.4 24.9
Hong Kong
Korea
Consumer Discretionary Consumer Staples Energy Financials Health care Industrials Information Technology Materials Telecommunication Services Utilities TOTAL
China
MSCI AC Asia Pacific ex-Japan Weightings (%)
Australia
Perspective: MSCI Asia Pacific ex-Japan Index Composition by Country and Sector
7.1 5.8 6.2 38.2 2.3 6.4 16.8 8.6 5.9 2.7 100.0
Source: MSCI, J.P. Morgan. Updated as of 05-Sep-2014 Note: Overweight (green shading/ light shading in B&W) and underweight (red shading/ dark shading in B&W) sectors in countries is from the perspective of the regional strategy team, not country. The country recomendation is also shown with green and red shading. Note: Within Australia Financials we are UW Banks and UW Fin. Ex. Banks. Within China Financials we are N Banks and N Fin. ex. Banks
19
Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
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Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
[email protected]
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Asia Pacific Equity Research J.P. Morgan Securities (Asia Pacific) Limited: Adrian Mowat (852) 2800-8599 ,
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J.P. Morgan Equity Strategy Team and Asia Pacific Macro Team Chief Equity Strategists Adrian Mowat Pedro Martins Junior David Aserkoff Frontier Markets Aditya Srinath Christian Kern Diego Celedon Developed Markets Dubravko Lakos-Bujas Jesper J Koll Mislav Matejka Country Strategists Adrian Mowat Paul Brunker Cusson Leung Aditya Srinath Bharat Iyer James Sullivan Anne Jirajariyavech Scott Seo Hoy Kit Mak Jeanette Yutan Alvin Kwock Regional Sector Research Nick Lai Josh Klaczek Cusson Leung Ebru Sener Sean Wu Karen Li MW Kim Alex Yao Daniel Kang Scott Darling Leon Chik JJ Park James Sullivan Corrine Png Boris Kan Economic & Policy Research Jahangir Aziz Masaaki Kanno Sajjid Chinoy Jiwon Lim Grace Ng Haibin Zhu Lu Jiang Stephen Walters Commodities Research Colin P. Fenton Rates Research Bert Gochet
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