Get access to all our content — subscribe today 30 day free trial. See full results. The ups and downs of the trade relationship between China and the US, as well as the pressure on growth, not just globally but particularly on the mainland, meant Qu had to shed the conventional way of analyzing economic trends to forecast growth as the broader picture around politics became important. Qu, who has worked at HSBC since and been an economist since , has done that remarkably well. Both those predictions played out well. Qu was voted by participants in the Asiamoney Brokers Poll as the best economist in the region, in a year when business confidence was sapped by the US-China trade war, particularly after the initial breakdown in trade negotiations between the two countries in May.
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Get access to all our content — subscribe today 30 day free trial. See full results. The ups and downs of the trade relationship between China and the US, as well as the pressure on growth, not just globally but particularly on the mainland, meant Qu had to shed the conventional way of analyzing economic trends to forecast growth as the broader picture around politics became important.
Qu, who has worked at HSBC since and been an economist since , has done that remarkably well. Both those predictions played out well. Qu was voted by participants in the Asiamoney Brokers Poll as the best economist in the region, in a year when business confidence was sapped by the US-China trade war, particularly after the initial breakdown in trade negotiations between the two countries in May.
But Qu, who works with a team of four others focusing on Greater China, is bullish on the medium-term and long-term prospects of the mainland. In contrast, Qu predicts that the quality of labour will actually improve in China, the emphasis on infrastructure development will pay off and the thrust given by private companies on innovation and upgrading their technology is positive. He covers about 20 stocks listed on the domestic stock exchange that focus on the consumer discretionary sector, including textiles and apparel, luxury goods, cosmetics, sportswear and footwear.
His reading of the market, thanks to over 10 years of experience, stood out in a year when tariff threats between the US and China created constant uncertainty among investors. Take Li-Ning Company as an example. The Chinese athletic and footwear company was set up in by its eponymous gymnast founder. Second, he says that Li-Ning is a pure Chinese sportswear company, meaning it focuses just on the fast-growing mainland market, which makes it attractive to investors targeting growth stories in the country.
And third, Chu says, the company catered well to changing fashions in China, where people are increasingly leaning more towards casual wear. Chu adds that he will continue to focus on sportswear companies in too, given the possible windfall for the sector from the Tokyo Olympics. One of them, he says, was in the China oil services industry, pointing to Hong Kong-listed China Oilfield Services as his best stock pick of So while it has been a difficult environment, there have been places where capital could be put to work.
Forecasts for share prices and operating performances are at more realistic levels, but the trajectory of commodity prices creates some potential risks in the year ahead, reckons Hilboldt, who has worked at HSBC since and been in Asia for more than two decades. In addition, new supply from China and the Asean region will likely weigh on the downstream oil sector, creating a more difficult environment.
This will stimulate the 5G smartphone launch, which will likely trigger a smartphone replacement cycle. This will be favourable for the market. In the middle of November, the firm announced a tie-up with US chipmaking firm Intel to supply Intel-powered personal computers with 5G modems from Hou also points out that the semiconductor industry faced its worst troubles in the first half of since the global financial crisis. While that was difficult, he says most semiconductor stocks, globally and regionally, held up much better than expected.
He was ranked as the number one regional semiconductors analyst in the and Asiamoney Brokers Poll as well. But some things have still managed to take him by surprise in They have companies such as Samsung Electronics and MediaTek in their sights. Change is unsettling. No one knows that better this year than bankers and analysts at CLSA, where the senior management changes included the exit of former chief executive Jonathan Slone, star strategist Christopher Wood and Australian analyst Brian Johnson, as well as the departure of about 30 CLSA bankers in the Australian equities business.
Laurence Balanco, voted the best quantitative and technical analyst in the brokers poll tells Asiamoney that the bank has rebuilt and filled the empty posts; his two-person quants team and the nine-member technical team have kept about their daily business. First was his thinking that the price of gold would go up, and the second that there would be rebound rally for risky assets in the first half of the year.
That was the most challenging part of the business. The year also had some surprises in store for Balanco, particularly in the US market. Closer to home, the outperformance by the China domestic A-share market was also a surprise, he adds.
There were three main drivers of volatility. First was the fact that the market was looking for signals from the Chinese government around policy loosening.
Second was more macro related, as the tit-for-tat trade tariffs between the US and China took a toll on sentiment. Agility was key for Kwok and her team, and will continue to be important in too. The changing dynamics of the market mean it is difficult to have one view now and maintain that same view for 12 months, she says. There are opportunities in China, but the market is constantly being tested.
Kwok, however, sees some promise in a number of small and mid-cap names with appealing valuations — but with a caveat. Because if companies have their production facilities outside the mainland, they are less likely to be affected by the trade-related tariffs imposed by the US against China. A low interest rate environment pushed Shing, who works at Haitong International as a director of research in the small and mid-cap team, to also focus on companies that tick a few boxes.
These include having a clear operating cash flow, a clear dividend policy and a good balance sheet, he tells Asiamoney. The same was the case with shoemaker Stella International Holdings, which was covered by Shing.
The firm has a strong dividend policy and has the majority of its production bases outside of China. There is a sense of panic among investors, given the uncertainty. So investors are focused on companies with a strong balance sheet, strong operating cash flow and a clear dividend policy.
Shing should know, given he has more than 13 years of equity research experience, having previously worked across a number of other sectors including China utilities, renewable energy, telecommunications and industrials. He has been with Haitong International for four years.
Liu focuses mainly on the dairy sector, food and beverage, and personal care. This year, the overall China consumer staples index outperformed the MSCI China index, with the industry posting its best performance in the last five or six years, Liu tells Asiamoney. That naturally gave him some great opportunities.
But we thought the new management showed stronger execution power and operational capabilities. So we picked this over Kweichow Moutai, a more popular brand. That could change, he reckons, predicting a delayed impact to the consumer staples market in due to an economic slowdown in the country. There will be other opportunities, however.
Liu is planning to focus more on the dairy market in , especially the upstream segment. The first half of was difficult, before the market saw an upturn at the end of Upstream companies can benefit from inflation, as they can expand their profit margin by hiking their selling price.
Technology-focused companies in China have learnt very quickly how to make the best of bad situations. We are more fundamental focused in picking stocks and use a much broader approach to identify winners and losers in the supply chain.
He also emphasizes regional collaboration within HSBC, which helps add more depth and breadth to its offerings to investors.
Take the example of Luxshare Precision, a Shenzhen-listed firm that designs and makes cable assembly and connector system solutions for consumer, automotive, cloud and enterprise applications. He and his team not only spoke to the management team at Luxshare, but also visited their manufacturing plants in Vietnam to provide the best insight on the stock and the company to investors. That extensive due diligence is unlikely to change — the HSBC team does in-depth coverage by talking to industry experts and having a localized approach to their clients.
He tells Asiamoney that his base case was that the China market would bottom out at the end of last year. On the movement of the dollar, Wood reckons the currency has peaked, and says that he hopes it stays that way. But he adds that one of his main concerns for will be another dollar rally. Speaking to Asiamoney at the end of November, Wood also points to two other worries: the uncertainty around a trade deal between the US and China, and the liquidity squeeze among non-banking financial companies NBFCs in India, which have struggled since a high-profile default at the end of The difference, however, in working at Jefferies versus at CLSA is the fact that the US firm has partnerships with various local research houses.
Jefferies has similar tie-ups with firms in other countries too, including South Korea, the Philippines and Malaysia. First was the government bailout of Baoshang Bank in May — the first time the regulators had stepped in to help out an ailing state-owned bank in about two decades. Next came a liquidity boost in July for Bank of Jinzhou, a city-level commercial bank, by a handful of government-backed asset managers. And then in November, news came of two rural commercial banks in China facing a liquidity crisis.
So investors need to comprehend this on a case-by-case basis: what will be the next approach from China when they need to rescue other banks? That backdrop, alongside worries about growth in China and the protests in Hong Kong, weighed on banks both in the city and on the mainland. He points out that Chinese banks offer the highest dividend yields among the Asian banks covered by HSBC, standing among the top three in terms of returns on earnings in the region.
Those worries around transparency mean more in-depth due diligence into the quality of the recommended banking stocks is needed. He has three main worries, he says. One is the introduction of the new benchmark rate for bank loans, called the loan prime rate, in China in August. Secondly, he is concerned about trade tensions and the impact on export-related sectors. And third is whether China will engage in large-scale monetary stimulus to revive its slowing economy.
Asiamoney Brokers Poll 2019: HSBC proves its mettle
Get access to all our content — subscribe today 30 day free trial. Even after Citic Securities, one of the most powerful financial institutions in China, acquired CLSA in , the research has maintained its reputation. The merger fostered doubts about whether the combination could be a world-beater. The firm only began to research Chinese onshore A-shares in April , covering just a few names.
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