Credit Suisse, – 10 themes from the AIC -The key messages

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AIC – 10 themes from the AIC ------------------------------------------------------------------------------
The key messages


● On this 14th AIC by Credit Suisse with over 2,000 investors and
270 corporates we have been able to gain some very interesting
insights into markets and investor sentiment.
● We have also been able to gauge the level of optimism or lack
there off in the corporate presentations and one on one meetings.
● In this note we highlight ten themes that we have gathered from
the week-long AIC.
1. Managements are optimistic
● Positive tone: Almost everyone (40 plus companies and most
panelists)!
● Neutral: Mindray Medical, Esprit, Cathay Pacific, HK banks (Bank
of East Asia, WingHang), Telecoms (Mediatek, HTC, PLDT),
Utilities (CLP,HK & China Gas)
● Negative: Pacific Basin
2. Best performing in 2011: Energy and China H shares
● AIC attendees voted Energy and China H shares to be the best
performers in 2011. In ASEAN, Indonesia is the top pick.
3. Food inflation to ease in 2H
● Food price inflation to ease in 2H11, helping inflation as a whole
(CS global strategist)
● Oilseed crushing – the worst appears to be over in 3Q/4Q (Wilmar)
● Expecting palm oil and sugar prices to soften in 2H11 (Tingyi)
4. Energy – gas is becoming attractive
● Oil has to rise a lot more to derail growth. On the Middle East,
wealthy economies have the ability to deal with unrest (CS global
strategist)
● Japan nuclear crisis should not cause China to cancel its nuclear
power construction programme, but could lead to delays
(Professor, Xiamen University)
● Natural gas is becoming increasingly attractive for China as a
quasi clean fuel source (Professor, Xiamen University)
5. Japan earthquake – limited impact near term
● From Lenovo, Skyworth, HTC, Samsung Electronics, PT Borneo
Lumbung and Yue Yuen
● ASE (2311 TT) sees near-term disruptions from lack of BT resin.
6. China – optimistic on demand
● Demand for excavators strong, prices are likely to rise (Lonking)
● China starting to rebound (Lenovo)
● Cement prices stable/positive in Guangdong, Guangxi, Shanxi
(CR Cement)
● Pricing power remains – price adjustments accepted by
consumers (Tingyi)
● New high-speed railway in China to be key driver of growth
visitation to Macau (Galaxy)
● Expecting 10-15% sportswear sector growth (Anta)
● Aggressive new retail store expansion in 2012: 40 plus openings
in China versus 180 in Hong Kong/Asia now (Sa Sa)
● China is the new growth engine (Esprit)
7. China – foreign brands facing issues?
● Local brands – stronger in rural areas – are taking back share
from foreign ones – stronger in urban China. (Skyworth)
● Food & Beverages – China remains a difficult market with
overcapacity, but has made significant headway in Vietnam,
Indonesia etc. (FNN)
● Demand for lower-margin parallel import toiletries / cosmetics has
been strong versus own brands (Sa Sa)
8. Malaysia – transforming?
● Closer working relationship with Singaporean developers (UEM
Land)
● On the Economic Transformation Programme, the prime minister’s
office did two rounds of KPIs with cabinet ministries and some
have not met their targets (Malaysia government performance
management unit)
● Positive outlook for the Malaysian construction market (IJM)
9. More shipping bankruptcies
● Banks more stringent with enforcing loan covenants
● More shipping bankrupcies possible
10. Banks – flat NIM
● Thailand: expects competition to keep margins flat (Bangkok Bank)
● India: not expecting margins to come under pressure (HDFC) /
maintaining NIMs (ICICI)
● Hong Kong: expecting margins to stabilise (Wing Hang)