CLSA, in its 2015 market outlook, says the next 12 months will be a better year for China.
“We expect 2015 to be better as Beijing is reining in risk, allowing the economy to slow, stabilising the property market and regulating shadow banking,” CLSA says in its report, Reform Power – Securing a soft landing.
The investment group is going overweight on stocks connected to the internet, telecoms, property, insurance, construction and utilities.
CLSA says its expects more interest rate cuts as China’s central bank embarks on a program of credit easing to stabilise the property market:
“We are positive on the market next year as monetary easing will lower the risk premium. The PBOC (People’s Bank of China) could ease more than expected and is following the footsteps of other central banks. We expect at least one to two more rate cuts of 50-60bps and two for the reserve-requirement ratio (RRR) of 100bps.”
Here are CLSA’s top BUY recommendations, for China stocks listed in Hong Kong and the US, for 2015:
Alibaba (BABA US): Internet. Mobile commerce was a big beat in terms of GMV (Gross Merchanidse Value) growth and monetisation, due to strong user growth and high purchase frequency.
Baidu (BIDU US): Internet. Mobile contribution reached 1/3 of total revenue. Mobile growth will accelerate with rising 4G adoption and falling data tariff. Baidu has stepped up efforts in developing O2O services
CCCC (1800 HK): Infrastructure. Large exposure to urban infra and region expansion driven by China infra fund & Silk road fund.
Ping An (2318 HK): Insurance. Ping An announced H-share placement and offer price is much better than expectations. The quality of investors should be better.
Galaxy (27 HK): Hotels & Leisure. The company is driving growth in both mass and VIP business. Galaxy Phase II which construction is progressing well and is on track for mid-2015 opening.
Great Wall Motor (2333 HK): Automotive. New models released next year especially highly anticipated SUV H8. Profits from exports will improve further.
Huadian Fuxin (816 HK): Power. Nuclear energy will contribute to revenue, which gets supportive policies from government. Meanwhile company’s high gear will benefit from interest rate cut.
JD.com (JD US). Internet. Expected to turn profitable in 2016, but could surprise and reach net profit earlier. User growth accelerated. Profit was boosted by marketplace growth and ad sales
PCCW (8 HK): Telecoms. Gaining market share as industry consolidates in mobile and paid TV business. The company’s paid TV and IT solution business could surprise.
Shenzhou Intl (2313 HK): Consumer. New Vietnam factory will expand production. Order growth is expected to be strong with sportswear being the major growth driver.
Vanke (2202 HK): Property. Beneficiary of property recovery with low inventory, quality land bank, and manageable gearing.
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