Category: Money tips Release Date: 2007-03-17
2006 is the Chinese Year of the Dog, investment in China's stock (shares of Chinese here, mainly as a reference MSCI stock index, MSCI stock index from the Morgan Stanley Capital International
Barra introduced, at present mainly by the MSCI China index in Hong Kong and other overseas markets, some large companies listed on China's composition, not including A shares temporarily - Editor's note) will be controlling bulldog. We expect that China shares the potential total revenue should be between 14-19%. This is mainly due to strong growth in macro-economic support to those downstream industries, and consumer driven industries, as well as the expected appreciation of the renminbi, the main limiting factor is the liquidity risk.
We believe that the government implemented a series of policies to stimulate domestic consumption in 2006 will be a major driver of macroeconomic growth. Deepening regional economic and trade ties and China's exports to the U.S. growth, declining U.S. consumer demand will reduce China's economic growth potential of the decrease in the impact.
Benefited from the macro-economic motivation, the downstream industry profitability will be restored. We expect that, taking into account the rate of corporate earnings and economic growth in highly relevant historical factors, the company's profit margins will be maintained at a high level. We believe that, depending on yuan appreciation and a more favorable balance between economic growth, the investment attractiveness of the downstream industries will be largely improved. This year, the upstream industry will face higher tax burden and pressure of overcapacity.
Changes in liquidity, taking into account the above three key factors - the yuan appreciation, asset allocation weights and potential upcoming IPO projects, we believe that Chinese stocks will lead to greater benefits. We recommend that middle-level consumers of products and services industries, downstream energy and infrastructure stocks, as well as a selection of real estate developers and financial service providers.
Between the increase in the 14-19%
China has made modest, but the stock off than most market participants expected the performance to be better after 2005 - MSCI China Index in U.S. dollar terms to achieve a 21% growth - we believe that the bull market will last until 2006 years, the potential total revenue will reach 14% -19%. Our view is based on the yuan continues to appreciate, more favorable macro-economic background, a stable corporate profits and liquidity risk is likely to focus on the upstream industry foundation.
Early in the first quarter, the good macroeconomic performance in the recent promotion, the market should continue to consolidate the existing position. The latter part of the first quarter, in a double-digit profit growth driven by expectations, the market will begin to rise. In San Siyue copies, because the market is worried that China's economy will be slowing down in the second half is expected to drag the U.S. economy and corporate profits announced by the difference in the expected results under the impetus of market performance will be revised downward at this time. We believe that consolidation will continue into the second quarter, even in the third quarter. After that, in our view, driven by strong macroeconomic data, released by the company's continued strong earnings growth expectations of favorable factors, the market will again be strong.
If we MSCI as China's benchmark stock index, the Chinese at least 10% of the stock price increases, then the vast majority of market participants take into account the expected rate of 3.5% dividend interest rates, as well as the renminbi non-deliverable far term contract, as expected, that is, 4% revaluation of the factors, we estimate MSCI China Index will rise 14% -19%, close to 2005 levels. This means that H-share index will be the end of 2006 to reach 5900 points. Driven by structural growth factors, we expect, as in 2005, this year's proceeds will be because of greater earnings per share on the basis of the growth to be revised upward, not because the earnings upward causing the problem.
The potential price increase should be between 6-10%: Taking into account the lag of earnings growth per share, we estimate MSCI index of stocks will be able to achieve 7-10% return, target-bit low-end will not be taken into account the The reason is the future price-earnings ratio will be from the current historical average of 10.7 times to 12.9 times the level of that return, which means that 20% of the price increases of space. Taking into account since 2002 earnings estimates over time, usually within a year, constantly revised upward, the potential upward revisions will enhance the profitability of the market the vast majority of people on the earnings per share growth expectations.
Exchange surplus revenue should be between 4% -6%: expected to be an investment in China's stock returns in 2006 a very important part of it. Since last July 21 has been the reform of the RMB exchange rate formation mechanism, the current 12-month yuan non-deliverable forward contracts had risen to 1 dollar 7.74 yuan, which means that the appreciation of the RMB exchange rate would be 4%.
Dividend rate will raise interest rates at between 3% -4%: the majority of people currently on the market is the MSCI China Index will be expected to reach 3.5% level. Given China's companies are generally spending levels of dividends, based on stable earnings growth and solid financial statements based on profit expectations are achievable.
Downstream and consumer industries are Niugu
Although this year and last year China Equity able to achieve similar levels of total revenue, but we believe that this growth momentum will be very different. To promote the industry profit growth this year will be very different last year: Last year, energy and telecommunications industries will be the main contributor to earnings growth index, these industries and other industries the main difference between the performance of a continuous level of profitability over the month revised upward, if you take out these two industries contributed to the exponential growth, we found that level of profitability last year, MSCI's index will be stronger than the market for 18 months before the expected low 2 percentage points. We believe that this year, because we have a pure upstream oil industry to see more lack of confidence in the company, these two sectors the contribution of the index will be reduced, although we still maintain a positive evaluation of the energy industry as a whole. At the same time we have the prospect of downstream consumption industries are far more optimistic, these "elite" in most of the poor performance of last year.
A wider range of earnings per share growth will become the major driver of growth this year: last year's imbalance of growth in different sectors, this year's earnings per share growth will be located in different occupations. Last year, MSCI index registered in China for half a downward trend in stock returns. Of particular note, the market agreed that last year's disappointing performance in earnings per share down 26% of the IT industry's profitability will be achieved this year, more than 50% increase. We expect that upstream industries, such as energy and raw materials, earnings per share more moderate pace of expansion, while the downstream industries will achieve very positive performance.
In our view, too many risk factors will affect China's stock prices. We are focused on the market, the vast majority of people in the next 12 months, earnings growth expectations, and even on the MSCI China Index, the historical average of 12 months earnings multiplier effect. We are investing in China stocks and holds a positive attitude of an important support for evaluation of our macroeconomic research team in China's economic growth this year, China held a positive evaluation. We believe that China will gradually be the main driving force of economic growth from trade to domestic consumption. Our macro-economic team believe that China's exports will maintain a moderate pace of growth, while fixed asset investment should be to maintain strong growth momentum. Furthermore, we believe that the recent upward revision of GDP, increase of 280 billion U.S. dollars should be on reducing macroeconomic risks and uncertainties of the action, to reduce the level of equity risk premium, potentially preventing the stock price down.
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