Global Liquidity: Quantitative Easing Every OECD central bank is doing it ….. Aggressive injection supports asset prices ….. Source: Credit Suisse (4/2009) G3+ Central Bank Balance Sheet Size 50 100 150 200 250 300 350 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Euro Area Japan UK US Size index (100 at Jan ’07)
Global Economy: Where are we now ? ‘ Green shoots’ are appearing Source: Credit Suisse (4/2009) G4 Economies - PMI New Orders Emerging Economies - PMI New Orders Index Index 16 20 24 28 32 36 40 44 48 52 56 60 64 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 US Euro Area UK Japan 28 32 36 40 44 48 52 56 60 64 68 72 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 India China (sa) Russia Brazil
China: Recent PMI offers a light in the tunnel Source: CITICS as at May 2009 PMI rose for third consecutive month PMI New orders up faster than PMI finished good inventory, showing economic recovery
Has the Chinese economy bottomed out ? Encouraging signs in key sectors Property Sales vol show stabilizing Primary Market Power output shows sign of recovery China: Monthly Power Generation Growth (Year-on-year Percentage, %) Property Sales vol show stabilizing – Source: Goldman Sachs as at May 2009 (Primary market — Beijing, Tianjin, Shanghai, Hangzhou, Guangzhou, Shenzhen, Chengdu, Chongqing, Wuhan and Nanjing) Power Output shows sign of recovery – Source: China Electricity Council and Citi Investment Research as at April 2009)
China Auto sales to rebound on re-stocking Trailing 12 month inventory days Monthly passenger vehicle sales and yoy sales growth Source: CAAM as at May 2009
China Consumer confidence – the next to rebound? Source: Bloomberg, National Bureau of Statistics as at May 2009
Trend of massive earning downgrade is reversing China — Earnings Revision Index Source: IBES Aggregate and Citi Investment Research and Analysis as at May 2009
China Resilient earnings and supportive valuations Source: JP Morgan (4/2009) * 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. 44.4 20.4 23.0 22.5 17.3 2010E -9.5 -0.8 -10.7 -9.8 -15.1 2009E Earning growth (%) -32.6 -9.7 -15.4 -22.1 -10.3 2008E 1.7 3.2 3.7 3.0 4.3 Current Trailing Div. Yield (X) 1.2 1.8 1.3 1.8 1.2 Current Trailing P/BV (x) 14.0 12.3 10.9 12.8 10.0 12m fwd 14.5 12.9 10.5 15.5 9.2 Current Trailing P/E (x) 13.3 China 7.6 11.2 10.7 11.5 2009E Korea EMF Asia USA * Global * Country ROE (%)
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