[ET Net News Agency, 9 July 2018] Credit Suisse thinks the A-share market has momentum
to tumble further over the next two-three weeks. Negative factors that haven't been fully
priced in include: (1) chain reactions from punitive tariffs between China and the US, and
(2) fund outflow caused by RMB depreciation and expectations of its further depreciation.
The research house said valuations have almost reached historical lows, and fundamentals
remain solid - 1H results might not see obvious deterioration, as implied by the
preliminary results; industrial profit growth speeded up to 16.5% in May.
A rebound will most likely happen once the following catalysts arise: (1) positive
surprise from June total social financing data releasing in July, (2) the government
decides to take a more proactive fiscal policy, and (3) the US-China trade war tension
alleviates.
Credit Suisse likes: (1) banks as the sector benefits from higher credit quota and RRR
cut. It has 0.8x PB, lowest in all sectors. Dividend payouts are concentrated in July, (2)
broader consumer as it is defensive against the trade war and slowing FAI growth.
It recommended: ICBC (01398), CCB (00939), ABC (01288), Midea (000333), Wuliangye
(000858) and Qingdao Haier (600690). (KL)