1. Commodities
Energy
Chinese price hike unlikely to significantly slow demand growth
On the contrary, in the near term, the announced hike will
likely incentivize higher refinery demand for crude oil,
alleviating domestic shortages of refined products.
Chinese domestic oil prices to increase by 18%
The announced increase in Chinese prices will not, in our opinion, depress
Chinese demand growth to any significant degree. On the contrary,
historical evidence suggests that in the near term it will likely help alleviate
the shortages of refined products that are plaguing the country, supporting
near-term crude demand from refineries. This is due to the higher
incentive for refineries to bring more products to the market. In the
medium term, we believe that the negative impact of the price hike on
demand will be very limited - less than 0.3% of current Chinese demand or
6% of our estimated Chinese demand growth for 2008.

2. 6-23 Asia-PacificSummary

Focus Items
South Korea: Machinery: Ship Building: Valuations fair but risks skewed to the
downside 1
South Korea: Energy: Oil - Refining: Deregulation & price hike in China; neutral
impact 2
China: Telecom Services: Regulation is king - navigating the potential changes 3
China Agri-Industries Holding (0606.HK): Higher gasoline price to boost biofuel
earnings; Reiterate Conv. Buy 4
New Oriental Education & Technology Group Inc. (ADR) (EDU): A series of
unfortunate, but transient, events

3. Global Economics Weekly

Soaring Oil Prices Are
Market for Global Equities
Over the past few months, investor concern
has shifted from the risk of a financial
meltdown to the risk that the global economy
will succumb to stagflation in the wake
soaring commodity prices. In
commentary, we study the interaction between
oil prices and global equity markets.
preview our conclusions, we show that
most countries, oil prices and equity indices
have been negatively correlated. This
especially true whenever oil prices
moved higher on the back of supply-induced
shocks, as is increasingly the case today.
However, our econometric estimates suggest
that very little of the weakness in equities
be attributed to either lower earnings views
response to higher oil prices or higher
interest rates. Rather, the bulk of the negative
correlation between oil and equities can
explained by the fact that risk aversion tends
increase when oil prices rise. This suggests
that fading oil price increases by
equities can generate profitable trading
opportunities.
More broadly, past oil spikes have tended
usher in bear markets for equities only
accompanied by a significant decline
economic growth and rising inflation.
current environment, our baseline scenario
sees global inflation peaking in the
quarter of this year, and for global growth
exceed its 25-year average in 2008 and
While this does not mean that equities
necessarily rally from here, it does mean
higher oil prices are unlikely to trigger
sell-off in global stock markets.

4。 China: Machinery: Construction
Constructing for China: 5 initiations – CRCC (Buy), CRG (Sell)

5。ACTION
Removed from Asia Pacific Conviction Sell List
China Mobile (HK) (0941.HK)
Removal from Conviction List, but consensus is still too optimistic

6。COMPANY UPDATE
China Agri-Industries Holding (0606.HK)
Buy
Higher gasoline price to boost biofuel earnings; Reiterate Conv. Buy

7。China: Metals & Mining: Coal
Mgt conf. call takeaway +ve: all about earnings security/visibility

8。6-24 Asia-PacificAfternoonSummary

Focus Items
China: Metals & Mining: Coal: Mgt conf. call takeaway +ve: all about earnings
security/visibility 1
Baoshan Iron & Steel (600019.SS): First take: Potential August price hike in line
with expectation 2
Taishin Financial Holdings (2887.TW): May-08 data re-affirms potential consumer
finance revival in 2H2008 3
Aban Offshore (ABAN.BO): Looking for growth potential beyond FY10E;lower TP
but retain Buy 4
LG Dacom (015940.KS): Lowering target price as higher subsidy reduces NPV
per VoIP sub

9。BRIC Monthly

Rising to the Inflation Challenge
Inflation has been an ongoing global concern
since last year, with global headline and core
inflation reaching almost 6.0%yoy and
3.5%yoy respectively in May—the highest
levels since 2001. However, we expect global
inflationary pressure to ease by the end of
2009, on the back of our forecast of a global
growth slowdown, and the likely easing in
food and energy inflation.