From Rat to Ox

In many ways, the Rat is an apt analogy for 2008. It was volatile (runs around a lot), problems multiplied
exponentially (breeds quickly) and sometimes, it looked like there was no end (rats are hard to get rid of).
We know something for certain — the year of the Ox will not be the same and it will be no less
challenging: demand is weak, profitability is low, exports are falling, and wealth has been destroyed.
In this report, we asked our analysts how Greater China can respond to this uniquely challenging macro
environment. Their responses focussed on three main areas — policy, currency implications and
redistribution of profits in a more pronounced government-led rather than export-led economy.
Firstly, policy: Governments have reacted swiftly with fiscal and monetary stimulus packages. We expect
more announcements — in the near term, details on infrastructure spending and property market support
amongst others. More structurally, announcements regarding new pricing mechanisms in Chinese
industries, ranging from electricity to water and fuel, are likely to have a longer-term impact.
Second, currency: Could China use its foreign exchange regime to support its export sector, i.e., allowing
RMB depreciation? Such a move would have an important knock-on effect on the rest of Asia. However,
FX strategist Richard Yetsenga argues a weaker RMB could complicate China’s broader monetary policy
objectives, and are therefore unlikely to resort to a short-term measure to improve competitiveness.
Third, profit redistribution: While we are not despondent about earnings prospects, strategist Steven Sun
highlights that there will be a growing disparity amongst sectors in the economy. We also discuss
government versus private sector earnings that will shift somewhat with the listed or private sector being
more of a latent beneficiary. Lower wages and raw materials already redistribute wealth away from
labour, while greater government involvement can crowd out private sector investments.
In many ways, we hope the Ox is an apt analogy for 2009 — hard working, steady, a little bit slow but
able to cope with a heavy burden.

目录

Key questions that shape 2009
for Greater China 4
Economics 5
Equity strategy 8
Foreign exchange strategy 16
Credit 18
Equity
– Banks 20
– Property 23
– Technology 25
Detailed macro forecasts 28
Disclosure appendix 31
Disclaimer 33