Contents
3Q09: Time to confirm the ‘V’ 3
We believe the market may top out at the current level and head lower on signs of a
failure of a V-shaped recovery to materialise in the US and increased risk aversion.
Chinese equities will also correct, but should outperform on relative growth and liquidity,
in our view.
3
Weaker-than-expected US macro may hurt equity markets 3
Chinese liquidity should remain favourable for now 4
Investment recommendation 6
We believe the market may top at these levels and consolidate with a 10-15% downside.
We recommend that investors raise cash, trim beta and add alpha. Aside from banks
where we favour mid-cap banks over large state banks, we recommend rotating into bigcap
blue-chips.
6
Banks: Overweight; add weighting of mid-cap banks 12
Energy: Equal Weight 13
Oil & gas 13
Telecom: defensive, but not much near-term upside 14
Insurance: Overweight; China Life is our preferred pick 15
Property: Overweight; switch out of high-beta to blue chips 16
Industrials: Equal Weight 17
Materials: Underweight 18
Cement: Underweight; prefer CNBM to Anhui Conch 19
Information technology: gaming is our top pick 20
Consumer staples: Overweight 21
Consumer discretionary: Overweight 22
Transportation: Underweight 23
Appendix:
China stocks – Key valuation data and
key performance data 26
Economics charts 31