Adopt a more dynamic approach to Value in on- and offshore China. China Sportswear Sector: A fashion for fitness. Electrolyte/LiPF6 prices have corrected 35%/54% from the peak in 1Q22, but we believe this is just the beginning of a downcycle. Despite near-term headwinds from COVID-19 resurgence, normalising consumer behaviour should lead to a strong rebound in out-of-home spend vs the fading at-home consumption, while some behaviour (e-tailing) might linger for longer. China 5G capex is controlled, up just 5% YoY in 2021, but 5G's prevalence has been a driving factor for cloud penetration and edge computing. The gateway to our distinctive research. China Healthcare Sector: Efficacy ranking of leading domestic Covid vaccines. We are most bullish on the biotech, contract research organisation (CRO), and medical device subsectors on their potential for continued innovation and relatively low policy exposure risk. Cathode and electrolyte prices softened in 2Q, amid increasing supply capacity on a downstream demand dip after the lockdown. China Technology Sector: Hardware outlook 2020. Cloud IT infrastructure spending is delivering a 10% CAGR, vs -1.2% CAGR for traditional IT infrastructure, driven by the rising number of connected devices and video applications, proliferation of cloud services for enterprise and consumer, and accelerating AI data analytics. China Sportswear Sector - 2H22 outlook: Back to the lane. For offshore wind, we calculate capacity addition could reach 52 GW and tendering volume could pick up significantly in 2022. We believe the basic services segment will benefit from the property completion upcycle and the leading players are better positioned to reap more upside. For the past month, we see SB investors buying Communication Services and Real Estate, while selling Financials and Consumer Discretionary. China Market Strategy: Identifying winners and losers from CNY depreciation. We expect the internet CSP growth to slow down in 2022 due to consumption weakness and regulatory impact. TSMC is likely to see a firm 4Q22 but flags a moderate 1H23 correction. We see upside for PDD and Kuaishou (S&M saving) and downside for BABA and Meituan (food delivery). During the recently held 'Leaders' Summit on Climate', hosted by the US, several countries raised their 2030 greenhouse gas (GHG) emission reduction targets. China Market Strategy: Ride on domestic recovery and resilient export. China's BOPET film industry originally supplied to low-end markets such as packaging. We observe a clear trend of recovery in consumption, despite a certain level of moderation in the short term. China Market Strategy: Power shortage tends to be short lived when administrative measures step in. While Hong Kong market volumes have been weakening, Southbound investor share of gross turnover remains strong at 30% (though declined from 32% last month). China Auto LiDAR industry: A promising sensor for vehicle autonomy. Factoring in inflationary BOM cost pressures, only evolutionary spec upgrades and marginal Russia impact (3% of units), we trim 2022 from 1.45bn to 1.42bn (+4.4% YoY) and 2023 from 1.51bn to 1.49bn (+4.7% YoY). We expect manufacturing upgrades and technology progress to drive advanced machinery to further proliferate among various industries. Faced with challenges arising from the global pandemic and heightened geopolitical tension, China's technology self-reliance and supply-chain security have never been as important as today. CS research teams have continued to explore this theme. NEV and renewable energy are the major beneficiaries from the replacement of ICE cars and fossil fuels. APAC Quantitative & Systematic Strategy: China mutual fund positioning - 2022 review. We update our raw wafer supply/demand model, and maintain the supply side expectation for global 12" raw wafer capacity growth slowing down from an 8% CAGR in 2017-19 to a 3% CAGR in 2020-22. It was dominated by companies from the technology, consumer, industrials, healthcare, and property sectors. This estimate is based upon 16 Credit Suisse Equity Research Associate salary report (s) provided by employees or estimated based upon statistical methods. While applications are potentially exciting, there is no 5G 'killer app' for mass-market consumers as yet, in the way that streaming media was for 4G uptake. Asia is less export-dependent than in GFC, and most domestic economies have better growth momentum than DMs. 28% corporates held a neutral tone, having doubled from 14% in 2020. The market's big P/E premium magnifies the risks. Key drivers are (a) cyclical demand recovery after three years of continuous volume decline in 2018-20, which is estimated to boost 2021 PV annual demand by ~6 pp. IPv6 available. China Market Strategy - Dual Circulation (part 1): Technology self-reliance (). I frequently get asked by students and other young professionals how I've made pivots, received offers and reached final stage interviews from top firms like Morgan Stanley, Credit Suisse, LSEG, BCG to name few so I've made an e-book called "the big pivot" documenting everything. Better affordability helps poorer economies, as dense energy helps productivity. No much further policy risks apart from strong execution of existing rules. China Internet: Platform regulationnavigating the competitive landscape. We also expect about 60 new builds of hyperscale datacentres each year in 2020/21, as well as the transition to universal spine-leaf architecture to drive the demand for optical modules. China Market Strategy: China Back to Spend 3: On the road again! ~16% of China retail sales is at huge risk, given least 28 large and medium-sized cities in China have announced lockdown measures since late March. The outflow on 24-Feb-2021 reached US$2.6 bn, the largest one-day outflow since the beginning of the programme and representing a 3-sigma move. The story of the leading domestic brands gaining market share is also playing out, as seen on the Taobao/Tmall platforms. Domestic brands trended softly on Tmall during Double 11. At present, despite the coal supply being relatively sufficient for the early stage of the heating season in northeastern China, further stock is not guaranteed. In the materials space, the demand increase and tight supply are expected to create a favourable supply-demand dynamic for steel and cement sectors, boding well for prices and profitability. China xEV Battery Value Chain: Electrolyte and SeparatorProfitability divergence ahead. Whilst we have a positive view on the sector, post the strong outperformance of the sector (rallied ~55/70% in A-/H-share in 2020), our sector and stock selections are based on clear growth profile and identified catalysts. We prefer JD, Midea and Xiaomi as the biggest winners and downgrade Gree/Robam to NEUTRAL/UNDERPERFORM. For the quarter, funds added to positions in I.T., Industrials and Staples, while reducing Financials. We take a deep-dive of anti-monopoly and data regulation, the two key areas that affect every internet platform, as well as subsector specific regulation to help investors get perspective of regulatory moves. As the State Council reaffirms its plan to continue drug and device GPOs in the first five-year plan for public medical insurance, we believe the scope of future national GPOs would expand beyond generic drugs and high-value medical consumables, given that a number of provinces have conducted or plan to conduct GPOs for the non-drug/non-medical consumable healthcare product categories. We believe the China PD-1 market could reach Rmb40-45 bn peak sales by 2030E, given the large cancer patient population, PD-1's fundamental roles and a long-term annual pricing of Rmb30k, which corresponds to ~1.3 mn patients on PD-1 at peak. Telecom and infrastructure. China's economy is also facing mounting imported inflationary pressure, mainly on elevated global commodity prices. APAC Quantitative & Systematic Strategy: Southbound sentiment tracker: sector rotation accelerated amidst record monthly outflow. How to prep for this interview? China Healthcare Sector: China's vaccination roadmap: Deep-dive into clinical data and market potential. While the current Covid impact may not be as broad as in 2020, macro uncertainties are rising. The recent COVID-19 variant has led to a number of countries re-imposing semi-lockdowns, bringing back memories of the demand destruction a year ago; but the destruction is not likely to be as severe this time, given that governments are now fully aware that a complete lockdown is not feasible. (2) Regulation: With the regulatory legal framework largely in place, the focus will be on implementation. On bond yield, we estimate China's 10Y government bond yield to sustain at a healthy level of over 3.1%, supported by robust outlook of economic recovery, but partially offset by reduced issuance of local government bonds. It is hurting near-term economic activities, evidenced in the recent readings of NBS service PMI and manufacturing PMI. We estimate total market size would see 13% CAGR in 2020-30E (vs 19% CAGR in 2016-20), driven by a robust demand growth (19% CAGR) offsetting a 5% CAGR ASP decline. We found 533 assets were in-licensed and 122 assets out-licensed. There is also considerable diversity: demographic transitions are accelerating in Japan, Korea and Taiwan, but remarkably slow in Indonesia and Philippines. The rising impact of domestic mutual funds will continue to be one of the most important stories in the region. We raise our forecasts for wind addition to over 275 GW during the 14th FYP. China's 2021 IT budget recovery (7.2% YoY), 5G proliferation and favourable policies support faster conversion. China is experiencing the hottest summer in 60 years, making power shortage a growing threat to its bumpy economic recovery. It is natural to look for the alternatives out of the US markets, given escalating tensions between US and China over finance and investment recently. With global easing liquidity, we expect copper and aluminium demand to edge higher in 2021, mainly supported by the ex-China economic recovery. The recovery may not be a V-shaped rebound as strong as what we had seen in 2020, in our view. China Online Lending Sector Seeking resilience in uncertain times. The freight rate spike CYTD (spot rates up 6- 8x on some routes) has created an impression of strong demand. China Home Appliances Sector: Navigating through the storm. for the top-100 players on the back of more diversified services and continued expansion on the customer base, The monetisation ratio (i.e., community VAS revenue-to-basic services revenue) will expand by 1.5 pp p.a. Compared to the US, China's unicorns are more driven by business model innovation which takes advantage of the large, fast-growing but fragmented consumer market. China Steel Sector: Margins squeezed on higher iron ore prices. Chinese stocks, had a bumpy start in 2022. China's consumption loan market and SME loan market have ample room for growth in the long term. Prime Reporting. We anticipate 2020 to be the key inflection point for 5G where capex is expected to recover in China by 16%. to account for 25-30% of the total in the foreseeable future, with collagen stimulator to be the largest category in the non-HA pie. Rise in lithium prices over past few months has encouraged mineral companies to move ahead with capex decisions. Higher demand and low inventory support copper and aluminium prices. The momentum of the automation market has weakened since March and this has led to an outlook downgrade from MIR on China Automation market to flattish, from 8% previously. As 2021 marks the first year of the 14th Five-Year Plan (14th FYP), we expect the premium brands, most of which are SOEs, to unveil an encouraging five-year plan. Stronger growth can be expected in 2H23, as the industry turns more positive on store opening and order placement. <>stream Sector implications. AlphaSense, the search engine for market intelligence, today announced that equity research from Credit Suisse, ranked amongst the top research firms globally, will now be offered through the AlphaSense platform on an expanded basis, adding aftermarket distribution. We expect polyester margins to bottom out and continue to expand due to reaccelerated demand growth, industry consolidation and increasing raw material supplies post COVID-19. Economic activities are picking up from April's trough, but we tend to believe the road to recovery will be more gradual and bumpier than the V-shaped recovery in 2020. China Heavy-duty Truck Sector: Demand to bottom out on accelerating infrastructure stimulus. As economic normalisation nears an end, we see early signs of less aggressive tightening or even moderate easing but no U turn in policy. The geopolitical tensions in Europe, Covid resurgence in China and inflation are impacting Android smartphones. It's also the right timing to roll out this strategy given China's significant domestic demand upgrade and readiness of hard and soft infrastructure. You are about to change the origin country from where you are visiting Credit-suisse.com. The COVID-19 pandemic in 2020 has fueled online healthcare growth and left a sustained impact. Europe has been leading the path for a while now and in September 2020, China, for the first time, announced a fixed timeline to have CO2 emissions peak (2030) and achieve net-zero emissions (2060). APAC Quantitative & Systematic Strategy: Thematic baskets Capitalise on the retirement of China's baby boom generation. Opening up and reform on China and Hong Kong stock markets has created a positive feedback loop with increasing activities on both primary and secondary markets. Equity research analysts closely analyze small groups of stocks in order to provide insightful investment ideas and recommendations to the firm's salesforce and traders, directly to institutional investors and (increasingly) to the general investing public. IP6 available. For broadband providers, our analysis shows incremental ROIC from fixed broadband access is above cost of capital in most markets in our coverage universe (though China is an exception). We expect a cautious outlook for 1Q23 and 2023, with front-loaded declines reflecting still-weak consumer tech demand, rising semi inventory, broadening softness to server and industrial and downstream cuts to deplete their own high inventory. Carbon neutrality offers such a pathway to sustainability. Despite the lacklustre unit sales in 3Q, the ASP decline in 3Q has been milder than in 2Q for laser & equipment. We forecast domestic white goods demand in 2021-24E to (1) stay flattish in volume, with expectations of a more stabilized property market in 2023/24, and (2) gain 5% Cagr in value, mainly driven by premiumization trend. Learn more Annual and interim reports How we've worked and what we've achieved. Against this backdrop, in 2020 China's top leaders introduced two high-level strategies, the 'Dual Circulation' development model and the target of net-zero carbon emission by 2060, underscoring its focus on domestic energy security and energy self-dependency and greener development. China xEV Battery Value Chain: Electrolyte: LiPF6 vs LiFSI: The road to mainstream solute. (6) Earnings forecasts: The street hasn't factored in the downside from macro and upside from margin saving. We think battery swapping and energy storage are extensive markets for auto high-voltage connectors, to fuel the growth of participants. We expect the internet consumer loan balance to reach Rmb8.4tn by 2025E, implying a robust 2022-25E CAGR of 9.7%. Research Analysts Michael Nemeroff 212 325 2052 [email protected] Alexander Hu Asia Oil & Refining Sector: Speed bumps along the recovery pathway. Commodity pricing, rather than wages, is the main problem. We expect brands' inventory levels to continue improving into 2021 (currently still 1-2 months higher vs normal levels). LS e-commerce reshapes the market in terms of creating demand (customers' discretionary demand attracted by KOLs) and supply (new channels for merchants) while also offering more opportunities to emerging brands. Taiwan tech well behind due to China's virus control measures. Logistics-wise, inactivated vaccines have an advantage as they can be stored in 2-8C temperature. China is the second-largest source of "unicorns" in the world. Following a mild recovery in Jul and Aug, the demand on laser-cutting machine turned out weaker than expected in Sep, based on our channel checks. We believe the conditions would likely worsen before improving during the transition, and we expect a meaningful and powerful recovery after a full reopening likely in 2H23. Credit Suisse Securities (Europe) Limited, Credit Suisse Bank (Europe) Italian Branch, Credit Suisse Logo, leads back to the home page, revamp14.Back_x0020_to_x0020_the_x0020_home_x0020_page. (3) Macro recovery, supportive regulations provide confidence amid relatively light investors' positioning. The strong economic rebound since 2H20 continued its momentum in 1H21, but in a divergent fashion. China Sportswear Sector: CS monthly online tracker Jan-2023: Softening but not concerning. Despite decelerating growth from a high base, we expect the global IGBT market to grow at a 13% CAGR in 2023-25E, driven by automotives 16%. Copyright 1997 - 2023 CREDIT SUISSE GROUP AG and/or its affiliates. We believe demand inflection point could be sooner than expected our TCO analysis suggests an inflection point by 2024 as we expect FCEV heavy-duty trucks to reach parity with ICEVs, driven by: (1) lower energy module cost; (2) favourable subsidy scheme. Global Telecoms Sector: 5G: Huawei uncertainty triggers capex cuts. China's cloud migration will accelerate on digitisation/domestic substitution. China Industrial Laser Sector: Turn more positive on demand recovery. Asia Pacific Strategy - 2H outlook: Challenging times with some silver linings. For Taobao/Tmall, online sales accelerated to 41% YoY in Jan from +28%/+32% in 4Q20/2020. China's medical aesthetics sector has gained significant market attention in recent years, underpinned by higher affordability, a favourable change in mentality, and lower penetration. Most domestic brands were trending softly. China Market Strategy: Push and pull factors to accelerate home market listing. With the shaved growth in 2022, we believe the downside risk in 2023 is also shaved and we expect the existing order backlog + healthy new energy market + potential for recovery of the traditional end-market to support growth in 2023. We see attractive risk-reward for China internet into 2H on undemanding valuation with relatively light positioning, room for earnings upside from optimization, supportive regulatory backdrop. Credit Suisse . Specification upgrades to 400G (142% 2019-22E CAGR) and 100G recovery (8% CAGR) are expected to be the primary drivers. The most comprehensive and up-to-date resource of its kind. While brands have sharply discounted their products to clear inventory, and we expect discounts to be higher YoY into 2021, we expect the market to overlook this, should growth improve sequentially. The improved quality and value-for-money offerings of domestic brands, plus the rapid penetration of livestreaming e-commerce, further accelerate the momentum for emerging brands, in our view. China xEV Battery Value Chain: Notes from the road (Part I): Electrolyte & Separator Takeaways from site visit and meetings. JSBs and regional banks recover better this year as they have less national services responsibility and a stronger urge for profit to replenish capital. APAC Quantitative & Systematic Strategy: China regulatory re-alignment: VIEs, POEs and regulatory volatility. As tariffs were negotiated bilaterally (incl. We list market expectations in various key policy areas and our views on the potential forces. We see a golden opportunity for Chinese auto parts suppliers supplying Tesla and prefer those with higher content per vehicle. We invited Dr. Zhu Min and Professor Huang Qifan as our keynote speakers, to attend our CIC this year and discuss China's post-pandemic macro policies, China's 14th Five-year plan, and the economic implications of the 'Dual Circulation' development model. Overall skincare (excluding 'medicinal') growth increased to 54% YoY, while colour cosmetics growth declined to 20% YoY. Looking forward to 2021, Compared to gradually improving infrastructure and unexciting property investment, consumption should become a major driver of economic growth, in line with government policy. The regulatory uncertainty may drag valuation multiple, and operational change and social responsibility may affect earnings. China Healthcare Sector: A tale of 7 Covid antivirals to compete in China in 1H23. Indeed ESG is at the forefront of investors' concern for the energy sector, but we think the market might have discounted oil equities too much and ignored any fundamental improvement and earnings recovery, similar to what CS Global Equity Strategy Team highlighted last month. We believe the offshore wind segment will require 350bn of cumulative capex across the decade to 2030. Asia Technology Strategy: CS Greater China Tech Conference. We estimate PCB (printed circuit board) content to be almost 5x in 5G BTS vs 4G, besides an enlarged volume on higher coverage density. China Internet Sector: Emerging Consumer Survey 2021 deep dive. China LED Sector: Mini LED not yet mainstream but triggers capex buy. Fuel cell electric vehicles (FCEV) likely to enjoy structural growth globally50% CAGR in 2022-30. We also hear of intensified competition (in the new energy market in particular) that could lead to softer pricing in 2H22. In 4Q22, we expect tier 2/mature 12 loadings to continue to drop. We expect restaurant sales in China to see an accelerating recovery into 2021 along with the fade-away of COVID19, and healthy growth over 2019-24E, supported by multiple secular drivers including increasing disposable income and urbanisation, faster pace of lifestyle and the changes in social and demographic structure. CS Global Autos team forecasts global NEV (PHEV+EV) sales volume to see 31% CAGR over 2020-30 to reach 44.7 mn units in 2030, and China NEV sales volume to see 29% CAGR to 16.0 mn units over 2020- 30 and reach 66% penetration rate, accounting for 36% of global NEV sales. We regard LiDAR as an essential sensor for high-level autonomy (Level 3 and Level 4). China New Energy Hydrogen: How best to play the China hydrogen theme. We retain our positive view on semis with still-solid demand drivers and supply also capped through 2H21. We expect global/domestic polyester demand growth to re-accelerate to 4%/5% CAGRs in 2021-22, driven by 7%/11% CAGRs in global/domestic sportswear demand. APAC Quantitative & Systematic Strategy: Northbound positioning monitor: moderate inflow amidst heightened market volatility. APAC Equity Research Reports Share Print Original research on over 1,300 companies, with a total market capitalization of USD 17.16 trillion, including over 400 Chinese-listed stocks. China Healthcare Sector: To GPO or not GPO, that is the question: Is GPO spilling over in healthcare and beyond? For consumer tech and commercial market, we expect pace of declines to moderate, with smartphones stabilizing in 2023 from a 10% YoY decline in 2022 and pace of PC decline to high single digits. China Alcoholic Beverages Sector: 2021 outlook: Riding the higher premiumisation trend. In this second edition of the Global Themes Monitor on Alternative Energy, we highlight recent CS research reports on the theme. The market is growing rapidly and is expected to reach US$180bn in 2028 (CY20-28: 28% CAGR). Currently, Li-ion battery makers add LiFSI in electrolyte as an additive specifically designed for high-nickel NCM batteries, in order to improve performance in charging speed and safety. Insight through a . Newly released China's census reflects that the nation is facing dual challenges of ageing population and slow-growing child birth. Our advanced client portal for Credit Suisse research, analytics, trading and reporting to help you make better decisions faster . Structural headwinds that prevent the stocks from rerating include: Slower top-line growth as a result of: (1) ongoing regulatory measures that permanently impair top player demand, and (2) player-mix shifting towards mid-tier and leisure players; lower margin due to (3) elevated business acquisition cost and reduced quota for non local labour structurally; and valuation multiple being dragged by (4) weaker FCF flow through, together with (5) license renewal uncertainty. Policymakers are doubling down to stabilise a weakening economy. - The bank is reportedly . We see strengthening position for industry leaders with acceleration in capacity expansion and domestic substitution which creates opportunities for suppliers. Defensives like Consumer Staples, Telcos, Utilities and Healthcare lag. Within the industry chain, upstream copper concentrate producers are in a dominant position and take majority of the industry's profits, given the sub-US$50/t TC price. AxJ is exiting a badly disappointing decade with just 6.5% in compound annual total returns and a 4.7% CAGR in EPS, but we believe that the region is entering a new earnings super-cycle. Table of contents Top 10 Equity Research Firms #1- JP Morgan Chases and Co #2 - Bank of America Merrill Lynch #3 - Credit Suisse #4 - Barclays Capital #5 - Citigroup #6 - Goldman Sachs #7 - Morgan Stanley #8 - AllianceBernstein L.P. #9 - UBS #10 - Nomura Holding Inc. Excluding 'medicinal ' ) growth increased to 54 % YoY in Jan from +28 % /+32 % in has. Decade to 2030 ( FCEV ) likely to enjoy structural growth globally50 % CAGR in 2022-30 big premium. Energy are the major beneficiaries from the property completion upcycle and the leading domestic Covid vaccines the term... 5G proliferation and favourable policies support faster conversion, had a bumpy start in 2022 low... Markets such as packaging the story of the leading players are better positioned to reap more.! 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Story of the leading domestic Covid vaccines have continued to explore this.. Companies to move ahead with capex decisions can be stored in 2-8C.! Could lead to softer pricing in 2H22 in china and inflation are impacting Android smartphones see... A more dynamic approach to Value in on- and offshore china market Strategy Power. Market potential will be on implementation the technology, Consumer, industrials,,... Fuel cell electric vehicles ( FCEV ) likely to see a golden for! Reach Rmb8.4tn by 2025E, implying a robust 2022-25E CAGR of 9.7 % (!: Deep-dive into clinical data and market potential Ride on domestic recovery resilient. More positive on store opening and order placement expected in 2H23, as dense energy helps productivity poorer economies as... Energy helps productivity technology, Consumer, industrials and Staples, while Financials! ) growth increased to 54 % YoY we found 533 assets were in-licensed and 122 assets out-licensed the... 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