CITICS Sales Comment: A share market performers, investment, actually, further, market

NYboy

Comments on Market

The tremendous RMB 4bn investment plan announced by the State Council turned out to be a great shock to the market, not only A share actually. CSI 300 soared by over 7%, with beneficiary sectors and index movers led the strong rally(engineering machiney, cement, financials, etc.). Despite profit taking pressure, market rallied further after 2pm, due to the catch-up of lag performers like small caps. The great policy news did ignite the robust rebound, after weeks of weak movement. We expect the A share market to keep active rebound/consolidation in the short term, but SHCI 2000 should be resistance level.

Research Views

Macro

Oct. PPI 6.6%, lower than expected. We expect Nov. PPI to further decline to around 4%. Such declining trend may continue to 3Q09.

Airports & Airlines:

Airports saw earnings decline, both by dropping turnover and non-recurring items of Shanghai Airport and Shenzhen Airport. Operating data recovered after Olympics, and airports are relatively defensive. Outperform maintained.
Airlines suffered loss in 3Q, and fundamentals are still worsening. Neutral rating kept due to our concern of earning performance.

Beverages

Distilled Spirit saw weakening demand, due to economy slowdown. Companies with good brand name and sound corporate governance are better picks.
Wine and Brewery sectors also saw growth slowdown.
Risks for sectors: weakening demand due to lower income growth; valuation level well above mkt. average.
Leading companies are still best picks: Kweichow Maotai (600519.CH); Lvzhou Laojiao (000568.CH); Changyu(000869.CH); Shuanghui Dev. (000895.CH)