In this briefing:
- Chinese Market Sentiment at a Crossroad
- TRACKING TRAFFIC/Chinese Tourism: Visits to Macau & HK Surge
- Growing Pains & PBoC Cut/US-China Clash/Railways & Airports & Bonds/More Babies Please/Moon Landing
- Forecasting the Semiconductor Market
- Gold: Trade Agreement Could Change the Bullish Narrative
1. Chinese Market Sentiment at a Crossroad
Chinese equities face a crossroad to start the year as the market mulls a more serious phase in the structural decline in China’s economy balanced against renewed efforts to stimulate growth in 2019. The US-China trade dispute and broader US policy shift to contain China’s economic ambitions in high tech industries have contributed to fears of a Chinese led global economic downturn. But these concerns may ease as China and the US progress through trade negotiations restarted amidst a truce on tariff policy through 1-March. The AUD and copper prices have been highly correlated with Chinese equities over the last year, highlighting the broader market implications of trade talks this week and renewed Chinese efforts to restore economic confidence.
2. TRACKING TRAFFIC/Chinese Tourism: Visits to Macau & HK Surge
A year ago we began publishing Tracking Traffic/Chinese Tourism as the hub for all of our research on China’s tourism sector. This monthly report features analysis of Chinese tourism data, notes from our conversations with industry participants, and links to recent company news and thematic pieces. Our aim is to highlight important trends in China’s tourism sector (and changes to those trends).
In this issue readers can find:
- A review of China’s outbound tourist traffic in November, which strengthened: Lifted by extraordinarily strong growth in visits to Hong Kong and, to a lesser extent, Macau, Chinese outbound travel demand rebounded strongly in the seven regional destinations we track. But the fact that November’s growth was led overwhelmingly by Hong Kong and Macau — destinations close enough for weekend or day trips from population centers in Southern China — suggests Chinese tourists’ purse strings are still tight.
- An analysis of November domestic Chinese travel activity, which turned weaker: November data from China’s three leading airlines and the Ministry of Transport show moderating domestic travel demand. For combined rail, highway, and air travel, November demand grew by less than 3% Y/Y. Along with the change in destination mix for outbound travel (that favors ‘nearby’ destinations), it now appears domestic demand has weakened, too.
- Links to other recent news & research on Chinese tourism: Readers can check out our quick takes on Macau’s December GGR figure, preliminary GTV and revenue figures released by Ctrip.Com International (Adr) (CTRP US), declining US visa issuance to Chinese tourists, and Qatar Airways’ new investment in a leading Chinese airline.
Although we remain positive on the long-term growth of Chinese tourism, it’s clear that near-term demand has weakened substantially. We continue to take a negative view of travel intermediaries like Ctrip, which face intensifying competition from many sources. We are more positive on the prospects of actual owners of Chinese travel and tourism assets, like hotel chain Huazhu Group (HTHT US) and Air China Ltd (H) (753 HK).
3. Growing Pains & PBoC Cut/US-China Clash/Railways & Airports & Bonds/More Babies Please/Moon Landing
China News That Matters
- PBoC responds to disappointing start to another year of slowing growth
- Talks planned but US-China “clash of civilisations” deepens
- Ever faster trains, new airports from Beijing to Antarctica – and more debt
- Two-child policy fails to avert demographic crisis
- Beijing nails first ever landing on moon’s far side
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.
4. Forecasting the Semiconductor Market
This is the time of year that Objective Analysis releases its semiconductor forecast. This post is based upon a video posted on the WeSRCH website that explains the Objective Analysis 2019 semiconductor forecast.
Although accurate semiconductor forecasts are straightforward to produce, the consistently-accurate methodology spelled out in this Insight is rarely used.
The forecast predicts that the downturn that the industry is currently entering will be longer than most, with profits eluding chip companies until 2022.
5. Gold: Trade Agreement Could Change the Bullish Narrative
INVESTMENT VIEW:
The same macro factors which knocked more than a third off Apple Inc (AAPL US)‘s share price have lifted Gold (GOLD COMDTY) prices by nearly 10% since Sept-18. However, we believe the market narrative could swiftly reverse if the US and China reach a trade agreement in the coming weeks. We would look to press our short on Gold…and even go long Apple.
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