Deutsche Bank Markets Research
Asia Periodical Date China 17 February 2016 Consumer Asia Consumer &
Media Daily
Anne Ling Winnie Mak Research Analyst Research Analyst Consumer & Media Daily (+852) 2203 6177 (+852) 2203 6178 [email protected] [email protected]
Company news China/HK/TW . Eclat Textile – Accelerating normalization; new target price of TWD380 (John Chou) . Tsingtao Brewery – Change of independent no-executive director and changes in board committees . Natural Dairy – Date of board meeting . Golden Throat – Strategic cooperation with Jointown Pharmaceutical Group . Zhongbai – To establish a CE retail JV South Korea . CJ CGV – No changes in fundamentals; Buy on recent correction (Dianna Kang) . Cosmax – Adjusting margin expectations, but positive on long-term growth case (Jeremy Kim) Sector news China/HK . Greater China Consumer – 2016 CNY - it is about quality of life and wellness (Anne Ling) . China Media – Ad spending on traditional media drops 7.2% . China F&B – KM, WLY and Luzhou Laojiao ranked top-3 baijiu products in CNY . China Consumer – JNBY plans IPO in Hong Kong in 2H16 . China Consumer – ELAND and Wanda co-found tourism company in Korea . China Consumer - China FMCG sales growth slows to 3.5% in 2015 . China Retail – China adds 50 shopping centers in January . HK Consumer – Food sales increase during Chinese Spring Festival
Japan . Retail Sector – Japan Foreign Visitors Monthly January 2016 (Takahiro Kazahaya) India . India Consumer – Food for thought: Question bank - 3rd edition (Manoj Menon)
Asia Consumer and Media team Gaurav Bhatia +91-22-6658 4055 (Indian Consumer/Media) ______Deutsche Bank AG/Hong Kong Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015.
Manoj Menon +91-22-7158 4358 (Indian Consumer/Media) Jihyun Song +82 2 316 8906 (Korea Retail/Consumer) Reggy Susanto+62-21-3189-527 (Indonesia Consumer) Chalinee Congmuang +66-2-633 6482 (Thailand Consumer) Carissa Mangubat +63-2-894 6647 (Philippine Consumer/Media) Anne Ling +852 2203 6177 (HK/China Consumer/Media, Team Leader) (Office) +852 91221099 (Mobile) Winnie Mak +852 2203 6178 (HK/China Consumer/Media) Jeffrey Ng +65 6423 5139 (Singapore/Malaysia Consumer/Gaming) Richard Huang +852-2203 6202 (HK/China Consumer/Media) Mark Yuan +852-2203 6181 (HK/China Consumer/Media) John Chou +852-2203 6196 (Taiwan Textile) Jeremy Kim +82-2-316 8902 (Korea Retail/Consumer)
17 February 2016 Asia Consumer & Media Daily
Company news
China/HK/TW
Eclat Textile – Accelerating normalization; new target price of TWD380
(1476.TW, TWD460.00, Sell)
2016 outlook: we are increasingly cautious; 4Q15 preview US inventory conditions may accelerate the erosion to Eclat’s premium growth and profitability in 2016, in our view. On top of sustainable challenges from competition, reduced orders and price cuts in 2016 further fuel our caution. Eclat’s strong innovation may be hard pressed to alter the trend. We further reduce 16E operating income/target price by 2%/7%. DBe OP profit is 9%/18% lower than consensus in 16/17E. We have limited visibility on Eclat’s 4Q15 earnings as FX benefit is a key swing factor for gross margin. However, we expect consecutive downward revisions by consensus into 2016.
Please refer to full report: http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08ac69c49
John Chou
Tsingtao Brewery – Change of independent no-executive director and changes in board committees
(0168.HK, HKD28.30, Hold)
Mr. MA Hai Tao has resigned as an independent non-executive director, chairman of audit & internal control committee, member of nomination & remuneration committee and member of strategy & investment committee of the company, pursuant to the requirements in the notice of further strengthening the administration of the part-time jobs taken by the leaders and cadres as Party member in institutions of higher learning, issued by the Ministry of Education.
Mr. YU Zeng Biao has been appointed as the independent non-executive director of the eighth session of the board of directors of the company, the chairman of audit & internal control committee, member of nomination & remuneration committee and member of strategy & investment committee. Mr. YU, aged 60, is currently professor of accounting and tutor of doctorial candidate in the School of Economics and Management at Tsinghua University, and a Chinese Certified Public Accountant.
Source: 16 February 2016, company announcement
Natural Dairy – Date of board meeting
(0462.HK, Suspended, NR)
Natural Dairy announced that its board meeting has been postponed to 29 February 2016 or earlier for the purpose of considering and approving the audited annual results
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of the company and its subsidiaries for the year ended 31 May 2015. The company expects that the unaudited management accounts for the six months ended 30 November 2015 will be published within two months after the publication of the audited annual results.
Source: 16 February 2016, company announcement
Golden Throat – Strategic cooperation with Jointown Pharmaceutical Group
(6896.HK, HKD4.00, NR)
Golden Throat entered into a framework agreement on strategic cooperation on 15 February 2016 with Jointown Pharmaceutical Group Co., Ltd. (600998.SS) and an independent third party of the company, based on both parties’ mutual desire for joint development.
Pursuant to the framework agreement, the company shall grant exclusive agency rights to Jointown for the sales and distribution of the company’s certain types of products including Golden Throat Lozenges (OTC) (with 16 lozenges per tin box), Fufang Banlangen Granule, Banlangen Granule, Xiaoer Ganmao Granule, Ganmao Kesou Granule, Fufang Baibu Zhike Granule, and Luohanguo Yuzhu Granule within mainland China through Jointown’s pharmaceutical distribution network, but such rights shall not include Jointown’s right to engage any sub-distributors outside of its distribution network. The term of the framework agreement is six years, from 1 January 2016 until 31 December 2021. The estimated annual sales value of the products to be distributed by Jointown under the framework agreement shall be RMB100m, RMB200m and RMB500m for the years ending 31 December 2016, 2017 and 2018 respectively, subject to adjustments based on actual annual sales value between the parties.
Source: 16 February 2016, company announcement
Zhongbai – To establish a CE retail JV
(000759.SZ, RMB7.03, NR)
Zhongbai has announced that it plans to establish a joint venture with Wuhan Taixin with 51/49% stakes in the JV.
Zhongbai operates 41 CE retail outlets in Hubei. It will entrust the joint venture to manage its 23 stores located in Wuhan, and entrust Wuhan Taixing to manage its remaining 18 stores.
Gongmao Jiadian, controlling shareholder of Wuhan Taixin, is one of the largest regional CE retail chain players in China, covering 36 cities in Hubei province, with CE sales revenue of RMB5.6bn in 2014.
According to the announcement, Zhongbai’s intention is to improve the operating efficiency of its CE retail stores by introducing Gongmao Jiadian, which has a better supply chain resources and stronger negotiation power.
Source: 14 February 2016, company announcement
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South Korea
CJ CGV – No changes in fundamentals; Buy on recent correction
(079160.KS, KRW110,500, Buy)
Buy on recent share price correction CJ CGV’s share price corrected 18% (vs. Kospi Index’s -5%) since 1 Feb, despite decent 4Q15 China earnings. We believe the sharp correction over the past few weeks was due to multiple factors such as: 1) negative sentiment on China-exposure stocks from potential THAAD deployment, 2) market's preference for defensives over risky assets amid volatile global stock markets, and 3) sluggish January domestic ticket volume growth. However, we maintain Buy on CJ CGV on the back of the recent excessive share price correction, as we see no changes in our fundamental growth outlook for the company.
Please refer to full report: http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08ac6c3db
Dianna Kang
Cosmax – Adjusting margin expectations, but positive on long- term growth case
(192820.KS, KRW139,000, Buy)
Maintaining Buy Despite the substantial earnings miss in 4Q15, we still believe Cosmax's long-term structural growth case remains valid. Cosmax's strong ties with Chinese local brands, increasing export orders from global brands, and positive traction from the US plant will likely sustain strong top-line growth momentum at a 26% CAGR over 2015-17E. We lowered our margin forecasts for 2016-17 but still estimate operating profit to post a 45.3% CAGR over 2015-17. We maintain Buy on the counter with a revised target price of W190,000.
Please refer to full report: http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08acaf4f5
Jeremy Kim
Deutsche Bank AG/Hong Kong Page 5
17 February 2016
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Sector news
China/HK
Greater China Consumer – 2016 CNY - it is about quality of life and wellness
CNY retail sales in China up 11.2%, no deterioration The Golden Week holiday is no longer a time for shopping, as mentioned in the past. Instead, Chinese people now want to enjoy a higher quality of life within China and recently even when travelling abroad. HKTB estimates that tourist arrivals to HK will fall a further 1.8% in 2016. Our top picks in the greater China consumer space: Buy Yanghe, Hengan, Anta, Midea; Sell Eclat and Li & Fung.
Please refer to full report: http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08ac94d69
Anne Ling
China Media – Ad spending on traditional media drops 7.2%
CTR Media Intelligence data show that total ad spending growth in China in 2015 was 2.9% YoY. Traditional media declined 7.2% YoY, which is a new low.
Among all traditional media, newspapers were the worst hit with an ad spend decline of 35.4%, followed by magazines (-19.8%) and TV (-4.6%). New media platforms, however, were upbeat. Internet ad spending, which accounted for the majority of the spending, rose by 22% from a year ago. The bullish cinema pre-roll ad spending grew by 63.8% for the full year, while ad spending on office building screens jumped by 17.1%. The only decline in new media platforms was for transportation screens, including those on buses and taxis, falling 8.8% from a year ago.
From the ad buyer side, it is clear that all industries related to finance and the internet were still increasing ad spending not only on traditional media but also significantly on the internet media. They also fully leveraged the power of cinema pre-roll and transportation screens. It is increasingly apparent that brand owners have realized that they have to change the messages, formats, methods and media of their brand communications.
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Figure 1: Traditional media ad spending YoY change Figure 2: Traditional media & new media platform ad (2011–2015) spending YoY
15% 13.1% 80.0% Bullish cinema pre-roll, 63.8% 60.0% 10% 6.7% 40.0% Office building 4.5% Internet, 22.0% screens, 17.1% 5% 20.0% Bus & Taxi, 8.80%
0.0% 0% 2011 2012 2013 2014 2015 TV, -4.6% -2.0% -20.0% Magazine, -19.8% -5% New media platforms -40.0% Newspaper, - -7.2% 35.4% -10% -60.0% Ad spending YoY change
Source: Deutsche Bank, CTR Source: Deutsche Bank, CTR
Source: 6 Feb 2016, CTR
China F&B – KM, WLY and Luzhou Laojiao ranked top-3 baijiu products in CNY
According to the liquor direct selling company 1919.cn data, baijiu is still the best gift for the Chinese dinner party during the Spring Festival, maintaining a share above 70%.
Chengdu, the capital city of Sichuan province, released the top-10 bestselling Baijiu products during the Spring Festival: Kweichow Moutai was ranked first, followed by Wuliangye and 52 degree Luzhou Laojiao Sanrenxuan. Figure 3 lists the top ten.
Figure 3: Top-10 baijiu products during 2016 CNY Top-10 products Company/ticker 1 Kweichow Moutai KM (600519.SS, Buy) 2 Wuliangye WLY (000858.SZ, Buy) 3 52 degree Sanrenxuan Luzhou Laojiao (000568.SZ) 4 1915 Bandaojing chateau Shangdong Bandaojing Ltd., 5 Zhihui Sede Tuopai Sede (600702.SS) 6 Tian Gong Kai Wu Jiuguijiu (000799.SZ) 7 Quanxing Daqu Sichuan Chengdu Quanxing Liquor Co. Ltd. 8 Shuijing Shangpin Shuijingfang (600779.SS) 9 Jiannanchun Sichuan Jiannanchun Group 10 38 Degree Sanrenxuan Luzhou Laojiao (000568.SZ) Source: Deutsche Bank, Chinanews.com
Source: 17 February 2016, Chinanews.com
China Consumer – JNBY plans IPO in Hong Kong in 2H16
JNBY has started a listing process, and plans to list on the Hong Kong Stock Exchange in the second half of 2016. The money to be raised has not been disclosed yet.
JNBY was founded in 1994 and commenced overseas expansion in 2004. The group own three brands, including JNBY, CROQUI and jnby by JNBY. The jnby by JNBY
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brand targets children wear, and its sales account for 25% of the sales of its women’s wear, JNBY.
Source: 17 Feb 2016, Linkshop
China Consumer – ELAND and Wanda co-found tourism company in Korea
ELAND and Wanda Group signed an agreement on 5 February to co-found a tourism company (50-50 joint venture) by VC. ELAND will be responsible for the operation of the new company, and the process will be completed in March 2016. Wanda aims to attract 1m Chinese customers to travel to Korea. In June 2014, both sides signed the first agreement related to the Ieisure industry.
Source: 16 Feb 2016, Linkshop
China Consumer – China FMCG sales growth slows to 3.5% in 2015
According to Kantar, FMCG products consumption only rose by 3.5% in 2015, slowing from 7.4%/5.4% in 2013/2014. By channel, hypermarkets, supermarkets, and convenience stores grew only 3.3%, while ecommerce grew by 37%. By geography, key cities and provincial capitals saw a growth of 1.4% while county-level cities grew by 4.4%. Hypermarkets were down 1.5% in key cities and provincial capitals but still saw 4.1% yoy growth due to new store openings in lower-tier cities. Kantar Worldpanel expects to see continued development in the hypermarket format in lower- tier cities in 2016. Smaller formats, e.g. convenience store formats, enjoyed a healthy growth of 13.1% across the country.
In addition, international players continued to lose market share to domestic retailers with a 1.1ppt decline to 13.4% in 2015 amid stronger competition from online channels, as international retailers’ stores are mainly located in key cities and provincial capital cities.
Outlook for 2016 • The convenience store format will likely continue to outperform. Although the competition in South China has accelerated, North and West China still have sizable room to grow. For instance, the recent agreement between Lawson and Zhongbai paved the way for even more rapid expansion in the inland areas.
• There should be further penetration in lower-tier cities, as higher-tier cities have nearly saturated. For example, 26 new stores in lower-tier cities was the main reason for RT-mart’s outstanding performance. However, a more tailored strategy needs to developed, given that absolute growth in lower-tier cities is also slowing down.
• Further regional market consolidation is expected in 2016. Retailers need to build up their scale to optimize the cost base and strengthen negotiation power. In 2015, Yonghui expanded into the affluent East China region through the acquisition of a stake in the Lianhua supermarket. Hongqi’s takeover of the Huhui supermarket enabled the group’s market share of the west market to increase 1.5%. China’s retail
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landscape is still fragmented, with top-10 retail groups accounting for less than one- third of modern trade formats sales.
• Real omni-channel experience is yet to shape up, as ecommerce significantly outgrows all other channels. JD.com and Tmall have invested in festive promotions and shopper conversion. More and more brick-and-mortar retailers have started to establish e-commerce platforms on the back of the boom of cross-border e-commerce and mobile commerce to get their consumers back to stores. However, most of them are yet to build a successful model.
Figure 4: Major grocery market share of Modern Trade – National Urban China 52 w/e 2014/12/26 52 w/e 2016/01/01 4Q14 4Q15 Sun Art Group 7 7.5 6.8 7.6 (include RT-Mart and Auchan) RT-Mart 5.8 6.2 5.5 6.3 Auchan 1.2 1.2 1.3 1.3 Vanguard Group 6.5 6.5 6.2 6.3 (include Vanguard and Tesco) Tesco 1.3 1 1.1 1 Wal-mart Group 5.2 4.8 4.8 4.7 Carrefour 3.7 3.3 3.5 3.1 Lianhua Group 3.2 2.8 3.1 2.8 Yonghui Group 2 2.2 2.2 2.4 Wu-Mart Group 1.6 1.6 1.7 1.6 Wsl Group 1.7 1.5 1.6 1.6 Spar Group 1.3 1.2 1.2 1.1 Bubugao Group 1.1 1.1 1.1 1 Source: Deutsche Bank, Kantar
Source: 16 Feb 2016, Kantar
China Retail – China adds 50 shopping centers in January
According to Soupu.com, China opened 60 shopping centers in January 2016. The number of the newly opened shopping centers is slightly higher than that in January 2015. However, these are less-famous developers compared with that in December 2015.
By store format, department stores are recovering and outlet stores are still popular. By region, stores are concentrated in third- and fourth-tier cities, while about half of the new stores are located in Eastern China. The traffic in the Jiaxing Yaohan department store reached 150,000 on its opening day.
Source: 16 February 2016, Linkshop
HK Consumer – Food sales increase during Chinese Spring Festival
Though the number of mainland visitors to Hong Kong decreased and outbound visitors increased, some food retailers report a satisfactory sales performance during the Chinese Spring Festival. YATA, a retailer focused on Hong Kong local clients,
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reported a sales growth of 10.3% yoy during the Spring Festival, and 13.3% growth during the promotion period in the Spring Festival. Thanks to the previous cold weather and holiday atmosphere, sales of closing and ginseng & marine products increased 16.2% yoy and 23.5% yoy respectively. Mr Lin Weijun of 759 Store indicated that a sales decrease of 11% to12% yoy is expected, but the sales of grain and oil, and quick-frozen food increased 30% to 40% yoy, while rice sales doubled during the Spring Festival.
However, Chow Sang Sang reported double-digit sales decrease during the Spring Festival. According to Mr Liu Ke Bin, general operation manager of the Great China area of Chou Sang Sang, consumption from mainland visitors declined since half a year ago, consumption per capita decreased from RMB6,000–7,000 last year to RMB5,000–6,000 this year, and gold products sales volume decreased 15% yoy mainly due to the gold price rally.
Source: 16 February 2016, mingpao
Japan
Retail Sector – Japan Foreign Visitors Monthly January 2016
Japan Foreign Visitors Monthly We update trends in foreign visitors to Japan, which have become increasingly important for analyzing consumption trends in the retail sector. (We use monthly data estimated by the Japan National Tourism Organization (JNTO) based on statistics from the Ministry of Justice. For details, see "Japan Foreign Visitors Monthly November 2014," published on 18 December 2014.)
This month's topic: Arrangement period for visitors from China According to the Oct-Dec 2015 Consumption Trend Survey for Foreigners Visiting Japan compiled by the Japan Tourism Agency (JTA), Chinese tourists' arrangements for visiting Japan for the purpose of sightseeing and leisure showed the following breakdown: tour participants 53.4% , individual visitors using travel packages 20.4%, and individual visitors making own travel arrangements 26.2%. Most travelers, 53.6%, made travel arrangements 1-2 months in advance, followed by 15.0% 1-2 weeks in advance, 14.4% 3-4 weeks in advance, and 12.4% three months or more in advance. Chinese visitors entering Japan require visas (four types: group tourist, individual tourist, multiple-entry for individual tourists visiting Okinawa / Tohoku (3 prefectures), and multiple-entry for individuals with a substantially high level of income). The time required for visa issuance is five working days from the day following application day (day application received by embassy) if there are no problems with screening results. Additionally, as tourist visas require screening by the travel agency (not included in the five working days), the arrangement period is generally 3-4 weeks or more as long as the visa is not multiple-entry. Among overall tourists that come to Japan for sightseeing/leisure, 44.5% make travel arrangements 1-2 months in advance, which - similar to visitors from China - is the most common timeframe, but preparations three months or more in advance comes in second at 26.0%. The stock market is concerned about the impact of changes in the Chinese macro environment and correction of yen weakness vs CNY on the number of foreign visitors to Japan and their consumption spending. At Laox's (8202: Hold, ¥132) tax-free shop business in FY12/15, footfall increased 3.7x YoY to 4.203m aided by store network expansion, but average spend per customer fell 35% to ¥19,932, with average spend in 2H FY12/15 falling 45% YoY to ¥16,143. Based on Chinese travel arrangement periods, we believe the impact of yen weakness correction and deterioration in the Chinese macro environment from
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start-2016 on the number of visitors to Japan from China could emerge around hanami time in late-March 2016. Moreover, consumption tax-free store expansion moves are currently fully under way with Isetan Mitsukoshi (3099: NR, ¥1,310) and Lotte planning to push ahead with development of airport-type duty-free stores (free of consumption tax, customs duty, tobacco tax, and alcohol tax) in towns. We consequently plan to focus on whether concurrent increases in tax-free store numbers and sluggish growth in consumption by foreign visitors to Japan will have an impact on sales and margins at companies' tax-free store businesses.
Foreign visitors rise 52% to 1.852m in January 2016 Data announced by JNTO on 16 February show that foreign visitors to Japan rose 52% YoY to 1.852m in January 2016, topping the previous record for the month of 1.218m (set in February 2015) by 630,000 people. The regional breakdown based on estimates (available aggregate estimates on a regional basis) was as follows: Asia 86% (+58% YoY to 1.589m), North America 5% (+23% to 94,000), Europe 3% (+18% to 52,000), Oceania 3% (+15% to 56,000).
Visitors from Asia: +58% to 1.589m Visitors from Asia increased 58% YoY to 1.589m in January. The breakdown by country based on estimates was: China 26% (+110% to 475,000), Taiwan 17% (+48% to 321,000), Hong Kong 7% (+42% to 125,000), South Korea 28% (+44% to 515,000), and Thailand 3% (+37% to 61,000). Elsewhere in Asia, increases were notable from countries such as Malaysia (+61%) and Indonesia (+41%), but China, Taiwan, South Korea and other countries or regions with higher weightings showed strong growth. For 2016, we forecast foreign visitors at 21.1m, with 6.33m coming from China. The January figures were above our outlook, and we plan to further evaluate our forecast values in consideration of future forex and the macro environment.
Please refer to full report: http://pull.db-gmresearch.com/p/53-8837/37382053/0900b8c08acac1f6.pdf
Takahiro Kazahaya
India
India Consumer – Food for thought: Question bank - 3rd edition
Discussing key industry and company-specific issues We present the third edition of our Question Bank for Indian Consumer, which reflects recent industry and company-specific developments. This report includes the most pertinent issues, while incorporating industry data, market shares, divisional breakdowns, financials and related metrics. Our preferred picks are Titan, Godrej Consumer, Marico and Bajaj Corp. We remain on the sidelines for Asian Paints, Hindustan Unilever, Jubilant and Dabur. Based on Deutsche Bank’s Consumer Momentum Indicator, relative valuations are currently unfavorable and there are pockets of exuberance.
Please refer to full report: http://gm.db.com/ger/document/ShowPdf.eqsr?productIDMore=0900b8c08aaec985
Manoj Menon
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The authors of this report wish to acknowledge the contribution made by Louise Li, Kerith Chen and Julia Xu, employees of Evalueserve, a third-party provider to Deutsche Bank of offshore research support services; and Jean Chen, employee of CRISIL Global Research & Analytics, a division of CRISIL Limited, a third-party provider of offshore research support services to Deutsche Bank.
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Appendix 1
Important Disclosures
Additional information available upon request
*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr
Analyst Certification This report covers more than one security and was contributed to by more than one analyst. The views expressed in this report accurately reflect the views of each contributor to this compendium report. In addition, each contributor has not and will not receive any compensation for providing a specific recommendation or view in this compendium report.
Equity rating key Equity rating dispersion and banking relationships Buy: Based on a current 12- month view of total 500 54 % share-holder return (TSR = percentage change in 450 share price from current price to projected target price 400 350 36 % plus pro-jected dividend yield ) , we recommend that 300 investors buy the stock. 250 200 Sell: Based on a current 12-month view of total share- 150 21 % 11 % 100 17 % 18 % holder return, we recommend that investors sell the 50 stock 0 Buy Hold Sell Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not Companies Covered Cos. w/ Banking Relationship recommend either a Buy or Sell. Asia-Pacific Universe Newly issued research recommendations and target
prices supersede previously published research.
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Regulatory Disclosures 1.Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2.Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.
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Additional Information
The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness.
If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this report, or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche Bank may act as principal for its own account or as agent for another person.
Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own account or with customers, in a manner inconsistent with the views taken in this research report. Others within Deutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those taken in this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equity-linked analysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differ from recommendations contained in others, whether as a result of differing time horizons, methodologies or otherwise. Deutsche Bank and/or its affiliates may also be holding debt securities of the issuers it writes on.
Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investment banking revenues.
Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or estimate contained herein changes or subsequently becomes inaccurate. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst’s judgment. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Prices and availability of financial instruments are subject to change without notice and investment transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Unless otherwise indicated, prices are current as of the end of the previous trading session, and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank, subject companies, and in some cases, other parties.
Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise to pay fixed or variable interest rates. For an investor who is long fixed rate instruments (thus receiving these cash flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, client segmentation, regulation (including changes in assets holding limits for different types of investors), changes in tax policies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to FX depreciation, or to specified interest rates – these are common in emerging markets. It is important to note that the index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is also important to acknowledge that funding in a currency that differs from the currency in which coupons are denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to the risks related to rates movements.
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Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk. The appropriateness or otherwise of these products for use by investors is dependent on the investors' own circumstances including their tax position, their regulatory environment and the nature of their other assets and liabilities, and as such, investors should take expert legal and financial advice before entering into any transaction similar to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp. If you are unable to access the website please contact your Deutsche Bank representative for a copy of this important document.
Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs, whose values are affected by the currency of an underlying security, effectively assume currency risk.
Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction.
United States: Approved and/or distributed by Deutsche Bank Securities Incorporated, a member of FINRA, NFA and SIPC. Analysts employed by non-US affiliates may not be associated persons of Deutsche Bank Securities Incorporated and therefore not subject to FINRA regulations concerning communications with subject companies, public appearances and securities held by analysts.
Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporated in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized under German Banking Law (competent authority: European Central Bank) and is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority.
United Kingdom: Approved and/or distributed by Deutsche Bank AG acting through its London Branch at Winchester House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by the Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial Conduct Authority. Details about the extent of our authorisation and regulation are available on request.
Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch.
India: Prepared by Deutsche Equities Private Ltd, which is registered by the Securities and Exchange Board of India (SEBI) as a stock broker. Research Analyst SEBI Registration Number is INH000001741. DEIPL may have received administrative warnings from the SEBI for breaches of Indian regulations.
Japan: Approved and/or distributed by Deutsche Securities Inc.(DSI). Registration number – Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, Type II Financial Instruments Firms Association and The Financial Futures Association of Japan. Commissions and risks involved in stock transactions – for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories of investment advice, products and services. Recommended investment strategies, products and services carry the risk of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Before deciding on the purchase of financial products and/or services, customers should carefully read the relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank
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Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan.
Korea: Distributed by Deutsche Securities Korea Co.
South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10).
Singapore: by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles Quay #18-00 South Tower Singapore 048583, +65 6423 8001), which may be contacted in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), they accept legal responsibility to such person for its contents.
Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG – QFC Branch may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower, West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre Regulatory Authority.
Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation.
Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box 301809, Faisaliah Tower – 17th Floor, 11372 Riyadh, Saudi Arabia.
United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG – DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority.
Australia: Retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Please refer to Australian specific research disclosures and related information at https://australia.db.com/australia/content/research-information.html
Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively.
Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting.
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Deutsche Bank AG/Hong Kong Page 17
David Folkerts-Landau Chief Economist and Global Head of Research
Raj Hindocha Marcel Cassard Steve Pollard Global Chief Operating Officer Global Head Global Head Research FICC Research & Global Macro Economics Equity Research
Michael Spencer Ralf Hoffmann Andreas Neubauer Regional Head Regional Head Regional Head Asia Pacific Research Deutsche Bank Research, Germany Equity Research, Germany
International locations
Deutsche Bank AG Deutsche Bank AG Deutsche Bank AG Deutsche Securities Inc. Deutsche Bank Place Große Gallusstraße 10-14 Filiale Hongkong 2-11-1 Nagatacho Level 16 60272 Frankfurt am Main International Commerce Centre, Sanno Park Tower Corner of Hunter & Phillip Streets Germany 1 Austin Road West,Kowloon, Chiyoda-ku, Tokyo 100-6171 Sydney, NSW 2000 Tel: (49) 69 910 00 Hong Kong Japan Australia Tel: (852) 2203 8888 Tel: (81) 3 5156 6770 Tel: (61) 2 8258 1234 Deutsche Bank AG London Deutsche Bank Securities Inc. 1 Great Winchester Street 60 Wall Street London EC2N 2EQ New York, NY 10005 United Kingdom United States of America Tel: (44) 20 7545 8000 Tel: (1) 212 250 2500