January 12, 2009 --- Premier Wen’s Claim
The US jobs report usually is the “prime mover” of markets. NFP in Dec matched expectations at -524K (cons. -525K), but there were net revisions of -154K to the previous 2 months. The shocker was in the unemployment rate, rising to 7.2% (cons 7.0%) in Dec, the highest in 16yrs, from 6.8% in Nov (upwardly revised from 6.7%).Thus, it is not surprising to see more retailer warnings in the US as there is no job, there is no demand. Over the weekend, Coach (largest US maker of luxury leather handbags) -13% after lowering its Q2 (ending Dec 08) profit forecast because of “depressed” store traffic and discounts. Best Buy -5.3% after saying that Dec SSS dropped 6.5% after holiday discounts failed to draw shoppers. Vail Resorts (Colorado-based owner of ski resorts) -5.7% after saying visits decreased 5.8% this season and revenue from lift tickets dropped 7.5%
Interestingly, Premier Wen claimed China’s efforts to offset the effect of the global economic slowdown an “initial success” on Sunday as the economy performed “BTE” last month. Wen vowed that the central government would take other measures, including large investments, to combat the crisis before the legislature’s annual meeting in early March, according to a speech published separately. The measures would include accelerated investment worth a total of Rmb600bn in six projects, originally approved as scientific and technological investments over the medium- and long-term. However, macro data looks not optimistic as Chinese exports fell 2.8% in Dec, at least 1% less than expected. Imports also fell sharply, indicating that China is suffering not only from the global economic slowdown but also from weakness in local demand, which Beijing had hoped would help sustain economic growth and restrain unemployment. I think we could see the PBOC slash rates once again.
Sector wise, according to MSCI China, I prefer consumer staple (10.1X09PE, EPSG=19.9%, ROE=23.8%), wireless telecom (10.8x09PE, EPSG=11.1%, ROE=28.2%), Food and Beverage (10.4x09PE, EPSG=23.1%, ROE=18.5%), energy (7.5X09PE, DY=4.6%, ROE=20%), construction materials (13.6X09PE, EPSG=18.9%, ROE=16.9%).
