Asia ex-Japan Morning Research Summary

Equity Research Hong Kong Open | 12 January 2015Asia ex-Japan Morning Research SummaryRead the latest Japan Equity Research Summary »This summary is compiled from research reports previously published by Barclays Equity Research. A full list of all publications isavailable on Barclays Live. VIEW SETTLEMENT DISCLOSURES, ANALYST CERTIFICATIONS AND OTHER IMPORTANT DISCLOSURES Company ResearchBaidu, Inc. (BIDU)Bitauto Holdings Ltd. (BITA)Changyou.com Ltd. (CYOU)Cheung Kong (0001.HK)China Shenhua Energy Co., Ltd. (1088.HK)Infosys Ltd. (INFY.NS)KT&G (033780.KS)Oil & Natural Gas Corp., Ltd. (ONGC.NS)TSMC (2330.TW)Industry ResearchBasic Barometer - From the Ground Up No. 25: Testing timesChina Internet (POS): Assessing the strategic partnership of Bitauto, JD and TencentIndia Materials: Q3FY15 preview: Expect a subdued quarterIndia Power Utilities: NTPC's PLF falls; overall deficit lowMINED MATTERS 12/1/15: Downside coal price seasonality coming up in China - anecdotal evidence and patterns in past yearsSave-the-date: Third Annual Barclays Generic Pharmaceuticals Symposium - April 8, 2015Taiwan Telecom Services: In-line 4Q14 results with modestly improving mobile trendsMacro ResearchChina: Mixed December inflation, worrisome nonfood and producer pricesGlobal Economics Weekly: Oil lower = growth higherGlobal Macro Daily (Sydney Open): Weak wage growth fuels risk unwindGlobal Portfolio Manager's Digest: A clean slateMalaysia: November IP - Manufacturing output edges higherTaiwan: December exports - a larger drag from lower oil prices Publications Summary | ReportsBasic IndustriesBasic Barometer - From the Ground Up No. 25: Testing timesAsia ex-Japan Metals & MiningEphrem Ravi+852 2903 4892ephrem.ravi@barclays.comBarclays Bank, Hong Kong Ada Dai+852 2903 4052ada.dai@barclays.comBarclays Bank, Hong Kong Krishan Agarwal+852 2903 4543krishan.agarwal@barclays.comBarclays Bank, Hong Kong Dixon Lau, CFA+852 2903 4838dixon.lau@barclays.comBarclays Bank, Hong Kong 09 January 2015With winter and the CNY holidays looming (when construction activity slows down),producers are expecting sequentially weaker demand in most commodities exceptcoal for January. Interestingly, more than half the coal producers we spoke toexpected prices to start coming down this month after six months of increases asinventories are high and seasonal pick-up has been muted. Order flows were steadyin steel, but producers were less optimistic near term as they felt the CNY restockingwould be muted with fewer distributors around and impact of the reduction in VATrebates on exports. Cement producers expect the usual seasonal slowdown indemand, but there have been more production pauses recently which makes themoptimistic on pricing during spring. Demand for end customers was withinexpectations, except for washing machines where sales picked up due topromotional activity.Coal - prices could start falling soon as demand pick-up has been weaker thannormal seasonality and IPP inventories are high: While the underlying demand forcoal continued to increase as per normal seasonality, the sequential increase wasless than expected in December. IPP stocks are now believed to be high across theboard. After almost six months of consistent expectations of sequential priceincreases, a couple of the producers were expecting prices to weaken in the comingmonth. Coking coal prices have stabilized.Steel - Order book holding steady, inventories materially lower: Order books havebeen steady but the distributor destocking of inventories has continued. All eyes areon the post Chinese New Year restocking season coming up in the next two to threeweeks, but expectations for a significant restocking are not high.Cement - production pauses in North and East China as well, potential positive intoMarch: Most cement producers reported weaker demand due to seasonality (asconstruction begins to wane in Northern China at the beginning of Jan). There hasbeen a couple of production pauses in Northern and Eastern China (in addition tothe cuts in the North Eastern region) which could support prices when constructionseason restarts.Downstream sectors: Air conditioner sales have been lukewarm as winter isoff-season; while washing machine sales have been helped due to promotions(December was up 15%y/y and January was expected to be up 10%y/y). Airconditioner and washing machine inventories are now normal. Automotive sales inDecember were strong, but producers expect more normal rates in Jan. Machineryproducers remain cautious and property starts have yet to pick up.Survey sample: Our channel checks involved 19 companies - 3 coal companies, 3steel, 4 cement, 2 white goods, 2 automotive, 2 machinery and 3 propertycompanies. View full report on Barclays LiveBack to Top Basic IndustriesChina Shenhua Energy Co., Ltd.: Railway tariff deregulation to enhancethe attractiveness of volume growthStock RatingOverweightIndustry ViewNeutralPrice TargetHKD 25.00Price (09 Jan 2015)HKD 22.85EPS FY1 (E)2.02EPS