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1、HOLT%upside,60,40,Imperial,Tiger Brands,30 January 2013EEMEA/South AfricaEquity ResearchInvestment StrategyEEMEA Equity Strategy,Research AnalystsAlexander Redman44 20 7883 6896alex.redmancredit-Arun Sai44 20 7883 0002arun.saicredit-,STRATEGYSouth Africa consumer versus resources:Has the trade reach
2、ed its conclusion?Figure 1:South African resources and consumer sectors HOLT upside versusmarket implied five-year forward CFROI less five-year median delivered CFROI,100,HOLT warranted,Gold,Market implied FY5 CFROI less 5-year delivered median CFROI,upside with un-80 demanding marketimplied CFROI,F
3、ields AquariusPlatinumSasol,Lewis Group,Anglogold Ashanti,-4Resources,Anglo American,Richemont,-25Consumer,20,BHP,Steinhoff,JD GroupFoschini,0-20,Naspers,ExxaroPioneer FoodImpala Platinum ShopriteSpar Group BAT TruworthsAnglo AmericanPlatinum,AVIOceana,SABmillerMr.Price,Woolworths,-40-60,Massmart,Pi
4、ck N Pay,HOLT warranted downside withdemanding market implied CFROI,-8,-6,-4,-2,0,2,4,6,8,10,12,14,Source:Credit Suisse HOLT,Credit Suisse research We believe the two key current issues for investors in South African equitiesare firstly,if the rand has further to weaken,and secondly,whether the long
5、-running consumer versus resources trade has finally reached its conclusion.Consumer relative to resources in South Africa has been one of the longest-running successful sector pair trades within the emerging EMEA region inrecent years,yielding 378%of relative price performance since the summerof 20
6、08.However,this pair trade has given back 3ppt of performance infavour of resources year to date.We believe the trade continues to unwind.We set out seven reasons which support a continued reversal of this trade:(i)emerging market cyclicals appear ripe for a bounce relative to defensives;(ii)the Chi
7、nese growth reacceleration is supportive for net commodityexporters;(iii)the strength of South African consumer fundamentals hasdeteriorated;(iv)the market is implying very demanding growth expectationsfor the SA consumer sector;(v)relative valuations for the SA consumerversus resources appear very
8、stretched;(vi)consumer sector earnings areshowing signs of disappointing;and(vii)resource names appear attractivelypositioned relative to consumers on Credit Suisse HOLT metrics.Within the resource space our top picks include AngloGold Ashanti,ExxaroResources and Lonmin.We continue to recommend only
9、 selected SAconsumer plays:Steinhoff,Foschini Group,Pick n Pay and Lewis Group.DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS.FOROTHER IMPORTANT DISCLOSURES,visit www.credit-or call+1(877)291-2683 USDisclosure:Credit Suisse does and seeks to do business with co
10、mpanies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investorsshould consider this report as only a single factor in making their investment decision.,CREDIT SUISSE SECURITIES RESE
11、ARCH&ANALYTICS,BEYOND INFORMATIONClient-Driven Solutions,Insights,and Access,2,30 January 2013SA consumer versus resources:Hasthe trade reached its conclusion?We believe the two key issues for investors in South African equities to tackle in early2013 are firstly,if the rand has further to weaken,an
12、d secondly,whether the long-runningconsumer versus resources trade has finally reached its conclusion.For the first issue,calling the rand correctly is critical for three key reasons:(i)the randcontributes more to changes in dollar total return than the equity market;(ii)randmovements dictate sector
13、 selection within a South African equities portfolio;and(iii)thecurrency is reflected(strength for strength)in domestic consumer sentiment.We set outour case for continued vulnerability for the South African currency in our 2013 EmergingEMEA Equities Outlook,dated 13 December 2012.For the second iss
14、ue we note that the South African consumer relative to resources hasbeen one of the longest-running successful sector pair trades within the emerging EMEAregion in recent years,yielding 378%of relative price performance since the onset of theglobal financial crisis in the summer of 2008.This has pro
15、ved the most profitableconsumer relative to resources pair trade in any of the larger emerging markets over theduration.However,year to date this pair trade has given back 3ppt in relative performance in favourof resources.We set out seven reasons which support a continued reversal of this trade:1.E
16、merging market cyclicals appear ripe for a bounce relative to defensives2.The Chinese growth reacceleration is supportive for net commodity exporters3.The strength of South African consumer fundamentals has deteriorated4.Market implying very demanding growth expectations for the SA consumer sector5.
17、Relative valuations for the SA consumer versus resources appear very stretched6.Consumer sector earnings are showing signs of disappointing7.Resource names appear attractively positioned relative to consumers on HOLT,Figure 2:Market relative performance of larger SouthAfrican sectors260,Figure 3:Con
18、sumer*relative to Resources US$indexperformance for the relevant major emerging markets,240220200,Cons DiscretionCons Staples,500400,S AfricaBrazil,180160,300,India,140120100,FinancialsTelcoms,200,ChileS KoreaMexico,8060,Other IndustrialsEnergy,100,RussiaChina,40Jul 08,Jul 09,Jul 10,Jul 11,Jul 12,Ma
19、terials,0Jul 08,Jul 09,Jul 10,Jul 11,Jul 12,Source:MSCI,Credit Suisse research,Note:*Staples and Discretionary.Materials and Energy,Source:MSCI,Credit Suisse researchEEMEA Equity Strategy,CreditSuisseestimates,8.0,20,-2.5,3,30 January 20131.Emerging market cyclicals appear ripe for a bounce relative
20、 to defensivesGiven our view that 1.4%in late July 2012 did mark the record low in US 10-year treasuryyields,it appears that the trade for defensives outperformance relative to the MSCIemerging markets benchmark is therefore looking stretched(Credit Suisse forecastsaverage 1Q13 UST yields of 2.25%ve
21、rsus the current 1.95%).Furthermore,cyclicalsremain close to the ex-global financial crisis record price book discount of 23%(theDecember 2008 trough discount was 30%).,Figure 4:Emerging market defensives relativeperformance versus US 10-year treasury yield,Figure 5:Emerging market cyclicals relativ
22、e to defensivesperformance versus price to book(+/-1s.d.),200,0.0,120,1.80,180,R-squared=0.76,1.3,110,1.65,100,1.50,160,2.7,90,1.35,140120100,4.05.36.7,80706050,1.201.050.900.75,80Jan 95,Jan 98 Jan 01 Jan 04 Jan 07 Jan 10 Jan 13MSCI EMF Defensives/EMF(US$,rebased to 100 on 1/1/95),40Jan 96,Jan 99 Ja
23、n 02 Jan 05 Jan 08 Jan 11MSCI EMF Cyclicals/Defensives(US$,LHS),0.60Jan 14,US 10Y bond yield(%,inverted,RHS)Defensives:Consumer Staples,Healthcare,UtilitiesSource:MSCI,Credit Suisse research,MSCI EMF Cyclicals/Defensives PBR(x,RHS)Cyclicals:Consumer Discretionary,Industrials,IT,Materials.Defensives:
24、Consumer Staples,Healthcare,Utilities.,Source:MSCI,Credit Suisse researchMoreover,a recovery to trend(circa 5%)global IP growth on Credit Suisse estimates isconsistent with a recovery in cyclicals relative performance versus defensives and risingglobal excess liquidity is supportive of materials for
25、ward earnings multiple expansion.,Figure 6:Global industrial production growth versusemerging markets cyclicals relative to defensives year-on-year performance,Figure 7:Global excess liquidity*versus emergingmarkets materials relative to market PE ratio,110,EM cyclicals rel defensives,yoy%,12.5,18,2
26、00,Global IP yoy%,rhs,15,180,100,10.0,12,160,9080706050Jan 97 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13,7.55.02.50.0,9630-3-6-9Jan 96,Global excess liquidity(%,pushed forward 10m)EMF materials relative to market PE ratio(%,rhs)Jan 99 Jan 02 Jan 05 Jan 08 Jan 11 Jan 14,140120100806040,C
27、yclicals:Consumer Discretionary,Industrials,IT,Materials.Defensives:Consumer Staples,Healthcare,Utilities.Source:MSCI,Thomson Reuters,Credit Suisse estimatesEEMEA Equity Strategy,*Note:excess liquidity defined by narrow money supply growth lessnominal industrial production growthSource:MSCI,Thomson
28、Reuters,Credit Suisse research,CreditSuisseforecast,68,4,30 January 20132.The Chinese growth reacceleration is supportive for net commodity exportersThe recovery in Chinese electricity generation growth and continued uptick in the latestDecember manufacturing PMI Output survey are both indicative of
29、 a mild reacceleration inChinese GDP.Credit Suisse is forecasting 2013E and 2014E GDP growth in China of8.0%and 8.2%,respectively,following 7.7%in 2012.,Figure 8:China electricity production versus GDP growthChina real GDP growth(LHS),Figure 9:China manufacturing PMI output versus GDPgrowthChina rea
30、l GDP growth(LHS),16%14%12%10%8%6%,China electricity production,yoy%,3mma,33%26%20%13%6%0%,16%14%12%10%8%6%,China manufacturing PMI:Output(3m lead),6358534843,4%,Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan00 01 02 03 04 05 06 07 08 09 10 11 12 13 14,-7%,4%,Jan Jan05 06,Jan07,Jan Jan0
31、8 09,Jan10,Jan Jan11 12,Jan13,Jan Jan14 15,38,Source:National Bureau of Statistics,Oxford Economics,Credit,Source:Markit Economics,Credit Suisse estimates,Suisse researchThe reacceleration in Chinese fixed asset investment new projects started over the pasttwelve months to 37%year-on-year is consist
32、ent with a pick up and subsequentstabilisation in monthly new society wide financing to a level averaging RMB1.3trn over thepast ten months.Momentum in EMEA metals and mining relative performance versusregional equities has turned positive and we think has much further to run beforerecoupling with i
33、ts eight year historical association with Chinese commercial propertytransactions which are now at their highest year-on-year growth rate since October 2011.,Figure 10:China fixed asset investment new projectsstarted versus society wide financing(3-month movingaverage),Figure 11:China commercial pro
34、perty transactionsversus MSCI EMEA Metals&Mining relative to MSCIEMEA,100806040200-20,24002000160012008004000,100806040200-20-40,544230186-6-18-30,-40,-400,Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13,Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13China society wide financi
35、ng(RMB bn,3mma,RHS)Fixed inv:projects started(yoy%chg 3mma,lagged by 3m,LHS)Source:National Bureau of Statistics of China,Peoples Bank ofChina,Credit Suisse researchEEMEA Equity Strategy,China:Commercial property transactions(msq floor space,yoy%chg,3mma,pushed forward 2 months,LHS)MSCI EMEA Metals&
36、Mining/MSCI EMEA(US$,yoy%chg,RHS)Source:China National Bureau of Statistics,MSCI,Credit Suisseresearch,5,30 January 2013Chinese steel production year-on-year growth(now the strongest since September 2011)has risen in conjunction with residential real estate new development floor space sold.Also supp
37、ortive of emerging markets metals and mining sector relative performance is theCredit Suisse forecast for stability in Chinese house pricesup by 5%in 1H2013 in thelarge cities(see China Property Sector:Sales momentum versus housing price risk,Jinsong Du,21 January 2013).,Figure 12:China:residential
38、new floor space sold versussteel production,Figure 13:Real China house prices versus MSCI EMFmetals&mining relative to MSCI EMF,60%50%40%30%20%10%0%,China real estate dev.floor space sold(12mmav,yoy%chg)China steel production(yoy%chg),122120118116114112110108106,188180172164156148140132124,-10%,1041
39、02,China:House prices(real,indexrebased,LHS)MSCI EMF Metals&Mining/,116108,-20%,Jan02,Jan03,Jan04,Jan05,Jan06,Jan07,Jan08,Jan09,Jan10,Jan11,Jan12,Jan13,MSCI EMF(US$,rebased,RHS)100Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12,100,Source:China National Bureau of Statistics,World Steel Assoc
40、iation,Credit Suisse research,Source:China National Bureau of Statistics,MSCI,Credit Suisseresearch,Supportive of the energy space within resources are Chinese crude oil imports at5.6mmbbl/day(as of December)running above the long-run trend and close to the recordhigh.China now accounts for the sing
41、le largest share of global oil demand growthof the0.60mmbbl/day additional global oil demand in 2011,China accounted for 0.51mmbbl/dayin demand growth.However,the above supports have yet to be reflected in any material boost to SouthAfrican mining volumes which have been dampened by industrial actio
42、n throughout 2012.,Figure 14:China crude oil imports(3mma)versus Brentspot crude oil price,Figure 15:South Africa mining production versus US ISMmanufacturing,9,China crude oil imports(mmbbl/day,3mav.,LHS),162,12,65,Brent crude oil price(US$/bbl,RHS),8,Linear(China oil imports(mmbbl/day,3mav.,LHS),1
43、44,8,60,7,126,6543,108907254,40-4-8,55504540,210,36180,-12-16,SA mining production(volindex,3mma yoy%chg)US ISM manufacturing,3530,Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12Source:China National Bureau of Statistics,Thomson Reuters,CreditSuisse researchEEMEA Equity Strategy,Jan 9
44、2 Jan 95 Jan 98 Jan 01 Jan 04 Jan 07 Jan 10 Jan 13Source:Company data,Credit Suisse estimates,70,20,66,9,6,6,30 January 20133.The strength of South African consumer fundamentals has deterioratedThe following ten key issues have eroded the consumer outlook in South Africa:(i)The PMI manufacturing out
45、put survey is indicating a somewhat worrisome profile formomentum of overall South African economic activity:a level of 45.5(the three monthmoving averagesmoothed owing to the volatile series)is consistent with GDP growth ofjust 1%versus the Credit Suisse forecast for 2013E of 3.1%.On 24 January the
46、 SouthAfrican Reserve Bank lowered their 2013E GDP growth forecast to 2.6%from 2.9%.Similarly,the latest December headline manufacturing PMI survey is consistent with year-on-year industrial production growth in negative territory,i.e.closer to-3%than theNovember reported+3%.,Figure 16:South Africa
47、real GDP yoy versusmanufacturing PMI output index,Figure 17:South Africa industrial production versusmanufacturing PMI,South Africa manufacturing PMI output Index(3mma)South Africa real GDP,yoy%chg(RHS),9%,South Africa industrial production(yoy%chg,LHS)South Africa Manufacturing PMI(RHS),65605550454
48、03530,7%6%4%3%1%-1%-2%-4%,151050-5-10-15-20,Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan,6258545046423834,Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14Source:Markit,Thomson Reuters,Credit Suisse research,99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14Source:Markit,Thomso
49、n Reuters,Credit Suisse research,(ii)According to the quarterly IFO World Economic Survey,South African lack ofconfidence in their governments economic policy has deteriorated steadily since the latteryears of the Mbeki administration,now reaching the lowest point since de Klerk.Figure 18:IFO World
50、Economic Survey South Africa:Lack of confidence in governmenteconomic policyLow confidence87South Africa:Lack of confidencein government economic policy5432,de Klerk,Mandela,Mbeki,Zuma,1High confidence0,Jan 91,Jan 94,Jan 97,Jan 00,Jan 03,Jan 06,Jan 09,Jan 12,Source:IFO World Economic Survey,Credit S
