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1、,Equity StrategyGlobal Emerging MarketsCEEMEA equityconversationsPlaying the secular consumer themein EM14 November 2012John Lomax*Strategist,abcGlobal Research We think the EM consumer will driveglobal growth for the foreseeable future Secular consumer themes will outperform Financials and consumer
2、 discretionarysectors are superior fundamental playsto staplesWith the emergence of an EM middle class,the EMconsumer is rising rapidly.In“Consumer in 2050:The riseof the EM middle class”,Karen Ward and Frederic Neumann(15 October 2012)suggest that by 2050,EM consumptioncould make up around 2/3 of g
3、lobal consumption comparedwith 1/3 today.They make projections for consumerspending by category out until 2050 and the main features ofthis are shown in the table on page 2.The methodologycombines projections for income per capita,demographics,HSBC Bank plc+44 20 7992 3712,and changes in spending pa
4、tterns.,Ben LaidlerHead of Americas ResearchHSBC Securities(USA)Inc+1 212 525 3460 Herald van der Linde*StrategistThe Hongkong and Shanghai Banking Corporation Limited+852 2996 6575.hkErwan Rambourg*AnalystThe Hongkong and Shanghai Banking Corporation Limited,This note attempts to take their broad p
5、redictions and distilthese into country,sector and stock calls for CEEMEA,Asiaand LatAm,as well as some global winners.Perhaps the most important conclusion of the report is thatwe need to put the consumer at the centre of our thinkingabout medium-term equity positioning.Given low growth inthe devel
6、oped world,the EM consumer will be driving thebulk of what growth there is to be had in the global economyfor a considerable time to come.Yet the intensity of the,+852 2996 6572Robert Parkes*StrategistHSBC Bank plc+44 20 7991 6716Wietse Nijenhuis*StrategistHSBC Bank plc+44 20 7992 3680,story varies
7、markedly between countries and so,of course,does market sensitivity to the story.In CEEMEA,the best secular consumer stories in the regionare in Turkey,Russia,Egypt,Nigeria and the UAE.SouthAfrica,in particular,shows a noticeably weaker trend.We believe that the outlook for Asian consumption remains
8、robust,given that growth has tilted towards domesticdemand.A lively labour market makes for a decent outlook,View HSBC Global Research at:http:/*Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations,we think.We identify Asian stocks t
9、hat will benefit mostfrom Asian consumers trading up,Issuer of report:,HSBC Bank plc,In LatAm,Peru stands out for having the worlds third-highest,Disclaimer&DisclosuresThis report must be read with thedisclosures and the analyst certificationsin the Disclosure appendix,and with theDisclaimer,which f
10、orms part of it,real per-capita income growth by 2050.Brazil is somewhat lesscompelling.Its demographics are less positive,and its startingpoint is higher in terms of both income per capita and consumerspend;though,we are still looking at growth rates that farexceed those in the developed world.,Equ
11、ity StrategyGlobal Emerging Markets14 November 2012CEEMEATrends in consumer spendingAs income grows,food and other basics stopabsorbing most of someones monthly salary,making room for more discretionary spending.Across CEEMEA,and indeed EM more broadly,the table below shows spending on food growings
12、lowly relative to overall spending.WithinCEEMEA,food spending is projected to continueto grow relatively more strongly in Nigeria,Turkey and Egypt,but very weakly in Russia.By contrast,spending on non-food is generallyexpected to grow more rapidly.In particular,notethat expenditure on housing,energy
13、 andfurnishings is expected to rise much more rapidlyout to 2050.Spending in this category is expectedto be particularly rapid in Russia,Turkey andCompound annual growth rate between now and 2050,Egypt,less so in Saudi Arabia,and to be relativelylacklustre in Poland and especially South Africa.Most
14、other forms of discretionary spending arealso expected to show strong growth rates clothing,health,transport(including autodemand),recreation and culture,education,andrestaurant and hotels all show strong averageyear-on-year growth rates.The only category of spending that shows asignificantly weaker
15、 trajectory is communications.In almost all instances,telecoms spending isprojected to grow less rapidly than income Egypt is the only CEEMEA exception.In fact,telecoms is a relatively mature EM sector andpenetration rates are already high.,abc,Clothing&,Housing&,Communic-Recreation&,Restaurants,Foo
16、d,Footwear,Energy Furnishings,Health,Transport,ation,Culture,Education,&Hotels,Overall,PhilippinesPeruIndiaMalaysiaChinaNigeriaPakistanTurkeyIndonesiaColombiaEgyptThailandRussiaSaudi ArabiaMexicoArgentinaBrazilPolandSouth AfricaUSEurope,4.7%2.1%3.5%4.0%2.2%4.6%3.9%3.2%2.5%3.7%4.4%2.2%0.9%2.2%2.4%1.9
17、%2.7%2.1%2.4%1.7%1.7%,5.8%4.5%4.8%5.3%4.6%4.7%4.1%4.5%3.6%3.8%4.5%3.3%3.3%3.5%3.6%3.1%2.7%3.3%2.3%1.7%1.7%,8.2%7.2%6.3%5.6%7.3%4.3%3.7%4.8%5.9%4.2%4.9%5.6%5.9%3.9%4.0%3.5%3.1%3.7%2.8%1.7%1.7%,7.0%5.7%5.0%5.4%5.8%4.3%3.6%4.6%4.7%4.2%4.9%4.4%4.5%3.6%3.8%3.2%3.1%3.4%2.8%1.7%1.7%,7.1%6.4%6.2%5.9%6.4%4.7
18、%4.1%5.1%4.8%3.7%4.3%4.5%5.1%4.1%4.2%3.7%2.6%3.9%2.2%1.7%1.7%,6.4%5.2%7.3%5.5%5.3%5.5%6.1%4.7%4.1%3.9%4.6%3.8%4.0%3.7%3.8%3.3%2.8%3.5%2.5%1.7%1.7%,5.7%3.7%5.8%4.6%3.8%6.6%5.7%3.8%3.5%4.3%5.0%3.2%2.5%2.8%2.9%2.4%3.2%2.6%2.3%1.7%1.7%,8.4%7.7%7.8%5.9%7.8%6.6%6.0%5.1%6.1%5.3%6.0%5.8%6.4%4.1%4.3%3.7%4.2%
19、3.9%3.8%1.7%1.7%,7.7%5.8%5.9%4.8%5.9%3.4%2.8%4.0%5.4%3.2%3.9%5.1%4.6%3.0%3.2%2.6%2.1%2.8%1.8%1.7%1.7%,7.9%7.3%7.3%6.0%7.4%5.6%4.9%5.2%5.6%4.2%4.9%5.3%6.0%4.3%4.4%3.9%3.1%4.1%2.7%1.7%1.7%,7.0%5.6%5.5%5.3%5.1%4.8%4.5%4.4%4.3%4.2%3.9%3.9%3.9%3.8%3.6%3.1%3.0%2.9%2.6%1.7%1.7%,Source:HSBC calculations2,Eq
20、uity StrategyGlobal Emerging Markets14 November 2012In line with a huge increase in consumerspending,the report also envisages a surge indemand for the finance industry.At presentemerging markets consume about 18%ofconsumer-facing financial services.This is likelyto rise to more than 50%by 2050.Stoc
21、k market implicationsOf course 2050 is a long way off,so we have tobe careful about reading too much from verylong-term trends into stock market performance.Nevertheless,there is clearly considerableinvestor frustration with risk-on-risk-off and adesire to orient strategy rather more towards long-te
22、rm secular themes;the consumer 2050 reportprovides a framework for such an approach.Perhaps the most important conclusion of the reportis that we need to put the consumer at the centre ofour thinking about medium-term equity positioning.Given low growth in the developed world,the EMconsumer will be
23、driving the bulk of what growththere is to be had in the global economy for aconsiderable time to come.Yet the intensity of thestory varies markedly between countries and so,ofcourse,does market sensitivity to the story.So,forexample,at a very general level,in our view,Turkeyshows a great consumer t
24、rajectory,but the stockmarket also has a plethora of different ways to playthis.By contrast,in Russia,consumer spendingshould also grow decently,but this is much moredifficult to capture from a stock market perspective.Stock market representation is part of the reasonwhy Turkey has performed so much
25、 more stronglythis year.Equally,in South Africa,where we expectthe consumption trajectory to be relatively slow byEM standards,stock market representation is rich.Still,in what follows we try to link Karen andFrederics consumer spending projections tocountry and sector themes in CEEMEA.Inaddition to
26、 focusing on the secular trends,we also,The best part of their story structurally appears tolie in the interface between housing and mortgagedemand.In most parts of CEEMEA,mortgagelending is still in its infancy,but the banks shouldof course be viewed as a generic play on EMconsumer demand.Regarding
27、 banks,this story seems to point mostclearly towards Turkey,Russia,Egypt and Nigeria,if you add its banks into the equation.Thesignificant Dangote acquisition premium paid byTiger Brands could be viewed as highlighting thecurrent value offered by the Nigerian market andin particular its consumer-rel
28、ated plays(TigerBrands Dangote:Medium-term pain for longer-term gain,Michele Olivier,23 October 2012).Of course many of these segments have alreadyperformed well,with the partial exception ofRussia,but there is still valuation headroom,inour view.For Russia,supply indigestion hascreated headwinds.An
29、 additional caveat is thathousehold credit is likely to slow(albeit fromc40%)next year,whereas in the other countries itis likely to be accelerating.Nevertheless,thelonger-term secular story still looks appealing.Saudi banks should also benefit from seculargrowth prospects,and cyclical lending growt
30、h isclearly supportive too,although earningsmomentum less so(Q3 earnings so far have comein 10%below expectations,largely because ofcredit-quality issues).By contrast,in Poland thestructural growth story is moderately lacklustrebut cyclical conditions are also weak,with softemployment growth in stro
31、ng contrast to SaudiArabia weighing on the lending growth outlook.For South African banks,both secular andcyclical prospects also appear rather discouraging.As regards the cycle,the major threat lies inmacro growth prospects in 2013;we forecast GDPgrowth at 3.1%,but the risk lies to the downside.,ab
32、c,consider the overlap between this and the cycle,where appropriate.3,PB2013e(x),Equity StrategyGlobal Emerging Markets14 November 2012Real private sector credit growth(%y-o-y),abc,2004,2005,2006,2007,2008,2009,2010,2011,2012f,2013f,Czech RepublicEgyptHungaryKuwaitMorocco*NigeriaPolandQatarRussiaSau
33、di ArabiaSouth AfricaTurkeyUAE,9.5-6.60.414.67.126.60.419.020.536.68.144.518.4,18.1-1.99.015.510.530.89.050.617.738.220.445.332.7,20.73.922.424.617.927.822.438.328.27.924.256.020.7,21.63.311.636.328.397.129.837.134.313.923.729.437.0,15.7-28.712.37.620.259.436.131.9-8.618.918.735.336.0,7.0-2.5-11.54.
34、18.926.6-4.016.48.3-4.84.611.3-0.4,1.2-2.90.6-4.15.2-4.98.97.24.0-0.65.520.6-2.3,4.1-10.7-4.3-0.59.015.47.711.95.96.76.235.8-0.1,0.8-5.9-10.11.06.535.04.716.59.912.32.016.02.8,3.2-5.4-1.53.27.537.55.615.315.314.53.019.06.4,Note:*Claims on the private sectorSource:Thomson Reuters Datastream,National
35、statistical offices,National central banks,HSBC estimates and forecasts,To a considerable extent our real estate preferencesoverlap with bank exposure.In terms of ourcoverage,we think Turkey and Egypt lookespecially attractive,Saudi Arabia somewhat so andSouth Africa less attractive.In the longer te
36、rm,thefollowing charts highlight what scope there is for apositive synergy to develop between the growth inmortgage lending and real estate demand.In general the CEEMEA real estate sector has beenheavily impacted by regulatory and legal changes,Egypt where real estate companies face challengesagains
37、t their land banks.For the Turkish real estate market,we expect theresidential segment to be partly driven by lowinterest rates.In addition,however,a refreshed urbantransformation law(which aims to renew 45-50%ofexisting housing)and a new law that allows Russianand GCC buyers to acquire houses in Tu
38、rkey shouldhelp.The hospitality segment should also bedynamic,given already very low vacancy rates.,and these are discussed in“CEEMEA Real Estate The three Rs:Regulations,Rates and Return”(Patrick Gaffney et al,22 October 2012).In manycases,associated fears are overstated,such as inTurkey where addi
39、tional taxes were mooted orCEEMEA banks valuations:P/B versus RoE trend(dots=CEEMEA banks)4.0,3.53.02.52.01.51.00.50.0,y=11.07x-0.29R 2=0.58,5%,10%,15%,20%,25%,30%,Ro E 2013eSource:HSBC estimates4,Expensive,Cheap,Equity StrategyGlobal Emerging Markets14 November 2012CEEMEA banks valuations:PB versus
40、 RoE trend along the cross-section,abc,Bank,Country,RoE 2013e,PB 2013e(x),Expensive in relation to trend,Capitec Bank HldgsMasraf Al-RayanAlinma BankPekaoBurgan BankFirstRandNSGBKuwait Finance HouseKomercniNational Bank of KuwaitAlrajhi BankPKO BPNedbankStandard BankAkbankRiyad BankCommercial Bank O
41、f Qatar,South AfricaQatarSaudi ArabiaPolandKuwaitSouth AfricaEgyptKuwaitCzech RepublicKuwaitSaudi ArabiaPolandSouth AfricaSouth AfricaTurkeySaudi ArabiaQatar,28%13%7%13%15%20%18%12%15%15%28%16%16%15%15%12%13%,3.811.901.081.701.882.412.211.501.801.763.161.701.671.551.441.081.18,At-par with the trend,
42、Garanti BankasiNational Bank of Abu Dhabi,TurkeyUAE,16%14%,1.511.31,Cheap in relation to trend,ABSAQatar Islamic BankQatar National BankArab National BankDoha Bank LtdOTPBank AsyaIS BankasiBanque Saudi FransiAbu Dhabi Comm BankCIBCredit Agricole Egypt BankVakifbankYapi Kredi BankasiSamba Financial G
43、roupUnion National BankFirst Gulf BankBank VTB OAOAlbaraka TurkHalkbankSberbank RF,South AfricaQatarQatarSaudi ArabiaQatarHungaryTurkeyTurkeySaudi ArabiaUAEEgyptEgyptTurkeyTurkeySaudi ArabiaUAEUAERussiaTurkeyTurkeyRussia,16%16%19%14%16%11%10%15%15%13%26%20%13%16%17%11%17%14%15%22%22%,1.451.411.741.1
44、81.420.760.701.151.140.882.301.670.861.141.180.581.130.830.921.381.10,Source:HSBC estimates,In Egypt,we believe that the housing shortage hasonly been exacerbated over the past two years asconstruction has dried up.HSBC estimates that themarket needs between 400,000 to 500,000 unitsevery year(based
45、on the number of marriages)andthat on average over the past 10 years fewer than,250,000 units have been built.The past two yearshave been even worse.In the Gulf,Saudi Arabia also has a strongdemographic profile,and the government stimulusshould help real estate companies in the mediumterm,as more Sa
46、udis receive government loans.,5,Equity StrategyGlobal Emerging Markets14 November 2012The new mortgage law will,in the long run,leadto greater affordability among home buyers,butwe expect banks to be conservative over the nexttwo years as they try to understand the new rules.Elsewhere in the Gulf,w
47、e also like Dubai realestate both on the improvement in the localcycle,but also as a play on hospitality and broaderEM real estate spending(not least Egypt).Mortgage penetration in developing countries(2011)Source:IMF,SAMA,Ministry of finance SA,Central bank of UAEBy contrast for South African real
48、estate,as withbanks,both the secular and cyclical impulses arenegative.Macroeconomic risks appear skewed tothe downside and any positive influence fromfurther modest monetary easing is likely to beoffset by softer growth numbers.With regard to direct consumer plays,one broadimplication of Karen and
49、Frederics piece seems,to be that investors should prefer discretionary tostaples(since food should take up a diminishingproportion of the expenditure aggregate).In fact,it is not quite as straightforward as this sincequoted organised retail has in many countries thepotential to take considerable mar
50、ket share fromthe informal sector.Nevertheless,the cocktail of arelatively weaker trend in consumer spending andhigher input costs from upward pressure on softcommodity prices does,in some cases,createheadwinds for the sector.Equally staples havebeen seen as a safe haven through the endlessrisk-on-r
