Nomura Securities on China Economics: A Cold Winter
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Nomura Securities on China Economics by Zhiwei Zhang, Matthew Cross
A special report: A cold winter in China: "The Chinese economy faces a number of challenges this winter, as both private and public housing investments are slowing, with exports set to weaken as well. We see heightened risks of GDP growth dropping below 8% in Q1 2012. We expect growth to pick up beyond Q1 as public housing resumes its strength and policy loosens gradually. We expect flat steel consumption for 2011-13, as we do not believe current levels of steel consumption are supported by fundamentals. We expect the spot coal price to correct by 10-15% in H1 2012 and rebound in H2 2012."
Matthew Cross, Zhiwei Zhang on China Steel: "Our China economics team shares our negative view on the outlook for steel demand, particularly in the next six months as private housing demand could slow sharply. We estimate housing accounts for ~30% of China’s total steel demand. We forecast China steel consumption will be flat at 655mtpa over 2011-13, which is significantly below consensus estimates. We see a real risk that steel consumption volumes actually fall in 2012/2013 unless new stimulus programs replace those that are reaching completion. We expect steel stocks to continue to pull back over coming weeks as the macro environment weakens. (We would sell Angang (Reduce, TP HKD 3.50/sh) and Maanshan (Reduce, TP HKD 1.50/sh))"
A special report: A cold winter in China: "The Chinese economy faces a number of challenges this winter, as both private and public housing investments are slowing, with exports set to weaken as well. We see heightened risks of GDP growth dropping below 8% in Q1 2012. We expect growth to pick up beyond Q1 as public housing resumes its strength and policy loosens gradually. We expect flat steel consumption for 2011-13, as we do not believe current levels of steel consumption are supported by fundamentals. We expect the spot coal price to correct by 10-15% in H1 2012 and rebound in H2 2012."
Matthew Cross, Zhiwei Zhang on China Steel: "Our China economics team shares our negative view on the outlook for steel demand, particularly in the next six months as private housing demand could slow sharply. We estimate housing accounts for ~30% of China’s total steel demand. We forecast China steel consumption will be flat at 655mtpa over 2011-13, which is significantly below consensus estimates. We see a real risk that steel consumption volumes actually fall in 2012/2013 unless new stimulus programs replace those that are reaching completion. We expect steel stocks to continue to pull back over coming weeks as the macro environment weakens. (We would sell Angang (Reduce, TP HKD 3.50/sh) and Maanshan (Reduce, TP HKD 1.50/sh))"
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