|作者：||Jessie GUO,Edith Qian|
|摘要：||Report title:CMS Strategy Weekly (11 Jun 2019) - Weak job data invites rising expectation for Fed rate cut
Analyst:Jessie GUO,Edith Qian
■ Fed signaled openness to rate cut; May US job creation much worse than expected
■ China May trade surplus beat expectation
■ Maintain cautious view in NT
What’s new. 1). China-US trade friction: On June 3, China Ministry of Education issued a warning to Chinese students studying in the US. On June 4, Ministry of Foreign Affairs announced a safety warning for Chinese citizens and companies in the US while Ministry of Culture and Tourism issued a warning for Chinese tourists travelling to US. On the same day, NDRC said China will consider strengthening controls on exports of rare earths. On June 6, US President Donald Trump said he will decide whether to enact tariff on the remaining US$325bn worth of Chinese imports after the G20 meeting. On June 7, Chinese President Xi Jinping delivered a speech at the St. Petersburg International Economic Forum in Russia and said “it’s hard to imagine a complete break of the US from China or of China from the US”. On June 9, US Treasury Secretary Steven Mnuchin tweeted that he had a “candid” and “constructive” talk on trade issues with PBOC Governor Yi Gang. 2). On June 4, Fed Chairman Jerome Powell signaled an openness to cut interest rates if necessary by saying that the central bank “will act as appropriate to sustain the expansion”. 3). On June 5, World Bank lowered its 2019/2020 global growth forecast to 2.6%/2.7%, from the previous estimate of 2.9%/2.8% made in Jan 2019. 4). On June 8, Trump decided not to raise Mexico tariff after the country promised new steps to stem an influx of illegal migration into the US. 5). On June 5, Shanghai Stock Exchange announced the first three companies eligible to be listed on the Science and Technology Innovation Board. 6). On June 6, MIIT granted 5G licenses to China Mobile, China Unicom, China Telecom and China Broadcast Network, marking the commencement of 5G era in China. 7). On June 6, NDRC unveiled a stimulus plan to help spur demand for auto and electronics.
Macro data. China: 1). May Caixin non-mfg. PMI came in at 52.7, below consensus (Apr: 54.5). 2). May exports rose 1.1% YoY, beating expectations (Apr: -2.7%); imports fell 8.5% YoY, missing expectations (Apr: +4.0%); trade surplus came in at US$41.6bn, better than consensus (Apr: US$13.8bn). US: 1). May nonfarm payrolls increased 75,000, far below estimates (Apr: 224,000). Unemployment rate remained at 3.6%, in line with consensus (Apr: 3.6%). 2). May ADP nonfarm private payroll gained 27,000, far below consensus (Apr: 271,000). 3). May ISM mfg. PMI came in at 52.1, below estimates (Apr: 52.8). ISM non-mfg. PMI rose to 56.9, beating consensus (Apr: 55.5). 4). Apr factory order/factory orders ex. transportation edged down 0.8%/rose 0.3% MoM, better than consensus (Mar: +1.3%/+0.3%) . 5). Apr trade deficit narrowed to US$50.8bn, in line with expectations (Mar: US$51.9bn).
Stock market update. HSI/MXCN gained 0.2%/0.2% over the past week respectively while CSI300 corrected by 1.8%. MXCN: Consumer Discretionary (+2.4%) and Communication Services (+1.9%) outperformed while Health Care (-5.8%) and Energy (-3.2%) lagged. A share: Banks (+0.7%) outperformed while Health Care (-6.7%) and Industrials (-4.4%) lagged. HSI/MXCN/CSI300 trade at forward P/E of 10.6x/11.2x/11.3x respectively (vs. 3-yr median of 11.7x/12.3x/12.7x).
Our view. We have been taking a cautious view on 2Q market performance. Weak 2Q data and escalating trade tension have been expected as severe headwinds. More accommodative policies are expected in 2H. Market expectation on Fed rate cut has increased on weak job data and DXY is expected to trend lower. Weakening DXY historically corresponded to better performance of EM market. Key risks to watch: worse-than-expected macro and monetary data; potential pullback of US market; escalation of the Sino-US trade tension; strengthening of USD. Key catalysts: More easing policies; bilateral solution between the US and China; weakening of USD.