|作者：||Jessie GUO,Edith Qian,Harrington ZHANG|
|摘要：||Report title:CMS Strategy Weekly (14 Sep 2020) - China TSF beat; UK may break law in new Brexit turmoil
Analyst:Jessie GUO,Edith Qian,Harrington ZHANG
■ China August TSF beat expectations, as local govt bond issuance surged
■ ECB left all policy settings unchanged, without signalling alarm on Euro
■ Brexit trade talk is under threat due to UK’s new legislation proposal
What’s new. 1) COVID-19 outbreak: In Europe, the second wave continued to deteriorate. Average daily new cases over the past week reached c.8,000 and c.9,600 respectively in France and Spain, up 20% and 13% compared to the week before. Average daily new cases surged in the UK, up 67% w-o-w to c.3,000. 2) On September 10, the ECB held its policy meeting at which the Governing Council decided to leave all policy settings unchanged. In the post-meeting press conference, ECB President Lagarde revealed that the Council currently has no plan and did not even discuss the possibility of extending its PEPP programme. Meanwhile, President Lagarde also hinted that the Council is not particularly concerned about the recent rally of the euro, as it does not target exchange rate, but it is closely monitoring the potential impact on domestic inflation in the eurozone. 3) The UK government proposed a new legislation last week, which could override key parts of the Brexit Withdrawal Agreement that it reached with EU last year. The proposed Internal Market Bill is expected to “eliminate the legal force of parts of the withdrawal agreement” which include areas of state aid and Northern Ireland customs. Whether such a move is intended for negotiating purpose from the Johnson Ministry or for solving some of the “flaws” in the withdrawal agreement remains to be seen. The bill has drawn staunch criticism from both the EU and some UK politicians. The EU has warned that if the Bill were to be adopted, it would constitute an extremely serious violation of the Withdrawal Agreement and of international law, and called on the UK government to withdraw these measures from the draft Bill in the shortest time possible.
Macro data update. China: 1) August CPI grew 2.4% yoy, in line with consensus (July: 2.7%); August PPI declined 2.0% yoy, in line with consensus (July: -2.4%). 2) August M2 rose 10.4% yoy, missing consensus (July: 10.7%); August new Renminbi loans issued were RMB1,280bn, beating consensus (July: RMB992.7bn); August total social financing was RMB3,580bn, beating consensus (July: RMB1,690bn). US: 1) August CPI rose 1.3% yoy, beating consensus (July: 1.0%); August core PPI increased 0.6% yoy, far above consensus (July: 0.3%). 2) Initial claims for week ended September 5 were 884,000, missing forecasts (previous week: 884,000).
Stock markets. HSI/MXCN/CSI300 dropped by 0.8%/2.6%/3.0% over the past week. MXCN: Insurance (+0.6%) and Banks (+0.1%) outperformed while IT (-5.7%) and Diversified Financials (-4.8%) lagged. A shares: Insurance (+3.1%) outperformed while Health Care (-6.2%) and IT (-6.1%) lagged. HSI/MXCN/CSI300 trade at forward P/E of 11.6x/15.5x/14.4x respectively (vs. 3-yr median of 11.2x/12.4x/12.5x). We have projected HSI to stay trend-ranged since April; expect a better performance in 4Q; expect MSCI China Index and CSI 300 to continue outperform major markets. Key catalysts/risks: 1) macro data; 2) COVID-19 infection development; 3) Sino-US relationship.