CSFB瑞士信貸第一BSDZ--投資策略報告(PDF 40頁)

No more than a bear market rebound. The current rebound of China stocks is normal in a
bear market environment. Indeed, a similar rebound happened in the last downcycle. The key
is fixed-asset investment growth: Completing unfinished projects will help to maintain strong
growth in 2004, but a ‘project gap’ would bring down growth significantly in 2005, in our view.
Earnings outlook and valuation. Consensus EPS estimates have not yet been downgraded,
but this does not mean that they will not be in 2005. Widespread margin decline in downstream
sectors in China reveals that the current situation is unsustainable. With the overall China market
somehow ‘fairly-valued’, earnings upgrade/downgrades will drive the market ahead.
Government policy/reform update. In the next few months, all eyes will be on whether the
Chinese government will raise its interest rate or allow its currency to appreciate – which,
despite all the talk, one should only believe when it happens. More concrete reform actions are
being seen in other areas, such as the new VAT reform in northeast China and the attempt to
deal with the ‘non-tradable’ share reform in the A-share market.
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