Made in China:CPI Inflation; Healthcare; Dairy/Milk;Feng Results (-); Belle, Cosco Pacific

THEME OF THE DAY

    Data Flash - China: CPI inflation rebounds due to holiday effect (Zhiwei Zhang) .

    The CPI inflation rose to 1.4% yoy in February from 0.8% in January (Consensus and DB: 1.0%). The PPI inflation dropped to -4.8% from -4.3%. On sequential basis?the CPI rose by 1.2% mom, while the PPI dropped by 0.7%. The rebound of CPI inflation is largely driven by seasonal factor as the Chinese New Year pushed up prices for food, transportation, and services. Nonetheless we maintain our view that the CPI inflation should remain in positive territory in 2015 at 1.8%, as monetary and fiscal policies will likely loosen in coming months. We believe the government is more concerned about the risks in property sector and fiscal revenue than deflation. As many prices in the CPI basket are regulated, the government can push up prices for public utilities if deflation risk becomes more serious. We continue to expect one interest rate cut and one RRR cut in Q2. (Zhiwei Zhang - 852 2203 8308) .

    http://pull.db-gmresearch.com/p/7193-7580/66774050/DB_DataFlash_2015-03-10_0900b8c0896c6eec.pdf

    China Edge P172 - Growth deceleration continues for global players in China (Jack Hu) .

    We have compiled comments from MNCs regarding their growth profiles in China for the past eight quarters. Most MNCs’ growth was in the low teens in 2H14, decelerating from more than 20% growth in 1H13. We also believe global pharma names are facing declining profitability, owing to price cuts and country-level initiatives, while margin pressure may not have emerged for medical device names. (Jack Hu - 852 2203 6208) .

    http://pull.db-gmresearch.com/p/3004-45AC/66468916/0900b8c08966c1a8.pdf

    China Dairy/Infant Milk Formula - The threat of New Zealand formula contamination (Winnie Mak)

    In a press conference held on 10 March, Prime Minister of New Zealand John Key said the threat was a "form of ecoterrorism, without doubt”, and he was confident of a low likelihood of the threats being carried out, and food products were safe.According to The New Zealand Herald, Federated Farmers and Fonterra (FCG NZ, Buy) received anonymous letters in November 2014. (Continued to next page)

    HK/China sector analysts' top picksFinancials - BOC, CCB, China Life, CTIH, NCI; Telecom - China Telecom; Property -COLI, CR Land, China Vanke, Wanda, Sino Ocean; Auto - Brilliance China, Zhengtong Auto; Transportation - Air China, China Shipping Development, China Merchants, Orient Overseas Int'l; Construction - CCC, Zhuzhou CSR; Consumer -Li & Fung, L'Occitane, Tsui Wah; Utilities - Beijing Enterprises, Beijing Enterprise Water, Longyuan, Huaneng Renewables; Metal/Mining - Conch, BBMG, WCC, Baosteel, CR Cement, Hongqiao; Internet - Baidu, SouFun, YY, Alibaba; Healthcare - Sihuan Pharmaceutical, CSPC Pharma, Phoenix Healthcare Group; Small-mid caps - Home Inns.