January 13, 2009

Deutsche Bank outlines its 2009 China economic outlook and equity strategy at Access China Conference

Deutsche Bank today presented its 2009 China economic outlook and equity market strategy at the Bank’s 7th annual Access China Conference in Beijing. The event is being attended by over 800 investors, representing many of the world’s largest asset management houses, hedge funds, pension funds, and banks.

In his keynote presentation at the conference, Dr. Jun Ma, Deutsche Bank’s Chief Economist for Greater China, said he had a cautious view in relation to the economy for the next one and a half years: “We forecast that China’s GDP growth will decelerate further from 9% in 2008 to 7% in 2009 on significantly weaker external demand and rapid deceleration in investments in the real estate, manufacturing and mining sectors.  Our analysis suggests that China’s GDP will have a ‘double dip’, finally reaching its low point in the first half of 2010.”

Dr. Ma said he also expects 2009 to witness the worst deflation in 10 years. “Our research team forecasts that CPI inflation will likely fall below -1% in February and PPI inflation could decline to -7% in Q3 this year”, he said.

Regarding China’s corporate earnings growth, Dr. Ma said, “Our top-down analysis suggests that EPS for the H share index will likely decline by 10 to 15% in 2009. Our view is that the H share index will likely be range-bound in the next two quarters; however a substantial rally could occur in the second half of 2009. Similarly, our fundamental analysis suggests that A-shares may also continue to experience headwinds in the first half of 2009, with the second half being more positive."

Given this outlook, Dr. Ma outlined that the Bank’s recommended equity market strategy in China is to stay defensively positioned in the first half of 2009 and to switch to a more aggressive asset allocation when signs of an end to analyst downgrades emerge, likely to be by the middle of 2009.  

Deutsche Bank highlighted several themes which could provide investment opportunities during 2009:

  • Counter-cyclical services: Healthcare, education, and online gaming could demonstrate significant resilience to the economic slowdown
  • Government-sponsored investments: Could boost demand for cement and railway construction
  • Ongoing industrial consolidation: Certain steel, non-ferrous, and property companies could be long-term beneficiaries
  • Beneficiaries of deflation: The effect of deflation is expected to be negative for many sectors of the economy, namely, real estate, commodities and banking; however, it is expected to be positive for the profit margin of sectors such as food & beverage, independent power producers, and oil refining
  • Rural policy: Electronics producers may significantly benefit from the government’s subsidy programme

Dr. Ma added that the key risks to his view included G3 economic performance, and the timing of the recovery of the Chinese property market.

For further information, please contact:

Richard Harbinson
+852 2203 8434

About Deutsche Bank

Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With 81,308 employees in 75 countries, Deutsche Bank offers unparalleled financial services throughout the world. The bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.


About Deutsche Bank China

Deutsche Bank (China) Co., Ltd. is a wholly-owned foreign-funded subsidiary of Deutsche Bank AG and is incorporated in the People’s Republic of China.  Headquartered in Beijing, Deutsche Bank China now operates branches and sub-branches in Beijing, Shanghai and Guangzhou with over 500 employees.