HSBC-中国投资策略-中国股票策略：从亚洲供应链的转变中寻找赢家

aswellastheEVsupplychains(Exhibit1)and2)screenfor15Chinesemanufacturingcompaniesthatmaybenefitfromglobalsupplychaindiversification,consideringfactorslikeR&D,capexandgrossmargin,etc.(Exhibit2).

13June2022EquityResearchReport

ChinaEquityStrategy

FindingwinnersfromshiftsinAsia’ssupplychains

EquityStrategy

China

令Indo-PacificEconomicFrameworkisthelatesteffortthatmaydiversifytheregion’ssupplychains,butChinacanstillbenefit

令ChinaisalreadyoneofthebiggestinvestorsinASEAN,with6,000+companiespresentthere,andissettogrowmore

令WepresenttwogroupsofChinastocksthatmaybenefitfromsupplychaindiversificationintoASEAN

IPEFjustthelatesttradeinitiativethatmaydiversifyAsiansupplychains

USPresidentBidenlaunchedtheIndo-PacificEconomicFramework(IPEF)lastmonthwith12initialpartnersrepresenting40%ofglobalGDP.Closercollaborationbetweentradingpartnersshouldhelpregionaltradebycuttingtradingcostsandmayleadtomorediversifiedsupplychainsintheregion.WithmorecompanieslookingtomovesomeproductionfacilitiestoASEANgivenitsappeal,weshowhowChinesecompaniescanbenefitfromthistransitionbyinvestingmorethere.

China’snoslouchwhenitcomestoinvestinginASEAN

ChinapumpedUSD7.7bnintotheregionin2020,rankingasthefifth-largestFDIsource,andwebelievethistrendwillcontinueon:1)risinglabourcostsinChina,2)tariffsonsomeexportsfromChina,3)increasinglyskilledworkforceinASEAN,and4)improvedqualityofASEANinfrastructureandtaxincentives.Asanexample,sixChinesecompaniesthatsupplytoApplehadsetupfactoriesinVietnamby2021,doublethenumberthreeyearsago.ButChinastillhasthemostApplerelatedfactories,isfocusingmoreonhigh-endtechathome,andisn’tlosingoutasforeigninvestorshaveincreasedtheirinvestmentsintoChinaevenamidthechallenges.

ASEAN’sEVsupplychaintogrow,providingopportunitiesforChinasuppliers

ASEANhasrapidlyclimbedthevaluechainwithanEVsupplychainemergingthereandissettogrowfurthergivenagrowingpopulationandrapideconomicdevelopment.Thereasonsincludeaccesstokeyrawmaterials(suchasnickel),awell-establishedautosupplychain,cheaplabourandfavourablegovernmentpoliciesthatfacilitatethedevelopmentofanASEANEVmarket,especiallygivenrisingFDIflows.AllthissignalsplentyofopportunitiesforChinesecompaniesinvolvedintheEV-relatedsupplychainlookingtoexpandtheirglobalmarketshare.

Stockscreens

Wepresent1)alistof10ChinesestockswithexposuretoASEAN’selectronic,solar

StevenSun*,CFA(Reg.No.S1700517110003)

HeadofResearch,HSBCQianhaiSecuritiesLimited

HSBCQianhaiSecuritiesLimited

stevensun@

+8675588983158

AnakinTang*(Reg.No.S1700521090001)

Analyst,A-shareEquityStrategy

HSBCQianhaiSecuritiesLimited

anakin.tang@

+862160813876

JeffreyXie*(Reg.No.S1700121100003)

Associate

Shenzhen

*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisnotregistered/qualifiedpursuanttoFINRAregulations

AsiamoneyBrokersPoll2022

Votingopens1June–29JulyIfyouvalueourserviceandinsight

Votenow

Disclosures&Disclaimer

ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.

Issuerofreport:HSBCQianhaiSecuritiesLimited

ViewHSBCQianhaiSecuritiesat:

2

EquityStrategy●China13June2022

Executivesummary

令WepresenttwogroupsofChinastocksthatmaybenefitfromsupplychainsdiversifyingtowardsASEAN…

令…whichmayaccelerategiventhelaunchofanewtradeframework

令It’snotazero-sumgameasChinafocusesonhigh-endproduction

It’snosecretthatsupplychainshavebeenedgingintoASEANoverthepastfewyears.ThisisparticularlythecasefortheelectronicsindustrywithsomemultinationalanddomesticmanufacturingcompaniesmovingproductiontoASEAN,givenacombinationofrisinglabourcostsinChina,tariffsonexportsfromChina,andtheimprovingqualityofinfrastructureandtaxincentivesinASEAN.Morerecently,thelaunchoftheIndo-PacificEconomicFramework(IPEF)mayimprovesupplychainsinASEANfurther(seenextchapterformoredetails).

ButthepurposeofthisreportistoshowhowChina,andmanyofitsleadingcompanies,canbenefitfromthistransition.Firstly,China’seconomictransitionmeansmovingtowardshigh-endmanufacturingandinnovation-orientatedindustriesathome,suchassemiconductors,renewableenergy,thedigitaleconomyand5Gdeployment.Infact,wethinkChinaislikelytobenefitfromthetransferoflow-endmanufacturing,asitmeansitcanconcentrateevenmoreonupgradingitsindustriesandtransformingitseconomy.Infact,foreigninvestorshavebeenincreasingtheirinvestmentsinChina,evenamidCOVID-19andthegeopoliticaltensions.

Atthesametime,wealsobelievethatleadingChineseandglobalcompaniesinthesupplychainarelikelytomaintaintheirmarketcompetivenessastheyrelocatesomeoftheirmanufacturingaspartofastrategytodiversifytheirsupplychaingivencurrentgeopoliticaltensions.VietnamisthestandoutstarinASEAN,havingrecentlyupgradeditsvaluechain,andgrownintoakeymanufacturinghubforconsumerelectronicsoverthelastfewyears.WeexpectmoreChinesecompaniestooutsourcelow-endmanufacturingtoVietnamorestablishadditionalassemblelinesthere.

ForChina,itisalreadyoneoftheleadinginvestorsintheASEANregionwithmorethan6,000Chineseenterpriseshavingestablishedoverseasbusinessesthere(asof2020),andweexpectmoreinvestmentintotheregion,especiallygiventherecenttradeagreements.Oneexample:SixmainlandChinacompaniesthatsupplytoApplehadsetupfactoriesandbusinessesinVietnamby2021,doublethenumberfromthreeyearsago.However,wecautionthatmainlandChinastillhasthelargestnumberoffactoriesforApplesupplychains.ThestoryisalsoaboutEVsintheASEANregion,consideringtheavailabilityofrawmaterials(nickel),awell-establishedautosupplychain,cheaplabourandfavourablegovernmentpolicies.

Asaresult,wepresentalistof10stocks(ninelistedinmainlandChinaandoneinHongKong)withexposuretotheASEANelectronic,electricequipmentsectorsandEVsupplychains(Exhibit1),andalsoscreenfor15Chinesemanufacturingcompaniesthatmaybenefitfromglobalsupplychaindiversification,consideringfactorslikeR&D,capexandgrossmargins,etc.(Exhibit2).

3

EquityStrategy●China13June2022

Exhibit1.StocksexposedtoASEANelectronic,solars,aswellasEVsupplychains

TickerCompanySectorDetails

002241CH

GOERTEK

Electronics

RevenuefromVietnamfactoriesreachedRMB20.7bnin2021andearningshitRMB1.28bn,accountingfornearly26%and30%,respectively,ofGoertek’stotal.

002475CH

LUXSHAREPRE

Electronics

TherevenuecontributedfromVietnamwasestimatedtobearoundUSD6.5bnin2021,equivalentto27.2%oftotalrevenue.

300433CH

LENSTECH

Electronics

NetprofitincreasedtoRMB244min2021duetotheimprovementinrisingorders.

productionefficiency,astableturnoverrate,and

000100CH

TCLTECH

Electronics

TCLinvestedRMB360minVietnamtobuildafactoryin2019,withannualproductioncapacityof3mbecamethelargestmanufacturingbaseforTCLinSoutheastAsia.

units.Italso

000049CH

DESAYBATTERY

Electronics

Thecompanysetupitssmallandmedium-sizedlithiumbatterypowermanagementsystembusinessinVietnam,andregisteredcapitalincreasedfromUSD3mtoUSD15m.

2018HK

ACCTECH

Electronics

ThegroupestablishedfactoriesinVietnamfrom2014,andnowthereareabout6,000-7,000workers,mainlyproducingprecisionacousticcomponentsandotherproducts,withanannualoutputvalueofmorethanRMB2.5bn,aproductioncapacityofmorethan1.5mpiecesperday,andcustomersthatcovermajorglobalmobilephonebrands.

688599CH

TRINASOLAR

Solar

ThecompanyinvestedUSD100min2017inVietnamandexperiencedanexpandingbusinessinrecentyears.Italsoequippeditselfwith14ofthemostadvancedbatteryproductionlines,producingavarietyofsingleandpolycrystallinecellstomeettheneedsoftheUSandEuropeanmarkets.

688223CH

JINKOSOLAR

Solar

ThecompanyplanstoinvestanotherUSD500minaVietnamfactoryfortheconstructionannualoutputof5GWofhigh-efficiencycellsand5GWofhigh-efficiencybatterymodules.

ofa

productionlinewith

an

601012CH

LONGIGREEN

Solar

LongiGreenacquiredafirminChinatoexpanditsoverseasdeployment.Afterthat,thecompanyhasanannualproductioncapacityofphotovoltaicmodulesexceeding7GWinVietnamwhichaccountsfor14%oftotalmodulescapacityin2020.

300750CHCATLEVbattery

Source:Companydata,HSBCQianhaiSecurities

Thecompanysignedapreliminaryagreement(worthUSD6bn)withtwostate-ownedIndonesiancompaniestoinvestintheproductionofEVbatteriesandrelatedrawmaterials.

Exhibit2.Ascreenof15A-sharesthataremanufacturingcompaniesthatcanbenefitfromglobalsupplychaindiversification;wescreenusingsixcriteriausing2021metrics

TickerCompanyIndustry

%Overseasrevenue

>30%

Research&Development(RMBbn)

>RMB1bn

CAPEX

(RMBbn)

>RMB1.5bn

GrossMargin

>10%

R&D/Rev.

>3%

CAPEX/

Rev.

>5%

ROE

2022

Employee

2021

Revenue/Employee

RMBm

002475.SZ

Luxshare

Electronics

94.2%

6.6

12.6

12.3%

4.4%

8.3%

22.3

228,152

0.67

002241.SZGoertekElectronics91.1%4.27.014.1%5.4%9.0%18.295,7800.80

300433.SZ

LensTech

Electronics

80.3%

2.1

6.8

20.9%

4.8%

15.4%

4.9

156,880

0.28

002384.SZDSPrecisionElectronics78.9%1.03.014.7%3.2%9.6%13.519,9621.59

002938.SZAvaryElectronics78.9%1.67.020.4%4.7%20.9%14.639,3870.85

002156.SZTongfuMicroElectronics69.1%1.16.417.2%6.8%41.2%9.616,7370.93

002600.SZLingyiiTechElectronics62.2%1.75.516.3%5.7%18.2%7.879,8920.38

000725.SZBOEElectronics58.2%10.735.728.9%5.0%16.6%21.079,4612.71

300014.SZEveEnergyElectricequip51.0%1.36.321.6%7.8%37.1%18.014,8261.14

300115.SZEverwinElectronics49.3%1.11.917.4%9.8%17.2%-9.729,1810.38

300207.SZ

Sunwaoda

Electric

equip

47.4%

2.3

3.9

14.7%

6.3%

10.4%

9.2

36,127

1.03

002601.SZLBGroupMaterial40.5%1.02.841.9%5.1%13.9%28.213,7181.45

300274.SZ

SungrowPower

Electric

equip

38.6%

1.2

1.7

22.3%

4.8%

6.9%

12.1

6,726

3.58

000100.SZTCLElectronics36.5%7.230.919.9%4.5%19.2%26.165,1592.47

002594.SZ

BYD

EVAuto

30.7%

8.0

15.9

13.0%

3.8%

7.6%

4.0

288,186

0.72

Source:Wind,HSBCQianhaiSecurities

4

EquityStrategy●China13June2022

Supplychainrestructuring

令Indo-PacificEconomicFrameworkmaydiversifymanufacturingsupplychainsacrosstheregion,butChinacanstillbenefit

令ChinaisalreadyoneofthebiggestinvestorsinASEAN…

令…with6,000+companiespresentthereandissettogrowmore

Ongoingsupplychainrestructuring

On23May2022,duringavisittoTokyo,USPresidentJoeBidenlaunchedtheIndo-PacificEconomicFrameworkforProsperity(IPEF)with12initialpartnersincludingAustralia,Brunei,India,Indonesia,Japan,SouthKorea,Malaysia,NewZealand,thePhilippines,Singapore,Thailand,andVietnam.

Biden’sadministrationclarifiedthedealisnotanotherformoftradeagreement.However,closercollaborationbetweenthesetradingpartnersshouldhelptradebycuttingtradingcosts.AndfortheUS,itmayhelptocutthecostsofimportedgoodsandservicesthankstomorediversifiedsupplychainsintheregion.Therefore,inthisreport,weassesstheimpactofpotentialfurthersupplychainshiftsandwhatthatmeansforChina’smanufacturingbusinesses.

BacktoIPEF,itwillconcentrateonfourpillarstodeepeneconomicengagementintheregion.

1)ConnectedEconomy.Topursuehighstandardrulesinthedigitaleconomy,seizeopportunitiesandaddressconcernsinthedigitaleconomy.

2)ResilientEconomy.Tobetteranticipateandpreventdisruptionsinsupplychainstocreateamoreresilienteconomy.

3)CleanEconomy.Topaymoreattentiontocleanenergy,decarbonisationandinfrastructureinordertotackletheclimatecrisis.

4)FairEconomy.Topromoteafaireconomyandstrengtheneffortstocrackdownoncorruption

AsmentionedinWhiteHousestatement,the12initialpartnersrepresentnearly40%ofglobalGDPin2021.Still,China’snominalGDPreachedUSD16.9trnin2021,12.8%higherthantheGDPoftheIPEFpartners,andequivalenttoapproximately18%oftheworld.

5

India

USA

Indonesia

Japan

Philippines

Vietnam

Thailand

SouthKorea

Malaysia

Australia

Singapore

NewZLD

Brunei

mln

ChinaIPEF

Rest

ChinaIPEF

Rest

EquityStrategy●China13June2022

Exhibit3.TheIPEFgrouprepresented

c40%ofglobalGDPin2021

Source:Wind,HSBCQianhaiSecurities

Exhibit4.WhileChinaaccountedforc18%

ofglobalGDPin2021,that’s13%higherthan12initialIPEFpartners

Source:Wind,HSBCQianhaiSecurities

Inaddition,thetotalpopulationinthisgroupwasover2.5bn,nearlyone-thirdofworld’spopulation,andwhichisprojectedtobeoneofthelargestcontributorstoglobalgrowthoverthefollowingdecades.

Exhibit5.Indiamayenjoythebiggestdemographicdividendinthisgroup

20%15%10%5%

0%

1,600

1,400

1,200

1,000

800

600

400

200

0

Population2020%ofworld(RHS)

Source:Worldpopulationreview,HSBCQianhaiSecurities

Exhibit6.IPEFmakesupaboutone-thirdofworld’spopulation

18%

50%

32%

Source:Worldpopulationreview,HSBCQianhaiSecurities

Exhibit7.ASEANcountrieshavethepotentialtobenefitmorefromtheframework

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

USA

Japan

S.Korea

Singapore

India

Australia

Malaysia

Vietnam

Thailand

Indonesia

Philippines

NewZLD

Brunei

9.0%8.0%7.0%6.0%5.0%4.0%3.0%2.0%1.0%0.0%

Exportvalue(USDtrn)%ofWorld(RHS)

Source:Wind,HSBCQianhaiSecurities

Exhibit8.IPEFmembers’shareofexportswasup0.7pptsfromayearago,whileChinadropped0.7ppts

14%

26%

60%

Source:Wind,HSBCQianhaiSecurities

6

EquityStrategy●China13June2022

BigmultinationalfirmsmovingfurtherintoASEAN

SomemultinationalsarealreadyshiftingpartoftheirmanufacturingtoASEAN,andinsomecasesthishasbeenawayfromChina.Whileeverycompanyisdifferent,someofthereasonsincludethetradetensionsbetweentheUSandChina,risingcosts(humanandcapital)aswellassupplychaindisruptionsgiventheCOVID-19outbreak.

Ontheissueofcosts,theadvantageoflow-costproductionhasgraduallyfalleninChinafollowingseveralyearsofrapideconomicgrowth.Atthesametime,largemultinationalsseetheadvantagesoflowerlaborcostsandtaxincentivesinASEAN,promptingthemtosetupnewmanufacturingbusinessesthere.

SomemultinationalsaremovingtoASEANwhileChinaismovingupthevalueaddedladder…

…andChinaisn’tlosingoutasforeigninvestorscontinuetolifttheirChinainvestments

ThisisespeciallythecasegiventheindustrialupgradinginChina.Manymultinationalsinthemanufacturingfieldsoftextiles,clothing,furnitureandelectronicsapplianceshavealreadylostsomemarketcompetiveness,andareinsteadseekingnewgrowthengines.

What’smore,somemultinationalsweresufferingfromhightariffsimposedbytheUSonChineseexports.Theyhavere-assessedtheirbusinessstructuresinordertodevelopabetterstrategytocombatthis.Inthiscontext,theASEANregionhasbecomethefirstoptiontoconsidermovingtheirsupplychainsto.AndlockdownsacrossChina,particularlyintheYangtzeDeltaRiverregion,havestrainedsomedomesticandinternationalsupplychains.Still,wealsostressthatforeigninvestorshaveincreasedtheirinvestmentsintothecountry,evenamidCOVID-19andthegeopoliticaltensions.

ChinainvestmentsinASEAN

Inrecentyears,ChinahasgraduallybecomeoneoftheleadinginvestorsintheASEANregion.AccordingtotheASEANSecretariat,foreigndirectinvestment(FDI)fromChinatoASEANreachedtoUSD7.7bn,accountingfor5.6%ofglobalFDI,andrankingasthefifth-largestFDIsourceinintoASEANin2020(ASEANSTATS).

Moreover,wehaveseenUSD57.4bnofFDIflowintoASEANfromChinaoverthepastfiveyears(2015-2020),ledbythefinancialandinsurancesectors(24.0%),followedbyrealestate(21.0%),themanufacturingindustry(16.2%),wholesaleandretailtrade(13.1%),andconstruction(6%).Inaddition,morethan6,000ChineseenterprisesestablishedtheiroverseasbusinessesinASEANin2020,accordingtoChina'sMinistryofCommerce.

Exhibit9.TherehasbeenUSD57.4bnofFDIflowstoASEANfromChinasince2015,ledbythefinanceandinsurancesector

Finance&Insurance

RealEstate&Supportsvcs

Manufacturing

Other

Wholesale&RetailTrades

Construction

Information&Communication

0.05.010.015.0

FDIstock2015-2020(USDbn)

Exhibit10.TheUS,EUandJapanarethemaindriversofFDIintoASEANoverthelastdecade

Source:China’sMinistryofCommerceHSBCQianhaiSecuritiesSource:ASEANSTATS,HSBCQianhaiSecurities

7

3%

4%

6%

10%

14%

63%

EquityStrategy●China

13June2022

Fromacountryperspective,SingaporeabsorbedthemostFDIfunds(USD280bn)followingthestartofSino-UStradetensions,accountingfor63%oftotalabsorbedFDIfollowedbyIndonesiawithUSD62.7bnandVietnamwithUSD47.4bn.FDIasapercentageofGDPinSingaporehasincreasedtoover20%onaveragesince2010,andithasbeenanincreasinglyattractiveinvestmentdestinationfordiversifiedmanufacturingsectors,especiallyinadvancedmanufacturing.

Sectorwise,thefinancialandinsurancesectorrecordedthelargestFDIinflowbetween2015and2020withUSD237bn,followedbythemanufacturingindustry(USD185bn),wholesaleandretailtrade(USD106bn)andrealestate(USD54bn).Additionally,thefinanceandinsurancesectorinSingaporehasseenthemajorityofFDIflowsgiventhecumulativeFDIvalueofUSD1.2trnasofend-2020.

Exhibit11.SingaporeattractedthemostFDIpostSino-U.S.tradetensions,followedbyIndonesiaandVietnam

Singapore

Indonesia

VietNam

Philippines

Malaysia

Thailand

Exhibit12.Finance&insurancesectorinSingaporehaveseenthemostFDIinflowsasofend-2020

Source:ASEANSTATS,HSBCQianhaiSecuritiesSource:DepartmentofStatisticsSingapore,HSBCQianhaiSecurities

ItiskeytonotethatmuchoftheChinaFDIflowshavepredominantlygonetomanufacturing,followedbyrealestate,wholesaleandretailtrades.Ifwelookatthebigpicture,China’sannualFDIflowstoASEANgraduallydecreasedafterpeakingin2017.TotalFDIin2020wasaroundUSD7.7bn,down3%fromits2012level.However,themanufacturingandelectricity,gasandsteam(renewableenergy)sectorsattractedthelargestFDIinflowsamidadownwardtrendintotalFDIinflows.

Exhibit13.ChinaFDIflowstoASEANfocusedmoreonmanufacturingandelectricity,aswellasairconditioningsupplyin2020comparedwith2012

Source:ASEANSTATS,HSBCQianhaiSecurities

8

EquityStrategy●China13June2022

Exhibit14.Besidesthat,theworld’s(excludingChina)FDIflowsalsoconcentratedon

wholesaleandretailtrade

Source:ASEANSTATS,HSBCQianhaiSecurities

InadditiontoIPEF,there’salsotheRegionalComprehensiveEconomicPartnership(RCEP),whichtookeffectonJanuary1,2022.TheprimarygoaloftheRCEPistoestablishacomprehensiveeconomicpartnership–buildingonexistingbilateralASEANagreementswithintheregion.Itwillbeguidedbyacommonsetofrulesandstandards,andaimstolowertradebarriers,streamlineprocesses,andimprovemarketaccess.WethinkFDIfromChinaintoASEANcouldcontinuegiventherolloutoftradeagreements.

9

EquityStrategy●China13June2022

Exhibit15.ASEAN+6andChina’sexportshaveconcentratedmoreonelectricaland

electronicequipmentrecently

Country/ExportExportvalue(USDbn)Exportshare

Singapore

Electrical,electronicequipment

Machinery,nuclearreactors,boilers

Mineralfuels,oils,distillationproducts

Optical,photo,technical,medicalapparatus

Pearls,preciousstones,metals,coins

131.9

58.1

30.2

20.8

20.4

35.0%16.0%8.1%3.5%3.1%

Top5Exports261.365.7%

Vietnam

Electrical,electronicequipment

Machinery,nuclearreactors,boilers

Footwear,gaiterandthelike

Articlesofapparel,knitorcrocheted

Articlesofapparel,notknitorcrocheted

111.1

18.4

17.3

13.7

13.3

39.0%6.5%6.1%4.9%4.8%

Top5Exports173.861.3%

Malaysia

Electrical,electronicequipment

Mineralfuels,oils,distillationproducts

Machinery,nuclearreactors,boilers

Animal,vegetablefatsandoils,cleavageproducts

Rubbers

102.9

37.3

25.1

19.7

16.7

34.0%12.0%8.4%6.6%5.6%

Top5Exports201.666.6%

Thailand

Mineralfuels,oils,distillationproducts

Electrical,electronicequipment

Vehiclesotherthanrailways,tramways

Pearls,preciousstones,metals,coins

Rubbers

38.1

34.4

24.3

18.2

15.6

16.0%15.0%11.0%7.9%6.8%

Top5Exports130.656.7%

Indonesia

Mineralfuels,oils,distillationproducts

Animal,vegetablefatsandoils,cleavageproducts

Ironandsteel

Electrical,electronicequipment

Pearls,preciousstones,metals,coins

25.6

20.7

10.9

9.2

8.2

16.0%13.0%6.6%5.7%5.0%

Top5Exports74.646.3%

Philippines

Electrical,electronicequipment

Machinery,nuclearreactors,boilers

Copper

Optical,photo,technical,medicalapparatus

Oresslagandash

38.1

9.5

2.6

2.2

2.0

51.0%13.0%3.5%3.0%2.7%

Top5Exports54.373.2%

China

Electrical,electronicequipment

Machinery,nuclearreactors,boilers

Furniture,lightingsigns,prefabricatedbuildings

Plastics

Vehiclesotherthanrailway,tramway

899.0

547.6

139.5

120.0

101.9

27.0%16.0%4.1%3.9%3.6%

Top5Exports1807.954.6%

Note:DataofMalaysiaandChinaasof2021,restasof2020

Source:COMTRADE,HSBCQianhaiSecurities

10

EquityStrategy●China

13June2022

Accordingtothedatawecollected,theexportsofelectricalandelectronicequipmenthavebecomeapillarindustryfortheASEAN6region.ThetotalexportvalueofelectricalandelectronicequipmentamongtheASEAN6exceededUSD400bnbytheendof2020,equivalenttonearly60%ofthetotalexportvalueofelectricalandelectronicequipmentinChina,andtheentireexportvalueinSingapore.InthePhilippines,electricalandelectronicequipmenthasapproached51.0%oftotalexports,andsoplaysadominantroleintermsofexports.

Lookingatelectricalandelectronicequipmentexportsspecifically(consideringASEAN6andChinaasawhole),exportsfromChinaweredown3.3pptsin2020,whileVietnamandMalaysiawereup4.5pptsand0.9pptsrespectively.TherewasnodoubtthatVietnamhasbenefitedthemostfromthisroundofsupplychainsshifts.Moreover,electricalandelectronicequipmentexportsfromVietnamsurged136.4%from2015to2020,indicatingaCAGRof18.8%duringthattime.

Atcurrentlevels,Chinaisstillthelargestexporterofelectricalandelectronicequipment.However,theASEAN6regionacceleratedtheirdeploymentinthisareawithfiscalandtaxincentives.ExportvaluefromtheASEAN6rosefromroughly50%to60%comparedtoChinainhalfadecade.Wethinkthatthisratioislikelytoincreaseinthefollowingyearsgivenlocalgovernmentsupport,lowerlaborcostsandthetariffburdenonChinaexports.

Exhibit16.TheelectricalandelectronicequipmentindustryhasbecomeamajorcontributortototalexportsformostcountriesinASEANandChina

Note:DataofMalaysiaandChinaasof2021,restasof2020

Source:COMTRADE,HSBCQianhaiSecurities

Exhibit17.Changestotheelectricalandelectronicequipmentexpo