Tag: Investing

MSCI China EPS in CNY terms from 2023 Q1-Q3 is 1.08, 1.23, 1.25, growing 3.85%, 1.65%, 2.46% yoy.

While reversing the downtrend in 2022, the growth is less than expected. Even with 23q4 current expectation of 9% growth yoy, MSCI China EPS growth is ~4.3% for the full-year 2023.

What was the expectation at the end of 2022 / early 2023?

Let’s take a look:

UBS (Nov/Dec 2022) – “We expect significant easing in COVID-19 restrictions in the second quarter. We forecast earnings growth of 15%-20% for MSCI China, which would be underpinned by lower commodity prices, improved economic growth and lower asset write-downs,”

Morgan Stanley (EPS growth in 2023: 12% -> 13% -> 16%) – for 2023 YE MSCI China Index target, in Nov 2022 report it was 59; raised to 70 in Dec 2022; raised again to 80 in Jan 2023

Goldman Sachs (Dec 2022) – “revise up our earnings forecasts to 13% from 8%” (the link is a report in Jan 2023 but revision is made in Dec 2022.

Citi (Jan 2023) – “expects earnings per share for the MSCI China index to grow 15% year-over-year in 2023. ”

The outcome is the big miss in earnings. We are like to see ~2% 2023 EPS growth in reality vs. expectation of ~15% at the beginning of the year

A good summary from Rob Stuckey, head of Carlyle’s U.S. real estate funds, on US office building weakness, from Insights and Indicators podcast by Carlyle:

1. Already weak before pandemic
   • oversupplied
   • low operating margin
   • high correction to GDP / exposure to macro cyclicality
2. Secular trend of work-from-home / technology trend

Factors to value real estate

• demand drivers (macro/GDP, demographics)
• technology
• operating margin (high maintenance/recurring capital expenditure)
• tenant stickiness (demand ever increasing)