摩根士丹利-澳大利亚-投资策略-过渡中的澳大利亚：更多转变与节俭-2019.1.31-51页.pdf

MMAustralia in Transition More Switch and ThriftMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research.Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures,refer to the Disclosure Section,located at the end of this report.+=Analysts employed by non-U.S.affiliates are not registered with FINRA,may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company,public appearances and trading securities held by a research analyst account.Our updated proprietary AlphaWise survey confirms growing headwinds for Australian households.We remove RBA rate hikes from our 2020 forecasts,downgrade WBC to UW,move more defensive in the Model Portfolio(-LLC,+COL),highlight de-rating risk for WES,and provide a most and least exposed list.January 31,2019 11:47 AM GMTMMMORGAN STANLEY AUSTRALIA LIMITED+Richard E WilesEquity Analyst+612 9770-1537Richard.W Contributors MORGAN STANLEY AUSTRALIA LIMITED+Chris NicolEquity Strategist+613 9256-8909Chris.NMORGAN STANLEY AUSTRALIA LIMITED+Thomas KierathEquity Analyst+612 9770-1578Thomas.KMORGAN STANLEY AUSTRALIA LIMITED+Chris ReadEquity Strategist+612 9770-1513Chris.RMORGAN STANLEY AUSTRALIA LIMITED+Emilie L ONeillResearch Associate+612 9770-1688Emilie.ONMORGAN STANLEY AUSTRALIA LIMITED+Peter J MarksEquity Analyst+612 9770-9290Peter.MMORGAN STANLEY AUSTRALIA LIMITED+Daniel K BlakeEquity Strategist+612 9770-1579Daniel.BMORGAN STANLEY AUSTRALIA LIMITED+Andrei Stadnik,FIAAEquity Analyst+612 9770-1684Andrei.SMMBanks lower growth,higher risk:We expect weaker housing loan growth,ongoing margin pressure,growing uncertainty about the retail bank pricing strategy,and a higher probability of the bear case.We cut our major bank EPS forecasts by an average of 3%in FY20,downgrade WBC to UW,and lift NAB to EW.Our new major bank order of preference is NAB(EW),ANZ(EW),WBC(UW),CBA(UW).Consumer reality to bite:Following a soft Christmas,decreasing consumption expenditure is likely to bite retailers through 2019,as financial conditions tighten and house prices fall.We see LFL sales growth fading,historically high margins beginning to fall,and P/E multiples compressing.We believe SUL(EW)and HVN(UW)have the most earnings risk,but WES(UW)has the most risk of P/E mul-tiple de-rating given the high starting point.In our bear case,we assume 210bps lower real consumption growth than in our base case (1.7%),leading to 20-30%share price downside for non-food retailers as earnings decrease and multiples fall further.Equity implications defensive domestic positioning:Conviction around UW positioning in Banks,Housing,and Consumer-linked exposures in our model portfolio is further bolstered.We remove residual residential housing exposure in LLC,add COL to gain further consumer defensiveness,and adjust our order of preference in Banks.We provide a most and least exposed Switch and Thrift list for the ASX200 and for several sub-sectors exposed to the domestic economy.Australia in Transition More Switch and ThriftWeaker outlook for 2019:Our updated AlphaWise survey of 1,800 mortgagors points to tighter credit conditions,potential deteriora-tion in housing sentiment,and pressure on household finances.This reinforces our view that Australian consumers are now dealing with a domestic cash flow and credit crunch driven by weak income growth,cost of living inflation,and a change in bank behaviour.This has implications for the markets earnings pulse,equity positioning,interest rate expectations,and the AUD.Macro peak impacts in 2019:Economic data have deteriorated in recent months,and the source of disappointment has been firmly linked to the housing and consumer sectors.Our GDP estimates are below consensus,recessionary risks are rising,and the direction of travel is skewing to our bear case.We have removed rate hikes from our 2020 forecasts and expect the RBA to move to an easing bias over the year.WHATS CHANGEDFromToNat Aust Bank(NAB.AX)RatingUnderweight Equal-weightPrice Target26.5025.60Westpac Banking(WBC.AX)RatingEqual-weight UnderweightPrice Target27.0024.30ANZ Bank(ANZ.AX)Price Target27.3026Commonwealth Bk Aust(CBA.AX)Price Target64.5062.50Our updated proprietary AlphaWise survey confirms growing headwinds for Australian households.We remove RBA rate hikes from our 2020 forecasts,downgrade WBC to UW,move more defensive in the Model Portfolio(-LLC,+COL),highlight de-rating risk for WES,and provide a most and least exposed list.M4M Contents 5Our Switch and Thrift Thesis:Weaker Outlook in 201916AlphaWise:Key Conclusions21Australia Macro:Finances Tightening27Australia Banks:Lower Growth,Higher Risk34Australia Consumer:Earnings Outlook Softening39AlphaWise Survey:Respondent Profile40 Risk-Reward:ANZ Bank(ANZ.AX,A$25.58,EW,PT A$26.00)41Risk-Reward:Commonwealth Bank Australia(CBA.AX,A$71.35,UW,PT A$62.50)42Risk-Reward:Nat Aust Bank (NAB.AX,A$24.26,EW,PT A$25.60)43Risk-Reward:Westpac Banking(WBC.AX,A$25.29,UW,PT A$24.30)44 Australian Banks:Valuation and Price Target45Major Banks:Changes to Valuation and Price Target46 More on AlphaWiseMMORGAN STANLEY RESEARCH5MWe introduced our Switch and Thrift thesis in 2017 as our AlphaWise survey of mortgagees showed that tighter financial conditions would drive switching away from interest-only loans and a reduction in consumer spending.Some of our expectations for the economy,the consumer sector,the bank sector,and the Australian equity market played out in 2018.However,we believe its crunch time in 2019 as the full impacts of Switch and Thrift are likely to emerge.Our updated proprietary AlphaWise survey points to ongoing pressure on household finances and associated risks for the Australian economy this year.In our model portfolio,we stay underweight Consumer,Housing-linked,and Banks,but also move more defensive by removing LLC and adding COL.In Banks,we lower earnings estimates for the majors,downgrade WBC to UW and upgrade NAB to EW.In Consumer,we highlight SUL and HVN as having the most earnings risk,but WES as having the most risk of P/E multiple compres-sion.Our Switch and Thrift Thesis:Weaker Outlook in 2019Weaker Outlook in 2019 Pressure on households:Investor focus is extremely elevated on the risks that emerge from the combination of falling house prices,tighter credit conditions,stalling consumption and reduced confi-dence.The greater scrutiny of banking practices and lending stan-dards from the Royal Commission has coincided with an economy that now faces this confluence of factors:lA post-peak fade in near-term growth potential,lA meaningful fiscal policy pivot if there is a change in Federal gov-ernment,andlThe first sustained cracks in consumption spending as higher cost of living and stagnating wage conditions bite.Exhibit 1:House prices fell sharply over 2018 -14.8%-12.1%-0.5%-9.6%-20%-10%0%10%20%30%2013201420152016201720182019SydneyMelbourneBrisbanePerth%3m ann.price growth Source:Corelogic,Morgan Stanley Research Exhibit 2:Consumer and business sentiment have both turned negative-2.0-1.5-1.0-0.50.00.51.01.52.02006200820102012201420162018Consumer SentimentBusiness confidencez-score Source:NAB,WBC-MI,Morgan Stanley Research M6MEnd of the credit super cycle and negative wealth effects:The risks from ever-increasing house prices and leverage have often been debated as Australia progressed through consumer credit and resource capex super cycles over the last two decades.With these super cycles behind,our new Household Deleveraging Risk Indicator for assessing debt sustainability helps to measure this risk see Global FX Strategy and Economic Research:Highly Levered Households Finances Tightening(29 Oct 2018).What is most interesting at this juncture is that a number of influ-ences are combining which will provide real insight into the impact of negative wealth effects on both the economy and the ASX 200 earn-ings pulse from the rapid and large house price declines underway see Australia Macro+:MSHAUS:Dont Dream Its Over(17 Jan 2019).More modest offsets in 2019:We believe offsets to the pressure on Australian households will be harder to find in 2019.In particular,we highlight these forces:lThe global backdrop has moved from one of synchronized growth to now one of trend deceleration further tempered by trade fric-tion.lThe fiscal stimulus led by the State governments has peaked and now awaits further Federal leadership,with uncertainty about the impact of potential policy outcomes see Australia Macro+:Australia in Transition:Mapping the Policy Crossroads(24 Aug 2018).lResponsible lending principles are now entrenched in lending behaviour and consumers/investors must deal with less available credit see Australia Banks:Interest Only Loans and the End of the Mortgage Bull Market(19 Dec 2018).Crunch time for the economy and the ASX200:In short,it is crunch time for Australia.This requires an assessment of both the real impacts from the current slowdown and what the policy response(if any)will be.Animal spirits have been dampened and we see the impacts as clear negatives to the near-term growth outlook for the Australian economy and the ASX 200.Recap of 2017 AlphaWise Survey:A Tightening Housing Credit Cycle Matters Switch and Thrift#1 RecapIn late 2017 we conducted a national survey of 1,836 mortgagors to identify household conditions,sentiment,and intentions in response to the increase in mortgage rates at that time Australia:Crunch Time:Switch and Thrift(3 Oct 2017).Our line of questioning was designed to provide insight into the health of the household balance sheet,the propensity to switch banks and to switch from higher-rate interest-only loans(IOL)to principal+interest(P+I)loans,the impact on household spending,and the decision to buy or sell resi-dential property.Our key expectations for 2018 and the actual outcome are outlined below and are summarised in AlphaWise:Key Conclusions later in this report:Macro consumption crunch risks were elevated:Findings from the AlphaWise survey confirmed that most households had minimal buffers against a shock to their income,and they expected to respond to higher debt servicing costs by drawing down on savings and cut-ting back on expenditure.We concluded that the concentrated exposure of the household sector and economy to an extended housing market posed an increasingly important structural and cyclical risk to consumer spending.Thus,we forecast real consumption growth to slow from 2.2%in 2017 to 1.1%in 2018.Macro what happened in 2018:Many of the risks from pressure on household finances began to play out during 2018.Specifically,house prices fell,retail sales were patchy,consumer confidence levels retraced,the RBA was forced to keep interest rates on hold despite a tightening bias,and the AUD adjusted lower.However,steady employment growth and a lower unemployment proved to be important offsets(Exhibit 3).Alongside a lower sav-ings rate,consumer spending and GDP growth proved more resilient than we expected(Exhibit 4)MMORGAN STANLEY RESEARCH7MExhibit 3:The labour market remained resilient in 20186162636465666768012345672000200320062009201220152018Employment growthUnemployment rateParticipation rate(rhs)%Source:ABS,Morgan Stanley Research Exhibit 4:Consumption spending was supported by a further drawdown in sav-ings-202468102006200820102012201420162018Consumption growth(real)Disposable income growth(real)Savings rate%yoy Source:ABS,Morgan Stanley Research Banks lower margins,higher loan losses:Findings from the AlphaWise survey highlighted that headwinds to banks margins were likely to re-emerge in 2018 given the combination of switching,slower deposit growth,and more competition for new owner-occu-pier loans.At the same time,we thought that pressure on household budgets and the associated impact on consumer spending was likely to weigh on business profitability and employment,leading to an increase in non-housing loan loss rates.Banks what happened in 2018:Following the margin sweet spot in late 2017,margins fell more than investors expected in 2018 as switching combined with more competition for new loans and higher wholesale funding costs(Exhibit 5).At the same time,reduced access to credit from macroprudential measures and the Royal Commission drove weaker housing loan growth.Despite various headwinds for the consumer,deposit growth slowed just modestly and loan losses did not rise as we expected(Exhibit 6).However,this did not prevent earnings downgrades or share price underperformance from the major banks.Exhibit 5:Major Banks:Net Interest Margins 2.25%2.25%2.17%2.13%2.07%2.03%2.06%2.01%2.00%1.97%1.94%1.92%0.0%0.5%1.0%1.5%2.0%2.5%3.0%FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19EFY20EFY21ESource:Company data,Morgan Stanley Research Exhibit 6:Major Banks:Impairment Charges to Total Loans 0.24%0.35%0.31%0.26%0.21%0.18%0.16%0.17%0.42%0.75%0.42%0.28%0.31%0.24%0.15%0.16%0.21%0.15%0.12%0.17%0.22%0.21%0.0%0.2%0.4%0.6%0.8%1.0%FY00FY01FY02FY03FY04FY05FY06FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19EFY20EFY21EImpairment Charges to Total Loans Source:Company data,Morgan Stanley Research M8MConsumer more stress added:The AlphaWise survey pointed to softer consumption growth.We believed that consumers would be more likely to cut back on discretionary purchases and trade down to lower price points,particularly for holidays,entertainment and dining,and by young consumers.As a result,we cut FY19 earnings estimates by 2%to 11%for the most exposed retailers.See also Australia Consumer:Switch and Thrift(3 Oct 2017).Exhibit 7:Retail Sales Growth Actually Proved Very Resilient in 20180%1%2%3%4%5%6%7%8%Jan-14Mar-14May-14Jul-14Sep-14Nov-14Jan-15Mar-15May-15Jul-15Sep-15Nov-15Jan-16Mar-16May-16Jul-16Sep-16Nov-16Jan-17Mar-17May-17Jul-17Sep-17Nov-17Jan-18Mar-18May-18Jul-18Sep-18Nov-18Monthly Retail Sales Growth YoY Source:ABS,Morgan Stanley Research Consumer what happened in 2018:Discretionary retail stocks materially de-rated,but earnings proved relatively resilient through most of 2018(Exhibit 7).However,a sales slowdown looks to have emerged late in the year,with a soft Christmas trading period(Exhibit 8).See also Australia Consumer:Discretionary Retail Outlook(13 Jan 2019).Exhibit 8:Indications Are That Christmas 2018 Was Soft New Car Sales Have Been Very Weak-30-20-100102030Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15Jul-15Jan-16Jul-16Jan-17Jul-17Jan-18Jul-18New Motor Vehicle Sales Growth YoY Source:C.au,Morgan Stanley Research MMORGAN STANLEY RESEARCH9M2018 AlphaWise Survey:2019 to Provide Many AnswersOur national survey of 1,800 mortgagors in September-October 2018 was designed to see how household conditions and the position of