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via Citi Research

*The Point for Asia Pacific*

*Pan-Asia Equity Road Ahead 2023*- *Positive Deltas*

Coming into 2022, we adopted a cautious stance on Asian equities, flagging China’s slowdown and weak EPS momentum. For 2023, we’re more positive. Most importantly, we see China-driven economic acceleration, in contrast to slowdown elsewhere. The same goes for company profits. We think many global equity markets will see EPS contract in 2023, yet Asia is expected to enjoy a rebound. A weakening US$ later in the year should also help, along with potential rate cuts (India, Korea). Our strategists’ forecasts now imply 12% upside for MSCI Asia ex-Japan, above our expectations for a 5% gain for the MSCI AC World. Our preferred market is China, where we think the current EPS recession should stabilize and the reopening trade has further to run.

*China Internet - PCAOB's Determination for Complete Access to Inspect and Investigate Chinese Firms*

We view the 15 Dec PCAOB determination report, in which it secured complete access to inspect and investigate Chinese firms, as a relief, as it suggests further lowering of de-listing risk. Despite some deficiencies found in its inspections during the nine-week investigations in Hong Kong from Sept to Nov, the PCAOB noted this was not unexpected, and those deficiencies are consistent with types that PCAOB has encountered in other first-time inspections worldwide. We

expect limited negative surprises from the inspection report's conclusion to be issued in early 2023. We view the PCAOB announcement as positive to Chinese ADRs, although we believe this was largely expected by the majority of investors. With the relaxation of China's covid policy and removal of de-listing risks, investors are likely to focus on fundamental recovery with sustainable profit growth, any supportive policies and resumption of foreign private investment. See our 2023 sector.

*Japan Post Bank (7182.T) - Upgrading to Buy - prime beneficiary of rising interest rates*

We maintain our earnings outlook but lower our BPS outlook in light of the current environment. We lift our target price to ¥1,200 from ¥1,050 and upgrade to Buy from Neutral as our expected total return now amounts to 20.7%. We expect lower unrealized gains to reduce BPS but anticipate firm earnings on surprisingly good returns from alternative investments, and conclude that downside risks to earnings have receded. We have concerns about the Japan Post Holdings group reducing its equity stake in Japan Post Bank, which would be a downside factor in terms of supply/demand, but if yen interest rates rise, we believe it would contribute to real hopes for earnings growth and upside potential for the shares.

*Taiwan Economics - Dec MPC meeting – A dovish 12.5bps rate hike; probably marking the last hike of this cycle*

As expected, the CBC raised the discount rate by 12.5bps and kept deposit RRR unchanged in its Dec MPC meeting, in line with our expectation. The CBC’s revised GDP forecasts portray a sharp deceleration of growth in 4Q22E and 1Q23E. As the CBC’s focus shifts from curtailing inflation to supporting growth next year, we think the CBC will no longer follow the Fed’s tightening footsteps. We now believe the latest policy rate hike is the last hike for this cycle.

*Yinson (YINS.KL)*- *Prelim. Agreement Struck For Agogo FPSO; Final Contract Could Bring Orderbook Cover to 15 Years*

Yinson recently announced it has signed an agreement with Azule Energy to begin preliminary works for the Agogo Integrated West Hub's FPSO. The $218m deal acts as both a partial upfront payment to support the project's early financing, and allows initial works to commence on schedule while both parties work on finalising the contract (EPCIC & 15+5yr Chartering/O&M). FPSO Agogo (120k bbl/d) could potentially be Yinson's largest job win to date, with a total contract value of $4.7bn-$6.2bn (est.) and lofty charter dayrates vs its Brazil- bound FPSOs (70k-100k bbl/d). Our back-of-the-envelope calculation for the full Agogo contract indicates a potential valuation upside of RM0.60-RM0.80/share, while the firm orderbook uplift (c.$17bn) should take its revenue cover to 15 years (from 12 years). *Reiterate Buy.*

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