HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China State Construction Int'L / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-state-construction-int-l-holdings" target="_blank" data-smartkarma-citation="entities:10038:1" rel="noopener">China State Construction Int'l (3311 HK)</a>'s backlog of HK$418.26bn is enough to cover 3x consensus forecast revenue of FY25, providing comfort for secured earnings outlook. </li>
<li>The focus on public housing and municipal projects limits its exposure to the real estate market. Its consecutive earnings growth in last five years demonstrated its resilience.</li>
<li>With ROE of 15-16%, its P/B of 0.8x is cheap. The reduction in operating cash outflow supports higher payout ratio, and its dividend yield of 5.6-6.3% is healthy. </li>
</ul>



China State Construction Int'l (3311 HK)'s backlog of HK$418.26bn is enough to cover 3x consensus forecast revenue of FY25, providing comfort for secured earnings outlook. 
The focus on public housing and municipal projects limits its exposure to the real estate market. Its consecutive earnings growth in last five years demonstrated its resilience.
With ROE of 15-16%, its P/B of 0.8x is cheap. The reduction in operating cash outflow supports higher payout ratio, and its dividend yield of 5.6-6.3% is healthy. 


China State Construction Intl (3311 HK): Steady as It Goes

Thematic (Sector/Industry)

<ul>
<li>China may bring ahead quota for special purpose bond issuance in 2023 to 2H22. This may potentially at Rmb1.5trn (US$220bn), which will provide big boost to the economy.</li>
<li>For 5M22, the three most important areas of spending of local government bond proceeds are urban construction and industrial park, social services and transport infrastructure.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-state-construction-int-l-holdings" target="_blank" data-smartkarma-citation="entities:10038:1" rel="noopener">China State Construction Int'l (3311 HK)</a>, <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>, <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group (390 HK)</a>, <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture (586 HK)</a> and <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports (2020 HK)</a> are the top picks.</li>
</ul>


China may bring ahead quota for special purpose bond issuance in 2023 to 2H22. This may potentially at Rmb1.5trn (US$220bn), which will provide big boost to the economy.
For 5M22, the three most important areas of spending of local government bond proceeds are urban construction and industrial park, social services and transport infrastructure.

China State Construction Int'l (3311 HK), Anhui Conch Cement (914 HK), China Railway Group (390 HK), China Conch Venture (586 HK) and Anta Sports (2020 HK) are the top picks.


China Stimulus: These Are the Key Beneficiaries

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Shanghai Electric Group Company / Equity Bottom-Up

<ul>
<li><strong>Hong Kong markets continue to outperform global equity markets this year outperforming the MSCI Asia Pacific index by a substantial margin.</strong></li>
<li>
<a href="https://www.smartkarma.com/entities/shanghai-electric-group-company-limited-d542164d-4d5a-4ce0-b33e-5fe6bc34722c" target="_blank" data-smartkarma-citation="entities:8777:1" rel="noopener"><strong>Shanghai Electric Group Company (2727 HK)</strong></a><strong> has a breakout pattern to a new high as it re-rates as a China robotics company.</strong>
</li>
<li>
<a href="https://www.smartkarma.com/entities/china-railway-construction-corp-limited" target="_blank" data-smartkarma-citation="entities:263:1" rel="noopener"><strong>China Railway Construction Corp (1186 HK)</strong></a><strong> has a breakout from a symmetrical triangle pattern showing further upside as valuations within the sector remain depressed.<br></strong>
</li>
</ul>


Hong Kong markets continue to outperform global equity markets this year outperforming the MSCI Asia Pacific index by a substantial margin.

Shanghai Electric Group Company (2727 HK) has a breakout pattern to a new high as it re-rates as a China robotics company.


China Railway Construction Corp (1186 HK) has a breakout from a symmetrical triangle pattern showing further upside as valuations within the sector remain depressed. 



Technically Speaking, Breakouts and Breakdowns: HONG KONG (OCTOBER 27)

Cross Asset Strategy

<ul>
<li>China State Construction International and Sinopec Engineering have short term reversal patterns indicating profit taking from recent advances.</li>
<li>China Resources Cement reverses downtrend with volume indicating some near term gains after reporting that 1st half profit was under pressure.</li>
<li>Yum China continues to show downward pressure given the increasing competition in the retail food segment, while Nongfu Spring collapses on news about the safety of its products.</li>
</ul>


China State Construction International and Sinopec Engineering have short term reversal patterns indicating profit taking from recent advances.
China Resources Cement reverses downtrend with volume indicating some near term gains after reporting that 1st half profit was under pressure.
Yum China continues to show downward pressure given the increasing competition in the retail food segment, while Nongfu Spring collapses on news about the safety of its products.


Technically Speaking: Breakouts & Breakdowns: HONG KONG (July 17)

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<p>For our next Webinar, we are excited to welcome Analysts <a href="https://www.smartkarma.com/profiles/said-desaque" target="_blank" data-smartkarma-citation="accounts:1107" rel="noopener">Said Desaque</a> and <a href="https://www.smartkarma.com/profiles/osbert-tang-cfa" target="_blank" data-smartkarma-citation="accounts:3879" rel="noopener">Osbert Tang, CFA</a> , who will go over China's latest potential $220 billion stimulus through a massive sale of special bonds. The Analysts will each present their views on the situation and a Q&amp;A will follow.</p>
<h3>The webinar was hosted on Wednesday, 13 July 2022, 17:00 SGT/HKT.</h3>
<p>Subscribe to our podcast feed and listen to the session on the go:</p>
<p><iframe src="https://open.spotify.com/embed/episode/5vGxVSGzl0Izwsa0swFIBi?utm_source=generator" width="100%" height="232" style="border-radius: 12px;" frameborder="0" allowfullscreen="allowfullscreen" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture"></iframe>Said DeSaque is a professional economist with over 33 years of experience covering the global economy, with significant expertise in the US, China, Japan, and emerging markets. He worked with US investment banks for 25 years covering institutional investors in Europe, Middle East, Far East and Australia. He covers financial markets on a multi-asset basis, and has been an independent economist covering the global economy and financial markets for the past 8 years since founding DeSaque Macro Research in London.</p>
<p>Osbert Tang is an equity analyst with over 20 years of experience, focusing on China transport, infrastructure, industrials, and utilities. He has been based in Shanghai since 2003, where he accumulated more than 15 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities.</p>

For our next Webinar, we are excited to welcome Analysts Said Desaque and Osbert Tang, CFA , who will go over China's latest potential $220 billion stimulus through a massive sale of special bonds. The Analysts will each present their views on the situation and a Q&amp;A will follow.
The webinar was hosted on Wednesday, 13 July 2022, 17:00 SGT/HKT.
Subscribe to our podcast feed and listen to the session on the go:
Said DeSaque is a professional economist with over 33 years of experience covering the global economy, with significant expertise in the US, China, Japan, and emerging markets. He worked with US investment banks for 25 years covering institutional investors in Europe, Middle East, Far East and Australia. He covers financial markets on a multi-asset basis, and has been an independent economist covering the global economy and financial markets for the past 8 years since founding DeSaque Macro Research in London.
Osbert Tang is an equity analyst with over 20 years of experience, focusing on China transport, infrastructure, industrials, and utilities. He has been based in Shanghai since 2003, where he accumulated more than 15 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities.

Smartkarma Webinar | Understanding China's Latest Stimulus

Hong Kong

China State Construction International Holdings Limited, through its subsidiaries, provides building construction and civil engineering works services in Hong Kong.

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China State Construction Int'L (3311 HK)