HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Various figures for the Chinese New Year holidays suggested that the domestic tourism market is lukewarm in 2022. However, there are evidences that high-end consumption is better than low-end.</li>
<li>Weak cross-province tourism and low-end spending are likely negative to <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a>, <a href="https://www.smartkarma.com/entities/maoyan-entertainment" target="_blank" data-smartkarma-citation="entities:27451:1" rel="noopener">Maoyan Entertainment (1896 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-pictures-group-ltd" target="_blank" data-smartkarma-citation="entities:20724:1" rel="noopener">Alibaba Pictures (1060 HK)</a> and <a href="https://www.smartkarma.com/entities/imax-china-holding-inc" target="_blank" data-smartkarma-citation="entities:888:1" rel="noopener">IMAX China Holding (1970 HK)</a>.  </li>
<li>Good duty-free sales and high-end spending are beneficial to <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">CTG Duty Free Corp (601888 CH)</a>, <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>, <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a> and <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a>. </li>
</ul>


Various figures for the Chinese New Year holidays suggested that the domestic tourism market is lukewarm in 2022. However, there are evidences that high-end consumption is better than low-end.
Weak cross-province tourism and low-end spending are likely negative to China Southern Airlines (1055 HK), Maoyan Entertainment (1896 HK), Alibaba Pictures (1060 HK) and IMAX China Holding (1970 HK).  
Good duty-free sales and high-end spending are beneficial to CTG Duty Free Corp (601888 CH), Fosun Tourism (1992 HK), Fosun International (656 HK) and Chow Tai Fook Jewellery (1929 HK). 


2022 Chinese New Year Holidays - Some Winners and Losers

<ul>
<li>State Council's announcement of China 14th 5-year Tourism Industry Development Plan recently should see positive policies and supportive measures to be rolled out over the medium term. </li>
<li>
<a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>, <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>, <a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel International Investment (308 HK)</a> and <a href="https://www.smartkarma.com/entities/haichang-ocean-park-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11396:1" rel="noopener">Haichang Ocean Park (2255 HK)</a> are some key beneficiaries.</li>
<li>We believe <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a> will benefit from the recovery of international air passenger as the Plan highlights the importance of promoting inbound/outbound tourism after the pandemic.</li>
</ul>


State Council's announcement of China 14th 5-year Tourism Industry Development Plan recently should see positive policies and supportive measures to be rolled out over the medium term. 

Fosun Tourism (1992 HK), China Tourism Group Duty Free Corp Ltd (601888 CH), China Travel International Investment (308 HK) and Haichang Ocean Park (2255 HK) are some key beneficiaries.
We believe Air China Ltd (H) (753 HK) will benefit from the recovery of international air passenger as the Plan highlights the importance of promoting inbound/outbound tourism after the pandemic.


Beneficiaries of China's 14th 5-Year Tourism Industry Development Plan

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.For the Hang Seng Composite Index (HSCI) there are 36 inclusions and 29 deletions, taking the number of index constituents up to 500.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. Secondary Listings are not eligible for inclusion in the Stock Connect program.Of the 36 inclusions, 4 are already a part of Stock Connect by virtue of having listed A-shares, 2 are Secondary listings and will not be included in Stock Connect, 9 will be added to Shanghai and Shenzhen Stock Connect, while 21 stocks will only be added to Shenzhen Stock Connect.Of the 29 index deletions, 13 are not a part of Stock Connect, 7 will continue to remain a part of Stock Connect by virtue of having listed A-shares, while 9 will be deleted from the Stock Connect program.We identify 4 stocks that could sell off ahead of their removal from the Stock Connect Buy list, while Biotech stocks could be in focus ahead of their inclusion in the Stock Connect Buy and Sell list.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.For the Hang Seng Composite Index (HSCI) there are 36 inclusions and 29 deletions, taking the number of index constituents up to 500.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. Secondary Listings are not eligible for inclusion in the Stock Connect program.Of the 36 inclusions, 4 are already a part of Stock Connect by virtue of having listed A-shares, 2 are Secondary listings and will not be included in Stock Connect, 9 will be added to Shanghai and Shenzhen Stock Connect, while 21 stocks will only be added to Shenzhen Stock Connect.Of the 29 index deletions, 13 are not a part of Stock Connect, 7 will continue to remain a part of Stock Connect by virtue of having listed A-shares, while 9 will be deleted from the Stock Connect program.We identify 4 stocks that could sell off ahead of their removal from the Stock Connect Buy list, while Biotech stocks could be in focus ahead of their inclusion in the Stock Connect Buy and Sell list.

HSCI Index Rebalance & Stock Connect: Inclusions & Exclusions

Equity Bottom-Up

China Tourism Group Duty Free Corp Ltd / Equity Bottom-Up

The approvals of more players in the Hainan duty free market at end-2020 is likely to pose challenge to <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> only in the long term, given the weaker relative competitiveness of the new entrants, CTG Duty Free's established strengths and the sustained positive growth in the overall market. Despite so, we see a trend of rise in competition in China's duty free industry, which is a threat that it cannot overlook in the long run.With the Dec (up to 28th) duty free sales value maintained a solid growth of over 150% YoY, the sustained market growth will offer CTG Duty Free a near-term buffer to competition. The low base in 1H20 as well as the limited appetite of overseas travel due to new coronavirus strains will continue to be positive factors for the company at least in the next six months.

The approvals of more players in the Hainan duty free market at end-2020 is likely to pose challenge to China Tourism Group Duty Free Corp Ltd (601888 CH) only in the long term, given the weaker relative competitiveness of the new entrants, CTG Duty Free's established strengths and the sustained positive growth in the overall market. Despite so, we see a trend of rise in competition in China's duty free industry, which is a threat that it cannot overlook in the long run.With the Dec (up to 28th) duty free sales value maintained a solid growth of over 150% YoY, the sustained market growth will offer CTG Duty Free a near-term buffer to competition. The low base in 1H20 as well as the limited appetite of overseas travel due to new coronavirus strains will continue to be positive factors for the company at least in the next six months.

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Singapore Airlines / Equity Capital Markets

As global markets rebound and businesses start to feel impact of the virus outbreak, there will likely be companies looking to access capital markets to shore up their balance sheet. <a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">Singapore Airlines (SIA SP)</a>'s rights issue was a case in point.
In this insight, we will explore what are some Asia-Pacific companies that may breach their debt covenants and will likely look to raise capital in the near-term.

As global markets rebound and businesses start to feel impact of the virus outbreak, there will likely be companies looking to access capital markets to shore up their balance sheet. Singapore Airlines (SIA SP)'s rights issue was a case in point.
In this insight, we will explore what are some Asia-Pacific companies that may breach their debt covenants and will likely look to raise capital in the near-term.

Potential Trade Ideas - Asia-Pacific Companies that May Access Capital Markets

Hong Kong

Fosun Tourism Group operates as a leisure focused integrated tourism group. The Company provides resorts management, tourism destinations development, and other related services. Fosun Tourism Group offers its services worldwide.

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Fosun Tourism (1992 HK)

2022 Chinese New Year Holidays - Some Winners and Losers

2022 Chinese New Year figures showed marginal decline domestic tourists, and pointed to better high-end consumption performance than low-end. We...

Osbert Tang, CFA

Beneficiaries of China's 14th 5-Year Tourism Industry Development Plan

China's 14th 5-year Tourism Development Plan are positive to many players in the tourism industry. We expect more favourable policies and...

Osbert Tang, CFA

HSCI Index Rebalance & Stock Connect: Inclusions & Exclusions

There are 36 inclusions/ 29 exclusions for the Hang Seng Composite Index. 9 stocks will be deleted from the Stock Connect Buy list & there are a...

Brian Freitas

CTG Duty Free Corp (601888 CH): Facing More Competition in a Rapidly Growing Market

New players to Hainan duty free market will not bring near-term impact to CTG Duty Free's leadership, but can be long-term challenges. However,...

Osbert Tang, CFA

Potential Trade Ideas - Asia-Pacific Companies that May Access Capital Markets

As global markets rebound and businesses start to feel impact of the virus outbreak, there will likely be companies looking to access capital...

Zhen Zhou, Toh

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