HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>The Rmb6trn of the new debt swap quota may disappoint the market given the lack of one-time direct stimulus. However, the underlying implications should not be overlooked.</li>
<li>A better balance sheet and savings in interest expenses will free up the resources of local governments, benefiting <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> and <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a>. </li>
<li>Shanghai has immediately rolled out consumption coupon distribution, which is positive for companies in the restaurant, travel, movies, and sports sectors. </li>
</ul>


The Rmb6trn of the new debt swap quota may disappoint the market given the lack of one-time direct stimulus. However, the underlying implications should not be overlooked.
A better balance sheet and savings in interest expenses will free up the resources of local governments, benefiting China Communications Construction (1800 HK) and China Everbright Environment (257 HK). 
Shanghai has immediately rolled out consumption coupon distribution, which is positive for companies in the restaurant, travel, movies, and sports sectors. 


China & HK Strategy: Stock Ideas on China's Debt Swap Plan

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<ul>
<li>Hong Kong markets continue to outperform this year with the HSCEI up 30% year to date.  Market breadth continues to be healthy with 80% of stocks over &gt; 200 DMA.</li>
<li>
<a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> announced its new hybrid technology which gives vehicles a range of more than 870 miles (1400 Kms).  The company has delivered more than 120k vehicles YTD.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities Co Ltd (H) (6099 HK)</a> benefits from increased market turnover.   <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> beat consensus for 3Q24 earnings and will continue its buyback program.</li>
</ul>


Hong Kong markets continue to outperform this year with the HSCEI up 30% year to date.  Market breadth continues to be healthy with 80% of stocks over &gt; 200 DMA.

XPeng (9868 HK) announced its new hybrid technology which gives vehicles a range of more than 870 miles (1400 Kms).  The company has delivered more than 120k vehicles YTD.

China Merchants Securities Co Ltd (H) (6099 HK) benefits from increased market turnover.   Yum China Holdings (9987 HK) beat consensus for 3Q24 earnings and will continue its buyback program.


The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 7)

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

<ul>
<li>Green Tea’s future performance growth is uncertain due to increasing competition, changes in consumer tastes, lack of a secondary growth curve, unsatisfactory table turnover rate and the old menu.</li>
<li>Simply opening more restaurants cannot break through development bottlenecks.Whether shares would perform well after IPO depends on if Green Tea is able to deliver persuasive/sustainable growth story to the market.</li>
<li>The moat of Green Tea is still “fragile”. We think the valuation of Green Tea should be between <a href="https://www.smartkarma.com/entities/haidilao-international-holding" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a> and <a href="https://www.smartkarma.com/entities/jiumaojiu-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:28293:1" rel="noopener">Jiumaojiu (9922 HK)</a>, <a href="https://www.smartkarma.com/entities/ajisen-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:990:1" rel="noopener">Ajisen (538 HK)</a>.</li>
</ul>


Green Tea’s future performance growth is uncertain due to increasing competition, changes in consumer tastes, lack of a secondary growth curve, unsatisfactory table turnover rate and the old menu.
Simply opening more restaurants cannot break through development bottlenecks.Whether shares would perform well after IPO depends on if Green Tea is able to deliver persuasive/sustainable growth story to the market.
The moat of Green Tea is still “fragile”. We think the valuation of Green Tea should be between Haidilao (6862 HK) and Jiumaojiu (9922 HK), Ajisen (538 HK).


Pre-IPO Green Tea Group - Lack of an Attractive "Growth Story"

Tongcheng Travel Holdings  / Equity Bottom-Up

<ul>
<li>Hong Kong is showing strong market momentum as consumer staples, consumer discretionary, healthcare and tech surge on increased momentum.</li>
<li><a href="https://www.smartkarma.com/entities/xtep-international-holdings" target="_blank" data-smartkarma-citation="entities:18118:1" rel="noopener">Xtep International (1368 HK)</a> had a good 1H24 and benefited from better consumer sentiment. Analysts are upgrading <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK) on an improved outlook.</a></li>
<li>Goldman Sachs upgraded their rating on <a href="https://www.smartkarma.com/entities/bilibili-inc-83a27302-cd7d-4e6a-a1de-bcf93eb022c3" target="_blank" data-smartkarma-citation="entities:32215:1" rel="noopener">Bilibili (9626 HK)</a> , <a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili (BILI US)</a> to a BUY with improving user MAU/DAU measures and the success of its newly launched game.</li>
</ul>


Hong Kong is showing strong market momentum as consumer staples, consumer discretionary, healthcare and tech surge on increased momentum.
Xtep International (1368 HK) had a good 1H24 and benefited from better consumer sentiment. Analysts are upgrading Tongcheng Travel Holdings (780 HK) on an improved outlook.
Goldman Sachs upgraded their rating on Bilibili (9626 HK) , Bilibili (BILI US) to a BUY with improving user MAU/DAU measures and the success of its newly launched game.


BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)

Haidilao International Holding / Equity Bottom-Up

<ul>
<li>Hong Kong is now the top-performing major world market this year.  With a large valuation disparity, both Hong Kong's and China's markets have more upside potential.</li>
<li>
<a href="https://www.smartkarma.com/entities/haidilao-international-holding" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao International Holding (6862 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 Products (2020 HK)</a> are benefiting from the improvement in consumer sentiment with government stimulus targeting housing payments and consumption.
</li>
<li><a href="https://www.smartkarma.com/entities/citic-securities-h" target="_blank" data-smartkarma-citation="entities:463:1" rel="noopener">Citic Securities (H) (6030 HK)</a> surged in anticipation of increased market trading and IPOs.  Industry consolidation is also part of the improved sentiment.</li>
</ul>


Hong Kong is now the top-performing major world market this year.  With a large valuation disparity, both Hong Kong's and China's markets have more upside potential.

Haidilao International Holding (6862 HK) and Anta Sports Products (2020 HK) are benefiting from the improvement in consumer sentiment with government stimulus targeting housing payments and consumption.

Citic Securities (H) (6030 HK) surged in anticipation of increased market trading and IPOs.  Industry consolidation is also part of the improved sentiment.


The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 27)

China

Jiumaojiu International Holdings Limited operates as a holding company. The Company, through its subsidiaries, focuses on manufactures food products. Jiumaojiu International Holdings serves customers in China.

Price Gauge
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Jiumaojiu (9922 HK)

China & HK Strategy: Stock Ideas on China's Debt Swap Plan

China's new debt swap quota will benefit local governments and infrastructure companies. Shanghai's consumption coupon distribution is positive for...

Osbert Tang, CFA

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 7)

Hong Kong markets are among the top performers this year. Short selling has declined as Southbound buying increases. Xpeng introduced a new hybrid...

David Mudd

Pre-IPO Green Tea Group - Lack of an Attractive "Growth Story"

Green Tea faces uncertain future growth due to competition/changing tastes/operational challenges.Valuation should be between Haidilao and...

Xinyao (Criss) Wang

BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)

Hong Kong market continues to re-rate on the back of PBOC stimulus. XTEP and Tongcheng benefit from improved consumer sentiment and earnings...

David Mudd

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 27)

HSI is the top performing major global index heading into 4Q2024. Haidilao and Anta both benefit from improved sentiment in consumer sector. Citic...

David Mudd

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China & HK Strategy: Stock Ideas on China's Debt Swap Plan

China's new debt swap quota will benefit local governments and infrastructure companies. Shanghai's consumption coupon distribution is positive for...

Osbert Tang, CFA

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 7)

Hong Kong markets are among the top performers this year. Short selling has declined as Southbound buying increases. Xpeng introduced a new hybrid...

David Mudd

Pre-IPO Green Tea Group - Lack of an Attractive "Growth Story"

​Green Tea faces uncertain future growth due to competition/changing tastes/operational challenges.Valuation should be between Haidilao and...

Xinyao (Criss) Wang

BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)

Hong Kong market continues to re-rate on the back of PBOC stimulus. XTEP and Tongcheng benefit from improved consumer sentiment and earnings...

David Mudd

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 27)

HSI is the top performing major global index heading into 4Q2024. Haidilao and Anta both benefit from improved sentiment in consumer sector. Citic...

David Mudd

Green Tea faces uncertain future growth due to competition/changing tastes/operational challenges.Valuation should be between Haidilao and...