HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>While we like <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> in the long term, we are caution that 1Q23 result may be disappointing. Its 4Q22 earnings already showed 49.1% YoY and 73.3% QoQ decline.</li>
<li>Indicators including China's PMI new export orders, export growth, container shipping freight rates (SCFI) and airfreight rates all showed that the recovery trend is weak. </li>
<li>9% of FY22 profit is from exchange gain as Rmb depreciated, and this may not happen again. Consensus forecast of just 10% decline in FY23 net profit seems overly optimistic. </li>
</ul>


While we like Sinotrans (598 HK) in the long term, we are caution that 1Q23 result may be disappointing. Its 4Q22 earnings already showed 49.1% YoY and 73.3% QoQ decline.
Indicators including China's PMI new export orders, export growth, container shipping freight rates (SCFI) and airfreight rates all showed that the recovery trend is weak. 
9% of FY22 profit is from exchange gain as Rmb depreciated, and this may not happen again. Consensus forecast of just 10% decline in FY23 net profit seems overly optimistic. 


Sinotrans (598 HK): We Are Concerned About the near Term Challenges

<ul>
<li>We stay bearish on <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> despite record net profit in FY22. The collapse in spot freight rate will take a toll on FY23 earnings.</li>
<li>Management is also conservative on outlook, citing both demand and supply issues. It expects gross margin to return to pre-pandemic levels (17-20%) in the future, vs. 41.8% in 2H22.</li>
<li>Market consensus is just too optimistic, projecting just 37% YoY decline in earnings for FY23. We believe actual earnings may be at least 18-27% lower than current street forecasts. </li>
</ul>


We stay bearish on SITC International (1308 HK) despite record net profit in FY22. The collapse in spot freight rate will take a toll on FY23 earnings.
Management is also conservative on outlook, citing both demand and supply issues. It expects gross margin to return to pre-pandemic levels (17-20%) in the future, vs. 41.8% in 2H22.
Market consensus is just too optimistic, projecting just 37% YoY decline in earnings for FY23. We believe actual earnings may be at least 18-27% lower than current street forecasts. 


SITC International (1308 HK): Still Not Easy to Find the Bright Spot

Thematic (Sector/Industry)

<ul>
<li>Weaker OECD demand, diversification of supply chain out of China, lesser room for Rmb depreciation and high base effects all suggest challenging export environment for China in 2023. </li>
<li>We expect 5-10% drop in China's export in next year, against consensus of 0.2% growth. Except ASEAN, exports to all major trading partners are already deep in negative in Nov.</li>
<li>Long-Haul container shipping is the most disastrous, while port and logistics sectors are less vulnerable. We think <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> and <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> will fare better than others.</li>
</ul>


Weaker OECD demand, diversification of supply chain out of China, lesser room for Rmb depreciation and high base effects all suggest challenging export environment for China in 2023. 
We expect 5-10% drop in China's export in next year, against consensus of 0.2% growth. Except ASEAN, exports to all major trading partners are already deep in negative in Nov.
Long-Haul container shipping is the most disastrous, while port and logistics sectors are less vulnerable. We think SITC International (1308 HK) and Sinotrans (598 HK) will fare better than others.


China's Export Outlook 2023: How Port, Shipping and Logistics Fare?

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyzed the latest HK SFC report for aggregate short position as of Nov 11th.</li>
<li>Top short increases and decreases were tabulated for one week and four week period. </li>
<li>We highlight short changes in AIA, Li Ning, SHK PPT, CSPC Pharma, Fosun Pharma, Kingsoft.</li>
</ul>


We analyzed the latest HK SFC report for aggregate short position as of Nov 11th.
Top short increases and decreases were tabulated for one week and four week period. 
We highlight short changes in AIA, Li Ning, SHK PPT, CSPC Pharma, Fosun Pharma, Kingsoft.


HK Short Interest Weekly: AIA, Li Ning, SHK PPT, CSPC Pharma, Fosun Pharma, Kingsoft

<ul>
<li>We analyzed the latest HK SFC report for aggregate short position as of Sep 30th.</li>
<li>Top short increases and decreases were tabulated for one week and four week period. </li>
<li>We highlight short changes in CSPC Pharma, Hygeia, GCL Technology, SHK Properties, Techtronic.</li>
</ul>


We analyzed the latest HK SFC report for aggregate short position as of Sep 30th.
Top short increases and decreases were tabulated for one week and four week period. 
We highlight short changes in CSPC Pharma, Hygeia, GCL Technology, SHK Properties, Techtronic.


HK Short Interest Weekly: CSPC Pharma, Hygeia, GCL Technology, SHK Properties, Techtronic

Hong Kong

Orient Overseas International Ltd, through its subsidiaries, owns and leases ships, operates terminals, and provides freight forwarding and container transportation services.  The Company also develops and invests in properties, leases equipment, and invests in securities.

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Orient Overseas International (316 HK)

Sinotrans (598 HK): We Are Concerned About the near Term Challenges

After a weak 4Q22 result, we think there are risks that 1Q23 and 1H23 earnings may not come out as expected. Market consensus forecast of 10% net...

Osbert Tang, CFA

SITC International (1308 HK): Still Not Easy to Find the Bright Spot

SITC is still facing tough operating environment with freight rate pressure. Market consensus looks too optimistic which means downgrade risks....

Osbert Tang, CFA

China's Export Outlook 2023: How Port, Shipping and Logistics Fare?

We are cautious on China's export outlook in 2023, and operating environment of port, container shipping and logistics sectors will be challenging....

Osbert Tang, CFA

HK Short Interest Weekly: AIA, Li Ning, SHK PPT, CSPC Pharma, Fosun Pharma, Kingsoft

We analyzed the latest HK SFC report for aggregate short position as of Nov 11th and highlight short interest changes in AIA, Li Ning, SHK PPT,...

Ke Yan, CFA, FRM

HK Short Interest Weekly: CSPC Pharma, Hygeia, GCL Technology, SHK Properties, Techtronic

We analyzed the latest HK SFC report for aggregate short position and highlight short interest changes in CSPC Pharma, Hygeia, GCL Technology, SHK...

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

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