Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Shanghai Shenzhen CSI 300 Index / Technical Analysis

Global equities (MSCI ACWI, ACWI ex-US, and EAFE) remain bullish with their uptrends intact, and the MSCI Emerging Markets index continues to hold above major support at $52 on the EEM-US. Additionally, Europe’s STOXX 50 and Hong Kong’s Hang Seng are on the cusp of short-term breakouts, while the major indexes in China (Shanghai Composite &amp; CSI 300) are currently breaking above short-term resistance... see chart below. Considering the absence of breakdowns and the fact that market dynamics remain largely positive, our overall constructive outlook remains appropriate.

Global equities (MSCI ACWI, ACWI ex-US, and EAFE) remain bullish with their uptrends intact, and the MSCI Emerging Markets index continues to hold above major support at $52 on the EEM-US. Additionally, Europe’s STOXX 50 and Hong Kong’s Hang Seng are on the cusp of short-term breakouts, while the major indexes in China (Shanghai Composite &amp; CSI 300) are currently breaking above short-term resistance... see chart below. Considering the absence of breakdowns and the fact that market dynamics remain largely positive, our overall constructive outlook remains appropriate.

Chinese Indexes Headed Higher; Actionable Themes: Transportation, Materials, and Services

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

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Data and anecdotes from a range of sources in December and January show the recovery in Chinese domestic travel demand has stalled. Looking forward, government estimates suggest travel activity over the Lunar New Year holiday in February will also remain muted. 
In the run up to the long holiday period, Chinese officials have responded aggressively to Covid19 outbreaks in several Chinese cities, most of them in Northern China. Until vaccines reach most of the population and prove effective against new variants of the virus, travel demand -- outbound and domestic -- will likely remain depressed. Even a Summer rebound now appears optimistic. 
A combination of hesitant consumers and necessarily aggressive government responses to new outbreaks leaves current travel demand far below normal (2019) levels. The stalled recovery in Chinese travel activity thus lags substantially the return of the Chinese consumer. With few signs of "pent-up" travel demand, it appears Chinese tourists may have altered spending priorities. 
The Chinese travel sector will enjoy easy YoY "comps" in early 2021 as we lap the worst of the Covid19 crisis in H120. However, in the medium-term, we see a "new normal" developing: non-essential travel has become riskier and less attractive, and thus a lower priority for consumers, and this will likely remain the case until Covid19 is put decisively in the rear-view mirror.




Data and anecdotes from a range of sources in December and January show the recovery in Chinese domestic travel demand has stalled. Looking forward, government estimates suggest travel activity over the Lunar New Year holiday in February will also remain muted. 
In the run up to the long holiday period, Chinese officials have responded aggressively to Covid19 outbreaks in several Chinese cities, most of them in Northern China. Until vaccines reach most of the population and prove effective against new variants of the virus, travel demand -- outbound and domestic -- will likely remain depressed. Even a Summer rebound now appears optimistic. 
A combination of hesitant consumers and necessarily aggressive government responses to new outbreaks leaves current travel demand far below normal (2019) levels. The stalled recovery in Chinese travel activity thus lags substantially the return of the Chinese consumer. With few signs of "pent-up" travel demand, it appears Chinese tourists may have altered spending priorities. 
The Chinese travel sector will enjoy easy YoY "comps" in early 2021 as we lap the worst of the Covid19 crisis in H120. However, in the medium-term, we see a "new normal" developing: non-essential travel has become riskier and less attractive, and thus a lower priority for consumers, and this will likely remain the case until Covid19 is put decisively in the rear-view mirror.  

December-January Travel Data Confirm Stalled Domestic Recovery; Weak LNY Unlikely to Help

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/179/973/original/BANNER-TourDec20.png?1608779882" class="editor-image img-responsive" data-smartkarma-image-id="179973"></figure></section>Outbound Chinese tourism activity remained dormant in November. Macau's recovery slowed, and the appearance of a new variant of the Covid19 virus suggests a potential recovery in Chinese outbound travel may be pushed back until at least the middle of 2021, maybe later. To our surprise, the recovery in domestic Chinese tourism also appears to have lost steam in November. Passenger counts at the three major national airlines fell YoY, and overall activity was well below that of October. Chinese consumers remain cautious towards discretionary travel. We believe Chinese travel demand will recover gradually in 2021, and that the recovery could gain momentum in the second half of the year. Still, the emergence of a new strain of the virus will likely cap outbound travel in the near-term, and it also appears the rebound in domestic demand is moderating. For now, we would avoid pricey travel-related stocks like <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a>.

Outbound Chinese tourism activity remained dormant in November. Macau's recovery slowed, and the appearance of a new variant of the Covid19 virus suggests a potential recovery in Chinese outbound travel may be pushed back until at least the middle of 2021, maybe later. To our surprise, the recovery in domestic Chinese tourism also appears to have lost steam in November. Passenger counts at the three major national airlines fell YoY, and overall activity was well below that of October. Chinese consumers remain cautious towards discretionary travel. We believe Chinese travel demand will recover gradually in 2021, and that the recovery could gain momentum in the second half of the year. Still, the emergence of a new strain of the virus will likely cap outbound travel in the near-term, and it also appears the rebound in domestic demand is moderating. For now, we would avoid pricey travel-related stocks like Trip.com (TCOM US).

TRACKING TRAFFIC/Chinese Tourism: Domestic Recovery Lost Steam in November

On Tuesday after the US market close, China's leading online travel agency <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> reported Q320 results. Net Revenue declined 48% YoY, and Adjusted Operating Income fell 50%.Trip.com's results were largely in-line with guidance and expectations, but we believe the pace of the company's recovery is lagging that of some peers and the industry as a whole, even after adjusting for Trip.com's relatively high exposure to outbound travel, which has collapsed. Trip.com's revenue guidance for Q420 also suggests the pace of its recovery will continue to disappoint in the near-term. We don't see anything to get excited about in Trip.com's Q320 results and Q420 guidance.

On Tuesday after the US market close, China's leading online travel agency Trip.com (TCOM US) reported Q320 results. Net Revenue declined 48% YoY, and Adjusted Operating Income fell 50%.Trip.com's results were largely in-line with guidance and expectations, but we believe the pace of the company's recovery is lagging that of some peers and the industry as a whole, even after adjusting for Trip.com's relatively high exposure to outbound travel, which has collapsed. Trip.com's revenue guidance for Q420 also suggests the pace of its recovery will continue to disappoint in the near-term. We don't see anything to get excited about in Trip.com's Q320 results and Q420 guidance. 

Trip.com Q320 Results Met Guidance, But Q420 Guidance Suggests Very Slow Recovery

Chinese online travel agency (OTA) <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng-Elong Holdings Ltd (780 HK)</a> released Q3 results on Monday evening in HK. Revenue and adjusted EBITDA were still below year-ago levels, but both metrics were significantly improved from Q2 levels. Notably, purchasing users in Q3 were flat YoY.
Market leading OTA <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> will report its Q3 results on Tuesday, December 1st after the US close. We expect Trip.com to report a sequential improvement, but we believe Q3 results will show its recovery lags Tongcheng-ELong's, mainly due to Trip.com's international exposure.
The expected availability of Covid19 vaccines in 2021 should eventually open up cross-border travel for Chinese tourists next year, but Trip.com and other travel service providers may still be facing a difficult start to 2021, including the long Lunar New Year holiday in February.
As such, we retain a negative view of Chinese tourism demand in the medium-term, anticipating that even a return to the modest demand growth seen pre-Covid19 will require another few quarters, at least.

Chinese online travel agency (OTA) Tongcheng-Elong Holdings Ltd (780 HK) released Q3 results on Monday evening in HK. Revenue and adjusted EBITDA were still below year-ago levels, but both metrics were significantly improved from Q2 levels. Notably, purchasing users in Q3 were flat YoY.
Market leading OTA Trip.com (TCOM US) will report its Q3 results on Tuesday, December 1st after the US close. We expect Trip.com to report a sequential improvement, but we believe Q3 results will show its recovery lags Tongcheng-ELong's, mainly due to Trip.com's international exposure.
The expected availability of Covid19 vaccines in 2021 should eventually open up cross-border travel for Chinese tourists next year, but Trip.com and other travel service providers may still be facing a difficult start to 2021, including the long Lunar New Year holiday in February.
As such, we retain a negative view of Chinese tourism demand in the medium-term, anticipating that even a return to the modest demand growth seen pre-Covid19 will require another few quarters, at least. 

Tough Times (Still) In Chinese Tourism | Trip.com Q3 Preview | TongCheng-ELong Q3 Review

China

Spring Airlines Co., Ltd. offers air transportation services. The Company provides domestic air transportation, international air transportation, cargo transportation, and other services. Spring Airlines also offers ticket home delivery, insurance transaction, and other services.

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Spring Airlines (601021 CH)

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Vermilion Research

December-January Travel Data Confirm Stalled Domestic Recovery; Weak LNY Unlikely to Help

The recovery in domestic travel demand stalled again in December, and we believe improvement will be muted in the near-term as officials battle...

Tracking Traffic

TRACKING TRAFFIC/Chinese Tourism: Domestic Recovery Lost Steam in November

It appears the nascent recovery in Chinese domestic tourism activity began to stall in November. Outbound travel activity remains dormant, and even...

Tracking Traffic

Trip.com Q320 Results Met Guidance, But Q420 Guidance Suggests Very Slow Recovery

Trip.com met Q320 net revenue guidance but offered guidance for Q420 that assumes only modest progress toward recovery in the current period.

Tracking Traffic

Tough Times (Still) In Chinese Tourism | Trip.com Q3 Preview | TongCheng-ELong Q3 Review

In Q3, TongCheng-ELong showed growth versus Q2, though revenue and earnings remain lower than a year ago. We expect Trip.com's Q3 results to be far...

Tracking Traffic

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