HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>With re-opening of borders, China's tourism and hospitality industry should see encouraging earnings outlook over the next two years; and we are now only in the early stage of recovery.  </li>
<li>Online travel agencies and hotel and resorts operators including <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a>, <a href="https://www.smartkarma.com/entities/huazhu-group-ltd-79e0c5b5-ad55-42ed-b8d2-a2173defd0ea" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">H World Group (1179 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a> and <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> are well positioned.</li>
<li>These companies all have sound business model, industry leadership position, solid competitive strengths, comprehensive customer coverage and, for some, meaningful global presence in their respective sub-sectors. </li>
</ul>


With re-opening of borders, China's tourism and hospitality industry should see encouraging earnings outlook over the next two years; and we are now only in the early stage of recovery.  
Online travel agencies and hotel and resorts operators including Tongcheng Travel Holdings (780 HK), H World Group (1179 HK), Trip.com (9961 HK) and Fosun Tourism (1992 HK) are well positioned.
These companies all have sound business model, industry leadership position, solid competitive strengths, comprehensive customer coverage and, for some, meaningful global presence in their respective sub-sectors. 


China Tourism and Hospitality Industry: A Year of Revenge

<ul>
<li>The just finished "Year of the Rabbit" Chinese New Year has witnessed strong revival in travel appetite. Total domestic travelers increased 23.1% YoY, returning to 88.6% of 2019 level.</li>
<li>
<a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng-Elong (780 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a>, <a href="https://www.smartkarma.com/entities/huazhu-group-ltd-79e0c5b5-ad55-42ed-b8d2-a2173defd0ea" target="_blank" data-smartkarma-citation="entities:33487:1" rel="noopener">Huazhu Group (1179 HK)</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/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a> and <a href="https://www.smartkarma.com/entities/china-film-co-ltd" target="_blank" data-smartkarma-citation="entities:29943:1" rel="noopener">China Film Co (600977 CH)</a> are some of the beneficiaries.</li>
<li>As we passed peak of infections and overseas PCR and visa constraints are further removed, the trend of improvement in travel demand will sustain into the National Day holidays.  </li>
</ul>


The just finished "Year of the Rabbit" Chinese New Year has witnessed strong revival in travel appetite. Total domestic travelers increased 23.1% YoY, returning to 88.6% of 2019 level.

Tongcheng-Elong (780 HK), Trip.com (9961 HK), Huazhu Group (1179 HK), Fosun Tourism (1992 HK), China Southern Airlines (1055 HK) and China Film Co (600977 CH) are some of the beneficiaries.
As we passed peak of infections and overseas PCR and visa constraints are further removed, the trend of improvement in travel demand will sustain into the National Day holidays.  


Chinese New Year Travel Market: Roundup And Implications

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

Tongcheng Travel Holdings  / Equity Bottom-Up

<ul><li>We turned more positive on TC’s recovery ahead, backed by faster-thanexpected reopening.</li><li>TC would deliver upbeat 4Q22E, with better-than-feared topline and positive earnings (vs. prior -RMB51mn).</li><li>With upcoming CNY Festival, travel data recovered to 70-80% of 2019 level. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We turned more positive on TC’s recovery ahead, backed by faster-thanexpected reopening.TC would deliver upbeat 4Q22E, with better-than-feared topline and positive earnings (vs. prior -RMB51mn).With upcoming CNY Festival, travel data recovered to 70-80% of 2019 level. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongcheng Travel (780 HK) – Better recovery ahead with China reopening

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

iShares MSCI China ETF / Technical Analysis

<ul>
<li>We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&amp;P 500, and several European indexes still below major resistance.</li>
<li>We continue to expect rangebound price action in the months ahead on the MSCI ACWI.</li>
<li>And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)</li>
</ul>


We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&amp;P 500, and several European indexes still below major resistance.
We continue to expect rangebound price action in the months ahead on the MSCI ACWI.
And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)


Hang Seng and MSCI China Bottoming -- Add; Europe Still Leading; Shift From U.S. To Non-U.S.

<ul><li>Tongcheng delivered better-than-feared 3Q22 results, with in-line rev and upbeat margin.</li><li>We are more prudent on its 4Q22E momentum, given stricter control on Oct Golden Week  and epidemic break.</li><li>We forecast 4Q22E rev -24% YoY vs. prior -10% YoY),  in which hotel/transportation -13%/-34% YoY.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongcheng delivered better-than-feared 3Q22 results, with in-line rev and upbeat margin.We are more prudent on its 4Q22E momentum, given stricter control on Oct Golden Week  and epidemic break.We forecast 4Q22E rev -24% YoY vs. prior -10% YoY),  in which hotel/transportation -13%/-34% YoY.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tongcheng Travel (780 HK) – Factoring in 4Q22E epidemic resurgence

China

Tongcheng Travel Holdings Limited operates as an online travel agency. The Company provides transportation ticketing, accommodation reservation, value added travel products sales, and other services. Tongcheng Travel Holdings provides its services throughout China.

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Tongcheng Travel Holdings (780 HK)

China Tourism and Hospitality Industry: A Year of Revenge

We are only in early stage of China's tourism and hospitality recovery, after its re-opening of borders in Jan. We identify Tongcheng, H World,...

Osbert Tang, CFA

Chinese New Year Travel Market: Roundup And Implications

Total domestic travelers in China was up 23.1% in CNY. Tongcheng-Elong, Trip.com, Huazhu Group, Fosun Tourism, China Southern Airlines and China...

Osbert Tang, CFA

Tongcheng Travel (780 HK) – Better recovery ahead with China reopening

We turned more positive on TC’s recovery ahead, backed by faster-thanexpected reopening. TC would deliver upbeat 4Q22E, with better-than-feared...

CMB International

Hang Seng and MSCI China Bottoming -- Add; Europe Still Leading; Shift From U.S. To Non-U.S.

We remain neutral on global equities $ACWI and expect rangebound price action in the months (possibly year) ahead. Specific $ACWI trading range we...

Vermilion Research

Tongcheng Travel (780 HK) – Factoring in 4Q22E epidemic resurgence

Tongcheng delivered better-than-feared 3Q22 results, with in-line rev and upbeat margin. We are more prudent on its 4Q22E momentum, given stricter...

CMB International

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