In this briefing:
- Angang Steel: PMI Recovery to Support Shares: Close Short
- QTT Placement: Liquidity Warrants a Quick Trade
- Zhongliang (中梁地产) Pre-IPO Review – Incredible Growth Bogged Down by Related Party Transactions
- CIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
- Market Wrinkles Ahead of a US/China Deal Spike
1. Angang Steel: PMI Recovery to Support Shares: Close Short
INVESTMENT VIEW:
The recovery in China’s March PMI index to 50.8 shows an unexpected expansion in economic activity. Historically, there is a strong correlation between the PMI and Chinese steel prices as well as Angang’s share price.
We close our short on Angang Steel Co Ltd (H) (347 HK) shares.
2. QTT Placement: Liquidity Warrants a Quick Trade
Qutoutiao Inc (QTT US) announced a USD 100 million share sales by the company and its shareholders, slightly more than two weeks after the lock-up expiration on March 13th. In this insight, we will provide our quick thought on the deal.
3. Zhongliang (中梁地产) Pre-IPO Review – Incredible Growth Bogged Down by Related Party Transactions
Zhongliang Holdings (ZLH HK) is looking to raise about US$800m in its upcoming IPO.
ZLH is a fast-growing real estate developer in China. Its completed projects are mostly in the Zhejiang Province but its projects under development are spread across the country.
It was highly leveraged in FY2016 as it ramped up its expansion efforts but had been able to reduce it significantly to about 260% net debt to equity levels while effective interest rates on debt has been falling every year.
In this insight, we will look at the company’s operations and financials, identify key corporate governance issues, and share our thoughts on peer valuation.
4. CIMC Vehicle (中集车辆): Market Leader of Semi-Trailers but Little Growth Ahead
CIMC Vehicle, the largest manufacturer of semi-trailers in the world and a subsidiary of CIMC, will start to pre-market its USD300-500 million IPO in Hong Kong, as per media reports. In this insight, we will cover the following topics:
- Company background
- Semi-trailer and truck body industry
- Shareholders and pre-IPO investors
- Our thoughts on valuation
5. Market Wrinkles Ahead of a US/China Deal Spike
Ftse China A50 Index (XIN9I INDEX) has been our top long bet in Asia from early January (10,800), outperforming both the HSCEI and HSI.
Key chart points that suggest the A share rise will be getting ahead of itself after the next rally phase out of bullish triangulation. Once this breakout terminates we see evidence of a harder decline unfolding ahead of a trade deal. This window allows for a pullback ahead of a trade deal spike that will put in place a key cycle peak just under shanghai composite resistance that goes back to highs from 2009, 2016 and 2018.
Keep in mind that China’s cycle exhibits a series of rally and fade cycles that form a multi-year basing process. The Shanghai composite longer term chart outlined rally and basing cycle correlations.
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