Daily Brief China: Swire Pacific (A), Yum China Holdings , Hang Seng Index, Semiconductor Manufacturing International Corp (SMIC), China Jinmao Holdings and more

• Swire Pacific (A) (19 HK), 82%-held Swire Properties (1972 HK), and Cathay Pacific Airways (293 HK) all announced interim results this week. 
• Of interest was Swire Prop announcing a HK$1.5bn share buyback. Shares popped 12% on the news. 
• Swire Pac remains cheap on a look-through P/B of 0.34x. However, the implied stub and simple ratio (Pac/Props) have just rolled over from multi-year peaks. 

• We believe Yum China remains the best long-term China catering play. 2Q24 results highlight the resiliency and agility of its business model and management to navigate tough environment.
• While cost optimization drove bottom-line beat, we share management’s view that it is not one-off exercise but will strengthen the company’s operation efficiency moat and market leadership.
• Macro concerns are well known and fully priced in in our view. Otherwise investors won’t have the opportunity to own the name for low double-digit P/E.

• In a previous insight we forecasted a rally for the Hang Seng Index in August. The picture has not changed, a positive close above 17344.60 is still possible.
• Looking at our MRM SHORT WEEKLY model for the HSI we can see that it has not yet reached overbought levels, so it could rise further in the next weeks.
• Conversely a SHORT trade will be possible from the levels we will indicate below.

• Expected sequential revenue growth of 13% to 15%, gross margin expected between 18% and 20%.
• The company has not increased capacity utilization through price cuts but supports customers in facing competition to maintain market share.
• Inventory replenishment behavior will end in the third quarter, and fourth-quarter orders will more accurately reflect actual demand rather than the impact of restocking.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Jinmao Holdings