Daily Brief Industrials: Luxshare Precision Industry, Deutsche Lufthansa and more

In today’s briefing:

Mainland Connect NORTHBOUND Flows (To 21 June 2024): BIG Consumer Name Selling Again
European Airlines – Fare Softening Suggests Elevated Earnings Risk with Self-Help Stories Crucial
Lufthansa – ITA Airways Financial Sustainability Questions Without Lufthansa Partnership/Steering

Mainland Connect NORTHBOUND Flows (To 21 June 2024): BIG Consumer Name Selling Again

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net SELL RMB 16.1bn of A-shares. NORTHBOUND bought tech and sold everything else, especially consumer names. Kweichow Moutai, Midea, appliances and renewables.
Ongoing questions as to whether the NORTHBOUND volumes to the buy side are all foreigners. Some suspect there is national team buying mixed in, as was expected from earlier announcements.

Forward looking fare data suggests pricing further weakening for the European flag carriers on long haul in particular.
We expect Lufthansa to miss EBIT guidance by 30% in 2024 while we also cut Air France-KLM 2024 EBIT by 15%.
IAG stands out as most resilient, with BA seemingly outperforming peer pricing on the Transatlantic.

As Lufthansa nears European Commission approval for its investment in ITA Airways, as widely reported this week, we highlight our analysis of the Italian carrier.
In a strong year for the global industry, heavy 2023 losses prompt questions over ITA’s financial sustainability with Lufthansa support.
We highlight that ITA’s problems are in revenue generation rather than operational efficiency.

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