HK/China Equity Long-Short

Osbert Tang, CFA

Osbert Tang is an equity analyst with over 20 years of experience with focuses on China transport, infrastructure, industrials and utilities sectors. He has been based in Shanghai since 2003, accumulated nearly 20 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities. 

Osbert has received votes from top-tier institutional investors and has been a highly-ranked transport and infrastructure analyst in the Asiamoney, Institutional Investors and Greenwich surveys. In addition to his extensive experience with international investment banks including RBS, ABN AMRO (both served as Shanghai Chief Representative), Paribas Asia Equity, Maybank Kim Eng and DBS Securities, he has been a senior analyst with Moody’s Investors Service with focus on ratings of China infrastructure and related LGFV issuers. He has also worked in the area of strategic development at Sun Hung Kai Properties Limited. 

Osbert holds a BBA from the Chinese University of Hong Kong, an MBA from the University of Texas at Austin and a MSSc in Applied Psychology from the City University of Hong Kong. He was accredited with the CFA charter in 1997, and is a member of both British Psychological Society and Hong Kong Psychological Society.

China Southern Airlines (1055 HK): Mixed Reform at Airfreight Logistics Is A Value Added Move

Chinese Airlines: Big Three Aug Passenger Traffic up 18% MoM

Shanghai International Airport (600009 CH): Best in Domestic and Cargo Traffic in Aug

Chinese Airlines and Airports: Huge Benefit from Resumption of Cross-Province Group Tourism

Chinese Airlines: China Southern the Clear Winner in 1H20 - A Must Read Comparison on the Big Three

Chinese Airlines Vs. Airports: Three Pair Trades Under Rmb Depreciation

Chinese Airlines: Jul Traffic Reflects Good Summer Strengths

Guangzhou Baiyun Intl Airport (600004 CH): First to Achieve Full Recovery in Domestic Market

Thematic (Sector/Industry)

China Airlines / Thematic (Sector/Industry)

<p>Given their significant USD debt and the high gearing of the Chinese airlines, they are the prime beneficiaries of the recent appreciation of the Rmb against the USD. Since end-Jun, the Rmb has appreciated by some 3.5% against the USD; and this will potentially reduce their losses significantly when they report the 3Q20 result by end-Oct.</p><p>Among the Big Three, we think <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> is the best exposed to such Rmb/USD trend. It has the most USD debt (Rmb60.5bn) and the least USD cash on hand (Rmb331m). It also has the fewest international routes, meaning that USD operating receipts is the less. At the current Rmb/USD level, it may report as much as Rmb2bn of exchange GAIN in 3Q20. With its loss of just Rmb2.9bn in 2Q20 and much better traffic in 3Q20, the question is now whether CSA will make a profit, instead of how much loss reduction in 3Q20, in our view.</p>

Given their significant USD debt and the high gearing of the Chinese airlines, they are the prime beneficiaries of the recent appreciation of the Rmb against the USD. Since end-Jun, the Rmb has appreciated by some 3.5% against the USD; and this will potentially reduce their losses significantly when they report the 3Q20 result by end-Oct.Among the Big Three, we think China Southern Airlines (1055 HK) is the best exposed to such Rmb/USD trend. It has the most USD debt (Rmb60.5bn) and the least USD cash on hand (Rmb331m). It also has the fewest international routes, meaning that USD operating receipts is the less. At the current Rmb/USD level, it may report as much as Rmb2bn of exchange GAIN in 3Q20. With its loss of just Rmb2.9bn in 2Q20 and much better traffic in 3Q20, the question is now whether CSA will make a profit, instead of how much loss reduction in 3Q20, in our view.

Chinese Airlines: The Key Plays on Rmb Appreciation, with China Southern Being the Best