Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Macroeconomics

<ul>
<li>Trump and Powell have had an acrimonious relationship since Trump's first term and that continues today.</li>
<li>Trump's fiscal policies will create crosscurrents for the US economy and run counter to Powell's objectives as chairman of the Fed.</li>
<li>Although tariffs can be implemented quickly, they must run concurrently with other policies to restrain their inflationary effects on the US economy.  Other policies will take longer to implement.</li>
</ul>


Trump and Powell have had an acrimonious relationship since Trump's first term and that continues today.
Trump's fiscal policies will create crosscurrents for the US economy and run counter to Powell's objectives as chairman of the Fed.
Although tariffs can be implemented quickly, they must run concurrently with other policies to restrain their inflationary effects on the US economy.  Other policies will take longer to implement.


Equity Bottom-Up

Sands China Ltd. develops, owns, and operates integrated resorts, retail malls, and casinos. The Company also manages convention and exhibition halls in Macau.

<ul>
<li>Although Hong Kong markets have slumped after Trump's election, mainland China's markets have gained.  Southbound net buying of HK stocks hit a 2024 high on the day Trump won.</li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China (1928 HK)</a> had a breakout from a double top as Macau recorded good Golden Week arrivals.  <a href="https://www.smartkarma.com/entities/blue-moon-group-holdings" target="_blank" data-smartkarma-citation="entities:29179:1" rel="noopener">Blue Moon Group Holdings (6993 HK)</a> had a breakout after 3 years.
</li>
<li>
<a href="https://www.smartkarma.com/entities/cansino-biologics-inc" target="_blank" data-smartkarma-citation="entities:27739:1" rel="noopener">CanSino Biologics (6185 HK)</a> formed a breakout after a new vaccine was approved and it reported better results.  <a href="https://www.smartkarma.com/entities/haidilao-international-holding" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao International Holding (6862 HK)</a> share price advanced as it expands stores.
</li>
</ul>


Although Hong Kong markets have slumped after Trump's election, mainland China's markets have gained.  Southbound net buying of HK stocks hit a 2024 high on the day Trump won.

Sands China (1928 HK) had a breakout from a double top as Macau recorded good Golden Week arrivals.  Blue Moon Group Holdings (6993 HK) had a breakout after 3 years.


CanSino Biologics (6185 HK) formed a breakout after a new vaccine was approved and it reported better results.  Haidilao International Holding (6862 HK) share price advanced as it expands stores.



Technically Speaking, Breakouts and Breakdowns: HONG KONG (NOVEMBER 13)

<ul>
<li>Trump's approach to China will be more transactional based on trade and technology.</li>
<li>China's dependence on the US for its exports has declined over the last 6 years.  ASEAN and other emerging markets are the engines for China's export growth.</li>
<li>The average tariff on China's exports to the US will increase from its current level of 20% but may be tempered by a reciprocal import agreement with the US.</li>
</ul>


Trump's approach to China will be more transactional based on trade and technology.
China's dependence on the US for its exports has declined over the last 6 years.  ASEAN and other emerging markets are the engines for China's export growth.
The average tariff on China's exports to the US will increase from its current level of 20% but may be tempered by a reciprocal import agreement with the US.


New Tariffs and China: THE BARK IS WORSE THAN THE BITE

Yum China Holdings, Inc. operates chain restaurants. The Company offers pizza, entrees, pasta, rice dishes, appetizers, soups, vegetables, beverages, and desserts. Yum China Holding conducts its business worldwide.

<ul>
<li>Hong Kong markets continue to outperform this year with the HSCEI up 30% year to date.  Market breadth continues to be healthy with 80% of stocks over &gt; 200 DMA.</li>
<li>
<a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> announced its new hybrid technology which gives vehicles a range of more than 870 miles (1400 Kms).  The company has delivered more than 120k vehicles YTD.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities Co Ltd (H) (6099 HK)</a> benefits from increased market turnover.   <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> beat consensus for 3Q24 earnings and will continue its buyback program.</li>
</ul>


Hong Kong markets continue to outperform this year with the HSCEI up 30% year to date.  Market breadth continues to be healthy with 80% of stocks over &gt; 200 DMA.

XPeng (9868 HK) announced its new hybrid technology which gives vehicles a range of more than 870 miles (1400 Kms).  The company has delivered more than 120k vehicles YTD.

China Merchants Securities Co Ltd (H) (6099 HK) benefits from increased market turnover.   Yum China Holdings (9987 HK) beat consensus for 3Q24 earnings and will continue its buyback program.


The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 7)

<ul>
<li>China's trade is growing strongly and has become less dependent on the US.  The EU and Mexico now exceed China's monthly exports to the US.</li>
<li>Taiwan as a flashpoint between the US and China will decline in coming years as each country ramps up its semiconductor manufacturing capabilities.</li>
<li>Tariffs and the Yuan will be important negotiating points between the US and China, but the good news is they will be talking.</li>
</ul>


China's trade is growing strongly and has become less dependent on the US.  The EU and Mexico now exceed China's monthly exports to the US.
Taiwan as a flashpoint between the US and China will decline in coming years as each country ramps up its semiconductor manufacturing capabilities.
Tariffs and the Yuan will be important negotiating points between the US and China, but the good news is they will be talking.


Trump and China: It's Going to Get Interesting!

Asian Hedge Fund manager based in HK/SG with over 20 years of experience managing Asian Long/Short Equity funds. Macroeconomic top-down analysis generates thematic investments that are further researched from the bottom-up. Research is supplemented with advanced technical analysis. 
Previous experience includes M&A with Morgan Stanley and CPA with Deloitte in NYC. Wharton MBA.

David Mudd
Asian Hedge Fund Manager, Long Short Equity, Macro

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