HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Surging by 19.4% since the trough on 19-Apr, the HSI is now only 3.2% shy away from the psychological resistance of 20,000. We look at some potential profit-taking names. </li>
<li>Heavy-Weights like <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> are among the best-performing ones YTD and since the trough. Hence they are more exposed, particularly for Meituan.</li>
<li>
<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> and <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> are another two on the list. Their valuations are no longer inexpensive relative to 3-year earnings CAGR.</li>
</ul>


Surging by 19.4% since the trough on 19-Apr, the HSI is now only 3.2% shy away from the psychological resistance of 20,000. We look at some potential profit-taking names. 
Heavy-Weights like Meituan (3690 HK) and Tencent (700 HK) are among the best-performing ones YTD and since the trough. Hence they are more exposed, particularly for Meituan.

Haidilao International Holding (6862 HK) and ENN Energy (2688 HK) are another two on the list. Their valuations are no longer inexpensive relative to 3-year earnings CAGR.


HK Strategy: To Sell or Not to Sell, that Is the Question

<ul>
<li>Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.</li>
<li>
<a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a>, <a href="https://www.smartkarma.com/entities/link-reit" target="_blank" data-smartkarma-citation="entities:872:1" rel="noopener">Link REIT (823 HK)</a>, <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> and <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a> are massive laggards YTD.</li>
<li>As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. </li>
</ul>


Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.

Li Auto (2015 HK), Link REIT (823 HK), China Mengniu Dairy Co (2319 HK), Hang Lung Properties (101 HK) and Galaxy Entertainment Group (27 HK) are massive laggards YTD.
As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. 


HK Strategy: Where Are the Short-Term Opportunities?

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>A mixed CNY, robust topline was likely aided by seasonality while the fall in spending power and price war continued.</li><li>We do agree both passenger flows and overall sales were strong during the CNY holiday, given that the spending power was somewhat diluted by the resumption of outbound tourism.</li><li>But on the other hand, the 2024 CNY holiday was a longer-than-usual one and contained one more Saturday and also the Valentine’s Day, hence the recovery rate after adjustment may just be stable (instead of improvements vs 4Q23).</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

A mixed CNY, robust topline was likely aided by seasonality while the fall in spending power and price war continued.We do agree both passenger flows and overall sales were strong during the CNY holiday, given that the spending power was somewhat diluted by the resumption of outbound tourism.But on the other hand, the 2024 CNY holiday was a longer-than-usual one and contained one more Saturday and also the Valentine’s Day, hence the recovery rate after adjustment may just be stable (instead of improvements vs 4Q23).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Consumer Sector – CNY Was Mixed and We Stay Conservative

<ul><li>Numbers for catering sector did rebound strongly YoY, but since SSS/ table turnover recovery rate were not as good as expected, de-rating was massive in 1H23E.</li><li>After a disappointing 2Q23 plus worrying macro outlook, we downgrade the sector to MARKET-PERFORM as we see more downside in earnings.</li><li>However, as valuation turned more attractive, we can start to accumulate industry leaders. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Numbers for catering sector did rebound strongly YoY, but since SSS/ table turnover recovery rate were not as good as expected, de-rating was massive in 1H23E.After a disappointing 2Q23 plus worrying macro outlook, we downgrade the sector to MARKET-PERFORM as we see more downside in earnings.However, as valuation turned more attractive, we can start to accumulate industry leaders. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Catering Sector – Staying cautious after a disappointing 2Q23E

<ul><li>Impressive recovery vs Feb-Apr 2023, while both consumer and investors sentiment should be boosted, the post holidays purchasing power is still important.</li><li>We find the data points during this 5-1 golden week in 2023 slightly better than expectation and encouraging, esp. after the weakening consumption trend post CNY 2023.</li><li>We are highly delighted to see a surge in recovery rate of domestic tourism volume/ spending during this holiday to 119%/ 101%, which is far better than the 83%/ 51% in Qingming Festival and 89%/ 73% in CNY, according to Ministry of Culture and Tourism/文化和旅游部.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Impressive recovery vs Feb-Apr 2023, while both consumer and investors sentiment should be boosted, the post holidays purchasing power is still important.We find the data points during this 5-1 golden week in 2023 slightly better than expectation and encouraging, esp. after the weakening consumption trend post CNY 2023.We are highly delighted to see a surge in recovery rate of domestic tourism volume/ spending during this holiday to 119%/ 101%, which is far better than the 83%/ 51% in Qingming Festival and 89%/ 73% in CNY, according to Ministry of Culture and Tourism/文化和旅游部.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Consumer Sector – A Strong Comeback in 5-1 Golden Week

China

Haidilao International Holding Ltd. is an investment holding company primarily operating a popular Chinese hot pot restaurant chain under the Haidilao brand. The company also engages in delivery services and the sale of condiment products and food ingredients. It was founded in 1994 and is headquartered in Beijing, China.

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Haidilao (6862 HK)

HK Strategy: To Sell or Not to Sell, that Is the Question

HSI surges by 19.4% nearing the 20,000 resistance, potential profit-taking names include Meituan, Tencent, Haidilao, and ENN Energy due to strong...

Osbert Tang, CFA

HK Strategy: Where Are the Short-Term Opportunities?

Li Auto, Link REIT, China Mengniu, Hang Lung Properties, and Galaxy Entertainment are massive laggards YTD but the recent rebound from the trough...

Osbert Tang, CFA

China Consumer Sector – CNY Was Mixed and We Stay Conservative

We do agree both passenger flows and overall sales were strong during the CNY holiday, given that the spending power was somewhat diluted by the...

CMB International

China Catering Sector – Staying cautious after a disappointing 2Q23E

Numbers for catering sector did rebound strongly YoY, but since SSS/ table turnover recovery rate were not as good as expected, de-rating was...

CMB International

China Consumer Sector – A Strong Comeback in 5-1 Golden Week

Impressive recovery vs Feb-Apr 2023, while both consumer and investors sentiment should be boosted, the post holidays purchasing power is still...

CMB International

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HK Strategy: To Sell or Not to Sell, that Is the Question

​HSI surges by 19.4% nearing the 20,000 resistance, potential profit-taking names include Meituan, Tencent, Haidilao, and ENN Energy due to strong...

Osbert Tang, CFA

HK Strategy: Where Are the Short-Term Opportunities?

Li Auto, Link REIT, China Mengniu, Hang Lung Properties, and Galaxy Entertainment are massive laggards YTD but the recent rebound from the trough...

Osbert Tang, CFA

China Consumer Sector – CNY Was Mixed and We Stay Conservative

We do agree both passenger flows and overall sales were strong during the CNY holiday, given that the spending power was somewhat diluted by the...

CMB International

China Catering Sector – Staying cautious after a disappointing 2Q23E

Numbers for catering sector did rebound strongly YoY, but since SSS/ table turnover recovery rate were not as good as expected, de-rating was...

CMB International

China Consumer Sector – A Strong Comeback in 5-1 Golden Week

Impressive recovery vs Feb-Apr 2023, while both consumer and investors sentiment should be boosted, the post holidays purchasing power is still...

CMB International

HSI surges by 19.4% nearing the 20,000 resistance, potential profit-taking names include Meituan, Tencent, Haidilao, and ENN Energy due to strong...