Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

Shenton Research

Shenton Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 200 stocks over the last week. The average A-H premium was 92.3% as of Oct 9th.</li>
<li>The average A-H premium changed by 3.7ppt week-on-week, led by materials, industrials, utilities.</li>
<li>We highlight weekly changes in A-H premium for Innocare, Ganfenglithium, China East Air, Yofc.</li>
</ul>


We analyse the changes of A-H premium on 200 stocks over the last week. The average A-H premium was 92.3% as of Oct 9th.
The average A-H premium changed by 3.7ppt week-on-week, led by materials, industrials, utilities.
We highlight weekly changes in A-H premium for Innocare, Ganfenglithium, China East Air, Yofc.


A-H Premium Weekly (Oct 9th): Innocare, Ganfenglithium, China East Air, Yofc

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>YTD, H-share securities companies outperformed the HSI and HSCEI, but valuations are still undemanding at 12.7x and 11.7x PERs for FY25 and FY26.</li>
<li>2H25F earnings for the sector are too conservative at -2.5%, compared with 64.9% YoY growth in 1H25. There is significant earnings upgrade potential after the 3Q25 result announcements.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a>, <a href="https://www.smartkarma.com/entities/china-galaxy-securities-co-h" target="_blank" data-smartkarma-citation="entities:165:1" rel="noopener">China Galaxy Securities (H) (6881 HK)</a>, <a href="https://www.smartkarma.com/entities/everbright-securities-h" target="_blank" data-smartkarma-citation="entities:22736:1" rel="noopener">Everbright Securities (H) (6178 HK)</a>, and <a href="https://www.smartkarma.com/entities/csc-financial-co-ltd-115216b6-b1c3-42f3-a314-a7ed93ea0b8e" target="_blank" data-smartkarma-citation="entities:23710:1" rel="noopener">CSC Financial (6066 HK)</a> appear interesting.</li>
</ul>


YTD, H-share securities companies outperformed the HSI and HSCEI, but valuations are still undemanding at 12.7x and 11.7x PERs for FY25 and FY26.
2H25F earnings for the sector are too conservative at -2.5%, compared with 64.9% YoY growth in 1H25. There is significant earnings upgrade potential after the 3Q25 result announcements.

China International Capital Corporation (3908 HK), China Galaxy Securities (H) (6881 HK), Everbright Securities (H) (6178 HK), and CSC Financial (6066 HK) appear interesting.


China Strategy: Interesting H-Share Securities Companies

<ul>
<li>Although the H-share securities companies have retreated significantly from their peaks, there are still "fats" in their share prices in the near term, relative to the market turnover.</li>
<li>
<a href="https://www.smartkarma.com/entities/citic-securities-h" target="_blank" data-smartkarma-citation="entities:463:1" rel="noopener">Citic Securities (H) (6030 HK)</a> looks vulnerable given its high valuations, low H-A share discount, limited correction from its peak, and significant rebound from the trough.</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 (6099 HK)</a> appears exposed though valuations are not high. It has the best YTD performance and rebound from the trough, and its H-A share discount is light.   </li>
</ul>


Although the H-share securities companies have retreated significantly from their peaks, there are still "fats" in their share prices in the near term, relative to the market turnover.

Citic Securities (H) (6030 HK) looks vulnerable given its high valuations, low H-A share discount, limited correction from its peak, and significant rebound from the trough.

China Merchants Securities (6099 HK) appears exposed though valuations are not high. It has the best YTD performance and rebound from the trough, and its H-A share discount is light.   


China Strategy: Screening the H-Share Securities Companies

Equity Bottom-Up

China International Capital Corporation / Equity Bottom-Up

China International Capital Corporation (3908 HK)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corp-ltd-class-h" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">CICC (3908 HK)</a> has received CSRC approval for its merger with <a target="_blank" rel="noopener">Cinda Securities (601059 CH)</a> and <a target="_blank" rel="noopener">Dongxing Securities (601198 CH)</a>, but its share price has fallen. </li>
<li>Concerns about EPS dilution are valid, as CDS' and DXS' 1H26 earnings are weaker than CICC's. However, amid increased industry consolidation, the merger is strategically important.</li>
<li>CICC now sits at 0.57x 12-month forward P/B, just the average since 2021. We expect the merger to enhance book value, and H-shareholders will benefit more. </li>
</ul>



CICC (3908 HK) has received CSRC approval for its merger with Cinda Securities (601059 CH) and Dongxing Securities (601198 CH), but its share price has fallen. 
Concerns about EPS dilution are valid, as CDS' and DXS' 1H26 earnings are weaker than CICC's. However, amid increased industry consolidation, the merger is strategically important.
CICC now sits at 0.57x 12-month forward P/B, just the average since 2021. We expect the merger to enhance book value, and H-shareholders will benefit more. 


CICC (3908 HK): CSRC's Approval of the Merger

Founder of Antler Capital

Stanley Tsai, CFA

In the spirit of the long-awaited UEFA Euro 2020, we present our inaugural "China Financials: Silver Linings Playbook", which summarizes our views on the names that are best positioned to navigate an environment of progressively slower credit growth, tighter liquidity and rising defaults. 
Our screen consists of 100+ stocks in the A/H share universe, as well as a select number of international / non-traditional names that have significant exposures to China's financial system. We have a preference for larger-cap and liquid names, which are then filtered by our opinions on their fundamentals, value, momentum and recent trading volumes. We also try to make our selections versatile and less vulnerable to single-factor movements.
Each player's position on the pitch and the team formation itself convey incremental information about our thoughts on the sector's performance over a three to six-month horizon. To the extent possible, we intend to update our ideas on a periodic basis. This provides a feedback loop with our other ongoing research on the industry.
However, our team selections are not investment recommendations. Instead, they are meant to give structure to our analysis. The playbook allows us to articulate our views on the sector in a timely, concise manner. Our objective is to ensure we don't throw the baby out with the bathwater as sentiments on the sector remain bleak.
With that out of the way, the following is our starting XI. We will dive deeper into our rationale for our selections in the remainder of this insight (Exhibit 1).
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 726.047px;">Exhibit 1: China Financials | Silver Linings Playbook</td>
</tr>
<tr>
<td style="width: 726.047px;">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/768/original/image_768460236451623962508577.png?1623962508" class="editor-image img-responsive" data-smartkarma-image-id="213768"></figure>

Source: Our analysis
</td>
</tr>
</tbody>
</table>
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In the spirit of the long-awaited UEFA Euro 2020, we present our inaugural "China Financials: Silver Linings Playbook", which summarizes our views on the names that are best positioned to navigate an environment of progressively slower credit growth, tighter liquidity and rising defaults. 
Our screen consists of 100+ stocks in the A/H share universe, as well as a select number of international / non-traditional names that have significant exposures to China's financial system. We have a preference for larger-cap and liquid names, which are then filtered by our opinions on their fundamentals, value, momentum and recent trading volumes. We also try to make our selections versatile and less vulnerable to single-factor movements.
Each player's position on the pitch and the team formation itself convey incremental information about our thoughts on the sector's performance over a three to six-month horizon. To the extent possible, we intend to update our ideas on a periodic basis. This provides a feedback loop with our other ongoing research on the industry.
However, our team selections are not investment recommendations. Instead, they are meant to give structure to our analysis. The playbook allows us to articulate our views on the sector in a timely, concise manner. Our objective is to ensure we don't throw the baby out with the bathwater as sentiments on the sector remain bleak.
With that out of the way, the following is our starting XI. We will dive deeper into our rationale for our selections in the remainder of this insight (Exhibit 1).



Exhibit 1: China Financials | Silver Linings Playbook





Source: Our analysis




Related Insights
China Macro: Consumers Remain on the Sidelines, as Their Home Equity Grows 
Glut and Famine: We Might See Snow in China This Summer 
China Macro: PPI Peaks, while CPI Eases Tightening Fears 
China Macro: Exports Disappoint, but It's Still Early in the Game 
Glut and Famine: China's Monetary Conditions a Notch Tighter in May 
ICBC: The Bond Identity | A Zero-Growth Dividend Discount Story 
BOC Aviation (2588 HK): The Stars Don't Look Bigger, but They Do Look Brighter

China Financials: Silver Linings Playbook

China

Shenwan Hongyuan Group Co., Ltd. is a state-owned securities brokerage company in China, offering comprehensive financial services including securities brokerage, investment banking, asset management, and wealth management. Its core business segments encompass enterprise finance, personal finance, institutional services and trading, and investment management. The company was founded on September 16, 1996, and is headquartered in Urumqi, Xinjiang, China.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Shenwan Hongyuan (6806 HK)

A-H Premium Weekly (Oct 9th): Innocare, Ganfenglithium, China East Air, Yofc

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Innocare, Ganfenglithium, China East Air, Yofc.

Ke Yan, CFA, FRM

CICC (3908 HK): CSRC's Approval of the Merger

The market has concerns about the merger's EPS dilution for CICC. However, it is strategically important. Also, CICC's 0.57x 12-month forward P/B...

Osbert Tang, CFA

China Financials: Silver Linings Playbook

Our Silver Linings Playbook outlines our views on the China financials names that are most likely to remain resilient in the face of macro...

Stanley Tsai, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

A-H Premium Weekly (Oct 9th): Innocare, Ganfenglithium, China East Air, Yofc

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Innocare, Ganfenglithium, China East Air, Yofc.

Ke Yan, CFA, FRM

China Strategy: Interesting H-Share Securities Companies

​H-share securities companies show strong performance and potential for earnings upgrades, with undemanding valuations. CICC, China Galaxy,...

Osbert Tang, CFA

China Strategy: Screening the H-Share Securities Companies

​H-share securities companies still have room for corrections despite recent retreats, with Citic Securities and China Merchants Securities looking...

Osbert Tang, CFA

CICC (3908 HK): CSRC's Approval of the Merger

The market has concerns about the merger's EPS dilution for CICC. However, it is strategically important. Also, CICC's 0.57x 12-month forward P/B...

Osbert Tang, CFA

China Financials: Silver Linings Playbook

Our Silver Linings Playbook outlines our views on the China financials names that are most likely to remain resilient in the face of macro...

Stanley Tsai, CFA

H-share securities companies show strong performance and potential for earnings upgrades, with undemanding valuations. CICC, China Galaxy,...

H-share securities companies still have room for corrections despite recent retreats, with Citic Securities and China Merchants Securities looking...