HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>CSRC's Market Value Management Guidelines will indirectly benefit the H-share stocks with their A-share counterparts with a P/B of below 1x.  </li>
<li>Chinese banks dominated the list with below-book A-shares. <a href="https://www.smartkarma.com/entities/china-everbright-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:16221:1" rel="noopener">China Everbright Bank (6818 HK)</a>, <a href="https://www.smartkarma.com/entities/china-citic-bank-corp-ltd-ea6c25fd-4b20-45cb-a4a6-df7a60136f03" target="_blank" data-smartkarma-citation="entities:653:1" rel="noopener">China Citic Bank H (998 HK)</a>, and <a href="https://www.smartkarma.com/entities/industrial-and-commercial-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a> are the prime beneficiaries.</li>
<li>Infrastructure construction companies <a href="https://www.smartkarma.com/entities/china-railway-construction-corp-limited" target="_blank" data-smartkarma-citation="entities:263:1" rel="noopener">China Railway Cons Corp (1186 HK)</a>, <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group H (390 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Comm Cons (1800 HK)</a> are also well-positioned to gain.</li>
</ul>


CSRC's Market Value Management Guidelines will indirectly benefit the H-share stocks with their A-share counterparts with a P/B of below 1x.  
Chinese banks dominated the list with below-book A-shares. China Everbright Bank (6818 HK), China Citic Bank H (998 HK), and ICBC (H) (1398 HK) are the prime beneficiaries.
Infrastructure construction companies China Railway Cons Corp (1186 HK), China Railway Group H (390 HK), and China Comm Cons (1800 HK) are also well-positioned to gain.


China & HK Strategy: Names to Watch for Market Value Management

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 150 stocks over the last week. The average A-H premium was 101.0% as of Dec 13th.</li>
<li>The average A-H premium changed by -1.9ppt week-on-week, led by consumer staples, consumer discretionary, industrials and offset by real estate.</li>
<li>We highlight weekly changes in A-H premium for ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA.</li>
</ul>


We analyse the changes of A-H premium on 150 stocks over the last week. The average A-H premium was 101.0% as of Dec 13th.
The average A-H premium changed by -1.9ppt week-on-week, led by consumer staples, consumer discretionary, industrials and offset by real estate.
We highlight weekly changes in A-H premium for ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA.


A-H Premium Weekly (Dec 13th):ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>With one trading day left in the review period, we expect one change with <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> replacing <a href="https://www.smartkarma.com/entities/yankuang-energy-group" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yankuang Energy Group (1171 HK)</a> in December.</li>
<li>Capping will result in selling for <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and buying in <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a>. </li>
<li>Short interest has jumped on both stocks, but the increase is far higher in <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> compared to <a href="https://www.smartkarma.com/entities/yankuang-energy-group" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yankuang Energy Group (1171 HK)</a>. </li>
</ul>


With one trading day left in the review period, we expect one change with China Merchants Securities Co Ltd (H) (6099 HK) replacing Yankuang Energy Group (1171 HK) in December.
Capping will result in selling for Meituan (3690 HK) and buying in Tencent (700 HK) and Alibaba Group Holding (9988 HK). 
Short interest has jumped on both stocks, but the increase is far higher in China Merchants Securities Co Ltd (H) (6099 HK) compared to Yankuang Energy Group (1171 HK). 


FXI Rebalance Preview: One Change in December as Shorts Spike

<ul>
<li>We analyse the changes of A-H premium on 150 stocks over the last week. The average A-H premium was 98.8% as of Nov 8th.</li>
<li>The average A-H premium changed by -0.1ppt week-on-week, led by utilities, real estate, financials and offset by consumer staples, information technology, energy.</li>
<li>We highlight weekly changes in A-H premium for BAIYUNSHAN PH, SMIC, PICC, CHINA LIFE, FDZJ.</li>
</ul>


We analyse the changes of A-H premium on 150 stocks over the last week. The average A-H premium was 98.8% as of Nov 8th.
The average A-H premium changed by -0.1ppt week-on-week, led by utilities, real estate, financials and offset by consumer staples, information technology, energy.
We highlight weekly changes in A-H premium for BAIYUNSHAN PH, SMIC, PICC, CHINA LIFE, FDZJ.


A-H Premium Weekly (Nov 8th):Baiyunshan, SMIC, PICC, CHINA LIFE, FDZJ

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<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)

China

Huatai Securities Co., Ltd. provides financial company. The Company provides securities brokerage services, research consulting services, investment banking and direct investment services, fixed-income services and asset management services.

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Huatai Securities Co Ltd (H) (6886 HK)

China & HK Strategy: Names to Watch for Market Value Management

SASAC issued "Several opinions on improving and strengthening the market value management of listed companies controlled by central enterprises"...

Osbert Tang, CFA

A-H Premium Weekly (Dec 13th):ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA

We analyzed A-H premium changes in the past week and highlight A-H premium changes for ZOOMLION, QDP, BeiGene, INNOCARE, TEC, MA STEEL, AIR CHINA.

Ke Yan, CFA, FRM

FXI Rebalance Preview: One Change in December as Shorts Spike

China Merchants Sec could replace Yankuang Energy in the ETF in Dec. There is over 1x ADV to sell in Yankuang. Capping will lead to selling in...

Brian Freitas

A-H Premium Weekly (Nov 8th):Baiyunshan, SMIC, PICC, CHINA LIFE, FDZJ

We analyzed A-H premium changes in the past week and highlight A-H premium changes for baiyunshan, SMIC, PICC, CHINA LIFE, FDZJ.

Ke Yan, CFA, FRM

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

Hong Kong markets are among the top performers this year. Short selling has declined as Southbound buying increases. Xpeng introduced a new hybrid...

David Mudd

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52-week Range

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