HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>China's defence industry is poised to be another major focus going forward. Many stocks have corrected by 3-20% from their recent peaks, presenting interesting opportunities. </li>
<li>Most of them are A-share stocks, with business ranging from fighter manufacturing to optical system development to aircraft engine research and production.</li>
<li>
<a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a> is the best play, given its Hong Kong listing, undemanding FY25 PER of 13.5x and 56% discount to holdings in A-share subsidiaries.</li>
</ul>


China's defence industry is poised to be another major focus going forward. Many stocks have corrected by 3-20% from their recent peaks, presenting interesting opportunities. 
Most of them are A-share stocks, with business ranging from fighter manufacturing to optical system development to aircraft engine research and production.

AviChina Industry &amp; Technology H (2357 HK) is the best play, given its Hong Kong listing, undemanding FY25 PER of 13.5x and 56% discount to holdings in A-share subsidiaries.


China Strategy: The Rise of China's Defence Industry

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 analysed the earning revision of component stocks of CSI 100 in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on CAMBRICON TECHNOLOGIES, CHINA VANKE, ZIJIN MINING, TONGWEI, CSCE, CHONGQING ZHIFEI BIOLOGICAL PRODUCTS, TCL TECHNOLOGY, Zijin Mining, Tcl Technology, China Vanke.</li>
</ul>


We analysed the earning revision of component stocks of CSI 100 in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on CAMBRICON TECHNOLOGIES, CHINA VANKE, ZIJIN MINING, TONGWEI, CSCE, CHONGQING ZHIFEI BIOLOGICAL PRODUCTS, TCL TECHNOLOGY, Zijin Mining, Tcl Technology, China Vanke.


CSI 100 Index Earning Revision (Aug): CAMBRICON, CHINA VANKE, ZIJIN MINING, TONGWEI

Chief Executive Officer, Emmer Capital Partners Limited

Manishi Raychaudhuri

Chief Executive Officer

Emmer Capital Partners Limited

Emmer Capital Partners is an Asia Pacific focused financial advisory firm engaging in strategic financial asset allocation advice, bespoke thematic research and advising early-stage companies and connecting them to investors. Emmer Capital provides macro-economic and multi-asset investment strategy inputs to institutions, family offices, private wealth managers, private equity, and corporate boards directly and through independent research platforms. Emmer Capital also advises a wide range of startup companies on fund raising and business strategy. Emmer Capital's active engagement with the print and electronic media reaches a broad spectrum of investors across the globe.

Equity Bottom-Up

<ul>
<li>We identified overvalued, over-leveraged, low growth stocks on EPS growth, high PEG, low ROE, high P/BV, high leverage.  Clients opined that EBITDA is more stable earnings parameter for such stocks.</li>
<li>Based on clients’ feedback we now screen the stocks using EBITDA growth as the earnings growth parameter and EV as the corresponding valuation parameter.</li>
<li>Our screen yields 30 stocks - 20 from Japan (largely property/REIT) and 10 from HK/China. 7 stocks are common to the EPS-PE and EBITDA-EV lists - mostly from Japanese property.</li>
</ul>


We identified overvalued, over-leveraged, low growth stocks on EPS growth, high PEG, low ROE, high P/BV, high leverage.  Clients opined that EBITDA is more stable earnings parameter for such stocks.
Based on clients’ feedback we now screen the stocks using EBITDA growth as the earnings growth parameter and EV as the corresponding valuation parameter.
Our screen yields 30 stocks - 20 from Japan (largely property/REIT) and 10 from HK/China. 7 stocks are common to the EPS-PE and EBITDA-EV lists - mostly from Japanese property.


Asian Equities: Overvalued, Over-Leveraged, Low Growth – a Different Look

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

Index Rebalance

Bank of Communications   / Index Rebalance

<ul>
<li>There are 5 changes for the <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50 Index (SSE50 INDEX)</a> that will be implemented at the close on 14 June. There is over 1x ADV to trade on most stocks.</li>
<li>The index committee has focused on sector balance with higher ranked stocks from the Financials sector ignored and lower ranked stocks from other sectors included.</li>
<li>The adds have outperformed the deletes over the last 6 months and positioning (especially on the surprises) could lead to further upside for a long/short trade.</li>
</ul>


There are 5 changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 14 June. There is over 1x ADV to trade on most stocks.
The index committee has focused on sector balance with higher ranked stocks from the Financials sector ignored and lower ranked stocks from other sectors included.
The adds have outperformed the deletes over the last 6 months and positioning (especially on the surprises) could lead to further upside for a long/short trade.


SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance

Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Huatai Securities Co Ltd (A) / Index Rebalance

<ul>
<li>SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.</li>
<li>The 12-month reference period used for the June 2024 review is now complete. The SSE 180 expected ADDs/DELs list has changed slightly since I published my last insight (<a href="https://www.smartkarma.com/insights/quiddity-leaderboard-sse50-180-jun-24-past-trades-successful-but-time-to-unwind-some" target="_blank" rel="noopener">link</a>).</li>
<li>In this insight, we take a look at our final expectations for index changes during the June 2024 index rebal event.</li>
</ul>


SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
The 12-month reference period used for the June 2024 review is now complete. The SSE 180 expected ADDs/DELs list has changed slightly since I published my last insight (link).
In this insight, we take a look at our final expectations for index changes during the June 2024 index rebal event.


Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months

China

AECC Aviation Power Co. Ltd. manufactures and distributes aerospace products. The Company produces aircraft power devices, aerospace turbines, aerospace engines, and other products. AECC Aviation Power also provides equipment testing, equipment maintenance, and other services.


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AECC Aviation Power (600893 CH)

China Strategy: The Rise of China's Defence Industry

China's defence industry stocks offer interesting opportunities with corrections of 3-20%, AviChina is a top pick with attractive valuation and a...

Osbert Tang, CFA

CSI 100 Index Earning Revision (Aug): CAMBRICON, CHINA VANKE, ZIJIN MINING, TONGWEI

We analyzed CSI 100's consensus for Aug 2025 and highlighted changes of EPS in CAMBRICON TECHNOLOGIES (688256 CH), CHINA VANKE (000002 CH), ZIJIN...

Ke Yan, CFA, FRM

Asian Equities: Overvalued, Over-Leveraged, Low Growth – a Different Look

We modify our "stocks to avoid" list using EBITDA as the earnings parameter & EV as the valuation parameter. We screen 30 stocks, mostly from...

Manishi Raychaudhuri

SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance

There are 5 changes for the SSE50 Index that will be implemented at the close on 14 June. Sector balance was a big consideration at the review....

Brian Freitas

Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months

I estimate one-way turnover to be roughly US$2bn. Since 12th March 2024, the LONGs have outperformed the SHORTs by 9.77%.

Janaghan Jeyakumar, CFA

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China Strategy: The Rise of China's Defence Industry

​China's defence industry stocks offer interesting opportunities with corrections of 3-20%, AviChina is a top pick with attractive valuation and a...

Osbert Tang, CFA

CSI 100 Index Earning Revision (Aug): CAMBRICON, CHINA VANKE, ZIJIN MINING, TONGWEI

We analyzed CSI 100's consensus for Aug 2025 and highlighted changes of EPS in CAMBRICON TECHNOLOGIES (688256 CH), CHINA VANKE (000002 CH), ZIJIN...

Ke Yan, CFA, FRM

Asian Equities: Overvalued, Over-Leveraged, Low Growth – a Different Look

​We modify our "stocks to avoid" list using EBITDA as the earnings parameter & EV as the valuation parameter. We screen 30 stocks, mostly from...

Manishi Raychaudhuri

SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance

There are 5 changes for the SSE50 Index that will be implemented at the close on 14 June. Sector balance was a big consideration at the review....

Brian Freitas

Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months

I estimate one-way turnover to be roughly US$2bn. Since 12th March 2024, the LONGs have outperformed the SHORTs by 9.77%.

Janaghan Jeyakumar, CFA

China's defence industry stocks offer interesting opportunities with corrections of 3-20%, AviChina is a top pick with attractive valuation and a...

We modify our "stocks to avoid" list using EBITDA as the earnings parameter & EV as the valuation parameter. We screen 30 stocks, mostly from...