HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>The companies that suffered exchange losses in FY23 due to Rmb depreciation will now benefit from potential Rmb appreciation in 2H24 and FY25. Meanwhile, gainers will become losers. </li>
<li>The beneficiaries are <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a>, <a href="https://www.smartkarma.com/entities/china-southern-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1078:1" rel="noopener">China Southern Airlines (1055 HK)</a>, <a href="https://www.smartkarma.com/entities/xinjiang-goldwind-science-technology-h" target="_blank" data-smartkarma-citation="entities:10112:1" rel="noopener">Xinjiang Goldwind (2208 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-eastern-airlines-co-h" target="_blank" data-smartkarma-citation="entities:1079:1" rel="noopener">China Eastern Airlines (670 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>, <a href="https://www.smartkarma.com/entities/china-east-education-holdings" target="_blank" data-smartkarma-citation="entities:27843:1" rel="noopener">China East Education (667 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 Communications Construction (1800 HK)</a> may need to book exchange losses (vs. gains in FY23). </li>
</ul>


The companies that suffered exchange losses in FY23 due to Rmb depreciation will now benefit from potential Rmb appreciation in 2H24 and FY25. Meanwhile, gainers will become losers. 
The beneficiaries are Air China Ltd (753 HK), Shenzhen International (152 HK), China Southern Airlines (1055 HK), Xinjiang Goldwind (2208 HK), and China Eastern Airlines (670 HK). 

Fosun Tourism (1992 HK), China East Education (667 HK), and China Communications Construction (1800 HK) may need to book exchange losses (vs. gains in FY23). 


China Strategy: Re-Assessing the Rmb Exchange Impacts

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>Media rife with narrative of booming inbound foreign tourism to China</li>
<li>But the numbers are well below historical highs, and climbing up from low base</li>
<li>Chinese tourists, not foreign, determine strength of Chinese tourism recovery</li>
</ul>


Media rife with narrative of booming inbound foreign tourism to China
But the numbers are well below historical highs, and climbing up from low base
Chinese tourists, not foreign, determine strength of Chinese tourism recovery


Chinese Inbound Foreign Tourist Arrivals Up 153% Y/Y in H124?! Much Ado About (Almost) Nothing

<ul>
<li>Despite slower top-line growth, Trip.com posted firmer margins in Q224</li>
<li>Cash Operating Expenses as a % of Net Revenue fell by around -250 bps Y/Y</li>
<li>Post-Covid, Trip.com has less competition; BUY with target of US$58 per ADS</li>
</ul>


Despite slower top-line growth, Trip.com posted firmer margins in Q224
Cash Operating Expenses as a % of Net Revenue fell by around -250 bps Y/Y
Post-Covid, Trip.com has less competition; BUY with target of US$58 per ADS


Trip.com Q224: Slower Growth | But Higher Margins | Competition Has Eased | BUY with US$58 Target

<ul>
<li>July outbound travel (and seat capacity) fnally approached pre-Covid19 levels</li>
<li>Domestic air travel demand also showed modest Y/Y improvement in July </li>
<li>We still like Trip.com on improving profitability, BUY with US$55 target</li>
</ul>


July outbound travel (and seat capacity) fnally approached pre-Covid19 levels
Domestic air travel demand also showed modest Y/Y improvement in July 
We still like Trip.com on improving profitability, BUY with US$55 target


Monthly Chinese Tourism Tracker | Outbound Activity Approaches Pre-Covid Levels | (August 2024)

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

Cross Asset Strategy

<ul><li>Airlines / In Depth: Domestic carriers add global routes as foreign rivals quit China amid sluggish demand, Russia ban Since China dropped the Covid-era restrictions that slowed international flights to a trickle, the experience of domestic and foreign airlines has diverged sharply.</li><li>Many foreign carriers are scaling back their operations in China and in some cases completely withdrawing from the market, largely because the need to avoid Russian airspace has sent their costs spiraling and made them uncompetitive against Chinese rivals who can still fly over the country’s northern neighbor.</li><li>Meanwhile, Chinese airlines are ramping up their overseas routes, particularly to the Middle East.</li></ul>

Airlines / In Depth: Domestic carriers add global routes as foreign rivals quit China amid sluggish demand, Russia ban Since China dropped the Covid-era restrictions that slowed international flights to a trickle, the experience of domestic and foreign airlines has diverged sharply.Many foreign carriers are scaling back their operations in China and in some cases completely withdrawing from the market, largely because the need to avoid Russian airspace has sent their costs spiraling and made them uncompetitive against Chinese rivals who can still fly over the country’s northern neighbor.Meanwhile, Chinese airlines are ramping up their overseas routes, particularly to the Middle East.

CX Daily: Domestic Carriers Add Global Routes as Foreign Rivals Quit China Amid Sluggish Demand

China

China Eastern Airlines Corporation Limited operates airline businesses. The Company provides passenger transport, air freight, air catering, and other related services. China Eastern Airlines conducts businesses worldwide.

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China Eastern Airlines Lt (600115 CH)

China Strategy: Re-Assessing the Rmb Exchange Impacts

With the US kick-starting the lower interest rate cycle with a 50bp cut overnight and indicated an expectation of an aggregate further 50bp cut in...

Osbert Tang, CFA

Chinese Inbound Foreign Tourist Arrivals Up 153% Y/Y in H124?! Much Ado About (Almost) Nothing

Yes, foreign inbound travel to China has shown strong growth so far in 2024, but the numbers are rising from a very low base, and ultimately matter...

Tracking Traffic

Trip.com Q224: Slower Growth | But Higher Margins | Competition Has Eased | BUY with US$58 Target

Trip.com posted slower revenue growth in Q2, but margins improved as the company expertly managed operating expenses. Post-Covid, Trip.com's...

Tracking Traffic

Monthly Chinese Tourism Tracker | Outbound Activity Approaches Pre-Covid Levels | (August 2024)

July data shows continuing improvement in Chinese outbound and domestic travel activity. We still like shares of Trip.com, and retain our BUY...

Tracking Traffic

CX Daily: Domestic Carriers Add Global Routes as Foreign Rivals Quit China Amid Sluggish Demand

Airlines / In Depth: Domestic carriers add global routes as foreign rivals quit China amid sluggish demand, Russia ban Since China dropped the...

Caixin Global

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