HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>By way of its 54.79% ownership in <a href="https://www.smartkarma.com/entities/zheshang-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:29981:1" rel="noopener">Zheshang Securities (601878 CH)</a>, <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> is an attractive indirect vehicle to access the mainland securities sector.  </li>
<li>The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.</li>
<li>ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.</li>
</ul>


By way of its 54.79% ownership in Zheshang Securities (601878 CH), Zhejiang Expressway Co H (576 HK) is an attractive indirect vehicle to access the mainland securities sector.  
The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.
ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.


Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Longyuan Power Group / Event-Driven

<ul>
<li>The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.</li>
<li>SOUTHBOUND a net buyer every day since the end of Chinese New Year. Still. NORTHBOUND a huge net seller this week, but net buyers in size (RMB +86bn) over 8wks.</li>
<li>For the first time in a while, AH premia among liquid stocks fell convincingly. Narrow AH premia pairs saw Hs outperform more than wide AH premia Hs (vs As).</li>
</ul>


The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND a net buyer every day since the end of Chinese New Year. Still. NORTHBOUND a huge net seller this week, but net buyers in size (RMB +86bn) over 8wks.
For the first time in a while, AH premia among liquid stocks fell convincingly. Narrow AH premia pairs saw Hs outperform more than wide AH premia Hs (vs As).


A/H Premium Tracker (To 22 Mar 2024):  Liquid AH Premia Still At Wides

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.

Equity Capital Markets

Zhuhai Kingsware Artificial Intelligence / Equity Capital Markets

Zhuhai Kingsware Artificial Intelligence (KGAI HK)

<ul>
<li>Kingsware, an AI digital worker and enterprise agent solutions provider, has filed its prospectus with the HKEX. GTJA and BOCI are the joint sponsors.</li>
<li>We look at the company's core segments: the K-APA Solution and the Ki-Agent Solution.</li>
<li>We then look at the company's financial profile, loss-making status, pre-IPO valuation and investor backing.</li>
</ul>


Kingsware, an AI digital worker and enterprise agent solutions provider, has filed its prospectus with the HKEX. GTJA and BOCI are the joint sponsors.
We look at the company's core segments: the K-APA Solution and the Ki-Agent Solution.
We then look at the company's financial profile, loss-making status, pre-IPO valuation and investor backing.


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>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

China

China Galaxy Securities Co., Ltd. provides securities services. The Company provides securities underwriting, securities brokerage, securities investment advisory, securities transaction, and other services. China Galaxy Securities provides its services throughout China.

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China Galaxy Securities (601881 CH)

Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

A/H Premium Tracker (To 22 Mar 2024): Liquid AH Premia Still At Wides

The Quiddity AH Monitor had a good week outperforming the biases on both long pairs and short pairs. AH Premia remain wide. Too wide. China...

Travis Lundy

Kingsware (金智维) Pre-IPO: Tearsheet

Kingsware has filed its prospectus with the HKEX. In this tearsheet, we look at the company's business and operating profile, its industry...

Ke Yan, CFA, FRM

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

​Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

A/H Premium Tracker (To 22 Mar 2024): Liquid AH Premia Still At Wides

The Quiddity AH Monitor had a good week outperforming the biases on both long pairs and short pairs. AH Premia remain wide. Too wide. China...

Travis Lundy

Kingsware (金智维) Pre-IPO: Tearsheet

Kingsware has filed its prospectus with the HKEX. In this tearsheet, we look at the company's business and operating profile, its industry...

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 & 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

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

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