Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>HK Alpha portfolio gained 3.45% in August, outperforming its benchmark by 2.67%.  Since inception, the portfolio has outperformed HK indexes by 60% to 84%. HK ALPHA is up 14.35% YTD.</li>
<li>The Sharpe ratio stands at 1.21, compared with a benchmark of 0.68 since inception.  This higher Sharpe ratio is driven by excess alpha, which represents more than 50% of returns.</li>
<li>The portfolio gained in the healthcare, industrial, and technology sectors in August, while utilities and telecom exposure dragged on performance.</li>
</ul>


HK Alpha portfolio gained 3.45% in August, outperforming its benchmark by 2.67%.  Since inception, the portfolio has outperformed HK indexes by 60% to 84%. HK ALPHA is up 14.35% YTD.
The Sharpe ratio stands at 1.21, compared with a benchmark of 0.68 since inception.  This higher Sharpe ratio is driven by excess alpha, which represents more than 50% of returns.
The portfolio gained in the healthcare, industrial, and technology sectors in August, while utilities and telecom exposure dragged on performance.


<ul>
<li>Hong Kong's market continues its consolidation in a Secular Bull Market.  Technology and healthcare sectors have weakened, while utilities, telecom, and energy sectors have strengthened.</li>
<li>Mainland investors have slowed net buying through the Southbound Connect platform.  Dividend yield, value and low volatility are leading investment factors since October. Growth and momentum factors have lagged.</li>
<li>
<a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK)</a> is initiated as BUY at Shenwan Hongyuan.  VLCC rates to China are rising amid U.S. oil sanctions on Russia and Venezuela.
</li>
</ul>


Hong Kong's market continues its consolidation in a Secular Bull Market.  Technology and healthcare sectors have weakened, while utilities, telecom, and energy sectors have strengthened.
Mainland investors have slowed net buying through the Southbound Connect platform.  Dividend yield, value and low volatility are leading investment factors since October. Growth and momentum factors have lagged.

Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) is initiated as BUY at Shenwan Hongyuan.  VLCC rates to China are rising amid U.S. oil sanctions on Russia and Venezuela.



BUY/SELL/HOLD: Hong Kong Market Update (December 17)

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>We remain near-term bullish since 4/22/25, we continue to believe SPX and ACWI-US likely bottomed at 4800-4820 and $101-$102 (May 13, 2025 report), and our intermediate-term outlook remains bullish also.</li>
<li>We'll maintain our bullish view as long as dynamics remain healthy and SPX and ACWI-US are above 5500 and $115, but we do not expect these levels to be tested.</li>
<li>We expect 5700-5785 on SPX and $120-$121 on ACWI-US to hold as support; considering the historic run up, don't be surprised to see another week or two of consolidation.</li>
</ul>


We remain near-term bullish since 4/22/25, we continue to believe SPX and ACWI-US likely bottomed at 4800-4820 and $101-$102 (May 13, 2025 report), and our intermediate-term outlook remains bullish also.
We'll maintain our bullish view as long as dynamics remain healthy and SPX and ACWI-US are above 5500 and $115, but we do not expect these levels to be tested.
We expect 5700-5785 on SPX and $120-$121 on ACWI-US to hold as support; considering the historic run up, don't be surprised to see another week or two of consolidation.


MSCI ACWI Coiling Under All-Time Highs; Buying Korean Financials; Monitoring Europe for Downgrade

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>There is no immediate impact of termination of 2M Alliance between <a href="https://www.smartkarma.com/entities/ap-moller-maersk-a-s" target="_blank" data-smartkarma-citation="entities:24755:1" rel="noopener">Ap Moller - Maersk A/S (MAERSKA DC)</a> and Mediterranean Shipping Company in 2025, but there are some long-term implications.</li>
<li>The change in competitive landscape will add uncertain operating variables to <a href="https://www.smartkarma.com/entities/china-cosco-holdings-h" target="_blank" data-smartkarma-citation="entities:286:1" rel="noopener">COSCO Shipping Holdings (1919 HK)</a> and <a href="https://www.smartkarma.com/entities/orient-overseas-international" target="_blank" data-smartkarma-citation="entities:801:1" rel="noopener">Orient Overseas International (316 HK)</a> as there is possibility of stiffer industry competition. </li>
<li>Port companies like <a href="https://www.smartkarma.com/entities/cosco-shipping-ports-ltd" target="_blank" data-smartkarma-citation="entities:360:1" rel="noopener">Cosco Shipping Ports (1199 HK)</a> and <a href="https://www.smartkarma.com/entities/china-merchants-port-holdings-company-ltd" target="_blank" data-smartkarma-citation="entities:15155:1" rel="noopener">China Merchants Port (144 HK)</a> may see improvement in their relative bargaining power, with potentially lower bulk volume discounts offered. </li>
</ul>


There is no immediate impact of termination of 2M Alliance between Ap Moller - Maersk A/S (MAERSKA DC) and Mediterranean Shipping Company in 2025, but there are some long-term implications.
The change in competitive landscape will add uncertain operating variables to COSCO Shipping Holdings (1919 HK) and Orient Overseas International (316 HK) as there is possibility of stiffer industry competition. 
Port companies like Cosco Shipping Ports (1199 HK) and China Merchants Port (144 HK) may see improvement in their relative bargaining power, with potentially lower bulk volume discounts offered. 


China Shipping Sector: Impacts of the Termination of 2M Alliance

<ul>
<li>Weaker OECD demand, diversification of supply chain out of China, lesser room for Rmb depreciation and high base effects all suggest challenging export environment for China in 2023. </li>
<li>We expect 5-10% drop in China's export in next year, against consensus of 0.2% growth. Except ASEAN, exports to all major trading partners are already deep in negative in Nov.</li>
<li>Long-Haul container shipping is the most disastrous, while port and logistics sectors are less vulnerable. We think <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> and <a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> will fare better than others.</li>
</ul>


Weaker OECD demand, diversification of supply chain out of China, lesser room for Rmb depreciation and high base effects all suggest challenging export environment for China in 2023. 
We expect 5-10% drop in China's export in next year, against consensus of 0.2% growth. Except ASEAN, exports to all major trading partners are already deep in negative in Nov.
Long-Haul container shipping is the most disastrous, while port and logistics sectors are less vulnerable. We think SITC International (1308 HK) and Sinotrans (598 HK) will fare better than others.


China's Export Outlook 2023: How Port, Shipping and Logistics Fare?

Hong Kong

China Merchants Port is a leading global port developer, investor, and operator, primarily engaged in port operations, bonded logistics, and property investment. The company manages container and bulk/general cargo terminals, operates logistics parks, and provides port transportation and airport cargo handling services. It is headquartered in Hong Kong and was founded in 1991.

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China Merchants Port (144 HK)

HONG KONG ALPHA PORTFOLIO: (August 2026)

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David Mudd

MSCI ACWI Coiling Under All-Time Highs; Buying Korean Financials; Monitoring Europe for Downgrade

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Vermilion Research

China Shipping Sector: Impacts of the Termination of 2M Alliance

Termination of 2M Alliance may mean stiffer competition to be faced by Cosco Holdings and OOIL. Meanwhile, port companies like Cosco Shipping Port...

Osbert Tang, CFA

China's Export Outlook 2023: How Port, Shipping and Logistics Fare?

We are cautious on China's export outlook in 2023, and operating environment of port, container shipping and logistics sectors will be challenging....

Osbert Tang, CFA

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