External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Thematic (Sector/Industry)

<ul><li>Given still weak property sales and volatile stock market, we suggest investors to play the spread of housing completion over new start.</li><li>In the short term, we think the ensuring completion fund will support the housing completion as a total fund size of RMB140bn has been distributed to the needed projects that could lead to 100mn sqm completion area (13% of 2021 total completion).</li><li>On the contrary, new start could remain weak due to lackluster property sales and piling inventory.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Given still weak property sales and volatile stock market, we suggest investors to play the spread of housing completion over new start.In the short term, we think the ensuring completion fund will support the housing completion as a total fund size of RMB140bn has been distributed to the needed projects that could lead to 100mn sqm completion area (13% of 2021 total completion).On the contrary, new start could remain weak due to lackluster property sales and piling inventory.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Property Sector – Long completion, short new start

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

What is the key question? Are we at the start of another 12-year bull market in value stocks? That's the duration of the last period when the value style of investing out performed growth in the Asia Pacific region.What is the evidence? Over the last 12-months, the balance between growth and value reversed the dominance that growth has held for much of the last 10-years. Whilst in Q1 2021, we remained cautious about a full declaration that the trend is reversing, we feel that the process is indeed underway and that a multi-year reversal is in progress. This is not just positive for value investors, but increasingly so for Small-Mid Cap investors.Why read this screening note? Q1 2021’s screen performance trumped the market delivering relative outperformance of 26.2%. Of the 27 names presented, 18 stocks delivered positive share price performance with an average increase of 21%, whilst the remaining 9 stocks declined 9.4 %. What is presented? 56 names appear in our Q3 2021 Asia Pacific list providing plenty of opportunity for investors. The average EV/FCF multiple of 5.2x in Q3 2021 compared to 6.3x in Q1 2021 and 5.6x in Q2 2020. The average Free Cashflow multiple on equity is 4.6x in Q3 2021 versus 4.2x in Q1 2021.

What is the key question? Are we at the start of another 12-year bull market in value stocks? That's the duration of the last period when the value style of investing out performed growth in the Asia Pacific region.What is the evidence? Over the last 12-months, the balance between growth and value reversed the dominance that growth has held for much of the last 10-years. Whilst in Q1 2021, we remained cautious about a full declaration that the trend is reversing, we feel that the process is indeed underway and that a multi-year reversal is in progress. This is not just positive for value investors, but increasingly so for Small-Mid Cap investors.Why read this screening note? Q1 2021’s screen performance trumped the market delivering relative outperformance of 26.2%. Of the 27 names presented, 18 stocks delivered positive share price performance with an average increase of 21%, whilst the remaining 9 stocks declined 9.4 %. What is presented? 56 names appear in our Q3 2021 Asia Pacific list providing plenty of opportunity for investors. The average EV/FCF multiple of 5.2x in Q3 2021 compared to 6.3x in Q1 2021 and 5.6x in Q2 2020. The average Free Cashflow multiple on equity is 4.6x in Q3 2021 versus 4.2x in Q1 2021.

Screening the Silk Road: Q3 2021 All Cap Screening - Free Cashflow (FCF)

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Despite playing such a minor role in China investment portfolios, Materials allocations have been on the rise.  Current holding weights represent an 8-year high and the percentage of funds invested is at the top of the 6 year range.  Activity over the last 6-months shows some of the pure metal plays gaining tracking with China investors.  A further 11.2% of funds added Steel exposure over the period and 10.3% Aluminum.  In contrast, Construction Materials suffered outflows and a scaling back of exposure from active managers.We would highlight stocks such as <a href="https://www.smartkarma.com/entities/beijing-oriental-yuhong-a" target="_blank" data-smartkarma-citation="entities:3060:1" rel="noopener">Beijing Oriental Yuhong A (002271 CH) </a>, <a href="https://www.smartkarma.com/entities/wanhua-chemical-group-co-a" target="_blank" data-smartkarma-citation="entities:5049:1" rel="noopener">Wanhua Chemical Group Co A (600309 CH)</a> , <a href="https://www.smartkarma.com/entities/shandong-sinocera-functional-material-a" target="_blank" data-smartkarma-citation="entities:6865:1" rel="noopener">Shandong Sinocera Functional Material (300285 CH)</a> , <a href="https://www.smartkarma.com/entities/china-molybdenum-co-ltd-d9c46a67-e31f-431f-9f5f-02222265d701" target="_blank" data-smartkarma-citation="entities:8585:1" rel="noopener">China Molybdenum Co Ltd H (3993 HK)</a> and <a href="https://www.smartkarma.com/entities/baoshan-iron-steel-co-a" target="_blank" data-smartkarma-citation="entities:3891:1" rel="noopener">Baoshan Iron &amp; Steel Co A (600019 CH)</a> as seeing investment levels rise from a very low base, having previously being off the radar for the majority of active China investors.Relative to 5-year history, allocations are now looking overstretched, but relative to 10 year history, allocations still have some way to go, and absolute weights are still tiny compared to the large allocations awarded to Consumer and Communication Services stocks.  In short, are the recent moves part of a short-term shift in momentum, or the early part of a longer-term structural shift?Taken from our active China fund universe, consisting of 116 funds with AUM $65bn.

Despite playing such a minor role in China investment portfolios, Materials allocations have been on the rise.  Current holding weights represent an 8-year high and the percentage of funds invested is at the top of the 6 year range.  Activity over the last 6-months shows some of the pure metal plays gaining tracking with China investors.  A further 11.2% of funds added Steel exposure over the period and 10.3% Aluminum.  In contrast, Construction Materials suffered outflows and a scaling back of exposure from active managers.We would highlight stocks such as Beijing Oriental Yuhong A (002271 CH) , Wanhua Chemical Group Co A (600309 CH) , Shandong Sinocera Functional Material (300285 CH) , China Molybdenum Co Ltd H (3993 HK) and Baoshan Iron &amp; Steel Co A (600019 CH) as seeing investment levels rise from a very low base, having previously being off the radar for the majority of active China investors.Relative to 5-year history, allocations are now looking overstretched, but relative to 10 year history, allocations still have some way to go, and absolute weights are still tiny compared to the large allocations awarded to Consumer and Communication Services stocks.  In short, are the recent moves part of a short-term shift in momentum, or the early part of a longer-term structural shift?Taken from our active China fund universe, consisting of 116 funds with AUM $65bn.

Growth as a style has been the “norm” for years, is the “norm” about to end? The continued strategies by Central Bank’s towards a “lower for longer stance around interest rates”, extended the underperformance of value for most of 2020. However, with the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review.

Growth as a style has been the “norm” for years, is the “norm” about to end? The continued strategies by Central Bank’s towards a “lower for longer stance around interest rates”, extended the underperformance of value for most of 2020. However, with the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review. 

Screening the Silk Road: Q1 2021 All Cap Screening - Free Cashflow (FCF)

HK/China Equity Long-Short

Osbert Tang, CFA

China's issuance of special purpose bonds (SPB) reached a record of Rmb2.4trn in 1H20, an overwhelming 73% YoY growth. At least 59% of the proceeds are to be invested in infrastructure and related sectors, with transport infrastructure being the largest category with a 26% share. In our view, such massive investment will support the earnings of the construction related companies in 2H20 when such funds filter through to the real economy in the form of end-product demand.We expect the construction materials, infrastruture construction companies and construction machinery sectors to benefit from such investments. Many of these stocks have underperformed the market sharply YTD and are trading at depressed valuations of single-digit or even low single-digit levels. In our view, potential earnings upside will serve as a catalyst for a catch up in their share prices over the next six months.

China's issuance of special purpose bonds (SPB) reached a record of Rmb2.4trn in 1H20, an overwhelming 73% YoY growth. At least 59% of the proceeds are to be invested in infrastructure and related sectors, with transport infrastructure being the largest category with a 26% share. In our view, such massive investment will support the earnings of the construction related companies in 2H20 when such funds filter through to the real economy in the form of end-product demand.We expect the construction materials, infrastruture construction companies and construction machinery sectors to benefit from such investments. Many of these stocks have underperformed the market sharply YTD and are trading at depressed valuations of single-digit or even low single-digit levels. In our view, potential earnings upside will serve as a catalyst for a catch up in their share prices over the next six months. 

China Infrastructure: Record Special Purpose Bonds Issuance to Drive Construction Sectors in 2H20

China

China National Building Material is a state-owned enterprise primarily engaged in the production and sale of building materials, including cement, concrete, new materials like glass fiber and composite materials, and engineering technology services. It is recognized as a leading global producer in several of these segments. The company is headquartered in Beijing, People's Republic of China, and was founded in 1984.

China National Building Material (3323 HK)

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China National Building Material (3323 HK)

China Property Sector – Long completion, short new start

Given still weak property sales and volatile stock market, we suggest investors to play the spread of housing completion over new start.

CMB International

Screening the Silk Road: Q3 2021 All Cap Screening - Free Cashflow (FCF)

Is it the start of a 12-year bull market in value? That's the duration of the last period when APAC value outperformed growth. Q'1s FCF screen...

David Lepper

China Materials: Exposure on the Rise

China Materials allocations are on the rise. Current holding weights represent an 8-year high and the percentage of funds invested is at the top...

Steven Holden

Screening the Silk Road: Q1 2021 All Cap Screening - Free Cashflow (FCF)

With the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review.

David Lepper

China Infrastructure: Record Special Purpose Bonds Issuance to Drive Construction Sectors in 2H20

China's issuance of special purpose bonds (SPB) reached a record of Rmb2.4trn in 1H20, an overwhelming 73% YoY growth. At least 59% of the proceeds...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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