HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Communications Construction / Equity Bottom-Up

China Communications Construction (1800 HK)

<ul>
<li>The fall in share price in the last five months have sent <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> back to very attractive level. The market has misread the strong 2Q23 result.</li>
<li>2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. </li>
<li>There should not be concerns about CCCC's contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.</li>
</ul>


The fall in share price in the last five months have sent China Communications Construction (1800 HK) back to very attractive level. The market has misread the strong 2Q23 result.
2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. 
There should not be concerns about CCCC's contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.


China Comm Const (1800 HK): Well Worth Revisiting

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.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 195 stocks over the last week. The average A-H premium was 85.5% as of Sep 25th.</li>
<li>The average A-H premium changed by 0.5ppt week-on-week, led by communication services, real estate, materials and offset by industrials.</li>
<li>We highlight weekly changes in A-H premium for Innocare Pharma, Vgt, ABC, Yofc.</li>
</ul>


We analyse the changes of A-H premium on 195 stocks over the last week. The average A-H premium was 85.5% as of Sep 25th.
The average A-H premium changed by 0.5ppt week-on-week, led by communication services, real estate, materials and offset by industrials.
We highlight weekly changes in A-H premium for Innocare Pharma, Vgt, ABC, Yofc.


A-H Premium Weekly (Sep 25th): Innocare Pharma, Vgt, ABC, Yofc

Thematic (Sector/Industry)

<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

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>Representatives of all relevant major Ministries showed up and had their say</li>
<li>As is now usual from these events some positives as well as some disappointment</li>
<li>Further steps taken to put a floor under the property market</li>
</ul>


Representatives of all relevant major Ministries showed up and had their say
As is now usual from these events some positives as well as some disappointment
Further steps taken to put a floor under the property market


Ministry of Housing Press Conference – First Take

<ul>
<li>A correction was natural after the fast, strong move up</li>
<li>Any detailed fiscal stimulus plan will come from the State Council or the MoF</li>
<li>Capital market reforms moving in the right direction with continued focus on consumption.</li>
</ul>


A correction was natural after the fast, strong move up
Any detailed fiscal stimulus plan will come from the State Council or the MoF
Capital market reforms moving in the right direction with continued focus on consumption.


Stay Calm and Don’t Panic! Overbought Conditions Meet an Overhyped Meeting.

China

China Railway Group Limited is a super-large corporate conglomerate primarily engaged in infrastructure construction, including railways, highways, bridges, and tunnels. It also provides survey, design, and consulting services, manufactures engineering equipment, and develops real estate. The company is headquartered in Beijing, China, and was founded in 2007.

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China Railway Group (390 HK)

China Comm Const (1800 HK): Well Worth Revisiting

CCCC has become very attractive due to an unjustified fall in share price. Recurring net profit surged 68.5% in 2Q23 and its contract outlook is...

Osbert Tang, CFA

A-H Premium Weekly (Sep 25th): Innocare Pharma, Vgt, ABC, Yofc

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Innocare Pharma, Victory Giant Technology, ABC, Yofc.

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

Ministry of Housing Press Conference – First Take

The next step on more detailed measures on stabilising the property market in China. Some big positives but disappointment likely for some

Rikki Malik

Stay Calm and Don’t Panic! Overbought Conditions Meet an Overhyped Meeting.

Correction in markets expected after rapid rise, detailed fiscal stimulus plans to come from State Council or MoF, capital market reforms...

Rikki Malik

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Comm Const (1800 HK): Well Worth Revisiting

CCCC has become very attractive due to an unjustified fall in share price. Recurring net profit surged 68.5% in 2Q23 and its contract outlook is...

Osbert Tang, CFA

A-H Premium Weekly (Sep 25th): Innocare Pharma, Vgt, ABC, Yofc

We analyzed A-H premium changes in the past week and highlight A-H premium changes for Innocare Pharma, Victory Giant Technology, ABC, Yofc.

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

Ministry of Housing Press Conference – First Take

The next step on more detailed measures on stabilising the property market in China. Some big positives but disappointment likely for some

Rikki Malik

Stay Calm and Don’t Panic! Overbought Conditions Meet an Overhyped Meeting.

​Correction in markets expected after rapid rise, detailed fiscal stimulus plans to come from State Council or MoF, capital market reforms...

Rikki Malik

Correction in markets expected after rapid rise, detailed fiscal stimulus plans to come from State Council or MoF, capital market reforms...