HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

The big three Chinese airlines have announced the range of their expected FY20 losses over the weekend, and the general indication is that the 4Q20 results have returned to wider losses after an improvement in 3Q20. We rank their 4Q20 performance in the following descending order: <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 Co (H) (670 HK)</a> &gt; <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> &gt; <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a>. Although we think the market should have anticipated the deterioration, the trend is not promising and we believe there will be near-term pressure on the sector's performance.In our view, weaker domestic passenger traffic, resurgence in cost pressure and fading positive impact of Rmb appreciation are some of the headwinds faced by the sector in 1Q21. However, we think this is a good opportunity to set up our high conviction trade - <a href="https://www.smartkarma.com/insights/2021-high-conviction-pair-trade-long-air-china-753-hk-short-china-southern-1055-hk" target="_blank" data-smartkarma-citation="insights:45584" rel="noopener">2021 High Conviction: Pair Trade - Long Air China (753 HK), Short China Southern (1055 HK)</a>.

The big three Chinese airlines have announced the range of their expected FY20 losses over the weekend, and the general indication is that the 4Q20 results have returned to wider losses after an improvement in 3Q20. We rank their 4Q20 performance in the following descending order: China Eastern Airlines Co (H) (670 HK) &gt; China Southern Airlines (1055 HK) &gt; Air China Ltd (H) (753 HK). Although we think the market should have anticipated the deterioration, the trend is not promising and we believe there will be near-term pressure on the sector's performance.In our view, weaker domestic passenger traffic, resurgence in cost pressure and fading positive impact of Rmb appreciation are some of the headwinds faced by the sector in 1Q21. However, we think this is a good opportunity to set up our high conviction trade - 2021 High Conviction: Pair Trade - Long Air China (753 HK), Short China Southern (1055 HK). 

Chinese Airlines: Initial FY20 Results Suggest Tough Market Has Already Begun

The recent rise in local COVID-19 cases in China has made domestic air travel market more challenging in the near term, and this has already reflected on slowing traffic in Dec 2020. <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> has the best performance in Dec and FY20 but we see headwinds given its significant domestic exposure. The government has advised minimising cross-province travel in the Spring Chinese New Year Travel Peak Season and many schools are suggesting the same.We think there are two trades to capture such trend. One, "Long <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a>, short <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>" as positive expectations on CSA's domestic exposure provides room for disappointment. Two, go long on domestic consumption names as savings in transportation and lodging expenses may be re-directed to F&amp;B and consumer discretionary. These include <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/jiumaojiu-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:28293:1" rel="noopener">Jiumaojiu (9922 HK)</a>, <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings Inc (9987 HK)</a>, <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>, <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> and <a href="https://www.smartkarma.com/entities/topsports-international" target="_blank" data-smartkarma-citation="entities:28153:1" rel="noopener">Topsports International (6110 HK)</a>. Meanwhile, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> may benefit on both the revenue and cost sides.

The recent rise in local COVID-19 cases in China has made domestic air travel market more challenging in the near term, and this has already reflected on slowing traffic in Dec 2020. China Southern Airlines (1055 HK) has the best performance in Dec and FY20 but we see headwinds given its significant domestic exposure. The government has advised minimising cross-province travel in the Spring Chinese New Year Travel Peak Season and many schools are suggesting the same.We think there are two trades to capture such trend. One, "Long Air China Ltd (H) (753 HK), short China Southern Airlines (1055 HK)" as positive expectations on CSA's domestic exposure provides room for disappointment. Two, go long on domestic consumption names as savings in transportation and lodging expenses may be re-directed to F&amp;B and consumer discretionary. These include Haidilao (6862 HK), Jiumaojiu (9922 HK), Yum China Holdings Inc (9987 HK), Anta Sports Products (2020 HK), Li Ning Co Ltd (2331 HK) and Topsports International (6110 HK). Meanwhile, Meituan (3690 HK) may benefit on both the revenue and cost sides. 

Chinese Airlines: Domestic Market Gets a Little Challenging in the Near Term, How to Play It?

We see the joint announcement by five ministries/departments on the development of postal and express industry in the Guangdong-Hong Kong-Macau Greater Bay Area has positive implications on many of the logistics operators in China in the medium to long term. The supporting initiatives range from the strengthening of the strategic hubs of Guangzhou and Shenzhen airports to encouraging more industry consolidations.While many companies are expected to benefit from these GBA postal and express policies, we highlight some of the most important ones in this Insight - <a href="https://www.smartkarma.com/entities/guangzhou-baiyun-international-airport" target="_blank" data-smartkarma-citation="entities:10819:1" rel="noopener">Guangzhou Baiyun International Airport (600004 CH)</a> (GBIA) and <a href="https://www.smartkarma.com/entities/shenzhen-airport-co-ltd" target="_blank" data-smartkarma-citation="entities:15522:1" rel="noopener">Shenzhen Airport Co A (000089 CH)</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/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a>, <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-intl-holdings" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen Intl (152 HK)</a> and <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a>.

We see the joint announcement by five ministries/departments on the development of postal and express industry in the Guangdong-Hong Kong-Macau Greater Bay Area has positive implications on many of the logistics operators in China in the medium to long term. The supporting initiatives range from the strengthening of the strategic hubs of Guangzhou and Shenzhen airports to encouraging more industry consolidations.While many companies are expected to benefit from these GBA postal and express policies, we highlight some of the most important ones in this Insight - Guangzhou Baiyun International Airport (600004 CH) (GBIA) and Shenzhen Airport Co A (000089 CH), China Southern Airlines (1055 HK), Sinotrans (598 HK), Kerry Logistics Network (636 HK), Shenzhen Intl (152 HK) and S.F. Holding (002352 CH).

China Logistics: Key Beneficiaries of China's Greater Bay Area Postal and Express Development

Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Equity Bottom-Up

Thai Airways International / Equity Bottom-Up

<ul><li>THAI reported disappointing operating statistics for May 2026.</li><li>We expect THAI to report a core loss in 2Q26E.</li><li>We maintain our Buy rating and 12-month fair value of Bt6.80, based on an EV/EBITDA multiple of 3.4x.</li></ul>

THAI reported disappointing operating statistics for May 2026.We expect THAI to report a core loss in 2Q26E.We maintain our Buy rating and 12-month fair value of Bt6.80, based on an EV/EBITDA multiple of 3.4x.

THAI: May 2026 Operating Statistics Weakened Amid Higher Fuel Costs.

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Less than a year since the news hit that the Chinese outbreak spread to the world, <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a> has announced its vaccine with more than 90% effective in preventing Covid-19 among those without evidence of prior infection. Similar to <a href="https://www.smartkarma.com/insights/china-outbreak-theme-winners-and-losers" target="_blank" data-smartkarma-citation="insights:35971" rel="noopener">China Outbreak Theme: Winners and Losers</a> , this insight will discuss the potential winners and losers from the announcement of the vaccine. Travel-related names such as airlines, airport operators, tour operators, the duty-free operators are the clear beneficiaries of this news while auto dealership will also benefit from the potential lower unemployment later on. Instant noodle makers, pc makers that benefit from the work-from-home rush, as well as glove makers will no longer enjoy the same growth rate in 1H, and in the case of the glove makers, both ASP and volumes may see a decline.

Less than a year since the news hit that the Chinese outbreak spread to the world, Pfizer Inc (PFE US) has announced its vaccine with more than 90% effective in preventing Covid-19 among those without evidence of prior infection. Similar to China Outbreak Theme: Winners and Losers , this insight will discuss the potential winners and losers from the announcement of the vaccine. Travel-related names such as airlines, airport operators, tour operators, the duty-free operators are the clear beneficiaries of this news while auto dealership will also benefit from the potential lower unemployment later on. Instant noodle makers, pc makers that benefit from the work-from-home rush, as well as glove makers will no longer enjoy the same growth rate in 1H, and in the case of the glove makers, both ASP and volumes may see a decline. 

China

China Southern Airlines Company Limited provides air transportation services. The Company offers passenger and freight air transportation services, aviation equipment maintenance and aircraft leasing services. Shanghai Airlines also provides ticket and hotel booking and consulting services. China Southern Airlines provides services worldwide.

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China Southern Airlines (600029 CH)

Chinese Airlines: Initial FY20 Results Suggest Tough Market Has Already Begun

Chinese airlines posted weak 4Q20 result ranges and this is expected to put near-term pressure on share prices. However, we believe Air China is in...

Osbert Tang, CFA

Chinese Airlines: Domestic Market Gets a Little Challenging in the Near Term, How to Play It?

Slowed domestic air traffic in Dec and rise in local COVID-19 cases mean more challenging environment in the next two months. "Long Air China,...

Osbert Tang, CFA

China Logistics: Key Beneficiaries of China's Greater Bay Area Postal and Express Development

China's support of postal and express industry development in the Greater Bay Area has positive implications on many logistics companies. We...

Osbert Tang, CFA

THAI: May 2026 Operating Statistics Weakened Amid Higher Fuel Costs.

We expect THAI to report a core loss in 2Q26E.We maintain our Buy rating and 12-month fair value of Bt6.80, based on an EV/EBITDA multiple of 3.4x.

Krungthai XSpring

Pfizer Vaccine: Winners and Losers

Similar to China Outbreak Theme: Winners and Losers , this insight will discuss the potential winners and losers from the announcement of the vaccine.

Henry Soediarko

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