HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>In the last 4 weeks, the HSI constituents with the highest yields have gained 3-4%, while the lowest-yielding ones have lost an average of 4%. </li>
<li>The top 15 high-yield constituents will deliver an average yield of 6.2% for FY26. The number increased to 25 when we include those at over 5%.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a>, <a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC Ltd (883 HK)</a>, <a href="https://www.smartkarma.com/entities/haidilao-international-holding" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao International Holding (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a>, and <a href="https://www.smartkarma.com/entities/power-assets-holdings-ltd" target="_blank" data-smartkarma-citation="entities:788:1" rel="noopener">Power Assets Holdings (6 HK)</a> also have net cash. </li>
</ul>


In the last 4 weeks, the HSI constituents with the highest yields have gained 3-4%, while the lowest-yielding ones have lost an average of 4%. 
The top 15 high-yield constituents will deliver an average yield of 6.2% for FY26. The number increased to 25 when we include those at over 5%.

China Mobile (941 HK), CNOOC Ltd (883 HK), Haidilao International Holding (6862 HK), China Unicom Hong Kong (762 HK), and Power Assets Holdings (6 HK) also have net cash. 


Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>Hong Kong Alpha portfolio gained 11.34% in October outperforming its benchmark and HK indexes.  The portfolio's Sharpe ratio increased to 2.91 and the beta and correlation to its benchmark decreased.</li>
<li>The Hong Kong Alpha portfolio is generating significant alpha (idiosyncratic) returns since launch, with 40% of returns represented by superior stock selection, with the remaining due to sector weighting.</li>
<li>
At the end of August, we bought <a href="https://www.smartkarma.com/entities/luk-fook-holdings-intl-ltd" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener">Luk Fook</a><a href="https://www.smartkarma.com/entities/luk-fook-holdings-intl-ltd" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener"> Holdin</a><a href="https://www.smartkarma.com/entities/luk-fook-holdings-intl-ltd" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener">gs</a><a href="https://www.smartkarma.com/entities/luk-fook-holdings-intl-ltd" target="_blank" data-smartkarma-citation="entities:19054:1" rel="noopener"> Intl (590 HK)</a> for the portfolio as retail demand for gold products in mainland China increases.
</li>
</ul>


Hong Kong Alpha portfolio gained 11.34% in October outperforming its benchmark and HK indexes.  The portfolio's Sharpe ratio increased to 2.91 and the beta and correlation to its benchmark decreased.
The Hong Kong Alpha portfolio is generating significant alpha (idiosyncratic) returns since launch, with 40% of returns represented by superior stock selection, with the remaining due to sector weighting.

At the end of August, we bought Luk Fook Holdings Intl (590 HK) for the portfolio as retail demand for gold products in mainland China increases.



<ul>
<li>The Hong Kong Alpha portfolio outperformed its benchmark and all Hong Kong indexes in July.  The portfolio achieved these results while increasing its Sharpe ratio and reducing beta and volatility.</li>
<li>The shift to the healthcare and materials sectors since Liberation Day in April has aided the portfolio's performance.  The consumer staples sector lost momentum, and we exited some positions there.</li>
<li>The HSI now trades above its long-term resistance levels for the first time since 2022.  This signals a good time to rotate back into market leaders in tech.</li>
</ul>


The Hong Kong Alpha portfolio outperformed its benchmark and all Hong Kong indexes in July.  The portfolio achieved these results while increasing its Sharpe ratio and reducing beta and volatility.
The shift to the healthcare and materials sectors since Liberation Day in April has aided the portfolio's performance.  The consumer staples sector lost momentum, and we exited some positions there.
The HSI now trades above its long-term resistance levels for the first time since 2022.  This signals a good time to rotate back into market leaders in tech.


<ul>
<li>Although lower interest rates will benefit the technology sector more, many investors will still opt for high-yield stocks to protect their income stream.</li>
<li>
<a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC Ltd (883 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Prop (101 HK)</a>, <a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao (1378 HK)</a>, <a href="https://www.smartkarma.com/entities/hengan-international-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a>, and <a href="https://www.smartkarma.com/entities/henderson-land-development-co" target="_blank" data-smartkarma-citation="entities:376:1" rel="noopener">Henderson Land (12 HK)</a> are the top 5 high-yield HSI constituents.</li>
<li>Mainland China banks no longer made the list, but <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> and <a href="https://www.smartkarma.com/entities/bank-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:656:1" rel="noopener">Bank Of China Ltd (H) (3988 HK)</a> remain attractive at 5.7% and 5.6%, respectively.</li>
</ul>


Although lower interest rates will benefit the technology sector more, many investors will still opt for high-yield stocks to protect their income stream.

CNOOC Ltd (883 HK), Hang Lung Prop (101 HK), China Hongqiao (1378 HK), Hengan Intl Group (1044 HK), and Henderson Land (12 HK) are the top 5 high-yield HSI constituents.
Mainland China banks no longer made the list, but ICBC (H) (1398 HK) and Bank Of China Ltd (H) (3988 HK) remain attractive at 5.7% and 5.6%, respectively.


HK Strategy: Time to Revisit the Yield Story

<ul>
<li>HSI poised to break 25k for first time since 2022.  Next resistance 27100.  Hong Kong market outperforming global markets by wide margin since our BUY was initiated in March 2024.</li>
<li>Financial, materials and healthcare sectors leading the market higher as tech sector consolidates.  China shares still offer the best valuation metrics in Asia.</li>
<li>
<a href="https://www.smartkarma.com/entities/alibaba-pictures-group-ltd" target="_blank" data-smartkarma-citation="entities:20724:1" rel="noopener">Alibaba Pictures (1060 HK)</a> , renamed Damai Entertainment has seen increased analyst attention as the company becomes the <a href="https://www.smartkarma.com/entities/live-nation-entertainment-inc" target="_blank" data-smartkarma-citation="entities:6893:1" rel="noopener">Live Nation Entertainment, Inc (LYV US)</a> of China.
</li>
</ul>


HSI poised to break 25k for first time since 2022.  Next resistance 27100.  Hong Kong market outperforming global markets by wide margin since our BUY was initiated in March 2024.
Financial, materials and healthcare sectors leading the market higher as tech sector consolidates.  China shares still offer the best valuation metrics in Asia.

Alibaba Pictures (1060 HK) , renamed Damai Entertainment has seen increased analyst attention as the company becomes the Live Nation Entertainment, Inc (LYV US) of China.



BUY/SELL/HOLD: Hong Kong Market Update (JULY 21)

China

CITIC Limited is a diversified conglomerate with five core business segments: comprehensive financial services, advanced intelligent manufacturing, advanced materials, new consumption, and new-type urbanization. Its activities include banking, securities, trust, insurance, specialty steel production, automotive parts manufacturing, heavy machinery, resource exploration, telecommunications, publishing, and real estate. The company was incorporated in 1985 and is headquartered in Hong Kong.

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CITIC (267 HK)

HK Strategy: Focusing Back on Yields

High-yield HSI constituents have outperformed low-yield ones in the last 4 weeks, reversing the pattern this year. The top 15 will deliver a 6.2%...

Osbert Tang, CFA

HONG KONG ALPHA PORTFOLIO (August 2025)

Hong Kong Alpha portfolio gained 11.34% in October outperforming its benchmark and HK indexes. The portfolio's Sharpe ratio increased to 2.91 and...

David Mudd

HONG KONG ALPHA PORTFOLIO (July 2025)

The Hong Kong Alpha portfolio outperformed its benchmark and all Hong Kong indexes in July. The portfolio achieved these results while increasing...

David Mudd

HK Strategy: Time to Revisit the Yield Story

High-yield stocks like CNOOC, Hang Lung Prop and Henderson can protect income stream despite lower interest rates favouring the tech sector. ICBC...

Osbert Tang, CFA

BUY/SELL/HOLD: Hong Kong Market Update (JULY 21)

HSI poised to break 25k for first time since 2022. Next resistance 27100. Hong Kong market outperforming global markets by wide margin since our...

David Mudd

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HK Strategy: Focusing Back on Yields

​High-yield HSI constituents have outperformed low-yield ones in the last 4 weeks, reversing the pattern this year. The top 15 will deliver a 6.2%...

Osbert Tang, CFA

HONG KONG ALPHA PORTFOLIO (August 2025)

Hong Kong Alpha portfolio gained 11.34% in October outperforming its benchmark and HK indexes. The portfolio's Sharpe ratio increased to 2.91 and...

David Mudd

HONG KONG ALPHA PORTFOLIO (July 2025)

The Hong Kong Alpha portfolio outperformed its benchmark and all Hong Kong indexes in July. The portfolio achieved these results while increasing...

David Mudd

HK Strategy: Time to Revisit the Yield Story

​High-yield stocks like CNOOC, Hang Lung Prop and Henderson can protect income stream despite lower interest rates favouring the tech sector. ICBC...

Osbert Tang, CFA

BUY/SELL/HOLD: Hong Kong Market Update (JULY 21)

HSI poised to break 25k for first time since 2022. Next resistance 27100. Hong Kong market outperforming global markets by wide margin since our...

David Mudd

High-yield HSI constituents have outperformed low-yield ones in the last 4 weeks, reversing the pattern this year. The top 15 will deliver a 6.2%...

High-yield stocks like CNOOC, Hang Lung Prop and Henderson can protect income stream despite lower interest rates favouring the tech sector. ICBC...