HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>October has been a poor month in the last five years, with an average return of -6.5%. This highlights the risk for the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> next month.   </li>
<li>Factors including higher interest rates, the US mid-term election, elevated crude oil prices, and concerns about the AI investment outlook are negative issues. </li>
<li>November and December are, interestingly, the good months in the last five years. Aggressive players may buy back after a possible plunge in October.</li>
</ul>


October has been a poor month in the last five years, with an average return of -6.5%. This highlights the risk for the Hang Seng Index (HSI INDEX) next month.   
Factors including higher interest rates, the US mid-term election, elevated crude oil prices, and concerns about the AI investment outlook are negative issues. 
November and December are, interestingly, the good months in the last five years. Aggressive players may buy back after a possible plunge in October.


HK Strategy: The Forthcoming Black October?

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

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

Macroeconomics

<ul>
<li>A divided FOMC cut by 25bp as expected, but Powell signalled Dec'25 cut was far from a foregone conclusion; instead the FOMC was strongly committed to returning to 2% inflation. </li>
<li>US$88.8bn decline in base money (Mar-Aug'25) has held M2 and inflation in check. The end of QT from Dec'25 will be a form of easing, precluding rate cuts until Jan'26. </li>
<li>FOMC voting shows doves isolated, and Powell-led FOMC will stay hawkish until Jan'26, especially amid fogginess on inflation data. The next rate cut is unlikely until Mar'26. </li>
</ul>


A divided FOMC cut by 25bp as expected, but Powell signalled Dec'25 cut was far from a foregone conclusion; instead the FOMC was strongly committed to returning to 2% inflation. 
US$88.8bn decline in base money (Mar-Aug'25) has held M2 and inflation in check. The end of QT from Dec'25 will be a form of easing, precluding rate cuts until Jan'26. 
FOMC voting shows doves isolated, and Powell-led FOMC will stay hawkish until Jan'26, especially amid fogginess on inflation data. The next rate cut is unlikely until Mar'26. 


US: No More Rate Cuts Likely from the Powell Fed; More Dovish FOMC by Q2 2026

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sichuan-kelun-biotech-biopharm" target="_blank" data-smartkarma-citation="entities:40071:1" rel="noopener">Sichuan Kelun-Biotech Bio (6990 HK)</a>, <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Ind. (669 HK)</a>, <a href="https://www.smartkarma.com/entities/vesync" target="_blank" data-smartkarma-citation="entities:31067:1" rel="noopener">Vesync (2148 HK)</a>, <a href="https://www.smartkarma.com/entities/chervon-holdings-limited" target="_blank" data-smartkarma-citation="entities:35309:1" rel="noopener">Chervon Hldgs (2285 HK)</a>, and <a href="https://www.smartkarma.com/entities/wuxi-apptec-co-ltd-bf4a1265-beef-48b6-b82d-29308426030f" target="_blank" data-smartkarma-citation="entities:27795:1" rel="noopener">WuXi AppTec (2359 HK)</a> have a very high reliance on the US market.</li>
<li>
<a href="https://www.smartkarma.com/entities/vtech-holdings-ltd" target="_blank" data-smartkarma-citation="entities:18812:1" rel="noopener">Vtech Hldgs (303 HK)</a>, <a href="https://www.smartkarma.com/entities/samsonite-international-sa" target="_blank" data-smartkarma-citation="entities:12790:1" rel="noopener">Samsonite (1910 HK)</a>, <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home (6690 HK)</a>, and <a href="https://www.smartkarma.com/entities/tcl-multimedia-technology" target="_blank" data-smartkarma-citation="entities:15654:1" rel="noopener">Tcl Multimedia (1070 HK)</a> ranked lower on the list, but consumer cutbacks will have a bigger impact. </li>
<li>The spillover effect of a US recession to other countries will pressurise companies that have low direct exposure, like <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> and <a href="https://www.smartkarma.com/entities/prada-s-p-a" target="_blank" data-smartkarma-citation="entities:889:1" rel="noopener">Prada S.P.A. (1913 HK)</a>.</li>
</ul>



Sichuan Kelun-Biotech Bio (6990 HK), Techtronic Ind. (669 HK), Vesync (2148 HK), Chervon Hldgs (2285 HK), and WuXi AppTec (2359 HK) have a very high reliance on the US market.

Vtech Hldgs (303 HK), Samsonite (1910 HK), Haier Smart Home (6690 HK), and Tcl Multimedia (1070 HK) ranked lower on the list, but consumer cutbacks will have a bigger impact. 
The spillover effect of a US recession to other countries will pressurise companies that have low direct exposure, like Orient Overseas International (316 HK) and Prada S.P.A. (1913 HK).


China & HK Strategy: Who Are the Victims of a US Recession?

<ul>
<li>In possibly the only Trump-Harris presidential debate, VP Kamala Harris clearly won, according to polls/focus groups conducted by FoxNews and CNN, as well as the vast majority of commentators. </li>
<li>Harris largely remained focused on centrist positions, and was able to bait Trump into angry outbursts and digressions away from his key talking points. The economy remained her Achilles Heel.  </li>
<li>Weakness on the economy, and the failure to highlight her "freedom" theme, meant that Harris didn't score a slam dunk. The race is a dead heat, Harris a nose ahead. </li>
</ul>


In possibly the only Trump-Harris presidential debate, VP Kamala Harris clearly won, according to polls/focus groups conducted by FoxNews and CNN, as well as the vast majority of commentators. 
Harris largely remained focused on centrist positions, and was able to bait Trump into angry outbursts and digressions away from his key talking points. The economy remained her Achilles Heel.  
Weakness on the economy, and the failure to highlight her "freedom" theme, meant that Harris didn't score a slam dunk. The race is a dead heat, Harris a nose ahead. 


US: Harris Wins the Presidential Debate Hands Down, but Impact on Race Still Mild

<ul>
<li>FOMC held rates steady at 5.25-5.5%, but emphasized that "a reduction could be on the table...in September". From inflation risks alone, the FOMC statement shifted focus to its dual mandate.  </li>
<li>0.9%YoY M2 growth (Jun'24) evidences restrictive monetary conditions. Withdrawing QT after Aug'23 led to Jan-Apr'24 shocks in MoM core PCE, but latter now reined-in by resumed QT since Mar'24.</li>
<li>Core PCE inflation likely to wane to 2.3%YoY by Sep'24, enabling rates to decline 25bp at each of the next 3 FOMC meetings, ignoring political threats regarding the Sep'24 cut.</li>
</ul>


FOMC held rates steady at 5.25-5.5%, but emphasized that "a reduction could be on the table...in September". From inflation risks alone, the FOMC statement shifted focus to its dual mandate.  
0.9%YoY M2 growth (Jun'24) evidences restrictive monetary conditions. Withdrawing QT after Aug'23 led to Jan-Apr'24 shocks in MoM core PCE, but latter now reined-in by resumed QT since Mar'24.
Core PCE inflation likely to wane to 2.3%YoY by Sep'24, enabling rates to decline 25bp at each of the next 3 FOMC meetings, ignoring political threats regarding the Sep'24 cut.


FOMC Waits; Despite Politics, 3 Rate Cuts Are Likely This Year as Inflation Abates

United States

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Dow Jones Industrial Average (INDU INDEX)

Dow Jones Industrial Average (INDU INDEX)

HK Strategy: The Forthcoming Black October?

With the HSI losing 2.5% so far today (the first trading day of Oct), it will be interesting to boomerang this Insight. Based on historical...

Osbert Tang, CFA

US: No More Rate Cuts Likely from the Powell Fed; More Dovish FOMC by Q2 2026

FOMC cut by 25bp, but wants to bring inflation back to 2% target. No-QT amounts to easing, precluding rate cuts until Jan'26, with next cut...

Prasenjit K. Basu

China & HK Strategy: Who Are the Victims of a US Recession?

Reliance on the US market varies among HK-listed companies, with some having high direct exposure to a recession. Those with low direct exposure...

Osbert Tang, CFA

US: Harris Wins the Presidential Debate Hands Down, but Impact on Race Still Mild

VP Kamala Harris was the debate winner, focusing on centrist positions and baiting Trump into angry outbursts. But her weakness on the economy,...

Prasenjit K. Basu

FOMC Waits; Despite Politics, 3 Rate Cuts Are Likely This Year as Inflation Abates

FF rate at a 23-year (real policy rate at 18yr high), M2 growth at 0.9%YoY in Jun'24, create conditions for steady decline in core PCE inflation to...

Prasenjit K. Basu

HK Strategy: The Forthcoming Black October?

With the HSI losing 2.5% so far today (the first trading day of Oct), it will be interesting to boomerang this Insight. Based on historical...

Osbert Tang, CFA

US: No More Rate Cuts Likely from the Powell Fed; More Dovish FOMC by Q2 2026

​FOMC cut by 25bp, but wants to bring inflation back to 2% target. No-QT amounts to easing, precluding rate cuts until Jan'26, with next cut...

Prasenjit K. Basu

China & HK Strategy: Who Are the Victims of a US Recession?

​Reliance on the US market varies among HK-listed companies, with some having high direct exposure to a recession. Those with low direct exposure...

Osbert Tang, CFA

US: Harris Wins the Presidential Debate Hands Down, but Impact on Race Still Mild

​VP Kamala Harris was the debate winner, focusing on centrist positions and baiting Trump into angry outbursts. But her weakness on the economy,...

Prasenjit K. Basu

FOMC Waits; Despite Politics, 3 Rate Cuts Are Likely This Year as Inflation Abates

FF rate at a 23-year (real policy rate at 18yr high), M2 growth at 0.9%YoY in Jun'24, create conditions for steady decline in core PCE inflation to...

Prasenjit K. Basu

FOMC cut by 25bp, but wants to bring inflation back to 2% target. No-QT amounts to easing, precluding rate cuts until Jan'26, with next cut...

Reliance on the US market varies among HK-listed companies, with some having high direct exposure to a recession. Those with low direct exposure...

VP Kamala Harris was the debate winner, focusing on centrist positions and baiting Trump into angry outbursts. But her weakness on the economy,...