HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Although the H-share securities companies have retreated significantly from their peaks, there are still "fats" in their share prices in the near term, relative to the market turnover.</li>
<li>
<a href="https://www.smartkarma.com/entities/citic-securities-h" target="_blank" data-smartkarma-citation="entities:463:1" rel="noopener">Citic Securities (H) (6030 HK)</a> looks vulnerable given its high valuations, low H-A share discount, limited correction from its peak, and significant rebound from the trough.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities (6099 HK)</a> appears exposed though valuations are not high. It has the best YTD performance and rebound from the trough, and its H-A share discount is light.   </li>
</ul>


Although the H-share securities companies have retreated significantly from their peaks, there are still "fats" in their share prices in the near term, relative to the market turnover.

Citic Securities (H) (6030 HK) looks vulnerable given its high valuations, low H-A share discount, limited correction from its peak, and significant rebound from the trough.

China Merchants Securities (6099 HK) appears exposed though valuations are not high. It has the best YTD performance and rebound from the trough, and its H-A share discount is light.   


China Strategy: Screening the H-Share Securities Companies

Equity Bottom-Up

China International Capital Corporation / Equity Bottom-Up

China International Capital Corporation (3908 HK)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corp-ltd-class-h" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">CICC (3908 HK)</a> has received CSRC approval for its merger with <a target="_blank" rel="noopener">Cinda Securities (601059 CH)</a> and <a target="_blank" rel="noopener">Dongxing Securities (601198 CH)</a>, but its share price has fallen. </li>
<li>Concerns about EPS dilution are valid, as CDS' and DXS' 1H26 earnings are weaker than CICC's. However, amid increased industry consolidation, the merger is strategically important.</li>
<li>CICC now sits at 0.57x 12-month forward P/B, just the average since 2021. We expect the merger to enhance book value, and H-shareholders will benefit more. </li>
</ul>



CICC (3908 HK) has received CSRC approval for its merger with Cinda Securities (601059 CH) and Dongxing Securities (601198 CH), but its share price has fallen. 
Concerns about EPS dilution are valid, as CDS' and DXS' 1H26 earnings are weaker than CICC's. However, amid increased industry consolidation, the merger is strategically important.
CICC now sits at 0.57x 12-month forward P/B, just the average since 2021. We expect the merger to enhance book value, and H-shareholders will benefit more. 


CICC (3908 HK): CSRC's Approval of the Merger

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>Smoore International, China Communication Services and GDS have Bullish technical signals in a challenging market.</li>
<li>After a 3 year run from the COVID lows, Samsonite has confirmed a Bearish technical signal.</li>
<li>Hautai Securities hits an all time low and becomes a "Catch a Falling Knife" chart.</li>
</ul>


Smoore International, China Communication Services and GDS have Bullish technical signals in a challenging market.
After a 3 year run from the COVID lows, Samsonite has confirmed a Bearish technical signal.
Hautai Securities hits an all time low and becomes a "Catch a Falling Knife" chart.


Technically Speaking: Breakouts and Breakdowns in HONG KONG (July 10)

Articles from Caixin Global, Caixin Global

Caixin Global

Articles from Caixin Global

Caixin is a media group dedicated to providing financial and business news through periodicals, online content, mobile apps, conferences, books and TV/video programs. Caixin aims to blaze a trail that helps traditional media prosper in the new media age through integrated multimedia platforms.

News from Caixin

Macroeconomics

<ul>
<li>China’s local governments have begun offering billions of yuan worth of coupons to boost consumer spending, in an effort to help businesses feeling the pain of China’s Covid-19 outbreaks over the past two months.</li>
<li>The measure comes as China’s economy faces some of the greatest strain it has experienced since the initial wave of outbreaks in early 2020 as strict lockdowns across the country have disrupted business and everyday life</li>
<li>This time, local governments have also chosen coupons or vouchers as the form of their demand-side stimulus policy. The coupons will be good for discounts on products like cars and electronics, as well as services such as admission into local tourist sites.</li>
</ul>


China’s local governments have begun offering billions of yuan worth of coupons to boost consumer spending, in an effort to help businesses feeling the pain of China’s Covid-19 outbreaks over the past two months.
The measure comes as China’s economy faces some of the greatest strain it has experienced since the initial wave of outbreaks in early 2020 as strict lockdowns across the country have disrupted business and everyday life
This time, local governments have also chosen coupons or vouchers as the form of their demand-side stimulus policy. The coupons will be good for discounts on products like cars and electronics, as well as services such as admission into local tourist sites.


Local Governments Again Break Out the Coupons to Boost Consumer Spending

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

DZT Research

DZT 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 analyze the weekly Hong Kong Connect flows with our data engine for holding position as of June 12th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight flows for Tencent, Kingboard, Knowledge Atlas, Alibaba, Smic, Yangtze Optical Fibre And-H, Kingboard Laminates, China Hongqiao, Ke, Kingdee.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of June 12th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for Tencent, Kingboard, Knowledge Atlas, Alibaba, Smic, Yangtze Optical Fibre And-H, Kingboard Laminates, China Hongqiao, Ke, Kingdee.


HK Connect Flows Weekly (Jun 12th): Tencent, Kingboard, Knowledge Atlas, Alibaba, Smic, Ke, Kingdee

China

Everbright Securities Company Limited is a leading financial services institution primarily engaged in securities brokerage, wealth management, corporate finance, and asset management. The company offers a comprehensive suite of financial products and services to individuals, corporations, and institutions. It was founded in 1996 and is headquartered in Shanghai, China.

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Everbright Securities (6178 HK)

CICC (3908 HK): CSRC's Approval of the Merger

The market has concerns about the merger's EPS dilution for CICC. However, it is strategically important. Also, CICC's 0.57x 12-month forward P/B...

Osbert Tang, CFA

Technically Speaking: Breakouts and Breakdowns in HONG KONG (July 10)

Share prices of Smoore International, China Communication Services and GDS had Bullish technical signals while Samsonite and Huatai Securities have...

David Mudd

Local Governments Again Break Out the Coupons to Boost Consumer Spending

China’s local governments have begun offering billions of yuan worth of coupons to boost consumer spending, in an effort to help businesses

Caixin Global

HK Connect Flows Weekly (Jun 12th): Tencent, Kingboard, Knowledge Atlas, Alibaba, Smic, Ke, Kingdee

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Tencent (700 HK), Kingboard (148 HK), Knowledge Atlas...

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

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China Strategy: Screening the H-Share Securities Companies

​H-share securities companies still have room for corrections despite recent retreats, with Citic Securities and China Merchants Securities looking...

Osbert Tang, CFA

CICC (3908 HK): CSRC's Approval of the Merger

The market has concerns about the merger's EPS dilution for CICC. However, it is strategically important. Also, CICC's 0.57x 12-month forward P/B...

Osbert Tang, CFA

Technically Speaking: Breakouts and Breakdowns in HONG KONG (July 10)

Share prices of Smoore International, China Communication Services and GDS had Bullish technical signals while Samsonite and Huatai Securities have...

David Mudd

Local Governments Again Break Out the Coupons to Boost Consumer Spending

China’s local governments have begun offering billions of yuan worth of coupons to boost consumer spending, in an effort to help businesses

Caixin Global

HK Connect Flows Weekly (Jun 12th): Tencent, Kingboard, Knowledge Atlas, Alibaba, Smic, Ke, Kingdee

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Tencent (700 HK), Kingboard (148 HK), Knowledge Atlas...

Ke Yan, CFA, FRM

H-share securities companies still have room for corrections despite recent retreats, with Citic Securities and China Merchants Securities looking...