HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>For 1H25, the companies under our coverage will report a 16.8% earnings growth. Breaking down by quarter, 2Q25 growth will accelerate to 30.8%, from 14.1% in 1Q25. </li>
<li>The best growth rates are at <a href="https://www.smartkarma.com/entities/china-national-building-ma-h" target="_blank" data-smartkarma-citation="entities:184:1" rel="noopener">China National Building Material (3323 HK)</a>, <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">CICC (3908 HK)</a>, <a href="https://www.smartkarma.com/entities/beijing-capital-international-airport-bcia" target="_blank" data-smartkarma-citation="entities:10626:1" rel="noopener">Beijing Capital Intl Airport (694 HK)</a>, <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a>, and <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC Intl (1308 HK)</a>. </li>
<li>The worst ones are <a href="https://www.smartkarma.com/entities/china-travel-international-investment-hong-kong" target="_blank" data-smartkarma-citation="entities:3879:1" rel="noopener">China Travel Intl (308 HK)</a>, <a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transp (1138 HK)</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/china-tourism-group-duty-free" target="_blank" data-smartkarma-citation="entities:36229:1" rel="noopener">CTG Duty Free (1880 HK)</a>, and <a href="https://www.smartkarma.com/entities/pacific-basin-shipping-ltd" target="_blank" data-smartkarma-citation="entities:929:1" rel="noopener">Pacific Basin (2343 HK)</a>. </li>
</ul>


For 1H25, the companies under our coverage will report a 16.8% earnings growth. Breaking down by quarter, 2Q25 growth will accelerate to 30.8%, from 14.1% in 1Q25. 
The best growth rates are at China National Building Material (3323 HK), CICC (3908 HK), Beijing Capital Intl Airport (694 HK), Tongcheng Travel (780 HK), and SITC Intl (1308 HK). 
The worst ones are China Travel Intl (308 HK), Cosco Shipping Energy Transp (1138 HK), China Southern Airlines (1055 HK), CTG Duty Free (1880 HK), and Pacific Basin (2343 HK). 


China & HK Strategy: 1H25 Preview - Where Are the Upside and Downside Surprises?

Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>1211 HK: BYD Company , Geely, Leapmotor Cut Prices (-)</li>
<li>LI US: AITO M8 Achieves Over 80,000 Pre-Orders in Its First Month(-)</li>
<li>LI US: Li Auto Revises Down 2025 Production Target (+)</li>
</ul>


1211 HK: BYD Company , Geely, Leapmotor Cut Prices (-)
LI US: AITO M8 Achieves Over 80,000 Pre-Orders in Its First Month(-)
LI US: Li Auto Revises Down 2025 Production Target (+)


[Blue Lotus Daily]:1211 HK/LI US/1179 HK/ATAT US

<ul>
<li>On average, companies under our coverage are forecast to see a 47.3% YoY growth in net profit in 1Q25. Their results should be a pointer for the outlook in 2025. </li>
<li>Good results are expected at <a href="https://www.smartkarma.com/entities/shanghai-electric-group-company-limited-d542164d-4d5a-4ce0-b33e-5fe6bc34722c" target="_blank" data-smartkarma-citation="entities:8777:1" rel="noopener">Shanghai Electric Group (2727 HK)</a>, <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>, <a href="https://www.smartkarma.com/entities/china-cosco-holdings-h" target="_blank" data-smartkarma-citation="entities:286:1" rel="noopener">COSCO Shipping Hldgs (1919 HK)</a>, <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-national-building-ma-h" target="_blank" data-smartkarma-citation="entities:184:1" rel="noopener">CNBM (3323 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com Group (9961 HK)</a>, <a href="https://www.smartkarma.com/entities/xinhua-winshare-publishing-media-co-ltd" target="_blank" data-smartkarma-citation="entities:15072:1" rel="noopener">Xinhua Winshare (811 HK)</a>, <a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transp. (1138 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power (916 HK)</a> will see weaker 1Q25.</li>
</ul>


On average, companies under our coverage are forecast to see a 47.3% YoY growth in net profit in 1Q25. Their results should be a pointer for the outlook in 2025. 
Good results are expected at Shanghai Electric Group (2727 HK), Anhui Conch Cement (914 HK), COSCO Shipping Hldgs (1919 HK), Air China Ltd (753 HK), and CNBM (3323 HK). 

Shenzhen Expressway (548 HK), Trip.com Group (9961 HK), Xinhua Winshare (811 HK), Cosco Shipping Energy Transp. (1138 HK), and China Longyuan Power (916 HK) will see weaker 1Q25.


China & HK Strategy: 1Q25 Preview - The Good, the Bad, and the Ugly

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>Although the tech sector in Hong Kong has surged over the last couple of weeks there appears to be minimal short covering in US-listed China tech names.</li>
<li>The performance of the "Magnificent 5" China tech names has led the rally as we outlined in <a href="https://www.smartkarma.com/insights/hong-kong-the-glass-is-half-full-time-to-buy-beta" target="_blank" data-smartkarma-citation="insights:134396" rel="noopener">Hong Kong: The Glass Is Half Full, Time to BUY Beta</a> .</li>
<li>The combination of of large outstanding short positions and a significant underweight of HK/China in international funds will lead to further upside in the tech sector.</li>
</ul>


Although the tech sector in Hong Kong has surged over the last couple of weeks there appears to be minimal short covering in US-listed China tech names.
The performance of the "Magnificent 5" China tech names has led the rally as we outlined in Hong Kong: The Glass Is Half Full, Time to BUY Beta .
The combination of of large outstanding short positions and a significant underweight of HK/China in international funds will lead to further upside in the tech sector.


<ul>
<li>Data from <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com Group (9961 HK)</a> showed good improvement in travel demand for the 2024 New Year holidays. The volume of various orders has surged between 2x and 5x YoY. </li>
<li>Aggregate net profit for the tourism and hospitality sector has turned around to Rmb20.4bn in 3Q23, from losses of Rmb24.7bn a year ago, demonstrating solid profitability recovery.</li>
<li>An average of 32% drop in the sector's share price YTD is unjustified. We like <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a>, <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China (H) (753 HK)</a> and <a href="https://www.smartkarma.com/entities/fosun-tourism-group" target="_blank" data-smartkarma-citation="entities:27439:1" rel="noopener">Fosun Tourism (1992 HK)</a>.  </li>
</ul>


Data from Trip.com Group (9961 HK) showed good improvement in travel demand for the 2024 New Year holidays. The volume of various orders has surged between 2x and 5x YoY. 
Aggregate net profit for the tourism and hospitality sector has turned around to Rmb20.4bn in 3Q23, from losses of Rmb24.7bn a year ago, demonstrating solid profitability recovery.
An average of 32% drop in the sector's share price YTD is unjustified. We like Tongcheng Travel (780 HK), Air China (H) (753 HK) and Fosun Tourism (1992 HK).  


China Tourism and Hospitality Industry: Boom in 2024 New Year Travel Demand

China

H World Group is a leading global hospitality company that manages a diverse portfolio of hotel brands, ranging from economy to luxury segments. It provides quality accommodation and hospitality experiences through its leased and owned, manachised, and franchised hotel models. The company was founded in 2005 and is headquartered in Jiading District, Shanghai, China.

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H World Group (1179 HK)

China & HK Strategy: 1H25 Preview - Where Are the Upside and Downside Surprises?

The companies under our coverage are expected to report 16.8% earnings growth for 1H25, with 2Q25 accelerating to 30.8%. Top performers include...

Osbert Tang, CFA

[Blue Lotus Daily]:1211 HK/LI US/1179 HK/ATAT US

BYD, Geely, and Leapmotor cut prices, AITO M8 gains over 80,000 pre-orders, Li Auto revises production target for 2025.

Blue Lotus Research Institute

China & HK Strategy: 1Q25 Preview - The Good, the Bad, and the Ugly

Earnings for the companies under our coverage are expected to grow by 47.3% in 1Q25, with Shanghai Electric Group, Anhui Conch, COSCO Shipping...

Osbert Tang, CFA

HK/China: THE BIG SHORT (SQUEEZE)

Even though HK/China tech names have surged, short positions have not covered. The large underweight position in HK/China by international funds...

David Mudd

China Tourism and Hospitality Industry: Boom in 2024 New Year Travel Demand

China's National Immigration Administration estimates there will be 1.56m travelers passing through immigration during the 2024 Chinese New Year...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

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China & HK Strategy: 1H25 Preview - Where Are the Upside and Downside Surprises?

The companies under our coverage are expected to report 16.8% earnings growth for 1H25, with 2Q25 accelerating to 30.8%. Top performers include...

Osbert Tang, CFA

[Blue Lotus Daily]:1211 HK/LI US/1179 HK/ATAT US

​BYD, Geely, and Leapmotor cut prices, AITO M8 gains over 80,000 pre-orders, Li Auto revises production target for 2025.

Blue Lotus Research Institute

China & HK Strategy: 1Q25 Preview - The Good, the Bad, and the Ugly

Earnings for the companies under our coverage are expected to grow by 47.3% in 1Q25, with Shanghai Electric Group, Anhui Conch, COSCO Shipping...

Osbert Tang, CFA

HK/China: THE BIG SHORT (SQUEEZE)

Even though HK/China tech names have surged, short positions have not covered. The large underweight position in HK/China by international funds...

David Mudd

China Tourism and Hospitality Industry: Boom in 2024 New Year Travel Demand

China's National Immigration Administration estimates there will be 1.56m travelers passing through immigration during the 2024 Chinese New Year...

Osbert Tang, CFA

BYD, Geely, and Leapmotor cut prices, AITO M8 gains over 80,000 pre-orders, Li Auto revises production target for 2025.