HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>By way of its 54.79% ownership in <a href="https://www.smartkarma.com/entities/zheshang-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:29981:1" rel="noopener">Zheshang Securities (601878 CH)</a>, <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> is an attractive indirect vehicle to access the mainland securities sector.  </li>
<li>The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.</li>
<li>ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.</li>
</ul>


By way of its 54.79% ownership in Zheshang Securities (601878 CH), Zhejiang Expressway Co H (576 HK) is an attractive indirect vehicle to access the mainland securities sector.  
The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.
ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.


Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

Smartkarma AI Primers, Smartkarma

αSK Primers

Smartkarma AI Primers

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<ul>
  <li>Haitong Securities is a top-tier, full-service securities firm in China with significant operations in brokerage, investment banking, and asset management, ranking among the top five by total assets.</li>
  <li>The company is navigating a challenging period marked by a sharp decline in net income, driven by lackluster market conditions, losses in its Hong Kong operations, and increased asset impairment provisions.</li>
  <li>A proposed merger with Guotai Junan Securities, announced in late 2024, is a key strategic initiative aimed at creating China's largest brokerage, enhancing competitiveness, and navigating industry consolidation and regulatory shifts.</li>
</ul><p><em>This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.</em></p>


  Haitong Securities is a top-tier, full-service securities firm in China with significant operations in brokerage, investment banking, and asset management, ranking among the top five by total assets.
  The company is navigating a challenging period marked by a sharp decline in net income, driven by lackluster market conditions, losses in its Hong Kong operations, and increased asset impairment provisions.
  A proposed merger with Guotai Junan Securities, announced in late 2024, is a key strategic initiative aimed at creating China's largest brokerage, enhancing competitiveness, and navigating industry consolidation and regulatory shifts.
This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

Primer: Haitong Securities Co Ltd (H) (6837 HK) - Apr 2026

Thematic (Sector/Industry)

<ul>
<li>CSRC's Market Value Management Guidelines will indirectly benefit the H-share stocks with their A-share counterparts with a P/B of below 1x.  </li>
<li>Chinese banks dominated the list with below-book A-shares. <a href="https://www.smartkarma.com/entities/china-everbright-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:16221:1" rel="noopener">China Everbright Bank (6818 HK)</a>, <a href="https://www.smartkarma.com/entities/china-citic-bank-corp-ltd-ea6c25fd-4b20-45cb-a4a6-df7a60136f03" target="_blank" data-smartkarma-citation="entities:653:1" rel="noopener">China Citic Bank H (998 HK)</a>, and <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> are the prime beneficiaries.</li>
<li>Infrastructure construction companies <a href="https://www.smartkarma.com/entities/china-railway-construction-corp-limited" target="_blank" data-smartkarma-citation="entities:263:1" rel="noopener">China Railway Cons Corp (1186 HK)</a>, <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group H (390 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Comm Cons (1800 HK)</a> are also well-positioned to gain.</li>
</ul>


CSRC's Market Value Management Guidelines will indirectly benefit the H-share stocks with their A-share counterparts with a P/B of below 1x.  
Chinese banks dominated the list with below-book A-shares. China Everbright Bank (6818 HK), China Citic Bank H (998 HK), and ICBC (H) (1398 HK) are the prime beneficiaries.
Infrastructure construction companies China Railway Cons Corp (1186 HK), China Railway Group H (390 HK), and China Comm Cons (1800 HK) are also well-positioned to gain.


China & HK Strategy: Names to Watch for Market Value Management

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

Shenzhen Salubris Pharmaceuticals A / Index Rebalance

Shenzhen Salubris Pharmaceuticals A (002294 CH)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dongxing-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:25320:1" rel="noopener">Dongxing Securities (601198 CH)</a> and <a href="https://www.smartkarma.com/entities/cinda-securities-company-limited" target="_blank" data-smartkarma-citation="entities:45389:1" rel="noopener">Cinda Securities (601059 CH)</a> shares will stop trading after 14 September following the merger with <a href="https://www.smartkarma.com/entities/china-international-capital-co" target="_blank" data-smartkarma-citation="entities:33010:1" rel="noopener">China International Capital (601995 CH)</a>. </li>
<li>There will be buying in <a href="https://www.smartkarma.com/entities/china-international-capital-co" target="_blank" data-smartkarma-citation="entities:33010:1" rel="noopener">China International Capital (601995 CH)</a> from global index trackers at the close on Monday.</li>
<li>There will be additions and other flows for the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300 Index</a>, <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI 500 Index</a> and the CSI 1000 Index at the time of delisting of <a href="https://www.smartkarma.com/entities/dongxing-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:25320:1" rel="noopener">Dongxing Securities</a> and <a href="https://www.smartkarma.com/entities/cinda-securities-company-limited" target="_blank" data-smartkarma-citation="entities:45389:1" rel="noopener">Cinda Securities</a>.</li>
</ul>



Dongxing Securities (601198 CH) and Cinda Securities (601059 CH) shares will stop trading after 14 September following the merger with China International Capital (601995 CH). 
There will be buying in China International Capital (601995 CH) from global index trackers at the close on Monday.
There will be additions and other flows for the CSI 300 Index, CSI 500 Index and the CSI 1000 Index at the time of delisting of Dongxing Securities and Cinda Securities.


CICC/ Dongxing Sec/ Cinda Sec Merger: Index Flows Next Week & More Later

<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

China

Haitong Securities is a major Chinese securities company offering a comprehensive suite of financial services, including brokerage, investment banking, asset management, and private equity. The company also provides alternative investments and financial leasing services. It was founded in 1988 and is headquartered in Shanghai, China.

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Haitong Securities (6HT GR)

Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

Primer: Haitong Securities Co Ltd (H) (6837 HK) - Apr 2026

Haitong Securities is a top-tier, full-service securities firm in China with significant operations in brokerage, investment banking, and asset...

αSK Primers

China & HK Strategy: Names to Watch for Market Value Management

SASAC issued "Several opinions on improving and strengthening the market value management of listed companies controlled by central enterprises"...

Osbert Tang, CFA

CICC/ Dongxing Sec/ Cinda Sec Merger: Index Flows Next Week & More Later

Dongxing Sec and Cinda Sec stop trading from 15 Sep following the merger with CICC. There are changes for the CSI300/500/1000 indices and passive...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

​Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

Primer: Haitong Securities Co Ltd (H) (6837 HK) - Apr 2026

Haitong Securities is a top-tier, full-service securities firm in China with significant operations in brokerage, investment banking, and asset...

αSK Primers

China & HK Strategy: Names to Watch for Market Value Management

SASAC issued "Several opinions on improving and strengthening the market value management of listed companies controlled by central enterprises"...

Osbert Tang, CFA

CICC/ Dongxing Sec/ Cinda Sec Merger: Index Flows Next Week & More Later

Dongxing Sec and Cinda Sec stop trading from 15 Sep following the merger with CICC. There are changes for the CSI300/500/1000 indices and passive...

Brian Freitas

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

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

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