HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China International Capital Corporation / Equity Bottom-Up

China International Capital Corporation (3908 HK)

<ul>
<li>China's securities industry is under a wave of consolidation. <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a> is interesting given its leadership in the investment banking business.</li>
<li>A combination with <a href="https://www.smartkarma.com/entities/china-galaxy-securities-co-h" target="_blank" data-smartkarma-citation="entities:165:1" rel="noopener">China Galaxy Securities (H) (6881 HK)</a> may bring synergy, given their different focuses. This will create the 3rd largest securities house in China. </li>
<li>Even without a merger, CICC also looks attractive with the US interest rate trending down. It is best set to gain upon the revival of the Hong Kong IPO market. </li>
</ul>


China's securities industry is under a wave of consolidation. China International Capital Corporation (3908 HK) is interesting given its leadership in the investment banking business.
A combination with China Galaxy Securities (H) (6881 HK) may bring synergy, given their different focuses. This will create the 3rd largest securities house in China. 
Even without a merger, CICC also looks attractive with the US interest rate trending down. It is best set to gain upon the revival of the Hong Kong IPO market. 


Global Equities, Multi-Asset PM, Dantes Outlook

Damanick Dantes, CMT

Global Equities, Multi-Asset PM

Dantes Outlook

We invest over a full market cycle, using multi-asset portfolios tailored to each global client, from individuals to family offices.

Built to Endure

Cross Asset Strategy

<ul>
<li>
Offshore relative value: We tested 12-month relative returns across onshore vs. offshore, and both vs. EM. Offshore China is the oversold leg, driven by its own weakness rather than onshore strength. </li>
<li>
AI rotation: The performance gap reflects capital favoring the onshore industrial upgrades vs. offshore consumption. Re-rating requires offshore earnings pickup regardless of how cheap the multiple looks.</li>
<li>
Stock selection:<a href="https://www.smartkarma.com/entities/msci-china-index" target="_blank" data-smartkarma-citation="entities:22895:1" rel="noopener">MSCI China Index (MXCN INDEX)</a> is dominated by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-limited" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba (9988 HK)</a> while dispersion across the index is wide. We built an investable bucket.
</li>
</ul>



Offshore relative value: We tested 12-month relative returns across onshore vs. offshore, and both vs. EM. Offshore China is the oversold leg, driven by its own weakness rather than onshore strength. 

AI rotation: The performance gap reflects capital favoring the onshore industrial upgrades vs. offshore consumption. Re-rating requires offshore earnings pickup regardless of how cheap the multiple looks.

Stock selection:MSCI China Index (MXCN INDEX) is dominated by Tencent (700 HK) and Alibaba (9988 HK) while dispersion across the index is wide. We built an investable bucket.



China Equities: Relative Upside in Offshore Vs. Onshore Stocks

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Thematic (Sector/Industry)

<ul>
<li>China considers launching a stock stabilization fund which could release RmB800B in liquidity support for the market.  Securities firms and insurance companies will be the major beneficiaries.</li>
<li>The mega merger between  <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong Securities Co Ltd (H) (6837 HK)</a> and <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a> could be the precursor to further industry consolidation.</li>
<li>Hong Kong trading volumes and IPO's set to surge as Beijing lifts sentiment.</li>
</ul>


China considers launching a stock stabilization fund which could release RmB800B in liquidity support for the market.  Securities firms and insurance companies will be the major beneficiaries.
The mega merger between  Haitong Securities Co Ltd (H) (6837 HK) and Guotai Junan Securities (2611 HK) could be the precursor to further industry consolidation.
Hong Kong trading volumes and IPO's set to surge as Beijing lifts sentiment.


<ul>
<li>While still progressing, <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a>'s merger will boost earnings. For 1Q26, the combined group will have seen a 66.9% earnings growth. </li>
<li>The IPO market boom is beneficial to CICC. YTD, it has a 36.9% share of the number of deals and 39.4% share in funds raised in Hong Kong.</li>
<li>Assuming completion by end-Sep, CICC will trade at 8.8x PER for FY27, a 26% premium to the sector average. However, its leadership position and the potential synergy support this.</li>
</ul>


While still progressing, China International Capital Corporation (3908 HK)'s merger will boost earnings. For 1Q26, the combined group will have seen a 66.9% earnings growth. 
The IPO market boom is beneficial to CICC. YTD, it has a 36.9% share of the number of deals and 39.4% share in funds raised in Hong Kong.
Assuming completion by end-Sep, CICC will trade at 8.8x PER for FY27, a 26% premium to the sector average. However, its leadership position and the potential synergy support this.


CICC (3908 HK): It's Getting More Interesting

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

COSCO SHIPPING Development / Event-Driven

<ul>
<li>AH spreads are slightly narrower, but performance is concentrated in fewer names and broad spread volatility is up. <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> now 5% through. CATL 10% through will help.</li>
<li>It feels like there were some concentrated shorts on H vs A. BYD performance on CATL and Hang Seng upweight/inclusion exacerbate the issue. CATL H less liquid than people think.</li>
<li>The data tables below update on a daily basis in the <a href="https://www.smartkarma.com/tools" target="_blank" rel="noopener">Tools</a> section of Smartkarma. The <a href="https://www.smartkarma.com/tools/quiddity/south-flow-monitor" target="_blank" rel="noopener">SOUTHBOUND Flow Monitor</a> and <a href="https://www.smartkarma.com/tools/quiddity/ah-shares-monitor" target="_blank" rel="noopener">AH Monitor</a> are both there free for SK readers.</li>
</ul>


AH spreads are slightly narrower, but performance is concentrated in fewer names and broad spread volatility is up. BYD (1211 HK) now 5% through. CATL 10% through will help.
It feels like there were some concentrated shorts on H vs A. BYD performance on CATL and Hang Seng upweight/inclusion exacerbate the issue. CATL H less liquid than people think.
The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Monitor are both there free for SK readers.


A/H Premium Tracker (To 23 May 2025):  AH Premia Contract, H Premia Names Perform Best; Batteries!

China

Huatai Securities Co., Ltd. operates securities businesses. The Company provides securities brokerage, securities underwriting, asset management, investment banking, and online exchange services. Huatai Securities mainly conducts businesses domestically.

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Huatai Securities Co Ltd (HTSC LI)

CICC (3908 HK): M&A Possibility

CICC announced that it has entered into agreements to merge with Dongxing Securities and Cinda Securities, instead of the widely rumoured China...

Osbert Tang, CFA

China Equities: Relative Upside in Offshore Vs. Onshore Stocks

Offshore China is improving relative to onshore China. We anticipate a re-ratings cycle and selected a basket of offshore stocks for active returns.

Damanick Dantes, CMT

Hong Kong/China Brokers: TAKE THE OFFER!

The HK/China brokers: 6030, 3908, 6886, 6806, 6881, 1776, 6178, 1456, 165, and 6099 have gained between 90% and 100% since the report was published...

David Mudd

CICC (3908 HK): It's Getting More Interesting

Merger boosts earnings for CICC, as the combined group's earnings surged 66.9% in 1Q26. It led the Hong Kong IPO market with strong growth and...

Osbert Tang, CFA

A/H Premium Tracker (To 23 May 2025): AH Premia Contract, H Premia Names Perform Best; Batteries!

AH Premia contract again. Interestingly, the best performing tranche of discount was stocks where Hs trade at a premium to As. BYD squeezed. CATL a...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CICC (3908 HK): M&A Possibility

CICC announced that it has entered into agreements to merge with Dongxing Securities and Cinda Securities, instead of the widely rumoured China...

Osbert Tang, CFA

China Equities: Relative Upside in Offshore Vs. Onshore Stocks

Offshore China is improving relative to onshore China. We anticipate a re-ratings cycle and selected a basket of offshore stocks for active returns.

Damanick Dantes, CMT

Hong Kong/China Brokers: TAKE THE OFFER!

The HK/China brokers: 6030, 3908, 6886, 6806, 6881, 1776, 6178, 1456, 165, and 6099 have gained between 90% and 100% since the report was published...

David Mudd

CICC (3908 HK): It's Getting More Interesting

​Merger boosts earnings for CICC, as the combined group's earnings surged 66.9% in 1Q26. It led the Hong Kong IPO market with strong growth and...

Osbert Tang, CFA

A/H Premium Tracker (To 23 May 2025): AH Premia Contract, H Premia Names Perform Best; Batteries!

AH Premia contract again. Interestingly, the best performing tranche of discount was stocks where Hs trade at a premium to As. BYD squeezed. CATL a...

Travis Lundy

Merger boosts earnings for CICC, as the combined group's earnings surged 66.9% in 1Q26. It led the Hong Kong IPO market with strong growth and...