HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Chinese government will continue to boost the slowing domestic economy by supporting consumption. The A-share consumer staples sector, which is less volatile than discretionary, will be benefited.</li>
<li>We see attractive stories for <a href="https://www.smartkarma.com/entities/shanxi-xinghuacun-fen-wine-factory-co" target="_blank" data-smartkarma-citation="entities:9288:1" rel="noopener">Shanxi Xinghuacun Fen Wine (600809 CH)</a>, <a href="https://www.smartkarma.com/entities/foshan-haitian-flavouring-food-co-ltd" target="_blank" data-smartkarma-citation="entities:15577:1" rel="noopener">Foshan Haitian Flavouring (603288 CH)</a>, <a href="https://www.smartkarma.com/entities/inner-mongolia-yili-indus-a" target="_blank" data-smartkarma-citation="entities:3220:1" rel="noopener">Inner Mongolia Yili Industrial (600887 CH)</a> and <a href="https://www.smartkarma.com/entities/fu-jian-anjoy-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:30110:1" rel="noopener">Fu Jian Anjoy Foods (603345 CH)</a>.  </li>
<li>While they are trading on high-end of peer multiples, their earnings quality, leadership status and product premiumisation provide good justifications for valuation. Also, all of them have solid financial position.  </li>
</ul>


Chinese government will continue to boost the slowing domestic economy by supporting consumption. The A-share consumer staples sector, which is less volatile than discretionary, will be benefited.
We see attractive stories for Shanxi Xinghuacun Fen Wine (600809 CH), Foshan Haitian Flavouring (603288 CH), Inner Mongolia Yili Industrial (600887 CH) and Fu Jian Anjoy Foods (603345 CH).  
While they are trading on high-end of peer multiples, their earnings quality, leadership status and product premiumisation provide good justifications for valuation. Also, all of them have solid financial position.  


China A-Share Consumer Staples: An Analysis of the Opportunities Ahead

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Greatview Aseptic Packaging / Event-Driven

<ul>
<li>Back on the 27 January 2023, <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson (JM SP)</a> entered an agreement with <a href="https://www.smartkarma.com/entities/shandong-xinjufeng-technology-packaging-co-ltd" target="_blank" data-smartkarma-citation="entities:36744:1" rel="noopener">Shandong Xinjufeng (301296 CH)</a> (XJF) to sell its 28.22% stake in <a href="https://www.smartkarma.com/entities/greatview-aseptic-packaging" target="_blank" data-smartkarma-citation="entities:10802:1" rel="noopener">GAPack (468 HK)</a>. </li>
<li>That sale completed in September.  Last week, XJF requisitioned an EGM to consider appointing five new (&amp; friendly) directors, all-but taking control of the board. </li>
<li>CEO and founder Jeff Bi holds 9.65%. The question is: what are his options?</li>
</ul>


Back on the 27 January 2023, Jardine Matheson (JM SP) entered an agreement with Shandong Xinjufeng (301296 CH) (XJF) to sell its 28.22% stake in GAPack (468 HK). 
That sale completed in September.  Last week, XJF requisitioned an EGM to consider appointing five new (&amp; friendly) directors, all-but taking control of the board. 
CEO and founder Jeff Bi holds 9.65%. The question is: what are his options?


GAPack (468 HK): Unpacking XJF's Move To Send The Board Packing

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>The Hong Kong market bounced off its long-term support levels in June and has outperformed the region in July, benefiting from rotational and southbound buying.</li>
<li>In a positive sign, the financials sector has rallied this month and is the second-best-performing sector YTD at +11%.  Value and dividend factors continue to perform well.</li>
<li>Youran Dairy (9858 HK) had a Descending Trendline Breakout after the company announced that Inner Mongolia Yili Industrial Group (A) (600887 CH) acquired a significant stake in the company.</li>
</ul>


The Hong Kong market bounced off its long-term support levels in June and has outperformed the region in July, benefiting from rotational and southbound buying.
In a positive sign, the financials sector has rallied this month and is the second-best-performing sector YTD at +11%.  Value and dividend factors continue to perform well.
Youran Dairy (9858 HK) had a Descending Trendline Breakout after the company announced that Inner Mongolia Yili Industrial Group (A) (600887 CH) acquired a significant stake in the company.


Technically Speaking Breakouts & Breakdowns - HONG KONG (July 2026)

<ul>
<li>Performance of China A-share consumer staples stayed lacklustre in the last three months, underperforming benchmark indexes. Negative consumer sentiments have weighted on them. </li>
<li>The pullback in valuations, however, has made them look more appealing now. Excluding <a href="https://www.smartkarma.com/entities/foshan-haitian-flavouring-food-co-ltd" target="_blank" data-smartkarma-citation="entities:15577:1" rel="noopener">Foshan Haitian Flavouring &amp; Food (603288 CH)</a>, there has been no earnings downgrades. </li>
<li>Both <a href="https://www.smartkarma.com/entities/shanxi-xinghuacun-fen-wine-factory-co" target="_blank" data-smartkarma-citation="entities:9288:1" rel="noopener">Shanxi Xinghuacun Fen Wine Factory Co (600809 CH)</a> and <a href="https://www.smartkarma.com/entities/anjoy-foods-group-co-ltd" target="_blank" data-smartkarma-citation="entities:30110:1" rel="noopener">Fu Jian Anjoy Foods Group (603345 CH)</a> have pre-announced 1H23 results which showed good 2Q23 earnings.</li>
</ul>


Performance of China A-share consumer staples stayed lacklustre in the last three months, underperforming benchmark indexes. Negative consumer sentiments have weighted on them. 
The pullback in valuations, however, has made them look more appealing now. Excluding Foshan Haitian Flavouring &amp; Food (603288 CH), there has been no earnings downgrades. 
Both Shanxi Xinghuacun Fen Wine Factory Co (600809 CH) and Fu Jian Anjoy Foods Group (603345 CH) have pre-announced 1H23 results which showed good 2Q23 earnings.


China A-Share Consumer Staples: The Most Challenging Time Is Behind

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with positive momentum over 2Q.</li><li>Considering the price gap between beer and other alcoholic drinks, and also the growing preference of low alcoholic content, in our view, breweries still offer a multi-year story that looks to be sustainable in the next 4-5 years.</li><li>In the contrary, we continue to see near-term drags in baijiu, dairies and condiments that not only led to a lacklustre 2Q but also a possible slow 2H. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with positive momentum over 2Q.Considering the price gap between beer and other alcoholic drinks, and also the growing preference of low alcoholic content, in our view, breweries still offer a multi-year story that looks to be sustainable in the next 4-5 years.In the contrary, we continue to see near-term drags in baijiu, dairies and condiments that not only led to a lacklustre 2Q but also a possible slow 2H. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Consumer Staples – Divergence continues

China

Inner Mongolia Yili Industrial Group Co., Ltd. produces milk, powdered milk, ice cream, and other dairy products.  The Company also produces frozen food and noodles.

Inner Mongolia Yili Industrial Group (A) (600887 CH)

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Inner Mongolia Yili Industrial Group (A) (600887 CH)

GAPack (468 HK): Unpacking XJF's Move To Send The Board Packing

Nothing like bringing one of your customers - China Mengniu - on board (so to speak), both as a substantial shareholder (5.01%) and board member...

David Blennerhassett

Technically Speaking Breakouts & Breakdowns - HONG KONG (July 2026)

The Hong Kong market bounced off its long-term support levels in June and has outperformed the region in July, benefiting from rotational and...

David Mudd

China Consumer Staples – Divergence continues

We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with...

CMB International

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China A-Share Consumer Staples: An Analysis of the Opportunities Ahead

With the recent IPOs of Foshan Haitian Flavouring and Fujian Anjoy Foods (planned), we think the interest in China's consumer staples sector will...

Osbert Tang, CFA

GAPack (468 HK): Unpacking XJF's Move To Send The Board Packing

Nothing like bringing one of your customers - China Mengniu - on board (so to speak), both as a substantial shareholder (5.01%) and board member...

David Blennerhassett

Technically Speaking Breakouts & Breakdowns - HONG KONG (July 2026)

The Hong Kong market bounced off its long-term support levels in June and has outperformed the region in July, benefiting from rotational and...

David Mudd

China A-Share Consumer Staples: The Most Challenging Time Is Behind

Negative consumer appetite has affected the performance of Chinese A-share consumer staples. With no significant earnings downgrades for most, the...

Osbert Tang, CFA

China Consumer Staples – Divergence continues

We had diverging takeaways from our distributor chancel check after the Dragon Boat Festival holiday, with beer being the only segment with...

CMB International