HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Our "Buy the Worst" strategy made a strong comeback in 2025, outperforming the HSI by 11.1pp YTD, reversing the losses in the last two years.</li>
<li>For 2026, the strategy will hold <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (9618 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy (2319 HK)</a>.  </li>
<li>The position in <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy (2319 HK)</a> may be replaced by <a href="https://www.smartkarma.com/entities/new-oriental-education-techn" target="_blank" data-smartkarma-citation="entities:32210:1" rel="noopener">New Oriental Education (9901 HK)</a> or <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a>, depending on their closing prices on 31 Dec. </li>
</ul>


Our "Buy the Worst" strategy made a strong comeback in 2025, outperforming the HSI by 11.1pp YTD, reversing the losses in the last two years.
For 2026, the strategy will hold Meituan (3690 HK), Li Auto (2015 HK), BYD Electronics (285 HK), JD.com (9618 HK), and China Mengniu Dairy (2319 HK).  
The position in China Mengniu Dairy (2319 HK) may be replaced by New Oriental Education (9901 HK) or Zhongsheng Group (881 HK), depending on their closing prices on 31 Dec. 


"Buy the Worst" HSI Strategy: A Fruitful 2025, Our Picks for 2026

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

Shenton Research

Shenton 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 analysed the earning revision of component stocks of HSI in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on AIA, LI AUTO, PING AN, ICBC, ORIENT OVERSEAS (INTERNATIONAL), LONGFOR, WEICHAI POWER, BIDU.</li>
</ul>


We analysed the earning revision of component stocks of HSI in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on AIA, LI AUTO, PING AN, ICBC, ORIENT OVERSEAS (INTERNATIONAL), LONGFOR, WEICHAI POWER, BIDU.


HSI Index Earning Revision (Sep): AIA, LI AUTO, PING AN, ICBC, ORIENT OVERSEAS (INTERNATIONAL), BIDU

<ul>
<li>Following a 20% rally in 1H25, the market has built in excessive optimism on the HSI. Historically, average returns for Jul-Oct are negative, suggesting caution is needed.</li>
<li>The top 10 best-performing constituents are sitting on 24x FY25F PER, much higher than 11x for the Index, implying that earnings excitement has been well factored in. </li>
<li>Among the worst-performing ones in 1H25, <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a>, <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home (6690 HK)</a>, and <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Industries (669 HK)</a> look appealing in 2H25.</li>
</ul>


Following a 20% rally in 1H25, the market has built in excessive optimism on the HSI. Historically, average returns for Jul-Oct are negative, suggesting caution is needed.
The top 10 best-performing constituents are sitting on 24x FY25F PER, much higher than 11x for the Index, implying that earnings excitement has been well factored in. 
Among the worst-performing ones in 1H25, BYD Electronics (285 HK), Haier Smart Home (6690 HK), and Techtronic Industries (669 HK) look appealing in 2H25.


Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.</li>
<li>In this insight, we take a look at the rankings of potential ADDs and potential DELs for the December 2026 index rebal event.</li>
<li>At present, we see two changes based on the latest data but the rankings can change until 30th September 2026.</li>
</ul>


The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.
In this insight, we take a look at the rankings of potential ADDs and potential DELs for the December 2026 index rebal event.
At present, we see two changes based on the latest data but the rankings can change until 30th September 2026.


Quiddity Leaderboard HSCEI Dec26: Two ADDs/DELs Likely

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>Hong Kong Dollar continues to trade at the strong end of its band  resulting in upward pressure on HIBOR in turn causing a further unwind of the HKD carry trade.</li>
<li>HSI shows the strongest market breadth in 15 years as nearly all members trade above 200 DMA.</li>
<li>
<a href="https://www.smartkarma.com/entities/xtep-international-holdings" target="_blank" data-smartkarma-citation="entities:18118:1" rel="noopener">Xtep International (1368 HK)</a> , <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> and <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a> all had breakouts to form uptrends.  All are part of the consumption sector in China
</li>
</ul>


Hong Kong Dollar continues to trade at the strong end of its band  resulting in upward pressure on HIBOR in turn causing a further unwind of the HKD carry trade.
HSI shows the strongest market breadth in 15 years as nearly all members trade above 200 DMA.

Xtep International (1368 HK) , Xiaomi Corp (1810 HK) and China Education Group (839 HK) all had breakouts to form uptrends.  All are part of the consumption sector in China



Technically Speaking, Breakouts and Breakdowns: HONG KONG (OCTOBER 14)

China

New Oriental Education & Technology Group is a leading provider of private educational services in China, offering a comprehensive range of programs including language training, test preparation courses, and online education. The company has expanded its offerings to include livestreaming e-commerce and private label products. It was founded in 1993 and is headquartered in Beijing, China.

New Oriental Education & Technology Group (9901 HK)

New Oriental Education & Technology Group

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

New Oriental Education & Technology Group (9901 HK)

"Buy the Worst" HSI Strategy: A Fruitful 2025, Our Picks for 2026

The "Buy the Worst" strategy outperformed the HSI by 11.1pp YTD in 2025. For 2026, it will hold Meituan, Li Auto, BYD Electronics, JD.com, and...

Osbert Tang, CFA

HSI Index Earning Revision (Sep): AIA, LI AUTO, PING AN, ICBC, ORIENT OVERSEAS (INTERNATIONAL), BIDU

We analyzed HSI's consensus for Sep 2026 and highlighted changes of EPS in AIA, LI AUTO, PING AN, ICBC, ORIENT OVERSEAS (INTERNATIONAL), LONGFOR,...

Ke Yan, CFA, FRM

HK Strategy: Some Ideas for 2H25

Excessive optimism on HSI after a 20% rally YTD, caution needed for Jul-Oct as historically returns are negative. BYD Electronic, Haier Smart...

Osbert Tang, CFA

Quiddity Leaderboard HSCEI Dec26: Two ADDs/DELs Likely

One of our expected DELs have more than 1x ADV to trade. The other names have less than 1x ADV to trade. However, our flow expectations can change...

Janaghan Jeyakumar, CFA

Technically Speaking, Breakouts and Breakdowns: HONG KONG (OCTOBER 14)

HKD strengthens, HIBOR moves higher and HK shorts become more expensive. HK market breadth reached its highest level in 15 years last week. Xtep,...

David Mudd

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

"Buy the Worst" HSI Strategy: A Fruitful 2025, Our Picks for 2026

​The "Buy the Worst" strategy outperformed the HSI by 11.1pp YTD in 2025. For 2026, it will hold Meituan, Li Auto, BYD Electronics, JD.com, and...

Osbert Tang, CFA

HSI Index Earning Revision (Sep): AIA, LI AUTO, PING AN, ICBC, ORIENT OVERSEAS (INTERNATIONAL), BIDU

We analyzed HSI's consensus for Sep 2026 and highlighted changes of EPS in AIA, LI AUTO, PING AN, ICBC, ORIENT OVERSEAS (INTERNATIONAL), LONGFOR,...

Ke Yan, CFA, FRM

HK Strategy: Some Ideas for 2H25

​Excessive optimism on HSI after a 20% rally YTD, caution needed for Jul-Oct as historically returns are negative. BYD Electronic, Haier Smart...

Osbert Tang, CFA

Quiddity Leaderboard HSCEI Dec26: Two ADDs/DELs Likely

One of our expected DELs have more than 1x ADV to trade. The other names have less than 1x ADV to trade. However, our flow expectations can change...

Janaghan Jeyakumar, CFA

Technically Speaking, Breakouts and Breakdowns: HONG KONG (OCTOBER 14)

HKD strengthens, HIBOR moves higher and HK shorts become more expensive. HK market breadth reached its highest level in 15 years last week. Xtep,...

David Mudd

The "Buy the Worst" strategy outperformed the HSI by 11.1pp YTD in 2025. For 2026, it will hold Meituan, Li Auto, BYD Electronics, JD.com, and...

Excessive optimism on HSI after a 20% rally YTD, caution needed for Jul-Oct as historically returns are negative. BYD Electronic, Haier Smart...