HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>With the US interest rate heading lower, the HSI constituent companies with the highest gearing levels are the prime beneficiaries as their interest burden will lessen.</li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China (1928 HK)</a>, while it has the highest leverage, is not a near-term gain. This is because its debt structure with 100% fixed rate borrowings. </li>
<li>Based on the gearing level, floating rate proportion, and YTD performance, <a href="https://www.smartkarma.com/entities/new-world-development" target="_blank" data-smartkarma-citation="entities:7037:1" rel="noopener">New World Development (17 HK)</a> and <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> are the two potential best bets.</li>
</ul>


With the US interest rate heading lower, the HSI constituent companies with the highest gearing levels are the prime beneficiaries as their interest burden will lessen.

Sands China (1928 HK), while it has the highest leverage, is not a near-term gain. This is because its debt structure with 100% fixed rate borrowings. 
Based on the gearing level, floating rate proportion, and YTD performance, New World Development (17 HK) and Hang Lung Properties (101 HK) are the two potential best bets.


HK Strategy: Rate Cut Beneficiaries - Fixed & Floating Rate Debt Analysis

<ul>
<li>
<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>will suffer from a higher USD rate as Trump's massive deportation plan raises inflation.  High-cash companies will better position, however.</li>
<li>The surge in tariffs on US imports of goods from China will further accelerate supply chain diversification, boosting intra-Asia trade and driving <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC (883 HK)</a> may gain from a slowdown in the green transition in the US as oil prices are supported. <a href="https://www.smartkarma.com/entities/meitu-inc" target="_blank" data-smartkarma-citation="entities:23573:1" rel="noopener">Meitu Inc (1357 HK)</a>, given its crypto investments, will benefit. </li>
</ul>



China Southern Airlines (1055 HK) will suffer from a higher USD rate as Trump's massive deportation plan raises inflation.  High-cash companies will better position, however.
The surge in tariffs on US imports of goods from China will further accelerate supply chain diversification, boosting intra-Asia trade and driving SITC International (1308 HK). 

CNOOC (883 HK) may gain from a slowdown in the green transition in the US as oil prices are supported. Meitu Inc (1357 HK), given its crypto investments, will benefit. 


China & HK Strategy: Some Stocks for Trump Trade

<ul>
<li>The best-of-the-breed constituents are those that outperformed HSI YTD, rallied more than the Index in the Apr-May rebound, and retreated less than the Index in the May-Jun retreat. </li>
<li>Only 4 out of the 82 HSI members made it - <a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao (1378 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank (939 HK)</a>, and <a href="https://www.smartkarma.com/entities/orient-overseas-international" target="_blank" data-smartkarma-citation="entities:801:1" rel="noopener">Orient Overseas International (316 HK)</a>. </li>
<li>Their fundamentals look to stay strong, while both valuation and dividend yield appear to remain undemanding despite share price strengths. </li>
</ul>


The best-of-the-breed constituents are those that outperformed HSI YTD, rallied more than the Index in the Apr-May rebound, and retreated less than the Index in the May-Jun retreat. 
Only 4 out of the 82 HSI members made it - China Hongqiao (1378 HK), Tencent (700 HK), China Construction Bank (939 HK), and Orient Overseas International (316 HK). 
Their fundamentals look to stay strong, while both valuation and dividend yield appear to remain undemanding despite share price strengths. 


HK Strategy: What Are the Best-Of-The-Breed Stocks?

<ul>
<li>Surging by 19.4% since the trough on 19-Apr, the HSI is now only 3.2% shy away from the psychological resistance of 20,000. We look at some potential profit-taking names. </li>
<li>Heavy-Weights like <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> are among the best-performing ones YTD and since the trough. Hence they are more exposed, particularly for Meituan.</li>
<li>
<a href="https://www.smartkarma.com/entities/haidilao-international-holding" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao International Holding (6862 HK)</a> and <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> are another two on the list. Their valuations are no longer inexpensive relative to 3-year earnings CAGR.</li>
</ul>


Surging by 19.4% since the trough on 19-Apr, the HSI is now only 3.2% shy away from the psychological resistance of 20,000. We look at some potential profit-taking names. 
Heavy-Weights like Meituan (3690 HK) and Tencent (700 HK) are among the best-performing ones YTD and since the trough. Hence they are more exposed, particularly for Meituan.

Haidilao International Holding (6862 HK) and ENN Energy (2688 HK) are another two on the list. Their valuations are no longer inexpensive relative to 3-year earnings CAGR.


HK Strategy: To Sell or Not to Sell, that Is the Question

<ul>
<li>Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.</li>
<li>
<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/link-reit" target="_blank" data-smartkarma-citation="entities:872:1" rel="noopener">Link REIT (823 HK)</a>, <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> and <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a> are massive laggards YTD.</li>
<li>As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. </li>
</ul>


Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.

Li Auto (2015 HK), Link REIT (823 HK), China Mengniu Dairy Co (2319 HK), Hang Lung Properties (101 HK) and Galaxy Entertainment Group (27 HK) are massive laggards YTD.
As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. 


HK Strategy: Where Are the Short-Term Opportunities?

Hong Kong

Orient Overseas (International) is an investment holding company primarily engaged in international container transport and logistics services, offering global containerized shipping and supply chain management. It also has interests in property investment and development. The company was incorporated in 1986 and is headquartered in Hong Kong.

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Orient Overseas (International) (316 HK)

HK Strategy: Rate Cut Beneficiaries - Fixed & Floating Rate Debt Analysis

With the Fed hinting at a slower rate cut path, the beneficiaries mentioned in this Insight will turn to suffer more. The names with the highest...

Osbert Tang, CFA

China & HK Strategy: Some Stocks for Trump Trade

A higher USD rate due to Trump's deportation plan will impact CSA. Tariff surge on US imports from China will boost SITC. CNOOC may benefit from...

Osbert Tang, CFA

HK Strategy: What Are the Best-Of-The-Breed Stocks?

Only 4 HSI members have outperformed YTD, in the Apr-May rally, and in the May-Jun retreat: China Hongqiao, Tencent, China Construction Bank, and...

Osbert Tang, CFA

HK Strategy: To Sell or Not to Sell, that Is the Question

HSI surges by 19.4% nearing the 20,000 resistance, potential profit-taking names include Meituan, Tencent, Haidilao, and ENN Energy due to strong...

Osbert Tang, CFA

HK Strategy: Where Are the Short-Term Opportunities?

Li Auto, Link REIT, China Mengniu, Hang Lung Properties, and Galaxy Entertainment are massive laggards YTD but the recent rebound from the trough...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HK Strategy: Rate Cut Beneficiaries - Fixed & Floating Rate Debt Analysis

With the Fed hinting at a slower rate cut path, the beneficiaries mentioned in this Insight will turn to suffer more. The names with the highest...

Osbert Tang, CFA

China & HK Strategy: Some Stocks for Trump Trade

​A higher USD rate due to Trump's deportation plan will impact CSA. Tariff surge on US imports from China will boost SITC. CNOOC may benefit from...

Osbert Tang, CFA

HK Strategy: What Are the Best-Of-The-Breed Stocks?

​Only 4 HSI members have outperformed YTD, in the Apr-May rally, and in the May-Jun retreat: China Hongqiao, Tencent, China Construction Bank, and...

Osbert Tang, CFA

HK Strategy: To Sell or Not to Sell, that Is the Question

​HSI surges by 19.4% nearing the 20,000 resistance, potential profit-taking names include Meituan, Tencent, Haidilao, and ENN Energy due to strong...

Osbert Tang, CFA

HK Strategy: Where Are the Short-Term Opportunities?

Li Auto, Link REIT, China Mengniu, Hang Lung Properties, and Galaxy Entertainment are massive laggards YTD but the recent rebound from the trough...

Osbert Tang, CFA

A higher USD rate due to Trump's deportation plan will impact CSA. Tariff surge on US imports from China will boost SITC. CNOOC may benefit from...

Only 4 HSI members have outperformed YTD, in the Apr-May rally, and in the May-Jun retreat: China Hongqiao, Tencent, China Construction Bank, and...

HSI surges by 19.4% nearing the 20,000 resistance, potential profit-taking names include Meituan, Tencent, Haidilao, and ENN Energy due to strong...