Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<ul>
<li>Hong Kong Alpha portfolio lost 2.9% in November, but has outperformed its benchmark by 4.9% since inception on October 1st.  It has outperformed HSI, HSCI and HSCEI by 9%.</li>
<li>Hong Kong Alpha has generated idiosyncratic returns during the market correction.  The portfolio has no exposure to energy, healthcare and property sectors. </li>
<li>We exit 4 positions at the end of the month and add positions in software, tech components, travel and restaurant sectors.</li>
</ul>


Hong Kong Alpha portfolio lost 2.9% in November, but has outperformed its benchmark by 4.9% since inception on October 1st.  It has outperformed HSI, HSCI and HSCEI by 9%.
Hong Kong Alpha has generated idiosyncratic returns during the market correction.  The portfolio has no exposure to energy, healthcare and property sectors. 
We exit 4 positions at the end of the month and add positions in software, tech components, travel and restaurant sectors.


HONG KONG ALPHA PORTFOLIO (November 2024)

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

<ul>
<li>
<a href="https://www.smartkarma.com/insights/hk-listed-apparel-footwear-screener-right-stocks-listed-in-the-wrong-market-attractive-yield-rapid-expansion-outside-china-sep-2024" target="_blank" data-smartkarma-citation="insights:158210" rel="noopener">HK-Listed Apparel &amp; Footwear Screener: Right Stocks Listed in the Wrong Market - Attractive Yield &amp; Rapid Expansion Outside China - Sep 2024</a>  helped us screen out great names.</li>
<li>
<a href="https://www.smartkarma.com/entities/jnby-design-ltd" target="_blank" data-smartkarma-citation="entities:23642:1" rel="noopener">JNBY Design Ltd (3306 HK)</a>, an apparel retailer trading at 9.2x FY24 with a ~10% yield and a long-term track record of &gt;34% 10 Yr-average ROCEs, is one such name. </li>
<li>Even with modest single-digit growth guidance, we see a growing yield and a great cash buffer (20% of the market cap), and dividends are sustainable. </li>
</ul>



HK-Listed Apparel &amp; Footwear Screener: Right Stocks Listed in the Wrong Market - Attractive Yield &amp; Rapid Expansion Outside China - Sep 2024  helped us screen out great names.

JNBY Design Ltd (3306 HK), an apparel retailer trading at 9.2x FY24 with a ~10% yield and a long-term track record of &gt;34% 10 Yr-average ROCEs, is one such name. 
Even with modest single-digit growth guidance, we see a growing yield and a great cash buffer (20% of the market cap), and dividends are sustainable. 


JNBY (3306 HK): >34% ROCE Track Record/10% Dividend Yield/Net Cash Business

<ul>
<li>The HK market is moving, and the share prices of high-yield companies are increasing. Despite the average YTD returns of 36%, stocks are trading at 5-18% dividend yields. </li>
<li>We await the November results of <a href="https://www.smartkarma.com/entities/pacific-textiles-holdings" target="_blank" rel="noopener">Pacific Textiles (1382 HK)</a>, which we will soon initiate coverage on.</li>
<li>We note <a href="https://www.smartkarma.com/entities/yue-yuen-industrial-holdings-limited" target="_blank" rel="noopener">that Yue Yuen Industrial Holdings (551 HK)</a> continues with its buybacks, having repurchased 3.2 million shares (0.2% of outstanding shares) since August 28th, 2024. </li>
</ul>


The HK market is moving, and the share prices of high-yield companies are increasing. Despite the average YTD returns of 36%, stocks are trading at 5-18% dividend yields. 
We await the November results of Pacific Textiles (1382 HK), which we will soon initiate coverage on.
We note that Yue Yuen Industrial Holdings (551 HK) continues with its buybacks, having repurchased 3.2 million shares (0.2% of outstanding shares) since August 28th, 2024. 


HK-Listed Apparel & Footwear Screener:  Attractive Yield & Rapid Expansion Outside China - Oct 2024

<ul>
<li>ETF flows in the Asian region continued their positive momentum during August with Southbound Connect positive again for the week.</li>
<li>
<a href="https://www.smartkarma.com/entities/stella-international" target="_blank" data-smartkarma-citation="entities:7610:1" rel="noopener">Stella International (1836 HK)</a> will increase its dividends and buybacks after positive earnings surprise. <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a> saw a surge in new policies from mainlanders in HK.
</li>
<li>
<a href="https://www.smartkarma.com/entities/lufax-holding-ltd-b751749a-8feb-4b4d-85a7-d99ac0308fe7" target="_blank" data-smartkarma-citation="entities:40067:1" rel="noopener">Lufax Holding (6623 HK)</a> reported an earnings miss with declining loan volume. <a href="https://www.smartkarma.com/entities/yancoal-australia" target="_blank" data-smartkarma-citation="entities:8427:1" rel="noopener">Yancoal Australia (3668 HK)</a> reported a decline of 57% in earnings which was below analysts' estimates.
</li>
</ul>


ETF flows in the Asian region continued their positive momentum during August with Southbound Connect positive again for the week.

Stella International (1836 HK) will increase its dividends and buybacks after positive earnings surprise. AIA Group Ltd (1299 HK) saw a surge in new policies from mainlanders in HK.


Lufax Holding (6623 HK) reported an earnings miss with declining loan volume. Yancoal Australia (3668 HK) reported a decline of 57% in earnings which was below analysts' estimates.



The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 26)

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

<ul>
<li>There are 38 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.</li>
<li>We expect 33 of the 38 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.</li>
<li>Since the start of the calendar year, shares held though Southbound Connect have increased in 22 of the 27 HSCI deletions that will also be removed from Stock Connect.</li>
</ul>


There are 38 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
We expect 33 of the 38 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
Since the start of the calendar year, shares held though Southbound Connect have increased in 22 of the 27 HSCI deletions that will also be removed from Stock Connect.


HSCI Index Rebalance: 38 Adds, 29 Deletes & Changes to Southbound Stock Connect

Hong Kong

Stella International is an investment holding company primarily engaged in the development, manufacturing, and sale of premium footwear products and leather goods. The company also operates in footwear retailing and wholesaling, offering products under its own brands such as Stella Luna. It was founded in 1982 and is headquartered in Kowloon, Hong Kong.

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Stella International (1836 HK)

HONG KONG ALPHA PORTFOLIO (November 2024)

Hong Kong Alpha portfolio continues to outperform during the market correction in HK/China stocks. We continue to like the consumer discretionary...

David Mudd

JNBY (3306 HK): >34% ROCE Track Record/10% Dividend Yield/Net Cash Business

Insight highlights HK-listed apparel and footwear stocks with attractive yields and expansion outside China. JNBY Design Ltd (3306 HK) stands out...

Sameer Taneja

HK-Listed Apparel & Footwear Screener: Attractive Yield & Rapid Expansion Outside China - Oct 2024

We compile a list of ten high-yielding/net cash or low-net debt stocks in HK's apparel/footwear value chain. Despite the recent rally in HK,...

Sameer Taneja

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 26)

ETF flows were again led by China. Stella International reported a surge in earnings and AIA announced new policy growth exceeded expectations....

David Mudd

HSCI Index Rebalance: 38 Adds, 29 Deletes & Changes to Southbound Stock Connect

There are 38 adds and 29 deletes for the HSCI at the September rebalance to take the number of index constituents up to 518. There will be a lot of...

Brian Freitas

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