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Cross Asset Strategy

<ul><li>Wahaha / Cover Story: Succession, scandal and bottled water — the real battle at the heart of Wahaha court case</li><li>Funds /In Depth: China’s mutual fund minnows struggle to survive</li><li>Dam /: China names duo helming construction of world’s largest hydropower dam</li></ul>

Wahaha / Cover Story: Succession, scandal and bottled water — the real battle at the heart of Wahaha court caseFunds /In Depth: China’s mutual fund minnows struggle to surviveDam /: China names duo helming construction of world’s largest hydropower dam

CX Daily: Succession, Scandal and Bottled Water — the Real Battle at the Heart of Wahaha Court Case 

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<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.


<ul>
<li>The "Buy the worst" basket has outperformed the HSI by a massive 16.7pp YTD, mainly boosted by <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a> and <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a>. </li>
<li>The best-performing constituents in 2024, however, lagged behind the HSI, dragged down by <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com Group (9961 HK)</a> and <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>. </li>
<li>Government's consumption boost should benefit <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a>, <a href="https://www.smartkarma.com/entities/budweiser-brewing-co-apac-ltd" target="_blank" data-smartkarma-citation="entities:28077:1" rel="noopener">Budweiser Brewing APAC (1876 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> in 2H25.</li>
</ul>


The "Buy the worst" basket has outperformed the HSI by a massive 16.7pp YTD, mainly boosted by Chow Tai Fook Jewellery (1929 HK) and Wuxi Biologics (2269 HK). 
The best-performing constituents in 2024, however, lagged behind the HSI, dragged down by Trip.com Group (9961 HK) and Meituan (3690 HK). 
Government's consumption boost should benefit Chow Tai Fook Jewellery (1929 HK), Budweiser Brewing APAC (1876 HK), and Hang Lung Properties (101 HK) in 2H25.


"Buy the Worst" HSI Strategy: Solid Gains in 1H25

<ul>
<li>On average, companies under our coverage are forecast to see a 47.3% YoY growth in net profit in 1Q25. Their results should be a pointer for the outlook in 2025. </li>
<li>Good results are expected at <a href="https://www.smartkarma.com/entities/shanghai-electric-group-company-limited-d542164d-4d5a-4ce0-b33e-5fe6bc34722c" target="_blank" data-smartkarma-citation="entities:8777:1" rel="noopener">Shanghai Electric Group (2727 HK)</a>, <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>, <a href="https://www.smartkarma.com/entities/china-cosco-holdings-h" target="_blank" data-smartkarma-citation="entities:286:1" rel="noopener">COSCO Shipping Hldgs (1919 HK)</a>, <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (753 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-national-building-ma-h" target="_blank" data-smartkarma-citation="entities:184:1" rel="noopener">CNBM (3323 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2875:1" rel="noopener">Shenzhen Expressway (548 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com Group (9961 HK)</a>, <a href="https://www.smartkarma.com/entities/xinhua-winshare-publishing-media-co-ltd" target="_blank" data-smartkarma-citation="entities:15072:1" rel="noopener">Xinhua Winshare (811 HK)</a>, <a href="https://www.smartkarma.com/entities/cosco-shipping-energy-tran-h" target="_blank" data-smartkarma-citation="entities:646:1" rel="noopener">Cosco Shipping Energy Transp. (1138 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power (916 HK)</a> will see weaker 1Q25.</li>
</ul>


On average, companies under our coverage are forecast to see a 47.3% YoY growth in net profit in 1Q25. Their results should be a pointer for the outlook in 2025. 
Good results are expected at Shanghai Electric Group (2727 HK), Anhui Conch Cement (914 HK), COSCO Shipping Hldgs (1919 HK), Air China Ltd (753 HK), and CNBM (3323 HK). 

Shenzhen Expressway (548 HK), Trip.com Group (9961 HK), Xinhua Winshare (811 HK), Cosco Shipping Energy Transp. (1138 HK), and China Longyuan Power (916 HK) will see weaker 1Q25.


China & HK Strategy: 1Q25 Preview - The Good, the Bad, and the Ugly

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

<ul>
<li>As expected, a SAMR investigation depressed top-line growth and profitability in Q226 </li>
<li>Management offered no forward guidance on earnings call, but hinted at headwinds to come</li>
<li>We believe it may take a few quarters for Trip.com to regain momentum</li>
</ul>


As expected, a SAMR investigation depressed top-line growth and profitability in Q226 
Management offered no forward guidance on earnings call, but hinted at headwinds to come
We believe it may take a few quarters for Trip.com to regain momentum


Trip.com Q226 Results | Slow Top-Line & Adj EBITDA Met Low Expectations | No Quick Fix, in Our View

Singapore

Trip.com Group is a leading global one-stop travel platform offering accommodation reservations, transportation ticketing, packaged tours, and corporate travel management services. It operates a portfolio of brands including Trip.com, Ctrip, Skyscanner, and Qunar. The company was founded in June 1999 and is headquartered in Shanghai, China.

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Trip.com Group (9961 HK)

CX Daily: Succession, Scandal and Bottled Water — the Real Battle at the Heart of Wahaha Court Case

TOP STORIES Wahaha / Cover Story: Succession, scandal and bottled water — the real battle at the heart of Wahaha court case In the heat of a Hong...

Caixin Global

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

"Buy the Worst" HSI Strategy: Solid Gains in 1H25

The "Buy the worst" basket outperformed the HSI by 16.7pp YTD, boosted by Chow Tai Fook and Wuxi Biologics, while top performers in 2024 lagged,...

Osbert Tang, CFA

China & HK Strategy: 1Q25 Preview - The Good, the Bad, and the Ugly

Earnings for the companies under our coverage are expected to grow by 47.3% in 1Q25, with Shanghai Electric Group, Anhui Conch, COSCO Shipping...

Osbert Tang, CFA

Trip.com Q226 Results | Slow Top-Line & Adj EBITDA Met Low Expectations | No Quick Fix, in Our View

Trip.com reported Q226 results that mostly met lowered expectations after SAMR's investigation into the platform's anti-competitive practices. We...

Tracking Traffic

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CX Daily: Succession, Scandal and Bottled Water — the Real Battle at the Heart of Wahaha Court Case

TOP STORIES Wahaha / Cover Story: Succession, scandal and bottled water — the real battle at the heart of Wahaha court case In the heat of a Hong...

Caixin Global

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

"Buy the Worst" HSI Strategy: Solid Gains in 1H25

​The "Buy the worst" basket outperformed the HSI by 16.7pp YTD, boosted by Chow Tai Fook and Wuxi Biologics, while top performers in 2024 lagged,...

Osbert Tang, CFA

China & HK Strategy: 1Q25 Preview - The Good, the Bad, and the Ugly

Earnings for the companies under our coverage are expected to grow by 47.3% in 1Q25, with Shanghai Electric Group, Anhui Conch, COSCO Shipping...

Osbert Tang, CFA

Trip.com Q226 Results | Slow Top-Line & Adj EBITDA Met Low Expectations | No Quick Fix, in Our View

Trip.com reported Q226 results that mostly met lowered expectations after SAMR's investigation into the platform's anti-competitive practices. We...

Tracking Traffic

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

The "Buy the worst" basket outperformed the HSI by 16.7pp YTD, boosted by Chow Tai Fook and Wuxi Biologics, while top performers in 2024 lagged,...