HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Worldwide, inflation is surging and outlook is for it to stay elevated for an extended period of time. Meanwhile, we are seeing retreats in some commodity prices lately. </li>
<li>We witnessed that some stocks have showed divergences against the downward movement of their input prices, and this made them look interesting.</li>
<li>Share prices for <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a>, <a href="https://www.smartkarma.com/entities/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a> and <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl (2313 HK)</a> are still at low levels while their input costs have already come down sharply.</li>
</ul>


Worldwide, inflation is surging and outlook is for it to stay elevated for an extended period of time. Meanwhile, we are seeing retreats in some commodity prices lately. 
We witnessed that some stocks have showed divergences against the downward movement of their input prices, and this made them look interesting.
Share prices for CPMC Holdings (906 HK), Want Want (151 HK) and Shenzhou Intl (2313 HK) are still at low levels while their input costs have already come down sharply.


China Industrials: Positioning for Lower Inflation? If Yes, Here Are Three Names of Interest...

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/muyuan-foods-co-ltd" target="_blank" data-smartkarma-citation="entities:3705:1" rel="noopener">Muyuan Foods Co (2714 HK)</a> (MF), a leader in the hog farming industry, raised around US$1.6bn in its H-share listing. Its cornerstone investors will soon be released from their lockup.</li>
<li>MF is a leading pork company with over 30 years of expertise in the hog farming industry.</li>
<li>In this note, we will talk about the lockup dynamics and possible placement.</li>
</ul>



Muyuan Foods Co (2714 HK) (MF), a leader in the hog farming industry, raised around US$1.6bn in its H-share listing. Its cornerstone investors will soon be released from their lockup.
MF is a leading pork company with over 30 years of expertise in the hog farming industry.
In this note, we will talk about the lockup dynamics and possible placement.


Aequitas: Muyuan Food A/H Lockup Expiry - US$580m Cornerstone Unlock

<ul>
<li>The sharp surge in Omicron-driven local cases has driven more stringent measures by local governments. On ground in Shanghai, we see more tightened measures being implemented over the weekend. </li>
<li>The measures will reduce a lot of foot traffic and lower discretionary spending appetite in Mar, and this will negatively weigh on many 1Q22 results to be announced in late-Apr. </li>
<li>We advocate a long staples, short discretionary strategy in the near term. Also, travel sector will be hit, and on net-net basis, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> looks to be a loser.</li>
</ul>


The sharp surge in Omicron-driven local cases has driven more stringent measures by local governments. On ground in Shanghai, we see more tightened measures being implemented over the weekend. 
The measures will reduce a lot of foot traffic and lower discretionary spending appetite in Mar, and this will negatively weigh on many 1Q22 results to be announced in late-Apr. 
We advocate a long staples, short discretionary strategy in the near term. Also, travel sector will be hit, and on net-net basis, Meituan (3690 HK) looks to be a loser.


China on the Ground: Escalating Measures to Combat Omicron and What Stocks Are Impacted?

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The broad global indexes are decisively below our "lines in the sand" of $54 on MSCI ACWI ex-US (ACWX-US), $75.25 on MSCI EAFE (EFA-US), and $99 on MSCI ACWI (ACWI-US).</li>
<li>As noted in our Feb. 15 Int'l Macro Vision, we are bearish at the index level as long as we are below the aforementioned levels.</li>
<li>Global 10-year sovereign yields remain elevated, leading to outperformance from value Sectors (Energy/Materials/Financials) which remain our preferred area of the market. We also continue to like defensive areas, especially Staples.</li>
</ul>


The broad global indexes are decisively below our "lines in the sand" of $54 on MSCI ACWI ex-US (ACWX-US), $75.25 on MSCI EAFE (EFA-US), and $99 on MSCI ACWI (ACWI-US).
As noted in our Feb. 15 Int'l Macro Vision, we are bearish at the index level as long as we are below the aforementioned levels.
Global 10-year sovereign yields remain elevated, leading to outperformance from value Sectors (Energy/Materials/Financials) which remain our preferred area of the market. We also continue to like defensive areas, especially Staples.


Buying Metals/Mining and Consumer Staples

Research from EqualOcean, EqualOcean

EqualOcean

Research from EqualOcean

EqualOcean is an investment research firm and information service provider focusing on China's Technology, Automotive and Consumer Internet sectors. With unique research and due diligence methodology, we provide tailored insights into a wide range of industries and companies, empowering our clients' value-added decisions.

Founded in 2014, EqualOcean is headquartered in Beijing and has offices in Shanghai, Shenzhen and New York.

<ul><li>The silver market will be the next blue ocean for the consumer goods market in China.</li><li>Redefining the seniors - Seniors in China are actually not yet 'old.'</li><li>Silver netizens - According to the China Internet Network Information Center (CINIC) that by end of June 2021, netizens over 50 years old accounted for 28% of the total number, reported 283 million.</li></ul>

The silver market will be the next blue ocean for the consumer goods market in China.Redefining the seniors - Seniors in China are actually not yet 'old.'Silver netizens - According to the China Internet Network Information Center (CINIC) that by end of June 2021, netizens over 50 years old accounted for 28% of the total number, reported 283 million.

Revealing the Hidden 'Silver Consumption' in China

Hong Kong

Want Want China Holdings Limited is a leading food and beverage company that manufactures and distributes a wide range of products, including rice crackers, dairy products, and various beverages like flavored milk and juices, as well as snack foods. The company primarily serves the Chinese market with exports to other regions. It was founded in 1962 and is headquartered in Kowloon Bay, Hong Kong.

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Want Want China (151 HK)

China Industrials: Positioning for Lower Inflation? If Yes, Here Are Three Names of Interest...

Share prices of CPMC Holdings, Want Want and Shenzhou Intl have not yet reacted to reflect the recent declines in input costs due to the retreat in...

Osbert Tang, CFA

Aequitas: Muyuan Food A/H Lockup Expiry - US$580m Cornerstone Unlock

Muyuan Foods Co (2714 HK) (MF), a leader in the hog farming industry, raised around US$1.6bn in its H-share listing. Its cornerstone investors will...

Sumeet Singh

China on the Ground: Escalating Measures to Combat Omicron and What Stocks Are Impacted?

Omicron combating measures have been stepped up over the weekend and this will make a dent on the Mar operations of many companies. This will be...

Osbert Tang, CFA

Buying Metals/Mining and Consumer Staples

Commodity prices remain in a secular bull market, and now even gold is joining the rally. This is bullish for global metals/mining stocks (precious...

Vermilion Research

Revealing the Hidden 'Silver Consumption' in China

'Grandpa Beihai' (Chinese: 北海爷爷) is a hotkey opinion leader (KOL) on Douyin – Chinese 'Tik Tok,' who defines himself as 'a 74-year-old young man...

EqualOcean

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