HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>The recent surge in Eurozone sovereign yields, particularly for France, has created pressure on the outlook for some HK-listed companies. </li>
<li>While the 100 largest companies generated an average of only 6% of revenue from Europe, 10 companies derived over 20%.</li>
<li>
<a href="https://www.smartkarma.com/entities/ck-hutchison-holdings-ltd" target="_blank" data-smartkarma-citation="entities:132:1" rel="noopener">CK Hutchison (1 HK)</a> group, <a href="https://www.smartkarma.com/entities/shein-global-holdings-limited" target="_blank" data-smartkarma-citation="entities:55372:1" rel="noopener">SHEIN Global (625 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corporation-class-b" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/lenovo-group-limited" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-biologics-cayman-inc" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a> group, and <a href="https://www.smartkarma.com/entities/cosco-shipping-holdings-co-ltd-class-h" target="_blank" data-smartkarma-citation="entities:286:1" rel="noopener">COSCO SHIPPING Holdings (1919 HK)</a> are the top. </li>
</ul>


The recent surge in Eurozone sovereign yields, particularly for France, has created pressure on the outlook for some HK-listed companies. 
While the 100 largest companies generated an average of only 6% of revenue from Europe, 10 companies derived over 20%.

CK Hutchison (1 HK) group, SHEIN Global (625 HK), Xiaomi (1810 HK), Lenovo (992 HK), Wuxi Biologics (2269 HK) group, and COSCO SHIPPING Holdings (1919 HK) are the top. 


HK Strategy: Exposure to Europe - Who Are at Risk?

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

<ul><li>What’s new? On 16 Sep, Generac (GNRC US, NR) signed a long-term agreement with Amazon (AMZN US, BUY, covered by our Internet team) to supply backup generators for datacentres.</li><li>The initial deliveries are expected to be US$2.4bn in 2027-28, with a total value of up to US$8bn as Amazon expands its data centres.</li><li>Meanwhile, Generac gave Amazon a warrant to buy up to 1.69mn shares of Generac’s stock at US$200.93/share (14.7% above the closing price on 16 Sep).</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

What’s new? On 16 Sep, Generac (GNRC US, NR) signed a long-term agreement with Amazon (AMZN US, BUY, covered by our Internet team) to supply backup generators for datacentres.The initial deliveries are expected to be US$2.4bn in 2027-28, with a total value of up to US$8bn as Amazon expands its data centres.Meanwhile, Generac gave Amazon a warrant to buy up to 1.69mn shares of Generac’s stock at US$200.93/share (14.7% above the closing price on 16 Sep).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Weichai Power (2338 HK/000338 CH) - Generac & Amazon Deal Positive to Weichai

<ul>
<li>October has been a poor month in the last five years, with an average return of -6.5%. This highlights the risk for the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> next month.   </li>
<li>Factors including higher interest rates, the US mid-term election, elevated crude oil prices, and concerns about the AI investment outlook are negative issues. </li>
<li>November and December are, interestingly, the good months in the last five years. Aggressive players may buy back after a possible plunge in October.</li>
</ul>


October has been a poor month in the last five years, with an average return of -6.5%. This highlights the risk for the Hang Seng Index (HSI INDEX) next month.   
Factors including higher interest rates, the US mid-term election, elevated crude oil prices, and concerns about the AI investment outlook are negative issues. 
November and December are, interestingly, the good months in the last five years. Aggressive players may buy back after a possible plunge in October.


HK Strategy: The Forthcoming Black October?

Smartkarma AI Primers, Smartkarma

αSK Primers

Smartkarma AI Primers

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<ul>
 <li>
<a href="https://smartkarma.com/entities/weichai-power-co-ltd-class-h">Weichai Power</a> is the undisputed leader in China's heavy-duty truck (HDT) engine market, commanding significant market share and benefiting from its vertically integrated powertrain system (engine, transmission, axle).</li>
 <li>The company is strategically pivoting towards future growth drivers, with substantial investments in new energy solutions, including hydrogen fuel cells and Solid Oxide Fuel Cells (SOFC) through its partnership with Ceres Power, and a rapidly growing power and energy business for data centers.</li>
 <li>While the core business is exposed to the cyclicality of the HDT market and macroeconomic headwinds in China, the company's strong financial position, consistent dividend payouts, and diversification into intelligent logistics and new energy provide a balanced risk-reward profile.</li>
</ul>This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.


  
Weichai Power is the undisputed leader in China's heavy-duty truck (HDT) engine market, commanding significant market share and benefiting from its vertically integrated powertrain system (engine, transmission, axle).
  The company is strategically pivoting towards future growth drivers, with substantial investments in new energy solutions, including hydrogen fuel cells and Solid Oxide Fuel Cells (SOFC) through its partnership with Ceres Power, and a rapidly growing power and energy business for data centers.
  While the core business is exposed to the cyclicality of the HDT market and macroeconomic headwinds in China, the company's strong financial position, consistent dividend payouts, and diversification into intelligent logistics and new energy provide a balanced risk-reward profile.
This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

Primer: Weichai Power (2338 HK) - Aug 2026

Chief Executive Officer, Emmer Capital Partners Limited

Manishi Raychaudhuri

Chief Executive Officer

Emmer Capital Partners Limited

Emmer Capital Partners is an Asia Pacific focused financial advisory firm engaging in strategic financial asset allocation advice, bespoke thematic research and advising early-stage companies and connecting them to investors. Emmer Capital provides macro-economic and multi-asset investment strategy inputs to institutions, family offices, private wealth managers, private equity, and corporate boards directly and through independent research platforms. Emmer Capital also advises a wide range of startup companies on fund raising and business strategy. Emmer Capital's active engagement with the print and electronic media reaches a broad spectrum of investors across the globe.

Cross Asset Strategy

<ul>
<li>In late May we argued that Asia was fully valued and awaited correction. That correction has happened over past two months with Asia's forward PE declining from 15.1x to 12.7x.</li>
<li>Some markets have corrected more and have had significant EPS upgrades. These markets should catch up with their earnings trajectory, Korea and Onshore China in particular. HK looks undervalued too.</li>
<li>Indonesia, though affected by governance-related concerns and fiscal worries, seems cheaper than the headwinds warrant. Other Asian markets are in "no man's land": not too expensive, not egregiously cheap either.</li>
</ul>


In late May we argued that Asia was fully valued and awaited correction. That correction has happened over past two months with Asia's forward PE declining from 15.1x to 12.7x.
Some markets have corrected more and have had significant EPS upgrades. These markets should catch up with their earnings trajectory, Korea and Onshore China in particular. HK looks undervalued too.
Indonesia, though affected by governance-related concerns and fiscal worries, seems cheaper than the headwinds warrant. Other Asian markets are in "no man's land": not too expensive, not egregiously cheap either.


Asian Equities: Valuations Look Interesting Again, Forward Earnings Outstripping Several Markets

China

Weichai Power is a Chinese industrial technology company specializing in the research, development, and manufacturing of powertrains, vehicles, and key components such as engines, transmissions, and axles. The company also offers intelligent logistics solutions, including forklifts and warehousing services, and is actively developing new energy technologies like hydrogen fuel cells. Weichai Power was founded in 2002 and is headquartered in Weifang, Shandong, China.

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Weichai Power (2338 HK)

HK Strategy: Exposure to Europe - Who Are at Risk?

A recent surge in Eurozone sovereign yields will put pressure on some companies. The 100 largest HK companies have only 6% of their revenue from...

Osbert Tang, CFA