HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>With the US$ rate likely to trend higher over the next 12 months, 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> constituent stocks with high gearing will be exposed. </li>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-china-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:375:1" rel="noopener">Hong Kong and China Gas (3 HK)</a> and <a href="https://www.smartkarma.com/entities/clp-holdings-limited" target="_blank" data-smartkarma-citation="entities:14433:1" rel="noopener">CLP (2 HK)</a> are on top of the list, given their leveraged balance sheet and relatively high proportion of floating-rate debt.</li>
<li>
<a href="https://www.smartkarma.com/entities/wharf-real-estate-investment-company-limited" target="_blank" data-smartkarma-citation="entities:26031:1" rel="noopener">Wharf Real Estate (1997 HK)</a>, <a href="https://www.smartkarma.com/entities/henderson-land-development-co-ltd" target="_blank" data-smartkarma-citation="entities:376:1" rel="noopener">Henderson Land Development (12 HK)</a>, and <a href="https://www.smartkarma.com/entities/sun-hung-kai-properties-limited" target="_blank" data-smartkarma-citation="entities:111:1" rel="noopener">Sun Hung Kai Properties (16 HK)</a> have lots of floating-rate debt, but their gearing levels are low.  </li>
</ul>


With the US$ rate likely to trend higher over the next 12 months, the Hang Seng Index (HSI INDEX) constituent stocks with high gearing will be exposed. 

Hong Kong and China Gas (3 HK) and CLP (2 HK) are on top of the list, given their leveraged balance sheet and relatively high proportion of floating-rate debt.

Wharf Real Estate (1997 HK), Henderson Land Development (12 HK), and Sun Hung Kai Properties (16 HK) have lots of floating-rate debt, but their gearing levels are low.  


HK Strategy: Rate Hike Exposure - Fixed & Floating Rate Debt Analysis

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

Equity Bottom-Up

<ul>
 <li>
World's Largest Pork Company with Vertically Integrated Model: <a href="https://smartkarma.com/entities/wh-group-ltd-hk">WH Group</a> holds a dominant position in the global pork industry, with leading market shares in China, the U.S., and key European markets. Its vertically integrated model, spanning hog production, slaughtering, and processing, provides significant control over the supply chain, enhancing efficiency and food safety.</li>
 <li>
Packaged Meats as the Core Profit Driver: The higher-margin packaged meats segment is the company's primary profit engine, contributing the majority of operating profit. The company is strategically focused on growing this segment through product innovation and channel expansion, particularly in convenience and e-commerce.</li>
 <li>
Exposure to Hog Cycle Volatility and Geopolitical Risks: The company's profitability is inherently tied to the volatile nature of hog and feed prices. Additionally, as a global entity with significant operations in both China and the U.S., it faces potential risks from geopolitical tensions and international trade policy shifts.</li>
</ul>This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.


  
World's Largest Pork Company with Vertically Integrated Model: WH Group holds a dominant position in the global pork industry, with leading market shares in China, the U.S., and key European markets. Its vertically integrated model, spanning hog production, slaughtering, and processing, provides significant control over the supply chain, enhancing efficiency and food safety.
  
Packaged Meats as the Core Profit Driver: The higher-margin packaged meats segment is the company's primary profit engine, contributing the majority of operating profit. The company is strategically focused on growing this segment through product innovation and channel expansion, particularly in convenience and e-commerce.
  
Exposure to Hog Cycle Volatility and Geopolitical Risks: The company's profitability is inherently tied to the volatile nature of hog and feed prices. Additionally, as a global entity with significant operations in both China and the U.S., it faces potential risks from geopolitical tensions and international trade policy shifts.
This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>Hong Kong Alpha portfolio gained 16.26% in January resulting in a 6.2% outperformance to its benchmark.  The portfolio has outperformed HK indexes by 48% to 63% since inception on 10/1/24.</li>
<li>Hong Kong Alpha has generated 50% of its return from alpha and has a Sharpe ratio of 1.79 since inception.  The portfolio's annualized mean excess return is 28%.</li>
<li>At the end of January, we reduced positions in the materials, communications, and conglomerate sectors and added positions in the food, energy, and manufacturing sectors.</li>
</ul>


Hong Kong Alpha portfolio gained 16.26% in January resulting in a 6.2% outperformance to its benchmark.  The portfolio has outperformed HK indexes by 48% to 63% since inception on 10/1/24.
Hong Kong Alpha has generated 50% of its return from alpha and has a Sharpe ratio of 1.79 since inception.  The portfolio's annualized mean excess return is 28%.
At the end of January, we reduced positions in the materials, communications, and conglomerate sectors and added positions in the food, energy, and manufacturing sectors.


HONG KONG ALPHA PORTFOLIO: (January 2026)

<ul>
<li>Hong Kong Alpha portfolio gained 8.45% in September and 60.89% and 62.80% YTD and since launch one year ago.  The portfolio has outperformed Hong Kong indexes by more than 40%.</li>
<li>The portfolio has a Sharpe ratio of 3.23 YTD and has generated more than 40% of its returns from stock-picking (alpha).  Its beta is low at only 1.17.</li>
<li>At the end of September, we increased exposure to AI and robotics and sold positions in the consumer and finance sectors.</li>
</ul>


Hong Kong Alpha portfolio gained 8.45% in September and 60.89% and 62.80% YTD and since launch one year ago.  The portfolio has outperformed Hong Kong indexes by more than 40%.
The portfolio has a Sharpe ratio of 3.23 YTD and has generated more than 40% of its returns from stock-picking (alpha).  Its beta is low at only 1.17.
At the end of September, we increased exposure to AI and robotics and sold positions in the consumer and finance sectors.


HONG KONG ALPHA PORTFOLIO: (September 2025)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sichuan-kelun-biotech-biopharm" target="_blank" data-smartkarma-citation="entities:40071:1" rel="noopener">Sichuan Kelun-Biotech Bio (6990 HK)</a>, <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Ind. (669 HK)</a>, <a href="https://www.smartkarma.com/entities/vesync" target="_blank" data-smartkarma-citation="entities:31067:1" rel="noopener">Vesync (2148 HK)</a>, <a href="https://www.smartkarma.com/entities/chervon-holdings-limited" target="_blank" data-smartkarma-citation="entities:35309:1" rel="noopener">Chervon Hldgs (2285 HK)</a>, and <a href="https://www.smartkarma.com/entities/wuxi-apptec-co-ltd-bf4a1265-beef-48b6-b82d-29308426030f" target="_blank" data-smartkarma-citation="entities:27795:1" rel="noopener">WuXi AppTec (2359 HK)</a> have a very high reliance on the US market.</li>
<li>
<a href="https://www.smartkarma.com/entities/vtech-holdings-ltd" target="_blank" data-smartkarma-citation="entities:18812:1" rel="noopener">Vtech Hldgs (303 HK)</a>, <a href="https://www.smartkarma.com/entities/samsonite-international-sa" target="_blank" data-smartkarma-citation="entities:12790:1" rel="noopener">Samsonite (1910 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/tcl-multimedia-technology" target="_blank" data-smartkarma-citation="entities:15654:1" rel="noopener">Tcl Multimedia (1070 HK)</a> ranked lower on the list, but consumer cutbacks will have a bigger impact. </li>
<li>The spillover effect of a US recession to other countries will pressurise companies that have low direct exposure, like <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> and <a href="https://www.smartkarma.com/entities/prada-s-p-a" target="_blank" data-smartkarma-citation="entities:889:1" rel="noopener">Prada S.P.A. (1913 HK)</a>.</li>
</ul>



Sichuan Kelun-Biotech Bio (6990 HK), Techtronic Ind. (669 HK), Vesync (2148 HK), Chervon Hldgs (2285 HK), and WuXi AppTec (2359 HK) have a very high reliance on the US market.

Vtech Hldgs (303 HK), Samsonite (1910 HK), Haier Smart Home (6690 HK), and Tcl Multimedia (1070 HK) ranked lower on the list, but consumer cutbacks will have a bigger impact. 
The spillover effect of a US recession to other countries will pressurise companies that have low direct exposure, like Orient Overseas International (316 HK) and Prada S.P.A. (1913 HK).


China & HK Strategy: Who Are the Victims of a US Recession?

Hong Kong

WH Group is the world's largest pork company, operating across China, the US, and Europe. It integrates hog production, slaughtering, and the processing and distribution of packaged meats and fresh pork. The company's core business includes a wide range of packaged meat products and fresh pork. Headquartered in Hong Kong, the company traces its origins back to 1958.

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WH Group (288 HK)

HK Strategy: Rate Hike Exposure - Fixed & Floating Rate Debt Analysis

With the US$ rate likely to trend higher over the next 12 months, the HSI constituent stocks with elevated gearing and floating-rate debt, like...

Osbert Tang, CFA

Primer: WH Group (288 HK) - Aug 2026

World's Largest Pork Company with Vertically Integrated Model: WH Group holds a dominant position in the global pork industry, with leading...

αSK Primers

HONG KONG ALPHA PORTFOLIO: (January 2026)

At the end of January, we began to move out of materials and tech and into early cycle sectors. We continue with mid-month exposure adjustments: we...

David Mudd

HONG KONG ALPHA PORTFOLIO: (September 2025)

Due to the sudden escalation of US/China tensions we have decided to reduce AI and other risk exposure in the Hong Kong Alpha portfolio at the open...

David Mudd

China & HK Strategy: Who Are the Victims of a US Recession?

Reliance on the US market varies among HK-listed companies, with some having high direct exposure to a recession. Those with low direct exposure...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HK Strategy: Rate Hike Exposure - Fixed & Floating Rate Debt Analysis

With the US$ rate likely to trend higher over the next 12 months, the HSI constituent stocks with elevated gearing and floating-rate debt, like...

Osbert Tang, CFA

Primer: WH Group (288 HK) - Aug 2026

World's Largest Pork Company with Vertically Integrated Model: WH Group holds a dominant position in the global pork industry, with leading...

αSK Primers

HONG KONG ALPHA PORTFOLIO: (January 2026)

At the end of January, we began to move out of materials and tech and into early cycle sectors. We continue with mid-month exposure adjustments: we...

David Mudd

HONG KONG ALPHA PORTFOLIO: (September 2025)

Due to the sudden escalation of US/China tensions we have decided to reduce AI and other risk exposure in the Hong Kong Alpha portfolio at the open...

David Mudd

China & HK Strategy: Who Are the Victims of a US Recession?

​Reliance on the US market varies among HK-listed companies, with some having high direct exposure to a recession. Those with low direct exposure...

Osbert Tang, CFA

Reliance on the US market varies among HK-listed companies, with some having high direct exposure to a recession. Those with low direct exposure...