HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.</li>
<li>
<a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a>, <a href="https://www.smartkarma.com/entities/link-reit" target="_blank" data-smartkarma-citation="entities:872:1" rel="noopener">Link REIT (823 HK)</a>, <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>, <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> and <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a> are massive laggards YTD.</li>
<li>As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. </li>
</ul>


Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.

Li Auto (2015 HK), Link REIT (823 HK), China Mengniu Dairy Co (2319 HK), Hang Lung Properties (101 HK) and Galaxy Entertainment Group (27 HK) are massive laggards YTD.
As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. 


HK Strategy: Where Are the Short-Term Opportunities?

Asia Pac ECM and Index Rebal, DZT Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analysed the earning revision of component stocks of HSI in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on ALIBABA, XIAOMI, HSBC, MEITUAN, LI AUTO, CNOOC.</li>
</ul>


We analysed the earning revision of component stocks of HSI in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on ALIBABA, XIAOMI, HSBC, MEITUAN, LI AUTO, CNOOC.


HSI Index Earning Revision (Mar): Oil and Tech

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

<ul>
<li>Over the past decade, Cyclical sectors have traded places with Sensitive sectors as the largest allocation among active Asia Ex-Japan investors. </li>
<li>The last cycle started in early 2019 and saw Sensitive overtake Cyclicals and move to a key overweight, but this peaked in mid-2021 and has started to reverse.</li>
<li>The major rotation on the year so far has been a scaling back of Technology and Communication Services allocations in favour of Financials and Consumer Discretionary/Staples</li>
</ul>


Over the past decade, Cyclical sectors have traded places with Sensitive sectors as the largest allocation among active Asia Ex-Japan investors. 
The last cycle started in early 2019 and saw Sensitive overtake Cyclicals and move to a key overweight, but this peaked in mid-2021 and has started to reverse.
The major rotation on the year so far has been a scaling back of Technology and Communication Services allocations in favour of Financials and Consumer Discretionary/Staples


Asia Ex-Japan:  Tech to Financials Rotation

Asia biased macro & technical analysis, Untying The Gordian Knot

Untying The Gordian Knot

Asia biased macro & technical analysis

A differentiated process with a primary focus on Asia. Technical Analysis as core and Macro drivers that could bring the view to fruition & changes that could make the idea fall apart. The objective is to be the best in class, hence corner shop.

Technical Analysis

<ul><li>Hong Kong Stocks are more excited than the mainland about cutting the Quarantine period from 14 to 7 days.</li><li>The 25th Anniversary of the Hong Kong handover means more stability ahead of celebrations and trading dominated by position squaring.</li><li>Only Xiaomi shows signs of a breakout. It broke the downtrend from August 2021 with the inside days in the last two trading sessions. It looks like it will test the breakout and cover it next week.</li></ul>

Hong Kong Stocks are more excited than the mainland about cutting the Quarantine period from 14 to 7 days.The 25th Anniversary of the Hong Kong handover means more stability ahead of celebrations and trading dominated by position squaring.Only Xiaomi shows signs of a breakout. It broke the downtrend from August 2021 with the inside days in the last two trading sessions. It looks like it will test the breakout and cover it next week.

Hang Seng Index Constituents 30th June 2022

Country Garden Holdings / Technical Analysis

<ul><li>The government has taken several steps to improve supply-side restrictions on first and second homes.</li><li>PBOC has added policy support by cutting longer-dated LPR rates for home loan pricing. Longfor Group and Country Garden are highly rated, large China Real Estate developers.</li><li>They do not seem to respond positively to many tailwinds</li></ul>

The government has taken several steps to improve supply-side restrictions on first and second homes.PBOC has added policy support by cutting longer-dated LPR rates for home loan pricing. Longfor Group and Country Garden are highly rated, large China Real Estate developers.They do not seem to respond positively to many tailwinds

Hang Seng Index Constituents 2nd June 2022

China

Xinyi Solar produces and sells solar glass products, including ultra-clear patterned, back, and anti-reflective coating solar glasses. The company also develops, operates, and manages solar farms, generating solar power. It was founded in 2008 and is headquartered in Wuhu, the People's Republic of China.

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Xinyi Solar (968 HK)

HK Strategy: Where Are the Short-Term Opportunities?

Li Auto, Link REIT, China Mengniu, Hang Lung Properties, and Galaxy Entertainment are massive laggards YTD but the recent rebound from the trough...

Osbert Tang, CFA

HSI Index Earning Revision (Mar): Oil and Tech

We analyzed HSI's consensus for Mar 2026 and highlighted changes of EPS in ALIBABA, XIAOMI, HSBC, MEITUAN, LI AUTO, CNOOC.

Ke Yan, CFA, FRM

Asia Ex-Japan: Tech to Financials Rotation

Asia Ex-Japan funds are in the midst of a major rotation out of Technology and Communication Services stocks and in to Financials and Consumer...

Steven Holden

Hang Seng Index Constituents 30th June 2022

Mainland opening, but not really. Hong Kong Stocks are more excited than the mainland about cutting the Quarantine period from 14 to 7 days. The...

Untying The Gordian Knot

Hang Seng Index Constituents 2nd June 2022

The government has taken several steps to improve supply-side restrictions on first and second homes. PBOC has added policy support by cutting...

Untying The Gordian Knot

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52-week Range

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