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.

Thematic (Sector/Industry)

<ul><li>Remarkable recovery vs 4Q22, improving spending power and excellent sustainability.</li><li>We believe the data points during the 2023 Chinese New Year are better than our expectation and meaningfully encouraging for the consumer sector, because: 1) the base was high in 2022, as the number of COVID-19 cases were very limited during Jan-Feb 2022 and the number of passenger journeys already grew by 31% YoY</li><li>2) the improvement is significant vs 4Q22, supported by the 89%/ 73% recovery rate of domestic tourism volume/ spending during this CNY, better than 61%/ 44% in the 10-1 holidays and any level in the entire 2022 year,</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.

Remarkable recovery vs 4Q22, improving spending power and excellent sustainability.We believe the data points during the 2023 Chinese New Year are better than our expectation and meaningfully encouraging for the consumer sector, because: 1) the base was high in 2022, as the number of COVID-19 cases were very limited during Jan-Feb 2022 and the number of passenger journeys already grew by 31% YoY2) the improvement is significant vs 4Q22, supported by the 89%/ 73% recovery rate of domestic tourism volume/ spending during this CNY, better than 61%/ 44% in the 10-1 holidays and any level in the entire 2022 year,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.

China Consumer Sector – Strong recovery and sustainability during CNY

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>While China's U-turn on COVID policy is expected to bring consumption rebound in 2023, the near-term surge in infections will weigh negatively on retail sales in Dec and Jan.</li>
<li>Residents are spending more time at home in the first wave, with subways and shopping malls empty. We think this will cast negativity on 4Q22 and 1Q23 consumer discretionary profit.</li>
<li>It is prudent to take some monies off the table, particularly F&amp;B stocks like <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/xiabuxiabu-catering-mgt-chn-hldgs-co-ltd" target="_blank" data-smartkarma-citation="entities:76:1" rel="noopener">Xiabuxiabu (520 HK)</a> and <a href="https://www.smartkarma.com/entities/helen-s-international-holdings" target="_blank" data-smartkarma-citation="entities:34113:1" rel="noopener">Helen's (9869 HK)</a> which have almost doubled from trough.</li>
</ul>


While China's U-turn on COVID policy is expected to bring consumption rebound in 2023, the near-term surge in infections will weigh negatively on retail sales in Dec and Jan.
Residents are spending more time at home in the first wave, with subways and shopping malls empty. We think this will cast negativity on 4Q22 and 1Q23 consumer discretionary profit.
It is prudent to take some monies off the table, particularly F&amp;B stocks like Haidilao (6862 HK), Xiabuxiabu (520 HK) and Helen's (9869 HK) which have almost doubled from trough.


China COVID Policy: Near-Term Pains for Consumer Discretionary

<ul><li>Resilient online sales growth during double 11, where Tik Tok, PDD and JD platforms continued to outperform.</li><li>Based on our channel check and CMBI est., the online GMV growth during 2022’s double 11 was at ~14% YoY, inline with CMBI est. and beat market expectation, similar to online sales growth in Sep 2022 and had picked up vs Oct 2022.</li><li>In terms of platforms, YoY growth for Alibaba (Tmall + Tao Bao)/ JD/ PDD/ TikTok increased by ~flattish/ ~teens/ 27%/ 38%.</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.

Resilient online sales growth during double 11, where Tik Tok, PDD and JD platforms continued to outperform.Based on our channel check and CMBI est., the online GMV growth during 2022’s double 11 was at ~14% YoY, inline with CMBI est. and beat market expectation, similar to online sales growth in Sep 2022 and had picked up vs Oct 2022.In terms of platforms, YoY growth for Alibaba (Tmall + Tao Bao)/ JD/ PDD/ TikTok increased by ~flattish/ ~teens/ 27%/ 38%.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.

China Sportswear Sector – Sequential improvements during double 11

<ul>
<li>2Q22 is a tough quarter for China's consumer discretionary companies. <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> has experienced improvement in recovery in May and Jun, but we see FILA stay challenging.</li>
<li>In its FY22 result, <a href="https://www.smartkarma.com/entities/bosideng-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6537:1" rel="noopener">Bosideng International Holdings (3998 HK)</a> demonstrated its resilience in gross margin despite higher input costs. More positive developments are brewing in 2H of this year.</li>
<li>
<a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd" target="_blank" data-smartkarma-citation="entities:7196:1" rel="noopener">Haier Smart Home (600690 CH)</a> has its business rebounding after the lockdown and healthy performance in overseas market should partly mitigate the lockdown-induced weakness in 2Q22.</li>
</ul>


2Q22 is a tough quarter for China's consumer discretionary companies. Anta Sports Products (2020 HK) has experienced improvement in recovery in May and Jun, but we see FILA stay challenging.
In its FY22 result, Bosideng International Holdings (3998 HK) demonstrated its resilience in gross margin despite higher input costs. More positive developments are brewing in 2H of this year.

Haier Smart Home (600690 CH) has its business rebounding after the lockdown and healthy performance in overseas market should partly mitigate the lockdown-induced weakness in 2Q22.


China Consumer Discretionary: Darkness Before Dawn

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

MSCI Emerging Markets Index / Technical Analysis

Broadly speaking, RS for MSCI EM is currently exhibiting some mild deterioration vs. MSCI EAFE following four months of clear outperformance. Nonetheless, the MSCI EM index is bottoming and remains attractive from a price perspective.  In today's report we offer a technical appraisal of major EM markets, and offer a host of technically attractivec bottoms-up stock ideas across the EM universe.

Broadly speaking, RS for MSCI EM is currently exhibiting some mild deterioration vs. MSCI EAFE following four months of clear outperformance. Nonetheless, the MSCI EM index is bottoming and remains attractive from a price perspective.  In today's report we offer a technical appraisal of major EM markets, and offer a host of technically attractivec bottoms-up stock ideas across the EM universe.

EM Equity Strategy: Cyclicals Leading, China Surging

China

Xtep International Holdings Limited designs, develops, manufactures, markets, and sells sportswear, including footwear, apparel, and accessories for adults and children. The company operates a multi-brand portfolio, featuring its core Xtep brand alongside international brands such as Saucony and Merrell. It was founded in 1987 and is headquartered in Xiamen, Fujian, China.

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Xtep (1368 HK)

China Consumer Sector – Strong recovery and sustainability during CNY

We believe the data points during the 2023 Chinese New Year are better than our expectation and meaningfully encouraging for the consumer sector

CMB International

China COVID Policy: Near-Term Pains for Consumer Discretionary

Near-term negative impact of China's U-turn in COVID policy on consumer discretionary has been underestimated by the market. It is prudent to take...

Osbert Tang, CFA

China Sportswear Sector – Sequential improvements during double 11

Based on our channel check and CMBI est., the online GMV growth during 2022’s double 11 was at ~14% YoY, inline with CMBI est. and beat market...

CMB International

China Consumer Discretionary: Darkness Before Dawn

The Covid-induced lockdowns have brought headwinds to China consumer discretionary names in 2Q22, but we are seeing a gradual recovery with...

Osbert Tang, CFA

EM Equity Strategy: Cyclicals Leading, China Surging

Broadly speaking, RS for MSCI EM is currently exhibiting some mild deterioration vs. MSCI EAFE following four months of clear outperformance....

Vermilion Research

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