Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

<ul>
<li>Hong Kong tech sector leads the market higher with increased momentum and lower volatility.  Short selling has abated with unwind of HKD carry trade.</li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China (1928 HK)</a> had a breakout from a Falling Wedge pattern. The share price broke above its short-term averages with increasing momentum.
</li>
<li>
<a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a> broke out from its downtrend with a Reversal from its U-Shaped Bottom.  <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Industries (669 HK)</a> broke out to a new YTD high.
</li>
</ul>


Hong Kong tech sector leads the market higher with increased momentum and lower volatility.  Short selling has abated with unwind of HKD carry trade.

Sands China (1928 HK) had a breakout from a Falling Wedge pattern. The share price broke above its short-term averages with increasing momentum.


China Feihe (6186 HK) broke out from its downtrend with a Reversal from its U-Shaped Bottom.  Techtronic Industries (669 HK) broke out to a new YTD high.



Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 23)

Cross Asset Strategy

<ul>
<li>Hong Kong market quietly broke its downward trend channel last week, however the HSI met strong resistance at 18200 (100 Week Moving Average).</li>
<li>
<a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty H (2328 HK)</a> and <a href="https://www.smartkarma.com/entities/china-petroleum-chemical-h" target="_blank" data-smartkarma-citation="entities:369:1" rel="noopener">China Petroleum &amp; Chemical (386 HK)</a> broke to new highs relative to MSCI indices.  Sinopec may benefit from stronger RMB in 2H24.
</li>
<li><a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> had a short-term turnaround from its downtrend.  The company reported growth in sales and better margins in 2Q24.</li>
</ul>


Hong Kong market quietly broke its downward trend channel last week, however the HSI met strong resistance at 18200 (100 Week Moving Average).

PICC Property &amp; Casualty H (2328 HK) and China Petroleum &amp; Chemical (386 HK) broke to new highs relative to MSCI indices.  Sinopec may benefit from stronger RMB in 2H24.

Shenzhou Intl Group Holdings (2313 HK) had a short-term turnaround from its downtrend.  The company reported growth in sales and better margins in 2Q24.


Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 3)

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>The turnaround of sports business at <a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang (3818 HK)</a> is very welcoming. We are glad that sales trend in Oct-Nov is sustained and Phenix brand is well-received.</li>
<li>Reported losses widened as poor market environment enlarged investment losses. However, net cash and investment portfolio are still valued at Rmb8.5bn, or 5.9x its market capitalisation. </li>
<li>CNDX looks comfortably at over 6% full-year dividend yield. Together with just 0.15x P/B, there are enough protections for the downside of the stock.  </li>
</ul>


The turnaround of sports business at China Dongxiang (3818 HK) is very welcoming. We are glad that sales trend in Oct-Nov is sustained and Phenix brand is well-received.
Reported losses widened as poor market environment enlarged investment losses. However, net cash and investment portfolio are still valued at Rmb8.5bn, or 5.9x its market capitalisation. 
CNDX looks comfortably at over 6% full-year dividend yield. Together with just 0.15x P/B, there are enough protections for the downside of the stock.  


China Dongxiang (3818 HK): Turned Around on Sports Business

Thematic (Sector/Industry)

<ul>
<li>President Trump has indicated that he will lower tariffs on ASEAN countries in exchange for future supply commitments of Rare Earth Elements (REEs) to counter China's industry dominance.</li>
<li>Although the supply commitments of REEs to supplant China's production will take years to fulfill, the tariff relief will provide immediate benefits to Chinese textile manufacturers with Southeast Asian production.</li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> , <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> ,<a href="https://www.smartkarma.com/entities/yue-yuen-industrial-holdings-limited" target="_blank" data-smartkarma-citation="entities:12281:1" rel="noopener">Yue Yuen Industrial Holdings (551 HK)</a> , and <a href="https://www.smartkarma.com/entities/stella-international" target="_blank" data-smartkarma-citation="entities:7610:1" rel="noopener">Stella International (1836 HK)</a> will benefit from the tariff relief.
</li>
</ul>


President Trump has indicated that he will lower tariffs on ASEAN countries in exchange for future supply commitments of Rare Earth Elements (REEs) to counter China's industry dominance.
Although the supply commitments of REEs to supplant China's production will take years to fulfill, the tariff relief will provide immediate benefits to Chinese textile manufacturers with Southeast Asian production.

Shenzhou Intl Group Holdings (2313 HK) , Bosideng International Holdings (3998 HK) ,Yue Yuen Industrial Holdings (551 HK) , and Stella International (1836 HK) will benefit from the tariff relief.



How Rare Earth Elements Helped China's Textile Companies

<ul>
<li>While the 2H FY25 result of <a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang (3818 HK)</a> does not look exciting, there are meaningful operating and financial improvements deep inside. </li>
<li>The HSI change is a good proxy for its investment gains, and the 5.9% gain since end-FY25 (Mar) should positively reflect on CNDX's 1H FY26 results. </li>
<li>The sports goods business is not expected to be a drag in FY26. Trading at a steep 76.5% discount, the stock stays highly undervalued.</li>
</ul>


While the 2H FY25 result of China Dongxiang (3818 HK) does not look exciting, there are meaningful operating and financial improvements deep inside. 
The HSI change is a good proxy for its investment gains, and the 5.9% gain since end-FY25 (Mar) should positively reflect on CNDX's 1H FY26 results. 
The sports goods business is not expected to be a drag in FY26. Trading at a steep 76.5% discount, the stock stays highly undervalued.


China Dongxiang (3818 HK): Better than It Appears

China

Xtep International Holdings Ltd. designs, manufactures, and markets sportwear. The Company produces footwear, apparel, and accessories.

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Xtep International (1368 HK)

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 23)

Hong Kong tech sector is key to lead the market higher. Lower volatility & decreased short selling volume provide tailwinds for HSTECH index. Sands...

David Mudd

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 3)

Hong Kong market broke its downtrend however it met strong resistance just above 18k. PICC and Sinopec broke to new highs relative to MSCI...

David Mudd

China Dongxiang (3818 HK): Turned Around on Sports Business

Along with the encouraging 3Q FY24 (Oct-Dec 2023) sportswear sales - Kappa brand sales up mid 40%–50% YoY, China Dongxiang has benefited from the...

Osbert Tang, CFA

How Rare Earth Elements Helped China's Textile Companies

President Trump will lower tariffs on ASEAN countries in exchange for future supply commitments of Rare Earth Elements (REEs) to counter China's...

David Mudd

China Dongxiang (3818 HK): Better than It Appears

China Dongxiang Group shows promising operating and financial improvements despite unexciting 2H FY25 results. The stock remains highly...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 23)

Hong Kong tech sector is key to lead the market higher. Lower volatility & decreased short selling volume provide tailwinds for HSTECH index. Sands...

David Mudd

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 3)

Hong Kong market broke its downtrend however it met strong resistance just above 18k. PICC and Sinopec broke to new highs relative to MSCI...

David Mudd

China Dongxiang (3818 HK): Turned Around on Sports Business

Along with the encouraging 3Q FY24 (Oct-Dec 2023) sportswear sales - Kappa brand sales up mid 40%–50% YoY, China Dongxiang has benefited from the...

Osbert Tang, CFA

How Rare Earth Elements Helped China's Textile Companies

President Trump will lower tariffs on ASEAN countries in exchange for future supply commitments of Rare Earth Elements (REEs) to counter China's...

David Mudd

China Dongxiang (3818 HK): Better than It Appears

​China Dongxiang Group shows promising operating and financial improvements despite unexciting 2H FY25 results. The stock remains highly...

Osbert Tang, CFA

China Dongxiang Group shows promising operating and financial improvements despite unexciting 2H FY25 results. The stock remains highly...