Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Thematic (Sector/Industry)

<ul>
<li>A big structural change to underpin consumer demand goes unnoticed</li>
<li>Efforts to prop up retail sales this year have had the desired effect</li>
<li>We change up the members of the original consumer basket</li>
</ul>


A big structural change to underpin consumer demand goes unnoticed
Efforts to prop up retail sales this year have had the desired effect
We change up the members of the original consumer basket


Low Bar, High Bounce: China’s Consumer Comeback

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>US is focusing on propelling growth with tax cuts, ignoring the debt problem. The obvious consequence, more USD depreciation, could drive more money from US assets into Asia and Europe.</li>
<li>If 1% of US free float market cap flows into Asia, it would constitute 7.2% of Asia's market cap. That's more than 5x the highest ever annual Asian FII inflow.</li>
<li>Taiwan, Korea and India have seen the biggest FII flow revival. To sidestep the deleterious effect of sharp USD appreciation on Asian exports, investors should play China, India, Indonesia, Philippines.</li>
</ul>


US is focusing on propelling growth with tax cuts, ignoring the debt problem. The obvious consequence, more USD depreciation, could drive more money from US assets into Asia and Europe.
If 1% of US free float market cap flows into Asia, it would constitute 7.2% of Asia's market cap. That's more than 5x the highest ever annual Asian FII inflow.
Taiwan, Korea and India have seen the biggest FII flow revival. To sidestep the deleterious effect of sharp USD appreciation on Asian exports, investors should play China, India, Indonesia, Philippines.


More USD Depreciation on the Cards - Who Wins, Who Loses.

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.

<ul><li>The consumption trend in Apr 2025 improved MoM across most sub-sectors compared to Mar 2025.</li><li>Numbers during the 2025 5-1 holidays either maintained this trend or further improved, mainly thanks to: 1) a low base, 2) improving weather conditions, 3) longer holidays compared to last year, and 4) fairly robust inbound tourism growth.</li><li>By subsector, apparel and tourism-hotel outperformed our expectations, sportswear and home appliances met expectations, while catering lagged behind. </li></ul><p><em>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.</em></p>

The consumption trend in Apr 2025 improved MoM across most sub-sectors compared to Mar 2025.Numbers during the 2025 5-1 holidays either maintained this trend or further improved, mainly thanks to: 1) a low base, 2) improving weather conditions, 3) longer holidays compared to last year, and 4) fairly robust inbound tourism growth.By subsector, apparel and tourism-hotel outperformed our expectations, sportswear and home appliances met expectations, while catering lagged behind. 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.

Consumer Discretionary - Constructive trend in S-R but cautious in L-R

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

<ul>
<li>The Hong Kong Alpha portfolio underperformed its benchmark index during April by 1.1%.  Since its inception last year, the portfolio has outperformed its benchmark by 18%.</li>
<li>Although the tech sector was hit after April 2nd, the portfolio made 2% in its tech exposure for the month.  We reduced the portfolio's volatility &amp; increased its Sharpe ratio.</li>
<li>At the end of April, sold positions that are at risk from the tariff uncertainty and increased our exposure to China domestic consumption.</li>
</ul>


The Hong Kong Alpha portfolio underperformed its benchmark index during April by 1.1%.  Since its inception last year, the portfolio has outperformed its benchmark by 18%.
Although the tech sector was hit after April 2nd, the portfolio made 2% in its tech exposure for the month.  We reduced the portfolio's volatility &amp; increased its Sharpe ratio.
At the end of April, sold positions that are at risk from the tariff uncertainty and increased our exposure to China domestic consumption.


<ul>
<li>US recession chatter is back. During past recessions, US declined less than Asia. Within Asia, select consumer staples, telecommunication, energy outperformed. Surprisingly, so did Korea and Taiwan tech, HK industrials.</li>
<li>Asian equity drawdown was driven more by valuation derating than by earnings decline. During every US recession, all Asian currencies depreciated and FIIs sold almost all Asian markets. </li>
<li>In the event of a US recession, we think Asia would outperform US. We like attractively valued domestic-focused sectors and stocks, unless a globally linked stock is egregiously undervalued.</li>
</ul>


US recession chatter is back. During past recessions, US declined less than Asia. Within Asia, select consumer staples, telecommunication, energy outperformed. Surprisingly, so did Korea and Taiwan tech, HK industrials.
Asian equity drawdown was driven more by valuation derating than by earnings decline. During every US recession, all Asian currencies depreciated and FIIs sold almost all Asian markets. 
In the event of a US recession, we think Asia would outperform US. We like attractively valued domestic-focused sectors and stocks, unless a globally linked stock is egregiously undervalued.


Asian Equities: What if There's a US Recession?

China

Yum China operates and franchises a diverse portfolio of restaurant brands across the People's Republic of China, including KFC, Pizza Hut, Taco Bell, Lavazza, Little Sheep, and Huang Ji Huang. The company also provides online food delivery services. Yum China Holdings, Inc. was spun off from Yum! Brands in 2016 and is headquartered in Shanghai, China.

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Yum China (9987 HK)

Low Bar, High Bounce: China’s Consumer Comeback

One of the members of our consumer basket, China Duty Free $1880, is up 16% today and 28% since we published, highlighting the asymmetric nature of...

Rikki Malik

More USD Depreciation on the Cards - Who Wins, Who Loses.

USD continues to decline against EM currencies. Last month North Asian currencies were up 2-2.5% (notably TWD) & ASEAN currencies 0.6-0.8%. INR was...

Manishi Raychaudhuri

Consumer Discretionary - Constructive trend in S-R but cautious in L-R

Numbers during the 2025 5-1 holidays either maintained this trend or further improved, mainly thanks to: 1) a low base, 2) improving weather...

CMB International

HONG KONG ALPHA PORTFOLIO (April 2025)

The Hong Kong Alpha portfolio underperformed its benchmark index during April by 1.1%. Since its inception last year, the portfolio has...

David Mudd

Asian Equities: What if There's a US Recession?

US recession chatter is back. US declined less than Asia in past recessions. This time it could be different. Valn derating, not EPS cuts, drove...

Manishi Raychaudhuri

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Low Bar, High Bounce: China’s Consumer Comeback

One of the members of our consumer basket, China Duty Free $1880, is up 16% today and 28% since we published, highlighting the asymmetric nature of...

Rikki Malik

More USD Depreciation on the Cards - Who Wins, Who Loses.

USD continues to decline against EM currencies. Last month North Asian currencies were up 2-2.5% (notably TWD) & ASEAN currencies 0.6-0.8%. INR was...

Manishi Raychaudhuri

Consumer Discretionary - Constructive trend in S-R but cautious in L-R

Numbers during the 2025 5-1 holidays either maintained this trend or further improved, mainly thanks to: 1) a low base, 2) improving weather...

CMB International

HONG KONG ALPHA PORTFOLIO (April 2025)

The Hong Kong Alpha portfolio underperformed its benchmark index during April by 1.1%. Since its inception last year, the portfolio has...

David Mudd

Asian Equities: What if There's a US Recession?

​US recession chatter is back. US declined less than Asia in past recessions. This time it could be different. Valn derating, not EPS cuts, drove...

Manishi Raychaudhuri

US recession chatter is back. US declined less than Asia in past recessions. This time it could be different. Valn derating, not EPS cuts, drove...