Equity & Credit Research

Duncan Chan

Thematic (Sector/Industry)

<ul>
<li>Gold's resistance to tighter policy suggests a higher structural floor, but weaker momentum and elevated real yields still favour consolidation.</li>
<li>The Yuanyou Bao incident provides the risk discipline, showing how familiar loss limits can fail when the assumed price domain does not match the underlying contract.</li>
<li>Futures provide linear exposure and miners add operating risk; a bull call spread fits structurally supported but momentum-constrained upside, subject to confirmation from the live volatility surface.</li>
</ul>


Gold's resistance to tighter policy suggests a higher structural floor, but weaker momentum and elevated real yields still favour consolidation.
The Yuanyou Bao incident provides the risk discipline, showing how familiar loss limits can fail when the assumed price domain does not match the underlying contract.
Futures provide linear exposure and miners add operating risk; a bull call spread fits structurally supported but momentum-constrained upside, subject to confirmation from the live volatility surface.


Gold Consolidation Favours Selective Upside

<ul>
<li>Asian LNG demand is forecast to fall 3–10% in 2026, its second consecutive decline, as high prices accelerate switching to coal, nuclear and domestic gas.</li>
<li>September Asian LNG imports are expected at 20.1 million tonnes, an eight-year seasonal low, even as buyers continue securing long-term supply and import capacity.</li>
<li>The market is shifting from LNG dependence to optionality, favouring low-cost, flexible supply over capacity reliant on continuously rising Asian utilisation.</li>
</ul>


Asian LNG demand is forecast to fall 3–10% in 2026, its second consecutive decline, as high prices accelerate switching to coal, nuclear and domestic gas.
September Asian LNG imports are expected at 20.1 million tonnes, an eight-year seasonal low, even as buyers continue securing long-term supply and import capacity.
The market is shifting from LNG dependence to optionality, favouring low-cost, flexible supply over capacity reliant on continuously rising Asian utilisation.


Asia’s Energy Security Push From LNG Dependence to Optionality

Macroeconomics

<ul>
<li>Hong Kong imported almost 100 tonnes of Russian gold in 2026’s first seven months, while July transactions showed that Delivery Connect, central clearing and OTC execution can work.</li>
<li>International-Bank financing is the next test, with global gold OTC derivatives already exceeding US$1.1 trillion outstanding, showing the financial activity that accepted bullion can support beyond physical delivery.</li>
<li>Longer term, a large pool of internationally accepted bullion could deepen financing and trading beyond each new shipment, extending Hong Kong’s role from physical delivery to offshore gold markets.</li>
</ul>


Hong Kong imported almost 100 tonnes of Russian gold in 2026’s first seven months, while July transactions showed that Delivery Connect, central clearing and OTC execution can work.
International-Bank financing is the next test, with global gold OTC derivatives already exceeding US$1.1 trillion outstanding, showing the financial activity that accepted bullion can support beyond physical delivery.
Longer term, a large pool of internationally accepted bullion could deepen financing and trading beyond each new shipment, extending Hong Kong’s role from physical delivery to offshore gold markets.


Hong Kong Gold Hub: From Physical Delivery to Financial Collateral

<ul>
<li>Beijing’s latest property easing reduces downside risk, but weak construction activity suggests limited immediate impact on China’s physical steel and iron-ore demand.</li>
<li>Cement and steel output remain weak despite stronger iron-ore imports, unlike the synchronised construction and commodity recovery seen during the 2020–21 cycle.</li>
<li>With global steel demand barely growing and new seaborne supply emerging, upside remains constrained, although subdued expectations could amplify a re-rating if inventories fall and steel margins recover.</li>
</ul>


Beijing’s latest property easing reduces downside risk, but weak construction activity suggests limited immediate impact on China’s physical steel and iron-ore demand.
Cement and steel output remain weak despite stronger iron-ore imports, unlike the synchronised construction and commodity recovery seen during the 2020–21 cycle.
With global steel demand barely growing and new seaborne supply emerging, upside remains constrained, although subdued expectations could amplify a re-rating if inventories fall and steel margins recover.


Property Easing Improves the Tail Risk, but an Iron-Ore Rally Remains Unwarranted

<ul>
<li>The market values <a href="https://www.smartkarma.com/entities/beijing-shougang-lanzatech-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:55324:1" rel="noopener">Beijing Shougang Lanzatech Technology (2553 HK)</a> primarily as a low-carbon ethanol producer, underestimating its transition toward an industrial carbon-conversion platform driven by technology, engineering and licensing.</li>
<li>Four commercial plants have proven gas fermentation at industrial scale. Near-term losses keep focus on whether technology licensing and integrated solutions can deliver recurring, higher-quality earnings beyond manufacturing.</li>
<li>We remain constructive. Our bear, base and bull cases imply valuations of HK$20–22, HK$30–33 and HK$40+, respectively, depending on utilisation, technology licensing and integrated solutions becoming meaningful earnings drivers.</li>
</ul>


The market values Beijing Shougang Lanzatech Technology (2553 HK) primarily as a low-carbon ethanol producer, underestimating its transition toward an industrial carbon-conversion platform driven by technology, engineering and licensing.
Four commercial plants have proven gas fermentation at industrial scale. Near-term losses keep focus on whether technology licensing and integrated solutions can deliver recurring, higher-quality earnings beyond manufacturing.
We remain constructive. Our bear, base and bull cases imply valuations of HK$20–22, HK$30–33 and HK$40+, respectively, depending on utilisation, technology licensing and integrated solutions becoming meaningful earnings drivers.


Shougang LanzaTech: Beyond Ethanol Toward Industrial Process Technology

Equity and credit research focused on value chains and capital structure. Experience across traditional metals, materials, advanced materials and industrial cyclicals. Built to Endure.