MCM Partners HK & CN Month in Review for July
| Hank Terrebrood & Ryan Roberts +852 2210 0833 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| July review: A-shares implode, HSI slides to 3-month low Markets in China and Hong Kong traded lower this week, with the Hang Seng index ending -2% lower against the backdrop of the Shanghai Composite losing -10%. For the month, the Hang Seng index fell about -6%, while the Shanghai Composite shed -14%. The below chart shows HKEX listed week on week fund flows, by sector, using turnover. Today’s end-of-month turnover was 50% vs. the last day of June’s turnover. Going forward, we will also show this detail for the month on month comparison by sector.
July is definitely one A-share investors would like to soon forget; the Shanghai Composite hasn’t seen monthly losses this steep since August 2008 when the index fell nearly -22%. There was some eco data out during the week for China, which included industrial profits falling -0.30% in June, down from +0.60% in May. The slumping profits data was close on the heels of July’s Flash Manufacturing PMI, a weak 48.2, the lowest reading in over a year and the fifth consecutive month showing contracting conditions. The combination of slumping profits and a pessimistic outlook on behalf of manufacturers reinforces the view that all is not well with China’s economy. Other economic data for June released this month was mixed. Industrial production rose +6.8% YoY, stronger than expected, retail sales rose +10.6% (vs. a +10.2% consensus estimate), and fixed asset investments were also stronger than anticipated. Investment in real estate development continued to slump, underscoring troubles in that segment of the economy. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer confidence posted a surprising rebound for the month, supporting retail sales data that signaled somewhat resilient consumption trends. The health of China’s consumer is very much a key issue for China; policymakers are hoping for consumption to take a leading role as the economy transitions from one led by manufacturing.
Although the Shanghai Composite has managed to maintain the 3,500-4,000 trading range, there are several reasons more caution is warranted. New A-share account opening data painted a very unenthusiastic picture of domestic investors (new accounts opened in the previous week fell to a lackluster 392,000, well beneath recent trends), as did a pullback in margin balances, which has fallen back to levels last seen in March 2015. Additionally, there are still a number of stocks which have bene suspended from trading, and valuations remain stretched. Please see our comprehensive “A-Shares: a wall of worry” on July 29, 2015 for more.
The idea that domestic investors are on edge is evident in trading trends as well. There has been notable rise in intra-day volatility recently, and a pullback earlier in the week following news that exploration ways to scale back market support measures draws a clear line between investor appetite and implicit government support.
The number of A-shares trading below their 200 day moving average doubled to 1,141 securities from last week’s 576. Companies with a market cap of greater than US$2bn and a PE ratio greater than 200 stands at 88 vs. last week’s 118 while the SHCOMP PE remained virtually unchanged @ 18.68. The HSI’s PE dropped -2.5% to 10.53. Something doesn’t smell right, like government sponsored buying is rotating in and out of large cap A-shares in their support activities. It’s a concept.
Other trends we’ve been following at MCM Partners include the series of US-listed Chinese companies that have been the target of “going private” transactions, ostensibly a grandiose valuation arbitrage trade to buy the US-listed stock at a low valuation with an eye to relist in China at a healthy premium. Popular opinion has been fixated on the notion that with a weak A-share market, the trade loses its appeal. However, as we noted in “Going-private China – Some spreads narrow, some closed” on July 29, 2015, that might not be the case. Please see the note for more detail, or contact us for a copy.
Performance of MCM’s quantitative/technical research has been particularly noteworthy this week, rounding out a month of solid performance. As noted below, the trade ideas include both long, short, and paired stocks, clearly providing uncorrelated alpha returns in in markets that have been very unforgiving to inflexible strategies.
Name | Ticker | Return |
Closed Trades | ||
China Water Industry Group L | 1129 HK Equity | 5.35% |
China Pioneer Pharma Holding | 1345 HK Equity | -5.58% |
Guolian Securities Co Ltd-H | 1456 HK Equity | 0.00% |
Synertone Communication Corp | 1613 HK Equity | 40.00% |
Dongyue Group | 189 HK Equity | 23.84% |
Yingde Gases Group Co Ltd | 2168 HK Equity | 7.27% |
Comba Telecom Systems Holdin | 2342 HK Equity | 21.52% |
Pacific Basin Shipping Ltd | 2343 HK Equity | 13.85% |
The United Laboratories Inte | 3933 HK Equity | -13.20% |
Boyaa Interactive Internatio | 434 HK Equity | 35.45% |
Skyworth Digital Hldgs Ltd | 751 HK Equity | 8.77% |
Bloomage Biotech / Baiyunshan Pharma | Multiple | 14.11% |
Baidu Inc - Spon Adr | BIDU US Equity | -9.21% |
China Mobile Games-Adr | CMGE US Equity | 10.74% |
Shanghai Se Composite | SHCOMP Index | -5.35% |
Youku Tudou Inc-Adr | YOKU US Equity | 19.85% |
Open Trades | ||
Summit Ascent Holdings Ltd | 102 HK Equity | 0.00% |
Zoomlion Heavy Industry - H | 1157 HK Equity | -1.71% |
Powerlong Real Estate Holdin | 1238 HK Equity | -8.12% |
Fu Shou Yuan International | 1448 HK Equity | 1.61% |
Consun Pharmaceutical Group | 1681 HK Equity | -0.69% |
Sa Sa International Hldgs | 178 HK Equity | 6.20% |
Peak Sport Products Ltd | 1968 HK Equity | -4.01% |
Smartone Telecommunications | 315 HK Equity | 9.53% |
Pax Global Technology Ltd | 327 HK Equity | 2.48% |
Goldpac Group Ltd | 3315 HK Equity | -6.61% |
China Dongxiang Group Co | 3818 HK Equity | -2.46% |
Nagacorp Ltd | 3918 HK Equity | 0.80% |
Greatview Aseptic Packaging | 468 HK Equity | 1.78% |
Beijing North Star Co Ltd-H | 588 HK Equity | 4.68% |
China High Speed Transmissio | 658 HK Equity | -9.00% |
Truly International Holdings | 732 HK Equity | 16.67% |
Maoye International Hldgs | 848 HK Equity | 8.00% |
Huaneng Renewables Corp-H | 958 HK Equity | 1.73% |
Baidu Inc - Spon Adr | BIDU US Equity | -1.19% |
Bona Film Group Ltd-Spon Adr | BONA US Equity | 1.64% |
China Cord Blood Corp | CO US Equity | -3.03% |
E-Commerce China-Spon Adr -A | DANG US Equity | -0.29% |
Idreamsky Technology Co-Adr | DSKY US Equity | -0.67% |
Sungy Mobile Ltd | GOMO US Equity | 6.36% |
Homeinns Hotel Group-Adr | HMIN US Equity | -4.22% |
Jd.Com Inc-Adr | JD US Equity | -3.33% |
Kongzhong Corp-Adr | KZ US Equity | -2.57% |
China Nepstar Chain Drug-Adr | NPD US Equity | 15.66% |
Renren Inc-Adr | RENN US Equity | 0.28% |
Xueda Education Gr-Spon Adr | XUE US Equity | 4.96% |
If you’re not seeing our trade messages in real-time basis and would like to, please contact Hank Terrebrood:
hank.terrebrood@mcmpartners.com +852 2210 0833
Research review from this month
§ Dying to tell you: BUY Fu Shou Yuan/1448.HK on Technicals, valuation
§ Baidu (BIDU) buyback offers short term support
§ Going-private China – Updated outlook
§ China A-shares - margin levels, new accounts, other challenges ahead
§ Boyaa Interactive/0434.HK COVER
§ Baidu Inc. (BIDU) Q2 FY2015 results signal heavy spending
§ Sohu.com (SOHU) Q2 FY 2015 Flash Update
§ Changyou.com Ltd (CYOU) Q2 FY2015 Flash Update
§ Consun Pharma/1681.HK BUY on Technicals, strengthening fundamentals
§ Summit Ascent Holdings/0102.HK SHORT on Technicals
§ Shanghai Composite (SHCOMP) - Time to BUY on technicals
§ Alibaba Holdings (BABA) Technical BUY
§ Guangzhou Baiyunshan/0874.HK Technical SHORT
§ Bloomage Biotech/0963.HK Technical BUY, RV also supportive
§ Going-private China – Deal Spreads Continue To Narrow
§ Youku Tudou (YOKU) seeing headwind in the form of competition
§ Zoomlion Heavy/1157.HK SHORT on Technicals and RV
§ Uniqlo closing JD (JD) store before the paint dries? Not a good sign.
§ Goldpac Group/3315.HK BUY on technicals, cheap relative value
§ LightInTheBox (LITB) COVER on technicals
§ NagaCorp/3918.HK BUY on Technicals
§ Updated: ECommerce China Dangdang (DANG) BUY on buyout
§ Powerlong Real Estate/1238.HK BUY on Technicals
§ China Dongxiang/3818.HK BUY on Technicals
§ RMB Internationalization - important milestones and a look ahead
§ JD.com (JD) BUY on strong fundamentals, and a pretty chart
§ Baidu Inc. (BIDU) Technicals signal COVER
§ "Going private" still makes sense for US-listed China stocks
§ China Water Industry/1129.HK BUY
§ Homeinns (HMIN) back on our radar, BUY on buyout & technicals
§ SmarTone Telecom/0315.HK reiterate BUY on technicals
§ Maoye International/0848.HK SHORT on Technicals
Our research above is available on Bloomberg, ThomsonReuters, S&P Capital IQ, Factset, and SeedAlpha. Alternatively, please get in touch if you’d like to be on the distribution list.
Looking Ahead Next Week:
§ Official PMI data – set for release over the weekend
§ Private estimates of Chinese home prices – set for release over the weekend
§ Caixin/Markit final Manufacturing PMI – set for release on Monday
§ Caixin/Markit Services PMI – set for release on Wednesday
§ Trade data (exports, imports, balance of trade) – set for release late next week
Important Disclaimers
This material is produced by the MCM Partners Sales Desk solely for the benefit of MCM Partners’ existing customers (collectively “Customers”, and individually “Customer”) on a restricted basis. MCM Partners retains all copyright and other intellectual property rights. If you are not the intended recipient, please permanently delete or destroy this material as reading, copying, disclosure or disseminating this material is strictly prohibited.
This material is being distributed only to Customers that are considered “professional investors” within the meaning of Part I, Schedule 1 to the Securities and Futures Ordinance (Cap.571 of the Laws of Hong Kong) (“SFO”) and is intended only for their own personal use and no-one else. For the avoidance of doubt, there is no intention of MCM Partners to produce or disclose this material (or any part thereof) to any resident(s) or other person(s) within United States of America or in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction and to such resident(s) or person(s) that are “professional investors” within the meaning of Part I, Schedule 1 to the SFO.
Persons receiving this material should note that this is not an investment research or a research recommendation or product that is subject to the legal requirements for the purposes of any applicable securities law in Hong Kong, United States of America or elsewhere or any codes or guidelines issued by the Securities Futures Commission or other regulators in the world, and should consult their investment, financial, legal tax, accounting or other advisors and consultants, as appropriate, to advise on, all applicable laws and regulations of any relevant jurisdiction and all the relevant risk factors that relate to the securities or other instruments or products described herein.
This material is confidential and the property of MCM Partners that is being supplied to you, being a Customer, for your information only, which should not be published, copied, reproduced, modified, distributed, forwarded or disclosed (in whole or in part) in any manner whatsoever or for any purpose without MCM Partners’ prior written consent.
The contents of this material are not to be construed as any advice relating to securities or other instruments or products described herein nor shall they be deemed to provide any investment, financial, legal, tax, accounting or other advice. This material should not, and shall under no circumstances, be construed as, a prospectus, an advertisement, a public offering, an invitation or an offer to sell or buy or the solicitation of an offer to buy or sell any securities or other instruments or products described herein, in any jurisdiction.
This material is based upon information which has been derived from publicly available sources that MCM Partners considers reliable as of the date hereof, but MCM Partners (together with its officers, employees, agents or representatives) shall make no representation or warranty as to, and accept no responsibility or liability whatsoever for, the accuracy, completeness or reliability of the information included herein, including any third party information. Customers should rely upon their own representatives, advisors and accountants for making any judgment or investment decision with respect to any securities or other instruments or products described herein and should not replace reliance upon the accuracy, completeness or correctness of the information contained in this material. All information will be subject to change without further notice. In addition, no responsibility or liability is accepted by MCM Partners or any of its officers, employees, agents or representatives for any errors, misstatements in or omissions from this material.
Whilst this material has been prepared in good faith by MCM Partners according to its own protocol and resources, the scenarios, simulations, development expectations and forecasts contained in this material are for illustrative purposes only and thus, there can be no assurance that any or all indicated returns, performance or results included in this material will be achieved, in particular certain performance data contained in this material is based on back-testing, i.e. simulations of performance of a strategy, index or assets as if it had actually existed during a defined period of time, Historical performance is not indicative of future results. Customers should be aware of all such inherent limitations embedded in back-testing and the risk of generating a result that may not be the same as the indicative results included in this material if a different set of models or assumptions are used by other registered institution in its analysis. Given there are a number of factors which may affect the indicative terms and certain transactions or securities described herein may give rise to substantial risk, Customers should carefully consider all the associated risk factors as disclosed in the announcements, circulars and/or financial statements from time to time published by the relevant issuer of the securities or other instruments or products described herein and should seek independent investment, financial, legal, tax, accounting or other advice to determine the suitability and consequences of making investment in such securities or other instruments or products. MCM Partners expressly disclaims any responsibility for the accuracy or completeness or reliability of any information or sources complied for the purpose of this material.
This material has been prepared and distributed by MCM Partners which is a registered institution regulated by the Securities and Futures Commission for the conduct of Types 1, 2 and 4 regulated activities within the meaning of the SFO.
22/F, Man Yee Building
68 Des Voeux Road, Central, Hong Kong
0 comments:
Post a Comment