Zico Files : After the stand-off – The Hang Seng Buy list

Assuming that the stand-off between the various protest groups and the SAR government gets resolved and business returns to some normality in HK, I expect the Beijing government to be more business/investor “friendly”.
Buying into a sell-off means first at looking at those that had seen the most selling pressure.
Let first look at the biggest China stock today – yes it’s Alibaba (BABA US) and it is listed outside of China/HK. All the “buying pressure” in the run-up to its listing in NY has also meant that there is more buying pressure than that of the selling variety. What’s the value of the sum of the parts in Alibaba? My take is that it’s closer to its issue price at 68. So at current levels Alibaba is not one to put into the buy-list. Jack Ma probably got full value for his stock.
It’s is interesting that the “largest” stock is in the China/HK is in the e-commerce space. Just prior to Alibaba’s listing, Tencent (700 HK)  was the largest. It’s also worth noting that when China became the biggest consumer of energy and commodities, the largest stock was Petrochina (857 HK/PTR US).
Many analysts have made the case for China to move away from an investment-driven economy to one that’s more focus on consumption. And so it follows that the stock-picker should be looking for the “Wal-Mart” of China. That’s the wrong place to look. It’s in the e-commerce space. My buy-list is still weighted towards the ‘consumption theme” and it’s through the e-commerce stocks like Tencent and Ctrip (CTRP US).
China is large enough for more than one pre-eminent financial centre. HK had been playing that role. Shanghai has also been rising and the current situation in HK will only accelerate the role of Shanghai. Therefore the financial services space is another to look for names to put into the buy list.The banks and brokers will benefit from the Shanghai-Hong Kong Stock Connect (27 October 2014 launch) theme – and the preference here include China Construction Bank (939 HK) and China Galaxy (6881 HK). I am also a long term fan of China Taiping Insurance (966 HK)- in a sense it’s a “consumption” stock. As the population get wealthy, the demand for financial services like life insurance will rise and the best name there is China Taiping Insurance.
So let’s start with these five –
  •  Tencent
  •  Ctrip
  •  China Construction Bank
  •  China Galaxy
  •  China Taiping

 

Related article
1 October 2014
Zico Files : The Stand Off In Hong Kong https://tradehaven.net/market/zico-files-the-stand-off-in-hong-kong/

A Bit About Zico
Zico is our in house equity consultant who is currently a private fund manager with more than a fair share awards in the course of his illustrious career.
Having managed both global and also regional themed equity portfolios, he specialises in stock picking that maximises returns for his various absolute return portfolios.