Revisiting new economy blue chips


Add Meituan, COSCO Shipping Port, SF Securities
Drop Angang Steel, China Eastern Airline, CICC


While the market expects the Fed to start taper talk this summer and
start reducing monetary stimulus by end-2021, we note that the HK
market had initially reacted poorly to the Fed’s taper announcement in
2013 but the pullback was short-lived as a rebound kicked in shortly after.
Given regulatory overhangs, new economy blue chips are attractively
valued vs other sectors. We have included Tencent, Alibaba, and Meituan
in our Top Picks


The A-share market saw a resurgence in the wake of strong RMB
performance in late May. The positive impact of RMB appreciation and
increasing foreign capital flow in China would spill over to the HK market –
thus boosting its trading volume. We believe undervalued Southbound
favourite new economy shares will benefit the most from the Southbound
resurgence in 2H2021 . We rotate our material sector exposure to more
new economy exposure in view of the better economic conditions,
expectations of strong southbound trading, and RMB appreciation. We
also expect the risk appetite in HK to improve amid an A-share
resurgence.


We replace China Eastern Airlines with COSCO Shipping Port for ports
exposure. Robust throughput volumes in 1Q and global economic
recovery in 2H21 should drive firm revenue recovery in 2021. We replace
CICC with GF Securities for a higher upside. We also remove Angang Steel
due to Chinese government’s intervention in cooling industrial commodity
prices.