Alpha Picks: October Conviction Calls
For October, Chinese equities could rebound ahead of the 20th Party Congress and on hopes of gradual easing of pandemic control measures after the Congress. But further out, the negative global market sentiment is likely to remain as the dominant factor. Investors should stay nimble. We add CATL, LINK REIT, Pinduoduo, Shenzhen Inovance, SHKP and Trip.com to our BUY list.
• Review of September. The MSCI China and HSI have dropped 14.7% and 13.7% respectively in September, as the lack of new positive catalysts in China, sticky US inflation and a hawkish Fed became a toxic mix for the markets. CTGDF (601888 CH/BUY) was the best performer among our stock picks, having increased 9.9% in Sep 22.
• For October, Chinese equities could rebound in the first half of the month ahead of the 20th Party Congress and on hopes that some easing of pandemic control measures is likely post-Congress. However, the negative sentiment in the global markets would likely remain as the dominant factor further out. Investors should stay nimble, and we are keeping both BUY and SELL calls on our list.
• Add CATL (300750 CH) to our BUY list as we expect a growth of monthly EV battery shipment and recovery of 2Q22 earnings.
• Add LINK REIT (0823 HK) to our BUY list on expectations of retail sales recovery in Hong Kong.
• Add Pinduoduo (PDD US) to our BUY list as it should see strong sales of agriculture products and improved monetisation rat.
• Add Shenzhen Inovance (300124 CH) to our BUY list as we expect registered resilient growth through the downcycle in 2H22-2023.
• Add SHKP (0016 HK) to our BUY list as we expect more supportive policies from the Hong Kong government.
• Add Trip.com (9961 HK) to our BUY list, a beneficiary of potential easing of pandemic control measures.
• Cut losses on Weimob (2013 HK) and AIA Group (1299 HK).
• Maintain BUY on CTGDF (601888 CH), CR Land (1109 HK), Kweichow Moutai (600519 HK), and Mindray (300760 CH).
• Maintain SELL on Ganfeng (1772 HK), Tinci Materials (002709 CH), and Sinopharm (1099 HK).