Insights: Bullish Chinese H Share Stocks
•China's inventory of bullish, technical opportunities continues to expand. This is especially on display in Hong Kong-traded shares, where themes that range from autos to banks to Macau casinos are breaking out from cyclical bottom patterns.•The aggregate of these improvements is visible in the Hang Seng China Enterprises Index (below). As seen below, the Index depicts a post-breakout pullback opportunity--one of the best-defined patterns among all global indices.
•Financial stocks play a prominent role in the Index's breakout. The sector accounts for a 70% weighting. If financials are having a bad day, so is this Index. Fortunately, financials, specifically banks, top our relative strength rankings. (We originally recommended H-share banks in our Feb. 17 Insights, “Hong Kong-listed Chinese Banks are Breaking Out.â€)
•Non-financial opportunities exist in autos (Great Wall Motor, Dongfeng Motor) and materials (Anhui Conch Cement).
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Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.
Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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