Have H~Shares Bottomed Out？

Investment Rating - The report indicates a positive outlook for H-shares, suggesting they may have bottomed out due to several supportive factors [2][3][4] Core Insights - H-shares experienced an increase amid volatility, supported by a decline in the HSI short-selling ratio from 20% to 13%, better-than-expected earnings from leading pharmaceutical companies, easing external market pressures, and a rise in the RMB exchange rate [2] - The report highlights a rebound in H-share earnings growth since the end of 2022, particularly in the "greater consumption" sectors, with notable earnings improvements in pharmaceuticals and consumer services [3] - The ongoing summer travel boom and government policies aimed at expanding domestic demand are expected to sustain consumption momentum, although price cuts have been observed in the travel sector [4] Summary by Sections H-Shares Performance - H-shares have shown resilience with narrowed net outflows of foreign capital and increased net inflows of southbound capital, indicating improved liquidity [2] - The report anticipates defensive attributes in H-share valuations in the short term, suggesting a focus on sectors sensitive to domestic demand and USD liquidity [6] Sector Analysis - The "greater consumption" sectors, particularly pharmaceuticals and consumer services, have seen significant earnings growth, with over 30% of companies in these sectors reporting improved earnings [3] - Midstream materials have faced pressure, likely due to reduced sales volumes and prices in cement and building materials [3] Economic Indicators - Recent economic data from the US has eased recession concerns, contributing to a stabilization in US stocks and a reduction in net outflows from H-shares [5] - The report emphasizes the importance of monitoring upcoming economic data, including the Jackson Hole Economic Symposium and US non-farm payrolls, for future market direction [6]