Fund Flow Monitor

Weekly recap:

    HK market continued to slide in spite of A-share rally. HKmarket rebounded mildly after falling to 27,049 last Thursday, butthen remained sluggish instead of strengthening along with theA-share market which closed above 5,000 on Friday. For the week,HSI lost nearly 1%. While sectors in the underestimated zoneincreased to 12 from 6, they were mostly low correlated with themovements of the broad market expect for the China banking sector.

    Those with high correlation such as securities exchanges andsecurities brokerages recorded fund outflow. The bullish sectors ofthe week included:i) coal, ii) packaging, paper & printing, iii) consumer fashion &apparel, iv) alternative energy, v) China banking, &vi) toll roads.

    Sectors in highlight:Coal: Shenhua, China Coal, Yitai Coal and Datong Coalsimultaneously announced price hikes in June despite lingeringweakness in the sector. From June 1, coal prices of the fourproducers were raised by RMB2 to RMB7/ton. Shenhua (1088)attracted an influx of liquidity on price hikes and reduced capacity.

    Weekly investment themes:

    Consumer fashion & apparel: Market cap of the sector increasedalong with a fund flowing back after China announced to lowerimport tariffs on some consumers goods to help upgrade domesticconsumption. Belle (1880 HK) reported better-than-expected FY15results thanks to strong growth in same store sales (SSS) in itssportswear sector as well as expanding gross margin througheffective cost control in the footwear sector. Meanwhile, Belle hassigned cooperation agreement with Alibaba Tmall for O2Omarketing, which is expected to further drive its earnings growth.

    Cosmo Lady (2298) posted a 54% growth in its FY14 net profit assales revenue surged on improving gross profits at its self-operatingstores. Its earnings are expected to sustain solid growth onoptimistic SSS growth outlook and store additions. Moreover,Fuguiniao (1819 HK) also attracted continuous fund inflow after thecompany announced to set up two subsidiaries in Xiamen Pilot FreeTrade Zone to operate e-commerce business including import andexport of apparel, footwear and headgear.

    Toll roads: Market cap of the sector has been increasing on largefund inflows since early March, which remained relatively solidduring the broad-market correction in May and rose again in the pastweeks. Apart from the stable operating cash flows, the sector is alsoregarded as one of the major beneficiaries of the SOE reform. AnhuiExpressway (995) posted largest fund inflow in the sector, possiblythanks to its high expected dividend at 3.5%. Meanwhile, ZhejiangExpressway (576) saw a net inflow of HK$7.48mn as the companyrecorded a 23% increase in its 1Q15 profit with 40% of revenuecoming from securities business.