Mechelany Advisors' INVESTMENT IDEAS are the result of our analyses and can cover trading or investment ideas in any asset class. They are destined to tell our readers what we believe offers asymmetrical risk/rewards that can be benefitted from. We may or may not include them in our MODEL PORTFOLIO depending on the risk structure of our Portfolio at the time of publishing.
BUY CHINA LIFE ( 2628 HK ), NEW CHINA LIFE ( 1336 HK ) and PING ANG (2318 HK )
As China re-opened today after their National Day October holiday, Chinese equities are are also coming back to life.
One of the sectors that is pulling equities higher is the insurance sector and our two favorites CHINA LIFE (2628 HK ) and New China Life ( 1336 HK ) have delivered very strong BUY signals today.
We have been recommending both stocks over the summer and have them as core holdings in our Model Portfolio. We are also adding Ping Ang today.
The Life insurance sector is extremely sensitive to the global stock market as insurance companies manage pension funds and investment funds and they are now anticipating the strong rally we are expecting for the year-end and the first quarter in Chinese equities.
China Life gained almost 5 % this morning and the MACDs are delivering a BUY signal after the stock marked a significant double bottom on October 6. The immediate target in the coming move is HKD 15.5 but our ultimate target is more towards HKD 19
At 5x earnings that will be growing in double digits in 2021 and 2022, the stock is cheap and a re-rating of the sector is on the card.
NEW CHINA LIFE
At 3.57 x earnings, New China Life is a steal !!! Its earnings will grow in the low double digits in the coming years and the company has never been that cheap historically.
The stock is up 4 % this morning and the bear market is over as a strong higher low has been confirmed in October on the March 2020 support.
PING ANG INSURANCE
We have added Ping Ang to our MODEL PORTFOLIO today to increase our exposure to the sector. Ping and has been crushed, losing 50% of its value since February 2021 as US investors liquidated all their Chinese tech and Fintech holdings. The stock is Hugely oversold and this has taken its valuation to the lowest ever in its history at 5.7x earnings.
But the Life insurance sector is not the only one to come back to life.
Time to buy Chinese Tech stocks if you have not so yet…
As our regular readers know, we had been avoiding Chinese tech stock for many months on valuation concerns.
They suffered tremendously form the over-exposure and hype of US growth investors liquidations since the Archegos debacle and the regulating of their activities, data collection and data usage by the Chinese Government.
We went back into the sector in September, accumulating some of the prime names such as Ali Baba, Tencent, Kuaishou and the like.
We put a strong BUY recommendation on IQIYI two days ago, highlighting the large Short open position. in the stocks.
Yesterday, IQIY recorded a sharp reversal and we expect it to rise sharply again today in the US session. To us, the bottom is in place and the Chinese NETFLIX should seen as a core holding in any global portfolio.
IQIYI’s business and growth prospects have not changed materially since February 2021 and this is clearly one of China’s best growth story ahead. You can now invest in it at a third of what “legendary” investors touted it in February.
The Chinese tech sector has definitely turned the corner…
KWEB US, the Kraneshare CSI China Internet Fund just recorded a major reversal yesterday, and investors who are out of this important and high growth segment of the Chinese economy should consider raising their exposure now.
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