Global Quantitative & Derivatives Strategy05 February 2024J P M O R G A Nwww.jpmorganmarkets.comGlobal Quantitative and Derivatives StrategyTony SK Lee AC(852) 2800-8857tony.sk.lee@jpmorgan.comBloomberg JPMA TONYLEE J.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedHaoshun Liu AC(852) 2800-7736haoshun.liu@jpmorgan.comBloomberg JPMA HLIU J.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedXipu Han AC(852) 2800-1029xipu.han@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedTwinkle Mehta, CFA AC(852) 2800-7109twinkle.mehta@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedDavide Silvestrini(44-20) 7134-4082davide.silvestrini@jpmorgan.comJ.P. Morgan Securities plcBram Kaplan, CFA(1-212) 272-1215bram.kaplan@jpmorgan.comJ.P. Morgan Securities LLCMarko Kolanovic, PhD(1-212) 622-3677marko.kolanovic@jpmorgan.comJ.P. Morgan Securities LLCThe 4Q23 earnings season for Hong Kong/China is set to begin in late February. This report aims to outline the principal trading themes leading into the earnings season, analyze market expectations as evidenced by dispersion and implied earnings movements and identify opportunities within single stock options.•China SOEs in focus: As the earnings season unfolds, attention increasingly turns to China SOE reforms. Shares of Hong Kong-listed China SOEs have seen their 1M turnover higher by 20% over their 3M average. This comes against ongoing negative earnings revision breadth since 2022. Investors are drawn to SOEs for their value and defensive attributes. This interest is supported by SASAC suggesting “market value management� could become part of SOE management KPIs. However, investor engagement remains half of what it was at previous highs, showing measured optimism. News and market actions hint at more developments to come. Meanwhile, a moderate increase in implied volatility shows restrained excitement. Clearer details on SOE reforms, expected in the March earnings season, may boost investor interest and affect market movements.•Dispersion trading opportunities in HK: As of now, the entry point for entering dispersion trading is close to the lowest observed in the past two years. We observed that the realized dispersion for January 2024 has decreased by approximately 2 volatility points compared to the levels recorded in December 2023. Stocks with a track record of heightened dispersion compared to the current entry point include HSBC (5 HK), Trip.com (9961 HK), BYD (1211 HK), Geely Automobile (175 HK), CNOOC (883 HK) and Li Auto (2015 HK).•Earnings implied move: About 32% of Hang Seng and 17% of H-share names (by index weight) are expected to announce their 4Q23 results in February 2024. For companies due to report, the options market on average expects higher levels of volatility...
