For past Pilgrimage publications, please contact BLRI sales (sales@blue-lotus.cn).

Dear all:

In the previous edition of Pilgrimage #11 (Oct. 8, 2018), we said:

We are introducing a new pair trade involving Bilibili (BILI US, BUY, US$15.2) vs. an uncovered stock that is about to be covered in the next few days. We will send an update on the coverage and pair trade after our initiation.

Yesterday we launched such coverage, a SELL rating on Baozun (BZUN US). The initiation report is attached. We update our pair trade table as follows.
 

As we are heading into US mid-election, we notice that Chinese government has demonstrated meaningful turn in strategy to put aside structural reforms in favour of tax cuts to boost the economy. This spells positively for our sector names in terms of boosting consumption and housing prices. However, since Chinese consumer households are leveraged, disposable income will restrain the consumption growth for years to come. We remain cautious on the strong cyclical names.
 

Our top picks are WUBA, BABA, BSTI and MOMO.