HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>The approval rate of Draft Bill is very low. So, it's more of a “strangulation” of investment sentiment. But considering the 2024 US presidential election, similar negative proposals may resurface. </li>
<li>WuXi AppTec has little control over the entire situation.There's “valuation discount” for China CXOs due to geopolitical conflicts. It’s difficult to completely rule out the possibility of “deliberate short selling”. </li>
<li>If look deeper, considering "sensitive situations" at present, to some extent, we may have already been in a financial war.The goal of short selling is to pick up cheap chips. </li>
</ul>


The approval rate of Draft Bill is very low. So, it's more of a “strangulation” of investment sentiment. But considering the 2024 US presidential election, similar negative proposals may resurface. 
WuXi AppTec has little control over the entire situation.There's “valuation discount” for China CXOs due to geopolitical conflicts. It’s difficult to completely rule out the possibility of “deliberate short selling”. 
If look deeper, considering "sensitive situations" at present, to some extent, we may have already been in a financial war.The goal of short selling is to pick up cheap chips. 


WuXi AppTec (2359.HK/603259.CH) - Behind the Plunge Is a War

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.</li>
<li>The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).</li>
<li>Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.</li>
</ul>


There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.


CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>Industrials and Consumer Staples Remain Top Overweights, Though Sentiment Fragile for Both.</li>
<li>Energy sector shows signs of a turnaround from long-term decline, whilst Financials remain unloved by China investors.</li>
<li>Real Estate allocations have hit record lows, with average holdings at just 2.93%, while Consumer Discretionary sector approaches all-time highs.</li>
</ul>


Industrials and Consumer Staples Remain Top Overweights, Though Sentiment Fragile for Both.
Energy sector shows signs of a turnaround from long-term decline, whilst Financials remain unloved by China investors.
Real Estate allocations have hit record lows, with average holdings at just 2.93%, while Consumer Discretionary sector approaches all-time highs.


<ul>
<li>Recent business updates of WuXi Bio led to a decline in WuXi AppTec's share price and changed investors' expectations for CXO. Now is the time to adjust forecasts.</li>
<li>We analyzed the growth rate of various business of WuXi AppTec in 2024. In a neutral scenario, growth next year could fall short of management's guidance.Reversal in 2025 is uncertain.</li>
<li>If WuXi AppTec "unexpectedly" receives blockbuster orders, which are large enough to hedge against the downward trend of WuXi AppTec’s other businesses, then it will help to change performance expectations.</li>
</ul>


Recent business updates of WuXi Bio led to a decline in WuXi AppTec's share price and changed investors' expectations for CXO. Now is the time to adjust forecasts.
We analyzed the growth rate of various business of WuXi AppTec in 2024. In a neutral scenario, growth next year could fall short of management's guidance.Reversal in 2025 is uncertain.
If WuXi AppTec "unexpectedly" receives blockbuster orders, which are large enough to hedge against the downward trend of WuXi AppTec’s other businesses, then it will help to change performance expectations.


WuXi AppTec (2359.HK/603259.CH) - How Bad Things Could Be?

Thematic (Sector/Industry)

<ul>
<li>Due to the popularity of GLP-1 target, the entire GLP-1 upstream and downstream industry chain has received great enthusiasm. We analyzed related investment opportunities but also concerns in this market.  </li>
<li>Domestic CXOs should focus on securing orders for overseas weight loss drugs. The market value increment brought by weight loss drugs to CXO should be higher than that of APIs.</li>
<li>Due to increasing competition/potential price war, how big the real market space is uncertain. So, the market value increment of weight loss drugs business for pharmaceutical companies could be lower-than-expected.</li>
</ul>


Due to the popularity of GLP-1 target, the entire GLP-1 upstream and downstream industry chain has received great enthusiasm. We analyzed related investment opportunities but also concerns in this market.  
Domestic CXOs should focus on securing orders for overseas weight loss drugs. The market value increment brought by weight loss drugs to CXO should be higher than that of APIs.
Due to increasing competition/potential price war, how big the real market space is uncertain. So, the market value increment of weight loss drugs business for pharmaceutical companies could be lower-than-expected.


China's Weight Loss Drug Market – The Investment Opportunities and the Risks Behind

China

WuXi AppTec Co., Ltd. manufactures medical products. The Company produces biological agents, antibodies, biological diagnostic reagents, and other products. WuXi AppTec also provides biological analysis, technical study, and other services.

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WuXi AppTec (603259 CH)

WuXi AppTec (2359.HK/603259.CH) - Behind the Plunge Is a War

The plunge of WuXi AppTec and its subsidiaries are due to some negative progress of US Draft Bill - There're already 6 senators votes secured at...

Xinyao (Criss) Wang

CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks

There are 4 changes for the CSI Medical Service Index in Dec. There are chunky flows on some stocks. There is overlap between global and local...

Brian Freitas

China Macro: Sector Positioning Update

Sector positioning among active China Funds. Industrials and Consumer Staples Remain Top Overweights, Energy shows signs of a turnaround, whilst...

Steven Holden

WuXi AppTec (2359.HK/603259.CH) - How Bad Things Could Be?

The share price decline may still be related to concerns about Wuxi AppTec's performance. For example, orders could fall in 23Q4, with no new...

Xinyao (Criss) Wang

China's Weight Loss Drug Market – The Investment Opportunities and the Risks Behind

The GLP-1 target has been recognized as a blockbuster target, which has attracted great enthusiasm from investors.We analyzed related investment...

Xinyao (Criss) Wang

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