Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>Travel and box office data in the past three-day Dragonboat Holiday showed worrying weakness despite sharp price cuts by hotel and airlines. </li>
<li>Removing travellers from Hong Kong, inbound travel was also quite bad; </li>
<li>E-Commerce sales backed by trade-in stimulus outperformed regular merchandises, indicating consumer confidence is still low. We believe the weak travel data boded ill for consumption throughout the year.</li>
</ul>


Travel and box office data in the past three-day Dragonboat Holiday showed worrying weakness despite sharp price cuts by hotel and airlines. 
Removing travellers from Hong Kong, inbound travel was also quite bad; 
E-Commerce sales backed by trade-in stimulus outperformed regular merchandises, indicating consumer confidence is still low. We believe the weak travel data boded ill for consumption throughout the year.


[Blue Lotus Multi-Sector Sector Update]: Consumer Spending Weakened During Dragon Boat

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>The June rebalance of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI INDEX</a>, <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a> and HSIII indices will use today's closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.</li>
<li>The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).</li>
<li>
<a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto</a>, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba</a>, <a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase</a>, <a href="https://www.smartkarma.com/entities/zijin-mining-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:6358:1" rel="noopener">Zijin Mining</a>, <a href="https://www.smartkarma.com/entities/sensetime-group-inc" target="_blank" data-smartkarma-citation="entities:34319:1" rel="noopener">SenseTime</a> and <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics</a> are the largest buys while <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent</a>, <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com</a>, <a href="https://www.smartkarma.com/entities/kuaishou-technology" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings</a> are the largest sells.</li>
</ul>


The June rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today's closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).

Li Auto, Alibaba, NetEase, Zijin Mining, SenseTime and BYD Electronics are the largest buys while Tencent, Meituan, JD.com, Kuaishou Technology, Xiaomi and HSBC Holdings are the largest sells.


HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>JD.com, a China-based multinational technology conglomerate, has announced its first-quarter results for 2024 in an earnings call and reported robust profit and revenue growth, along with an encouragingly high Net Promoter Score (NPS).</li><li>The revenue growth was accelerated by strong execution amidst evolving industry dynamics, improved user experience, price competitiveness, and platform ecosystems.</li><li>Importantly, the general merchandise and supermarket category recorded a notable jump in terms of gross merchandise value (GMV) and revenue growth.</li></ul>

JD.com, a China-based multinational technology conglomerate, has announced its first-quarter results for 2024 in an earnings call and reported robust profit and revenue growth, along with an encouragingly high Net Promoter Score (NPS).The revenue growth was accelerated by strong execution amidst evolving industry dynamics, improved user experience, price competitiveness, and platform ecosystems.Importantly, the general merchandise and supermarket category recorded a notable jump in terms of gross merchandise value (GMV) and revenue growth.

JD.com Inc.: How Are They Strengthening the Platform Ecosystem & Continuing Their Market Dominance? - Major Drivers

<ul>
<li>As expected, there are no constituent changes for the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng TECH Index (HSTECH INDEX)</a> in June. However, there are float and capping changes.</li>
<li>Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a>. </li>
<li>Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.</li>
</ul>


As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June. However, there are float and capping changes.
Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in Li Auto (2015 HK). 
Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.


HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>JD.com (JD) reported (16 May) better-than-expected 1Q24 results: revenue was RMB260.0bn, up 7% YoY, 1% ahead of Bloomberg consensus; non-GAAP net income was RMB8.9bn, ahead of consensus estimates of RMB7.4bn thanks to better-than-feared gross profit margin aided by scale effect.</li><li>Management noted that general merchandise category has entered clean base since 1Q24, and commission revenue growth has also entered clean base since 2Q24 since the impact from enhancing merchant support has reached the full-year milestone.</li><li>JD is staying vigilant in industry competition, although industry competition seems more benign than market expectation given that all the industry peers are focusing on driving growth in an efficient way by targeting more on core user base operation. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

JD.com (JD) reported (16 May) better-than-expected 1Q24 results: revenue was RMB260.0bn, up 7% YoY, 1% ahead of Bloomberg consensus; non-GAAP net income was RMB8.9bn, ahead of consensus estimates of RMB7.4bn thanks to better-than-feared gross profit margin aided by scale effect.Management noted that general merchandise category has entered clean base since 1Q24, and commission revenue growth has also entered clean base since 2Q24 since the impact from enhancing merchant support has reached the full-year milestone.JD is staying vigilant in industry competition, although industry competition seems more benign than market expectation given that all the industry peers are focusing on driving growth in an efficient way by targeting more on core user base operation. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

JD.com (JD US) - Entering into a Clean Base for Growth

China

JD.com, Inc. is an online direct sales company in China. The Company offers a wide selection of products through its website and mobile applications. JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

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JD.com (9618 HK)

[Blue Lotus Multi-Sector Sector Update]: Consumer Spending Weakened During Dragon Boat

Weak travel data during Dragonboat Holiday despite price cuts by hotels and airlines suggests low consumer confidence, impacting consumption for...

Blue Lotus Research Institute

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)

The June rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today's closing prices for capping. The round-trip trade across the four...

Brian Freitas

JD.com Inc.: How Are They Strengthening the Platform Ecosystem & Continuing Their Market Dominance? - Major Drivers

JD.com, a China-based multinational technology conglomerate, has announced its first-quarter results for 2024 in an earnings call and reported...

Baptista Research

HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

Float and capping changes will result in one-way turnover of 8% and in a round-trip trade of HK$19.2bn (US$2.46bn). Li Auto is the largest passive...

Brian Freitas

JD.com (JD US) - Entering into a Clean Base for Growth

JD.com (JD) reported (16 May) better-than-expected 1Q24 results: revenue was RMB260.0bn, up 7% YoY, 1% ahead of Bloomberg consensus

CMB International

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52-week Range

Market Cap (USDm)

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[Blue Lotus Multi-Sector Sector Update]: Consumer Spending Weakened During Dragon Boat

​Weak travel data during Dragonboat Holiday despite price cuts by hotels and airlines suggests low consumer confidence, impacting consumption for...

Blue Lotus Research Institute

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)

The June rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today's closing prices for capping. The round-trip trade across the four...

Brian Freitas

JD.com Inc.: How Are They Strengthening the Platform Ecosystem & Continuing Their Market Dominance? - Major Drivers

JD.com, a China-based multinational technology conglomerate, has announced its first-quarter results for 2024 in an earnings call and reported...

Baptista Research

HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

Float and capping changes will result in one-way turnover of 8% and in a round-trip trade of HK$19.2bn (US$2.46bn). Li Auto is the largest passive...

Brian Freitas

JD.com (JD US) - Entering into a Clean Base for Growth

JD.com (JD) reported (16 May) better-than-expected 1Q24 results: revenue was RMB260.0bn, up 7% YoY, 1% ahead of Bloomberg consensus

CMB International

Weak travel data during Dragonboat Holiday despite price cuts by hotels and airlines suggests low consumer confidence, impacting consumption for...