Smartkarma Daily Briefs

• A share indices were up on the week. HK stock indices were down except for HS Tech. H-shares with A-share pairs were up. 
• Net SOUTHBOUND buying was HK$9.1bn in the second post-holiday week after being +HK$20bn in the first week. LOTS of SOEs on the net buying side. Still.
• SOUTHBOUND continues to buy high-div SOEs. ex-div is still three months away, and given the new KPIs discussed late January by SASAC official, these still seem to be appropriate targets.

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND and NORTHBOUND flows net positive. NB 5 weeks in a row. AH premia rebounded slightly. AH Premia are still wide on average. Premia curves should still shift flatter.
• Two Sessions seems like a good place to make positive public statements but recent speeches from the very top seem more oriented towards “The People Must Endure.”

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 23.5bn of A-shares on strong average activity after RMB +49bn the previous four trading weeks. More efforts by authorities to eliminate selling.
• No finance names of any kind in the top ten this week after 5/10 the week before. Slight tendencies to trade on reversion.

• In the current challenging environment, investors should prioritize pharmaceutical companies with abundant cash flow and Biotech with diversified funding sources, as their safety margin is much higher.
• After the “clamor of consumer upgrading” fades away, we will eventually realize that the so-called pricing power has never belonged to anyone or any enterprise, but always to consumers.
• Hengrui is overvalued. There’re still around RMB5 billion generic drugs yet to enter VBP scope. So, the assumption that all negative effects of VBP have cleared up is not correct.

• The iShares A50 China (2823 HK) and CSOP China A50 (HKD) (2822 HK) ETFs will rebalance their holdings at the close on 15 March.
• Shaanxi Coal Industry, Hygon Information Technology, CGN Power and China Everbright Bank will replace Aier Eye Hospital, Bank Of Ningbo, WuXi AppTec and Jiangsu Yanghe Brewery in the ETFs.
• Hygon Information Technology (688041 CH) will also be added to a global index at the same time while CGN Power (1816 HK) will be added to the FXI ETF.

• Chongho Bridge (2314866D CH) is looking to raise up to US$500m in its upcoming HK IPO. The deal will be run by CICC.
• Chongho Bridge (CB) is an integrated services provider to China’s rural population. It offers rural inclusive credit services, agricultural production services, rural consumer goods and rural clean energy services.  
• According to F&S, CB is the largest non-traditional financial institution targeting China’s rural market in terms of total loan balance as of FY22 (31st Dec 22).

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, we took an early look at the possible summer 2024 listing of Tokyo Metro.
• For placements, there was another large selldown in Renesas Electronics (6723 JP), while ITC Ltd (ITC IN) could see one as well soon from British American Tobacco (BATS LN). 

• In the past few years, a big problem of Taiji is weak performance/low valuation. The main purpose of mixed-ownership reform with CNPGC is to improve operational efficiency and enhance profitability.
• CNPGC made a clear commitment to solve the horizontal competition issue. So, after the privatization of China TCM is completed, it’s worth noting whether it will be merged into Taiji.
• 2024 is expected to see Taiji launch new M&A deals, which would bring a qualitative leap for Taiji. Market value of Taiji is expected to at least double. 

• CIMC Vehicles Group (301039 CH) (CIMCV) is a leading global manufacturer of semi-trailers and various truck bodies that is the mainstay of heavy ground goods transport  
• 9M23 earnings surged by 216% and beat consensus, scope for further earnings upgrade as the business and management outlook statement is very positive   
• Our target price of CNY12.50 (+31% UPSIDE) is based on 2024 PE 15x – a 10% discount against the industry leader Caterpillar 

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Adaro Energy
• China Jinmao Holdings