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In today’s briefing:
- HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)
- A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide
- Mainland Connect NORTHBOUND Flows (To 1 Mar 2024): Foreigners Buy a New Set of Names
- China Healthcare Weekly (Mar.1) – Prioritize Big Pharma, Real Ownership of Pricing Power, Hengrui
- China A50 ETF Rebalance: Four Changes in March
- Chongho Bridge Pre-IPO Tearsheet
- ECM Weekly (4th Mar 2024) – Tokyo Metro, Mixue, Xtalpi, Bharat InvIT, Renesas, ITC/BAT, Precinct
- Will China TCM (570.HK) Be Incorporated into Taiji Group (600129.CH)? –If Yes, Valuation Will Double
- CIMC Vehicles (301039 CH): Cheap And Steady Long Term Growth Potential
- Morning Views Asia: Adaro Energy, China Jinmao Holdings
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HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)
- 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.
A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide
- 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.”
Mainland Connect NORTHBOUND Flows (To 1 Mar 2024): Foreigners Buy a New Set of Names
- 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.
China Healthcare Weekly (Mar.1) – Prioritize Big Pharma, Real Ownership of Pricing Power, Hengrui
- 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.
China A50 ETF Rebalance: Four Changes in March
- 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 Pre-IPO Tearsheet
- 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).
ECM Weekly (4th Mar 2024) – Tokyo Metro, Mixue, Xtalpi, Bharat InvIT, Renesas, ITC/BAT, Precinct
- 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).
Will China TCM (570.HK) Be Incorporated into Taiji Group (600129.CH)? –If Yes, Valuation Will Double
- 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 (301039 CH): Cheap And Steady Long Term Growth Potential
- 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
Morning Views Asia: Adaro Energy, China Jinmao Holdings
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.