China

• RTHK just reporting that HK Finance Secretary Paul Chan has said in his budget speech that HK will remove all property cooling measures in place, with immediate effect. 
• That would be That is Special Stamp Duty, Buyer’s Stamp Duty, New Residential Stamp Duty. “Measures no longer necessary given the current economic and market conditions.”
• This should cause people to get excited short-term about property developers.

• Hong Kong residential property prices declined 7% in 2023 and are down >20% from the 2021 peak in 2021. The average price of offices also declined ~7% in 2023.
• Scrapping property cooling measures, such as the special stamp duty applied to homes resold within 24 months, have been rumoured, to push up housing prices. 
• In today’s annual budget, we got those. And then some. 

• Recent newsflow and company results suggest China outbound travel is on track to recover to pre-pandemic level by the end of this year.
• China airports have different exposures to outbound travel, which largely determines the scale of their duty-free shopping business and earnings upside amidst this recovery cycle.
• Beijing Capital Airport offers best risk/return profile among listed China airports in our view as current valuation does not fully capture even a conservative scenario of recovery in outbound travel.

• China announced game approval for the Feb batch. The number of games approved remained at a higher level than 2023.
• The pace of China game approval appears to be accelerating, to the same level as pre-tightening.
• Netease gets one game approved but we don’t see that the acceleration of game approval benefits big names proportionally.

• LI Auto reported C4Q23 top line, non-GAAP operating profit and GAAP net income (6.2%), 13% and 81% vs. our estimates and 4.9%, 52% and 102% vs. consensus.
• We believe LI can beat our delivery estimate on exports, but can also miss the consensus on gross margins if its 2024 volume target is met by sedans;
• We raise our TP by US$5 to US$52 and reiterate BUY.

• Despite average weights falling from over 6% in 2020 to under 2% today, 73% of EM funds remain invested in Alibaba.
• The make up of the investor base has changed, with a rotation between high growth investors (out) and Value investors (in).
• Of the 73% of current holders, the core portfolio weight range sits between 1.5% and 3%, with the most bullish topping out at 5%+

• A Profit-Oriented State Owned Enterprise that is walking the walk.
• Management incentives are aligned with shareholders, a rarity in China.
• Plenty of upside remains despite the market outperformance to date

• Jiuyuan is not a typical innovative pharmaceutical enterprise with cutting-edge technology. The current seemingly good revenue/profit performance is actually based on some old products from over a decade ago.
• The risk of VBP could lead to a significant decrease in profit margins at any time. The cyclical changes in heparin industry would put more pressure on Jiuyuan’s performance.
• As Jiuyuan has not yet demonstrated superior clinical data in Jikeqin for overweight/obesity indication, together with fierce competition, we are cautious about the performance in GLP-1s pipeline at this stage.

• The Hang Seng Index, HSCEI, and HS Tech rebals were announced on 16 Feb. Janaghan Jeyakumar, CFA had expected GDS out, Tongcheng Travel in on HSTECH, along with the…
• …deletion of Zhongsheng Group (881 HK) in HSCEI, with a low conviction replacement of Zijin Mining, which turned out to be an add of China Unicom Hong Kong (762 HK). 
• No changes to the main HSI Index, which means evolution is further delayed. Today was the day to recap the caps. Mar1 Flow estimates are included below for all three.

• The March rebalance of the HSI, HSCEI, 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.
• Tencent (700 HK), Meituan (3690 HK) and Tongcheng Travel (780 HK) are the biggest buys while Alibaba (9988 HK), Li Auto (2015 HK),  HSBC (5 HK) are the biggest sells.
• The round-trip trade across all stocks across the four indices is estimated at HK$16.16bn (US$2.06bn).

• We expect Baidu to report C4Q23 revenue, GAAP op. profit and GAAP net income inline, (2.3%) and (4.5%) vs. consensus.
• The slight bottom-line miss was mainly attribute to the increased marketing costs related to user acquisition. Baidu cloud revenue is robust due to AI product stimulating demand. 
• We cut our target price to US$146 for the spendings related to the construction of future e-commerce business but maintain BUY for its cheap valuation.

• We publish a deep dive on historical margin management at Cathay Pacific following Bloomberg reports that Air China is considering raising its 29.99% stake.
• We see Cathay’s consistent underperformance of the global industry as due to structural disadvantages competing against lower cost competitors without the benefit of attractive joint ventures or M&A.
• Our deep dive comparing margin generation to ten major global peers highlights weak pricing power without sufficient offset from staff cost/other cost efficiencies as the key problem.

• Luckin Coffee reported 4Q23 revenue/non-GAAP NI in-line/(39.8%) vs. our estimate due to (1) extra winter subsidies; (2) rental cost from new stores; (3) more operating expenditures.
• We view the non-GAAP NPM decline to 5.1% in 4Q23 as temporary and outlook for sequential improvements in 1H24 from (1)ASP rebound from easing competition, (2)efficiency improvement in rental cost
• We think Luckin’s profitability outlook is intact and maintain BUY rating, but lower TP by US$2 to US$41 to factor in the rising cost.

• Speculations on Air China Ltd (753 HK) seeking control of Cathay Pacific (293 HK) reappeared recently. We think a change in CX’s ownership is just a matter of time.
• CX has been a more important profit contributor to Air China after the pandemic, and depends on pricing, Air China is expected to benefit from such acquisition.
• Both are trading on 0.5SD below their 5-year P/B average and we prefer CX in the short term, but Air China looks to be a better long-term choice. 

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.

• China Vanke

• In healthcare AI industry, the commercialization process is complex and burdened with challenges. Related products mainly plays an auxiliary role in medical scenarios, rather than a core support or rigid-demand. 
• The idea of creating corresponding solutions for C-end and B-end customers by FUNFEI is not inappropriate. However, both B-end and C-end businesses of FUNFEI have encountered varying degrees of problems.
• We’re not optimistic about XUNFEI’s profitability. The sluggish stock price performance after Airdoc’s listing indicates that the market/investors have not fully recognized healthcare AI enterprises, leading to low valuation.

• It is well-known that Alibaba (ADR) (BABA US) is cheap (9x FY24 PE, fiscal year ending March; 8x FY23 free cash flow; net cash 25% of market cap).
• Taking into account all of the major moving parts, I believe Alibaba can now be categorized as a good value stock. 
• Shareholder returns through buyback and dividend, minus stock-based compensation in 2023 calendar year equal to around 5% yield.

• In 4Q23, revenue grew by 136% and operating profit was significantly higher than the market consensus.
• Li Auto grew the most rapidly among the top-ten Chinese NEV sellers.
• We believe Li Auto will be one of the winners after the market gets more concentrated. Upgrade to Hold.

• Alibaba plans to provide operational services to third-party sales broadcasters.
• Xpeng will hire 4,000 employees and raise research budget by 40%.
• Tuhu Car expected that its net profit will turn positive in 2023.

• Some global investors are urging Chinese private education giant XJ International Holdings Co. Ltd. to redeem half of its $350 million in bonds before maturity, as the creditors fear the Hong Kong-listed firm may intentionally default on repayments.
• The bonds are due in 2026, but the creditors asked for the early redemption to be completed by March 2 in a letter sent to the Chinese company last month by their legal adviser, Chicago-headquartered global law firm Kirkland & Ellis LLP.
• The creditors are a group of large international investors who collectively hold no less than $154 million, or about 50%, of the bonds’ outstanding principal amount, according to the letter seen by Caixin.

• In the search for good value stocks to invest in for the long run, a good long-term ROIC is essential. It ascertains the moat or execution quality of the company. 
• Unfortunately, with a 5 Yr/10 Yr average ROIC of 4%/8%, the company did not satisfy all our criteria, yet the value seems appealing (66% of market cap cash, 8.8% yield).
• The persistent structural challenges in H1 FY24 in the industry (resulting in the subpar ROIC) convince us that the stock is only a good trade, but long-term a value trap.

• 160 Health collaborates with medical institutions and then get access to high-caliber medical professionals, which helps to attract patients/other business parties. So, its business model is B2B2C, similar to ClouDr.
• However, ClouDr has much better performance than 160 Health, because ClouDr has established moat/barriers to more effectively monetize medical resources, while 160 Health is clearly lagging behind in this regard.
• 160 Health’s revenue mainly comes from sales of pharmaceutical and healthcare products, whose gross margin is very low. As the competition intensifies, the C-end customer acquisition cost would also increase.  

• Mixue Group  is looking to raise about US$1bn in its Hong Kong IPO, while Sichuan Baicha (ChaPanda) and Guming Holdings (Good me) are said to be looking to raise US$300m each.
• All three are primarily focussed on providing freshly-made drinks, including freshly-made fruit drinks, and tea, with some selling ice cream, coffee, baked goods and ready to drink beverages as well.
• In this note, we will undertake a peer comparison, including the Hong Kong listed peer, Nayuki Holdings (2150 HK).

• QuantumPharm (QUP HK) (Xtalpi) is looking to raise US$200m in its upcoming Hong Kong IPO.
• QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
• In this note, we will talk about the not so positive aspects of the deal.

• On 21 February, Bloomberg reported that due to the steep share price declines, major ESR Group (1821 HK) shareholders are considering options for their stakes, including ESR’s privatisation.
• The reports also noted buyer interest in ESR’s significant assets. Past share dealings suggest that Warburg Pincus and the co-founders are the likely consortium to lead a potential privatisation. 
• The offer probability is low as a scheme would likely require a HK$16.00 offer, posing a funding challenge. Nevertheless, the upside remains as ESR trades at an undemanding valuation. 

• There are 10 changes for the STAR100 Index in March. We correctly forecast all 10 deletes and got 8 of the 10 adds right.
• Estimated one-way turnover is 6.8% and that results in a one-way trade of CNY 1.79bn. Nearly all constituent changes have more than 1 day of ADV to trade.
• The adds have started to outperform the deletes and the index over the last couple of weeks and there could be more outperformance in the next two weeks.

• Trip.com reported a strong set of Q4 and FY23 earnings results last week
• Company has held the line on SG&A expenses; look for strong H124 growth
• We believe shares are cheap and recommend investors buy below US$43/ADS

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads  Probiotec Ltd (PBP AU), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), CSR Ltd (CSR AU), China Traditional Chinese Medicine (570 HK), Lithium Power International (LPI AU). 
• Lowest spreads – Tietto Minerals Ltd (TIE AU), Orecorp Ltd (ORR AU), Pact Group Holdings (PGH AU), CPMC Holdings (906 HK), T&K Toka Co Ltd (4636 JP), Snow Peak.    

• 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 looked at Trial Holdings (5882 JP) refiling and Xiaocaiyuan International Holding .
• For placements, it was an action packed week in India, again, with Australia joining in as well.

• Luckin Coffee (LKNCY US) concluded FY23 with a 203.3% surge in non-GAAP net profit to Rmb3.2bn, benefiting from higher store count and monthly transacting customers.
• Luckin plans to lift store count by at least 23%, with total to reach over 20,000 in FY24. Product innovation, promotional discount reduction, and better store efficiency are profit drivers. 
• Net cash reached Rmb3.8bn, or 7% of market cap. With a consensus EPS forecast of 28% CAGR in the next two years, its 15.1x and 11.7x PERs are not stretched.

• Fang Weihao’s departure means PAGD’s strategic transformation failed. The business model of being a “vassal” of Ping An Group seems hard to bring high valuation due to “discounted” growth potential.
• PAGD is at a crossroads. The question is which development path will the new CEO choose – Follow Fang Weihao’s strategy or return to the traditional Internet healthcare business model?
• Both directions have painful costs that investors will not be happy with. Therefore, we recommend that investors remain sober and rational in the face of the bullish view on PAGD.

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.

• Powerlong Commercial Management Holdings

• QuantumPharm (QUP HK) (Xtalpi) is looking to raise US$200m in its upcoming Hong Kong IPO.
• QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
• In this note, we will talk about the positive aspects of the deal.

• The changes for the SSE STAR50 (STAR50 INDEX) and STAR100 Index were announced post market close on Friday.
• The coming week is a full one with capping cutoffs, review cutoffs, announcements and implementations apart from futures expiries.
• With China open after Lunar New Year, the National Team is back pouring money into ETFs with the largest inflows to the CSI 300, CSI 500, ChiNext and STAR50 indices.

• 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. AH premia on average fell so Hs OUTperformed As by 2.1%. Liquid Hs saw their H outperform the A by 3.1% on average.
• Last week was the sharpest one-week fall in AH premium in a very long time.  SOUTHBOUND Flows Monitor here. NORTHBOUND Flows Monitor here.

• A great week for HK and Chinese shares, especially the larger caps. Mainland indices were up 8 days in a row to Friday, helping HK shares stay bid.
• Net SOUTHBOUND buying was HK$20.0bn in the first post-holiday week. LOTS of SOEs on the net buying side.
• Remarkable this past week, was a new tendency to net sell names which were up a lot and net buy names which haven’t performed as well. 

• I tally 53 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Five new deals discussed this week on Smartkarma! Boral Ltd (BLD AU), CSR Ltd (CSR AU), Ansarada Group Ltd (AND AU),TCM (570 HK), and Snow Peak Inc (7816 JP).
• Key updates took place on Azure Minerals (AZS AU),  CIMC Vehicle Group Co Ltd (1839 HK), Outsourcing Inc (2427 JP), and Genetron Holdings Ltd (GTH US).

• 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 10.7bn of A-shares on strong average activity after RMB +16.1bn, +9.9bn and +12.1bn the three weeks before. More National Team buying this week.
• Five of the top ten buys among liquid NORTHBOUND stocks were finance. Again. Info Tech saw net selling. Again. People trading long gamma now instead of short gamma.

• Thanks to the continuous support of policies, the TCM industry has ushered in a harvest period. So, TCM remains to be a relatively certain field for investment in China healthcare. 
• Biotech companies must meet several conditions in order to have good long-term development, such as sufficient financial support, at least one blockbuster product and high moral standard of the management.
• Reasonable valuation of Sichuan Kelun-Biotech Biopharm (6990 HK) is about RMB15 billion. So, we think it is now overvalued. Meanwhile, restricted shares will be lifted 12 months after the IPO.

• There are three constituent changes for the SSE STAR50 (STAR50 INDEX) at the March rebalance. One inclusion and one non-inclusion are surprises.
• One way turnover is estimated at 2.9% and will result in a one-way trade of CNY 4,075m with over 2.5x ADV to trade on all constituent changes.
• The adds have outperformed the deletes over the last few months with a jump in the last few trading sessions. There could be more outperformance over the next two weeks.

• Since early November 2023 we have been expecting global equities (MSCI ACWI) to stage a year-end rally that would continue into the early part of 2024.
• As we progress through the “early part” of 2024, more global indexes and Sectors are breaking out and starting to participate in the upside. This is classic bull market behavior.
• Our outlook remains bullish; continue to ride this trend higher, and treat pullbacks as buying opportunities. Actionable Themes: Hong Kong/China, Consumer Discretionary, Industrials, Energy/Coal, and Polish Banks

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.

• Lenovo

• The main businesses, hotel and air ticket bookings increased by 131% YoY and 86% YoY in 4Q23.
• The Chinese traveling market continued its recovery after the lift of the lockdown at the end of 2022.
• The stock price is close to our last price target – Downgrade to Hold.

• We expect NetEase to report C4Q23 revenue, GAAP op. profit and GAAP net income 4.9%, 5.7% and 8.5% vs. consensus.
• The robust topline growth was mainly contributed by revenue recognition of <Justice Mobile> in the peak summer season.
• The grossing of legacy titles like <FWWJ> is also growing steadily due to the low-price strategy. We raise our TP to US$118 to reflect the rich and diversified pipeline…

• Trip.com Group (9961 HK) has a remarkable 4Q23 with adjusted net profit surged 437.1% YoY. Higher volume and better market efficiency have resulted in massive margin expansion.
• Net cash has ballooned to about 15% of its share price, and this has allowed it to carry out a massive US$300m Capital Return Program in 2024.
• Business has outperformed the industry in CNY, with domestic hotel and air business volume increased by 60% and 50% YoY. Its overseas platform also saw double-digit growth.

• StandChart may need to take further impairment hit on China Bohai Bank
• VIU model is used to justify the higher carrying value compared to fair value of the holdings.  There is zero headroom between the VIU model and the carrying amount.
• We looked at VIU model assumptions for HSBC and StandChart. A declining NIM is likely put further pressure on the VIU model output for StandChart.  

• Intra-Urban mobility in major cities and foot traffic in leading shopping malls in China have demonstrated decent growth during 2024 CNY holiday period.
• We estimate Miniso domestic store sales increased 35% yoy during CNY-holiday and 11% yoy during Jan to mid-Feb 2024. We expect Miniso total revenue to increase 26% yoy in 1Q24.
• We maintain the stock as BUY and maintain TP at US$33/ADS.

• Xiaocaiyuan International Holding (XCY HK) is looking to raise up to US$200m in its upcoming HK IPO.
• Xiaocaiyuan is a Chinese home-style cuisine restaurant operator. It prices its menus’ items to achieve average spending per consumer between RMB50 and RMB70 for its dine-in customers at its restaurants. 
• In this note, we talk about the company’s historical performance.

• China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
• The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final. 
• Ping An Insurance (H) (2318 HK), which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn. 

• $4.60/Share. That’s the number – by way of a Scheme – that only matters. Below the recently rumoured $6/share, and $5.10/share a little over three years ago. Terms are final.
• As widely expected, the Offeror is SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), indirectly owning 32.46% in China Traditional Chinese Medicine (570 HK) (TCM) via Sinopharm Group Hongkong,
• Optically, the Offer price appears light. But this should still get up. TCM is trading rich to peers. No other competing bidder will emerge. Expect regulatory pre-cons to be fast-tracked.

• In the most recent quarters HSBC saw its NIM decline from around 1.7% to 1.5%
• As the bank de-risks its CRE lending it is left with a greater proportion of bad CRE loans
• There can be more significant impairment charges on BoCom, the USD3bn done was small

• Numans values light asset model, which helps reduce cost/expenditures, and thereby increase profits. However, such business model has flaws – no R&D/production, only terminal sales/brand operation, no control over upstream.
• Revenue growth of core business Algal oil DHA products declined.Numans attempts to change its monotonous product line and enter milk powder industry, but the results weren’t ideal. Numans suffered losses. 
• If Numans only plays the role of a “porter” of finished products from abroad and lacks core competitiveness/technological content, it will face multiple challenges to achieve sustained high performance growth.

• In More Hong Kong Stocks Priced For Liquidation, I flagged thirteen stocks the market is all-but implying are priced for liquidation. 
• One of the cut-off points in that analysis was a requirement for stocks to trade at least US$1mn/day. Removing that constraint uncovers shipping services play COSCO International Holdings (517 HK) (CSI).
• CSI’s market cap accounts for ~86% of its 1H23 net cash position. Earlier this month, CSI announced another positive profit warning. Those numbers should be out late-March.

• On the 28 November 2023, SOE-backed CIMC Vehicle Group Co Ltd (1839 HK) announced a conditional H-share buyback at a $7.00/H-share, a forgettable 8.6% premium to last close.
• This Voluntary Offer followed by a Merger by Absorption requires shareholder approval and SAFE signing off. The SAFE condition was satisfied on the 26th Jan.
• Last night, CIMC announced the CBP investigation into the evasion of  U.S. anti-dumping and countervailing duties was extended. There is no mentioned in interim accounts or HKEx of this investigation.

• The open interest of the HSCEI 2024 dividend futures is less than half that of the HSCEI 2023 and HSCEI 2022 open interest at the same time of the year.
• Market volatility and the fallout of the losses faced by Korean investors (and the scrutiny of Korean ELS-issuing banks) are among the primary reasons for the low open interest.
• Our fair value for the HSCEI 2024 dividend futures is higher than the current market but there is a lot of sensitivity to bank dividends and special dividends.

• There is room for FY23 result of Cathay Pacific Airways (293 HK) to beat market expectations on stronger traffic volume and better yield performance.  
• Resumption of more capacity, from 70% of the pre-pandemic level at end-FY23, will drive FY24 earnings with ROE at 12-13%, putting it on an inexpensive 0.65x P/B. 
• Its associate Air China Ltd (H) (753 HK) will also benefit from the release of pent-up demand in the domestic market and the recovery in international travel. 

• On February 15, OpenAI, Google and Amazon launched respective AI advances in video LLM (SORA), long text (Gemini 1.5), and text-to-speech (BASE) abilities. The evolution speed of AI inspired awe;
• We estimate rival equivalent of SORA, delivered over cloud, will appear in 4-6 months of time but on-device version will take years.
• We suggest 2C AI applications, especially video, will be the prime beneficiary

• Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.
• CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.
• There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.

• Ownership levels among Asia Ex-Japan funds hit record highs as funds continue to add exposure.
• 13% of the funds in our analysis opened new positions over the last 6-months, with average weights increasing by 0.57%
• New positions added by Invesco Asia Opportunities (4.3%), LO Funds High Conviction (3.6%) and Allianz Asian Equity (2.9%) over the period.

• As of the review cutoff date of 19 February, there could be four changes for the iShares A50 China (2823 HK) / CSOP China A50 (HKD) (2822 HK) in March.
• Shaanxi Coal Industry, Hygon Information Technology, CGN Power and China Everbright Bank could replace Aier Eye Hospital Group, Bank Of Ningbo, WuXi AppTec and Jiangsu Yanghe Brewery.
• CGN Power (1816 HK) is a potential iShares China Large-Cap (FXI) (FXI US) inclusion while Hygon Information Technology C (688041 CH) is an inclusion to a global index in March.

• One year ago, we published a note valuing Wechat Channels at US$29 billion by applying 25xPE to RMB8 billion net profit out of RMB37 billion revenue by 2024.
• Fast forward to today, the platform’s priority has been further elevated by Tencent management in its attempt to pursue high quality growth.
• We review our thesis on Wechat Channels based on recent channel checks and now believe that the platform could represent ~35% of Tencent’s total incremental profit from 2024 to 2026. 

• With the review period complete, there could be 3 changes for the iShares China Large-Cap (FXI) (FXI US) in March.
• CGN Power (1816 HK), Yankuang Energy (1171 HK) and China Coal Energy (1898 HK) could replace Wuxi Biologics (2269 HK), China Resources Beer (291 HK) and China Vanke (2202 HK). 
• Short interest on China Vanke (H) (2202 HK) and Yankuang Energy Group (1171 HK) is higher than the other stocks and there could be covering on implementation day.

• Auntea Jenny (Shanghai) Industrial (AJI HK) is looking to raise US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are CITIC Securities, Haitong, and DFZQ.
• Auntea Jenny (Shanghai) Industrial (Auntea) is a freshly-made beverage producer.
• As per CIC, the firm operates the fourth largest network of freshly-made tea shops in China as of Sept 23, with an extensive reach into the lower-tier markets

• HUTCHMED’s 2023 results are relatively certain. Fruquintinib had a strong start after obtaining approval in the US, with sales of about US$13-15 million in just more than a month.
• Oncology/Immunology consolidated revenue would be in line with management’s performance guidance (US$450 to US$550 million) in 2023. There are promising data readout/NDA submission this year, which would be potential catalysts.
• HUTCHMED has sufficient cashflow and does not require external financing. From 2024 to 2026, it will enter a period of accelerated growth in product revenue. Breakeven is achievable in 2025.