China

• WeChat Usage increased by 23% YoY in physical store during Chinese New Year holidays.
• JD.com will close its e-commerce platforms in Indonesia and Thailand in March.
• Microsoft denies a layoff plan in China, but the details of the plan are spreading.

• The MSCI EM vs.EAFE ratio (local currency) shows EM has outperformed relative to EAFE since the DXY peaked in November 2022, and also shows signs of reversing the 2-year downtrend.
• As long as the DXY remains below $103.50-$106, we expect outperformance from EM to continue.
• China/Hong Kong, Greece, South Africa, and Mexico stand out as attractive countries. Our top actionable Sectors include Communications, Consumer Discretionary, and Technology. We highlight 76 attractive EM stocks.

• Shanghai Junshi Bioscience (688180 CH) did not receive FDA approval for toripalimab in US, as the agency could not conduct on-site inspection of the company’s manufacturing facility for the drug.
• Toripalimab (branded as TUOYI) is showing decelerated revenue growth rate in China. Besides being approved for small patient population, TUOYI has seen reduction in price after being included in NRDL.
• In May 2022, the company launched adalimumab biosimilar in China. It marks a late entry in a highly competitive market. COVID-19 oral drug should not bode well for the company.

• PICC P&C was a shelter for investors in 2022, as its earnings were largely shielded from the pandemic. However, momentum has shifted in favor of the rest of the sector.
• As the reopening story tails off, we expect the stock’s performance to recouple to the broader H-Financials index. 
• Valuation is undemanding, but the same can be said of almost any other stock in the space. If the HKD7.25/share resistance level breaks, we may see a major correction.

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.

• Country Garden Holdings Co
• Greentown China

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• January completed a bullish 3 month reversal pattern in 688006 CH and thus confirmed a likely MT bottom.
• 688006 CH has had an incredible pivotal relationship with its 50 week MA since 2020. A weekly close above the 50 week MA will confirm a high probability MT uptrend.

• RemeGen’s revenue declined in 22H2, leading to lower-than-expected performance last year.However, 2022’s low base is good for the growth this year,especially when non-COVID treatment returns to normal after China reopens. 
• We analyzed our revenue forecast on RC48 and RC18. We don’t think there should be big difference between the market value of RemeGen and Akeso. So, RemeGen’s valuation is attractive.
• The sentiment in HKEX has changed this year, so the trading strategy should be different. The pullback could be a buying opportunity, especially for good biotech companies such as RemeGen.

• Greatpower Nickel & Cobalt Materials (1919613D CH) is looking to raise about US$300m in its upcoming Hong Kong IPO.
• Greatpower Nickel and Cobalt Materials (GNCM) is a supplier of new energy battery materials in China, with a dual focus on nickel and cobalt for the production of cathode materials. 
• The firm has made itself one of the top Chinese players in terms of cobalt refining by sales volume and nickel by trading volume. However, its profitability was significantly impacted. 

• Three quarters of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 June.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 11.47% at the June rebalance resulting in a one-way trade of CNY 10.11bn.
• The potential adds have outperformed the potential deletes and the CSI500 Index over the last few weeks. There could be more outperformance till nearer the end of the review period.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Origin Energy (ORG AU), Golden Energy & Resources (GER SP), 111 Inc (YI US), Toyo Construction (1890 JP). 
• Lowest spreads – Essential Metals (ESS AU), Tyro Payments (TYR AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Kanematsu Electronics (8096 JP), Elmo Software (ELO AU). 

• Hesai Group (HSAI US) is looking to raise around US$170m in its upcoming US IPO.
• HSAI is a manufacturer of three-dimensional light detection and ranging (Lidar) solutions. It has shipped over 103,000 Lidar units from 2017 to the end of 2022.
• We have looked at the company’s past performance and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.

• In this insight, we take a look at the potential index changes for the Hang Seng Index (HSI INDEX) in March 2023.
• We believe Healthcare names could be given top priority when selecting additions for the upcoming rebalance.
• The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

• Our base case valuation of Hesai Group is implied market cap of US$3.4 billion or target price of US$27.1 per share.
• Our target price is 43% higher than the high end of the IPO price of US$19 per share. Given the solid upside, we have a positive view of this IPO. 
• The company’s superior technology in the LiDAR product segment along with its global market leadership should help Hesai Group to successfully complete this IPO despite political risks related to China. 

• Unlike ADC, there’re still doubts on the outlook of whole bispecific antibody mechanism. Alphamab Oncology doesn’t actively promote related head-to-head trials, which makes people doubt the competitiveness of its products.
• Investors’ trust in Alphamab Oncology continues to decline, mainly because the Company often missed the guidance/milestones it announced before. This will greatly affect the credibility of Alphamab Oncology.
• The current valuation is expensive and has basically priced in all the positive factors. The Company is more suitable for short-term trading to capture the rebound rather than long-term holding.

• We initiated Luckin with a BUY with TP $40 because we believe Luckin is a rising challenger in a rising market, half way through a rising business model; 
• We see room for Luckin to expand transaction frequency and transacting customers before expanding ASP in order to drive same store sales;
• In the long run, we see coffee + western bakery to gain market share over tea house + Chinese dim sum in the snack + breakfast market. 

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.

• Adani Ports & Special Economic Zone
• China Hongqiao

• Although the operating metrics are expected to be weak in 4Q22 due to the lingering of Covid effects, we expect the resumption of travel to stimulate hotel demands in 2023. 
• We expect Atour to report its 4Q22 revenue at RMB580mn and OPM at 8.2%, both in-line with consensus. We expect a strong revenue growth at 60% YoY in 2023.
• We rate the stock as BUY and maintain the TP at US$35.

• Hesai Group (HSAI US) is getting ready to complete its IPO in the next several weeks in the United States, planning to raise as much as $171 million.
• The ADAS penetration rate in China is expected to surge from 4.6% in 2022 to 11.2% in 2024 and 87.9% in 2030.
• The company is a leading maker of laser-based LiDAR sensors in China. The company’s major customers in the ADAS segment include Li Auto, Jidu, and Lotus.

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• 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, Indonesia kicked-off bookbuild for what is likely to be one of its largest IPOs this year.
• On the placement front, Adani’s FPO continued to keep everyone busy with its twists and turns. 

• Mismatch between blood products supply and demand is intensifying, but there’s little way to increase production capacity in short time, which offers a good time to invest blood products companies. 
• Investors should not be too greedy in front of every rally and rebound, but the proportion of medical expenditure and pension expenditure in China’s GDP would still increase.
• CanSino Biologics Inc (688185 CH) intends to IPO in Swiss. We think share price of CanSino would bounce back. It’s time to keep an eye on CanSino again. 

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. China Jinmao Holdings
2. Lifestyle International Holdings
3. Geely Auto
4. First Pacific Co
5. Tata Motors Ltd

and more…

• The Hang Seng Index (HSI INDEX) is a blue-chip index that represents the performance of the large cap stocks listed in the Hong Kong Stock Exchange.
• The index is undergoing some significant composition changes and the index provider currently uses a highly subjective constituent selection process which is quite challenging to decode.
• In this insight, we take a look at Quiddity’s approach to solving this Hang Seng constituent selection puzzle and the historical performance of past rebalance events.

• Likely new 4G restrictions will delay Huawei’s ability to launch mid-range offerings at volume. Xiaomi stands to gain 1.2ppts of share in 2024 vs. our prior forecast. 
• However, new limits are long-term negative, as it (1) raises the chance for cascading limits on China 3Cs; (2)  triggers reduced 3C electronics demand; (3) weaker industry electronics demand.
• The impact of the latest set of restrictions will likely prove net negative, in our view, as a result we re-iterate our SELL rating and HK$7.3 TP.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• January 2023 confirmed a high probability bullish outlook when all 3 pillars were definitively triggered. 
• Monthly Relative Strength Index (RSI) has an incredible multi-year history of confirming large upswings in 916 HK. January completed the 5th such bullish confirmation since 2014. Multi-month target at 12.945. 

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

• Shineway released good turnover data in 22Q1-Q3. Due to large market demand for COVID-related TCM, 22Q4 performance would remain strong growth momentum, leading to positive outlook of 2022 annual report.
• With the peak of respiratory disease outbreak past and COVID-19 also begins to be under control, demand for related TCM would weaken. Accordingly, the pullback of share price could begin.
• Strong performance of Shineway’s share price may not be sustainable in long term. Shineway is no longer cheap at current valuation. While short-term catalysts remain, future upside may become limited. 

• After Greatview Aseptic (468 HK) was suspended on the 30 January, it emerged that Shandong Xinjufeng (301296 CH) had entered a SPA to acquire Jardine Matheson (JM SP)‘s 28.22% stake
• Greatview has now confirmed the transaction. Shares were supposed to resume trading this afternoon but were immediately suspended again.
• Importantly, Inner Mongolia Yili Industrial Group (A) (600887 CH), Xinjufeng’s largest customer is a main competitor of Greatview’s largest customer. That may be an untenable situation, according to the announcement.

• Cosco Shipping Energy Transportation (1138 HK) rallied 12.5% in the last two trading days after issuing a FY22 positive profit alert, but we are concerned that momentum is peaking. 
• Its P/B of 0.92x is 4SD above average since 2016, more than sufficient to reflect rebound in FY23-24F profitability. Meanwhile, VLCC rate has plunged 80% in the last 3 months.  
• We believe CSET is already midway in the upcycle which normally lasts for 2-3 years. With high 4Q22 profit difficult to sustain for long, there is downside risk on earnings.  

• Single product structure is the biggest risk of BCHT. Varicella vaccine is hard to drive BCHT’s performance growth in the future and the sales of influenza vaccine are not ideal. 
• There’re concerns about the protection rate of attenuated zoster vaccine,which won’t be officially sold until 2023H2/2024. It’s not sure whether the situation can be reversed by attenuated zoster vaccine alone.
• BCHT is inferior to CanSino in terms of pipeline quality and R&D capability. The investment value of BCHT is not high. We think its valuation should be lower than CanSino.

• Many people aren’t optimistic about CD47 because there is no sufficient evidence to solve blood toxicity. Although I-MAB’s problem-solving idea has no obvious flaws in logic, risks remain.
• CD73 is still at a relatively “shallow level”, which can be understood as a low level of verification. I-MAB has to make a last-ditch effort on CD47.
• At such low market cap, Investors could make an “entertaining bet”. If CD47 is successful, you can earn several times. If not, then admit the defeat.

• In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng Tech Index (HSTECH INDEX) in March 2023.
• According to our estimation, there could be two changes for the HSTECH in March 2023 and there could be one-way index flows of US$365mn.
• The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

• The review period for the March rebalance ends today. We forecast 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
• We expect the index committee to continue using a 6-month minimum listing history. The impact on the potential deletes is a lot higher than the impact on the potential adds.
• With 5 changes to the index, estimated one-way turnover is 5.1% resulting in a one-way trade of CNY 4,549m. There is a reasonably large reverse funding trade.

• We believe total revenue growth rate will accelerate from 4Q22 and grow by 9% in 2023.
• We believe the operating margin will be stable from 4Q22 to 2Q23, but the margin will climb up from 3Q23.
• We believe that EPS will increase by 16% and the stock will have an upside of 21%~44%.

• Shandong Xinjufeng Technology Packaging (301296 CH) agreed to acquire Jardine Matheson Holdings (JM SP)’s 28.22% stake in Greatview Aseptic Packaging (468 HK) at HK$2.65 per share.
• Post-Completion, Xinjufeng will be the largest shareholder. As Xinjufeng’s shareholding will remain below the 30% voting threshold, the transaction will NOT result in a mandatory general offer. 
• The transaction price, which is a 22.7% premium to the last close, highlights Greatview’s value. Greatview’s forward P/E multiple is undemanding in comparison to peer P/E multiples.

• The company has defaulted since 2021 and has already missed a few payments as well as the deadline to deliver a restructuring blueprint at the end of 2022.
• We believe the Chinese government is looking now to rescue developers (such as Country Garden) which are seen as systemically important.  
• We are of the opinion that the sector is not investable for the general public  in 2023 and only the Distressed specialists should endeavor investing in Chinese high-yield property developers.

• Xpeng has announced it is speeding up its new model launch pipeline by launching 5 new models this year
• If all go to plan, Xpeng’s sales may hit 30k vehicles/month end of ’23 or early ’24
• The appointment of new President from ICE sector may lead to some market confusion on management and branding in the short term

• New policy about surgical robots was released, which is conducive to the promotion and popularization of surgical robots in China. However, the situation is not as simple as it seems.
• We deep dive the business environment of surgical robots in China.Even with favorable policies, both surgical robot systems and consumables have to reduce price largely so as to be affordable.
• It’s difficult to make profits in China. Medbot could lose money for quite some time.Without solid internationalization, the rally cannot be sustained for a long time only by policy catalyst.

• In this note, we will take a look at the performance of bookrunners for ASEAN placements from 2019-2022.
• The following dataset includes all ASEAN placements above US$100m for the period of Calendar Years 2019-2022, which amounted to a total of 54 deals.
• The deals you see in this note are based on our historical placements tracker. Feel free to drop us a message for additional information on any of these placements.

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.

• The PBOC has extended the use of its policy tools to support the green loan industry as part of the country’s’ drive towards carbon neutrality.
• China’s green loan market is already the largest in the world, if you agree with its definitions and can look past its limitations.
• The state of green finance matters to investors, and not just those with explicit ESG mandates. We look at the potential pitfalls in the China.

• China catering players have seen strong recovery during the Chinese New Year starting from Jan 22th, amidst a broad-based revival of the service sector as a whole.
• For Xiabuxiabu, latest data points suggest significant progress in turnaround and higher visibility into 2023 performance.
• We see upside to our financial projection for 2023 and are more confident that Xiabuxiabu is the most attractively-priced to play re-opening in China catering sector. Expect 50% upside.

• In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng China Enterprises Index (HSCEI INDEX) in March 2023.
• According to our estimation, there could be one change for the HSCEI in March 2023 and there could be one-way index flows of US$440mn.
• The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

• The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
• The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
• There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP). 

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – New Ruipeng Pet Group (RPET US) and Hesai Group file for US$100 million IPOs for listing in the US.
• Event-Driven developments – Aag Energy Holdings (2686 HK), Acotec Scientific Holdings (6669 HK), Xingda International (1899 HK), Kanematsu Electronics (8096 JP), Toyo Construction (1890 JP), Origin Energy (ORG AU). 

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• While the holiday shortened week didn’t see much action in Asia, but there was one more ADR filing in the US, adding to the mini-pipeline.
• Adani’s ongoing FPO was the only live deal this week, although it had enough drama to make up for the lack of other deals.