China

• The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
• Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
• Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

• On 6 September, Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) entered a legally binding agreement to merge through absorption and share exchange. 
• The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.
• In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

• SOUTHBOUND was a net buyer this week, again, after a small net sell week broke the 28-week buying streak. This week, over four days, it was +HK$9.3bn.
• ETFs were a net buy this week; CCB, ICBC, Meituan, China Mobile, as well as BYD, Nonfu Spring, and ANTA Sports stand out among net buys. Sells were small. 
• This week sees Alibaba Group Holding (9988 HK) eligible for SOUTHBOUND buying. And what was supposed to be the HSI/HSCEI/HSTECH rebals Friday are pushed to Monday (link here).

• China’s home appliance industry is facing challenges. Even with large-scale “trade in” activities, its expansion effect on market size still appears limited, making it difficult to trigger significant growth momentum.
• However, Midea still achieved strong performance growth in 24H1. Both revenue and net profit showed double-digit growth rates. Midea’s business expansion and product profitability are much better than peers.
• Performance drivers are overseas business and air conditioners. Our forecast is Midea’s 2024 net profit would reach about RMB37 billion. Valuation of Midea could be higher than Haier Smart Home.

• Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes and net back up, but not high.
• AH Premia rose slightly as HK-listed shares underperformed mainland share indices. Hs underperform their As consistently compared to relative index performance.
• It is not clear what impetus there might be for better H performance.

• We compile a list of ten high-yielding/net cash or low-net debt stocks in the apparel/footwear value chain. Just because HK has become a pariah for investors, trailing dividend yields are approaching 6-20%.
• We track recent developments of these companies; for given their low valuations any incremental recoveries could spark huge share price returns.
• Crystal International (2232 HK), Stella International (1836 HK), and Yue Yuen Industrial Holdings (551 HK) stand out – they have had positive inflections in their earnings/dividend payouts and capital allocation.

• JNBY Design Ltd (3306 HK) is successful in capturing China’s niche designer fashion segment. Its FY24 net profit surged 36.4%, despite the challenging retail market.
• Gross margin reached a record high of 67.3% in 2H24 on higher purchases from loyal members. Operating cash flow surged 70.7% YoY, affirming its status as a cash cow.
• Including special dividends, FY24 payout ratio was 95%. At 75% ordinary payout for FY25, it sits on a 10.9% yield. Net cash equals 22% of the share price.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, we looked at Midea Group Co Ltd A (000333 CH) and Bajaj Housing Finance (BHF IN), which are two relatively large listings coming up. 
• Placement were flowing through again this week, across the region.

• A change in depreciation policy boosted reported profits in Jan-May 2024
• But Adjusted EBITDA margins have declined consistently in recent periods
• Among our growing list of questions: why hasn’t Hive Box grown faster?

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

• 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: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) IPO.
• Event-Driven developments: Fuji Soft Inc (9749 JP), Pasco Corp (9232 JP), Seven & I Holdings (3382 JP), Xingda International (1899 HK), CPMC Holdings (906 HK), Psc Insurance (PSI AU). 

• The past “infrastructure-driven demand model” in medical devices has become “an updated model”. The future reasonable demand for medical devices may fall back to a quarter of pre anti-corruption levels.
• Top innovative pharmaceutical companies worth investing in need to meet certain conditions. Currently, there is still a gap between Chinese pharmaceutical companies and companies like Regeneron in various aspects.
• Henlius is of great strategic significance for Fosun Pharma, which actually increases the privatization success rate. Valuation logic of Fosun Pharma should be based on PE/VC firms not traditional pharma.

• Miniso (MNSO) reported C2Q24 revenue (3.2%)/1.9% vs. our estimate/consensus. Non-GAAP NI (5.6%)/(2.7%) vs. our estimate/consensus. 
• Recent weak economic data in both China and U.S.,along with MNSO’s deceleration in overseas average store sales;
• We cut TP from US$34 to US$24 and maintain BUY.

• Media rife with narrative of booming inbound foreign tourism to China
• But the numbers are well below historical highs, and climbing up from low base
• Chinese tourists, not foreign, determine strength of Chinese tourism recovery

• Midea Group Co Ltd A (000333 CH) is getting ready for a Hong Kong IPO listing, trying to raise at least US$3 billion.
• Midea Group is trading a relatively attractive valuations. It is trading at P/E of 11.8x, EV/EBITDA of 8.1x, and P/B of 2.5x based on 2024 consensus earnings estimates.
• In the past five days, Midea’s price is down 2.3%. Some investors have been selling shares in Midea due to concerns about higher discount price offered at HK IPO listing.  

• PDD Holdings, Inc. has shared their financial results for the second quarter of 2024 along with an overview of strategic actions and challenges.
• The company saw substantial revenue growth, with total revenue reaching RMB 97 billion, marking an 86% year-on-year increase.
• This significant growth stems mainly from robust online marketing and transaction services.

• Didi Global Inc. is investing 670 million yuan ($94 million) in an affiliated firm of digital mapping company NavInfo Co. Ltd. (002405.SZ -3.09%) and has moved its team responsible for smart cockpit development to the venture, as the Chinese ride-hailing giant takes another step away from carmaking to streamline its business.
• Beijing-based Didi’s smart transportation arm will take a 16.46% stake in AutoAI (Nanjing) Technologies Co. Ltd., becoming its second-largest shareholder, NavInfo said in a Shenzhen Stock Exchange filing dated Wednesday.
• NavInfo, AutoAI’s largest shareholder, will also invest an additional 100 million yuan in AutoAI, diluting its stake from 30.29% to 27.01%, the filing said.

• 1H24 results was above expectation and showing good signs of cost control and topline recovery. We expect the momentum to continue. 
• Air traffic in China continues to grow strongly, with domestic travel leading the way. International traffic is picking up momentum, but still 23% gap to pre-Covid’s numbers. 
• Revised fair value of HKD11.10 (+18% UPSIDE) is based on 2025 PE 12.5x (1SD below mean). 

• iQIYI recently divulged its financial and operational results for the second quarter of 2024, revealing several intriguing aspects about its current business trajectory.
• This analysis aims to distill the substantial information provided during the earnings call and form an even-handed view on iQIYI’s performance and future prospects.
• iQIYI remains a significant player in the long-form video sector in China, holding a competitive edge in the drama and film categories.

• 0.08x P/B. That’s where New World Development (17 HK) is currently trading. Less than half the P/B of the next comparable real estate peer.
• So, what’s going on? Announcing an expected HK$19-20bn loss for FY24 last week didn’t help matters. Shares are down 14% this week and 85% since Covid.
• Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers. 

• Back on the 7 Dec 2023, Xingda International (1899 HK)  announced a partial Offer from a consortium comprising management at HK$1.88/share.
• The consortium, at the time, held 45%, with the objective to hold >50.01% at the close of the Offer. The final % was 50.42%. 
• The consortium was then free to take their stake up to 75%. However the shareholder structure has materially changed in 2024. Xingda is suspended (again) pursuant to the Takeovers Code.

• Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers. 
• Significant changes in substantial shareholders have occurred since the previous partial offer closed on 10 March 2023, which could be the catalyst for an offer. 
• Management is likely reloading a partial offer to exercise statutory control and bypass the 2% creeper rule. The partial offer price could be around HK$1.60-1.70 per share. 

• Chinese appliance maker Midea’s application to list its shares on the HKEx has been approved and the company plans to list up to 10% of its shares to raise $4bn.
• Midea Group Co Ltd A (000333 CH)  has a diversified product portfolio,  well-balanced exposure to domestic as well as overseas markets and M&A’s that have helped significantly grow its business.
• Our analysis on previous secondary listings of Chinese-listed companies on HKEx shows that the HK listings were priced at a significant discount to their A-Shares.

• Baidu has reported its financial results for the second quarter of fiscal year 2024, showcasing resilience with its Baidu Core which posted a modest revenue growth to RMB 26.7 billion.
• This growth was driven by the accelerating performance in the AI Cloud sector, which somewhat counterbalanced the drag provided by the online marketing segment.
• Notably, there was an 8% year-over-year increase in non-GAAP operating profit for Baidu Core, reflecting continued operational efficiencies.

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.

• Samvardhana Motherson International Ltd
• West China Cement
• Yuexiu Property

• NetEase’s 2024 second quarter earnings report revealed considerable strategic progress, although accompanied by some operational challenges typical for a growing enterprise.
• The company reported a total revenue of RMB 25.5 billion, indicating a 6% year-over-year increase, driven largely by the success in its gaming division and expanded efforts in international markets.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

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.

• Greentown China
• Medco Energi

Shui On Land’s (SOL) H1/24 results were weak, as the company reported reduced earnings, higher net debt and weaker leverage. Positively, rental income continued to grow. As a result, recurring operating income from rentals and property management covered 0.9x of interest expense for LTM June (FY 2023: 0.8x). In addition, asset values were stable, with consolidated investment properties covering 1.7x of net debt. We expect cash flows to improve in H2/24, supported by the planned delivery of two projects.  

That said, liquidity is poor. We view negatively management’s cautious tone during the earnings call. Going forward, we believe that SOL could seek to monetise its 100% stake in its property investment and management arm, Shui On Xin Tian Di. In addition, the company may raise fresh funding by further increasing the LTV on its investment property portfolio to the maximum of 45%, albeit this is uncertain (depending on its arrangements with banks). SOL may also carry out more asset sales.

Meanwhile, we believe that the company may be considering potential liability management exercises for the USD bonds in the event it fails to obtain sufficient financing for repayment.

• Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
• In Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health, we noted that Midea is in good health, with strong growth, margins, and cash generation.
• In this note, we examine the likely discount that Midea will offer its H Shares compared to the A Shares.

• PC Partner showed a significant improvement in its 1H24 results YoY.
• The company will be relocating HQ to Singapore and move its primary listing from HK to Singapore. If this move is successful, it will improve AI chips allocation from Nvidia.
• Why Singapore? PC Partner is preparing itself for a future where China/USA political relationship does not improve.

• China Tower (788 HK) will replace China International Capital Corporation (3908 HK) in the iShares China Large-Cap (FXI) (FXI US) at the close on 20 September.
• The appears to be a lot more positioning and short interest in China International Capital Corporation (3908 HK) compared to China Tower (788 HK). 
• The listing of Midea Group Co Ltd A (000333 CH) H-shares could result in another change for the ETF prior to the next scheduled rebalance in December.

• We have seen positive progress of the privatization of China TCM, which is still considered an important project on the agenda. CNPGC’s new leadership is very supportive of the deal.
• The SAMR process has begun. There should be no problem to meet the Pre-Conditions. If the approval process takes more time, Long Stop Date would be extended.
• Considering China Resources has decided to acquire Tasly, we think the integration of TCM business by CNPGC is expected to accelerate. We remain optimistic and this deal will get up. 

• The iShares A50 China (2823 HK) and CSOP China A50 (2822 HK) ETFs will rebalance their holdings at the close on 20 September.
• China National Nuclear Power (601985 CH) and Huaneng Lancang River Hydropow (600025) will replace China Tourism Group Duty Free (601888 CH) and Yihai Kerry Arawana (300999 CH) in the ETFs.
• Passive trackers are estimated to buy between 0.3-0.5 days of ADV in the adds and sell between 0.4-1.1 days of ADV in the deletes.

• Sanergy (2459 HK), a graphite electrode manufacturer, was added to the MSCI Small-Cap Index on 30th August; and was due to enter the Hang Seng Composite Index on 9th September.
• However, the SFC announced a concentration warning on the 2nd September. Shares promptly cratered ~98% yesterday (the 3rd September). Expect the HSCI inclusion to now be yanked.
• This Sanergy debacle should refocus investors on other heavily concentrated stocks, such as Jinhai Medical (2225 HK), in which GoFintech (290 HK) (another heavily concentrated stock) has inexplicably been buying. 

• China Tourism Group Duty Free Corp Ltd (601888 CH) (CTG) share price on downtrend due to negative sentiment, increased competition, and Chinese being more frugal in their consumption  
• 2024 and 2025 consensus earnings declined by -2%/-17%, but CTG will deliver +16% YoY earnings growth in 2025. CTG remains a growths stock, a fact we think many investors forget!  
• We revise our target price to CNY71.3 pegged to 18.5x FY25 PE (1.5 standard deviation below mean). We think the share price decline is overdone and ignores its strong fundamentals.  

• Zai Lab (9688 HK) recorded Vyvgart revenue of $10M, $13M, and $23M in 4Q23, 1Q24, and 2Q24, respectively. The company raised 2024 Vyvgart revenue guidance to $80M from $70M earlier.
• Despite strong momentum from Vyvgart, Zai Lab still has a lot of pain points. Decelerating revenue growth from Zejula is one of them.
• Due to its in-licensing business model, Zai Lab has lower gross profit margin of 64–65%, compared with ~80% for a typical innovator biotech company.

• Atour (ATAT) reported C2Q24 revenue 2.2%/8.3% higher than our est./cons., and non-GAAP NI 6.8%/12.3% higher than our est./ cons, driven by stronger hotel supply chain sales and better retail efficiency.
• We keep 2024 revenue growth estimate at 53% YoY vs. the uplift company guidance at 48%-52% YoY. Potential catalysts are stronger off-season travel,old hotel renovation scheme, and new brand launch.
• We keep TP unchanged at US$36/ADS and maintain the BUY rating.

• Carote Ltd (CARO HK) is looking to raise around US$120m in its upcoming Hong Kong IPO.
• Carote Ltd is a distributor of kitchenware products. Expanding its lineup of products, Carote aims to meet its customers’ varied kitchen scenarios and enhance their culinary experience.
• We had looked at the firm’s past performance in an earlier note. In this note, we discuss its PHIP updates.

• The September 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.
• The round-trip trade across all stocks across the four indices is estimated at HK$18.1bn (US$2.3bn).
• Kuaishou, ASM Pacific Technology, JD.com, J&T Global, Sunny Optical and New Oriental Education are the largest buys while Alibaba, Tencent, Meituan, Xiaomi and HSBC Holdings are the biggest sells.

• The close of 3 September 2024 was the final price to determine capping for the Hang Seng Index Rebalances which will take place this Friday 6 September 2024 at close.
• The numbers are largely unchanged, though price changes in the interim cause more Kuaishou Technology (1024 HK) to be bought, and more Xiaomi Corp (1810 HK) to be sold.
• The biggest name in flows is, of course, ASM Pacific Technology (522 HK) which sees 15 days to buy.

• South Africa was downweighted in ACW, EM and EM ex China for a second consecutive quarter. 
• Brazil was the largest upweight in ACW, EM and EM ex China.
• Tencent was downweighted in the EM index but upweighted in ACW.

• With 70% of the review period complete, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
• There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
• The potential adds have outperformed the potential deletes for both indices on a year-to-date basis, but near-term performance has been lackluster.

• China TCM’s 24H1 results is weaker-than-expected. Net profit YoY growth for the whole year of 2024 could be negative. Based on calculation, without privatization, HK$3.26/share is fair for China TCM.
• The remedial tax is a “one-time expenditure” to clear the “obstacle” so as to smooth the completion of privatization. Weak financial performance in 24H1 should help the shareholder vote. 
• Due to the low base in 2024, 2025 is expected to see an obvious performance rebound.Long-term outlook of TCM granules business is still promising, reasonable share price is above HK$5/share.

• At the first close , SASAC/NCSSF-backed Champion Holdings failed to secure the 50% acceptance condition. No surprises there. What was a surprise was Champion Tech letting the Offer lapse. 
• Champion Tech could have extended the Offer to the 30th Sept, which would have achieved little. But they could have bumped terms. They did neither.
• That leaves ORG Technology Co., Ltd. A (002701 CH) as the sole bidder for CPMC Holdings (906 HK) . And arguably, an unwilling bidder at that. 

• Historical valuation affirms that Zhongzheng is the cheapest it has been in the past 10 years 
• Chart analysis is to compliment our recent report Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play published yesterday
• Our TP of HKD12.5 is based on FY25 PE of 5x. This implies an UPSIDE POTENTIAL of 33%. It also delivers a dividend yield of ~9% at current prices. 

• Midea Group Co Ltd A (000333 CH) aims to raise up to US$3bn in its H-share listing, as per media reports.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premiums.

• Asia Ex-Japan fund managers continue to reduce their positions in Hong Kong Exchanges & Clearing.
• Percentage of funds invested and the average weight of the stock in portfolios have been on a downward trend since the recent peak in early 2023
• Wave of position closures in 2024 by Allianz, T Rowe Price, and Baillie Gifford has resulted in over half of the historical investor base exiting the stock

• Estimated take rate up vs year ago and vs Q124, and EBITA margin turned +ive
• However, revenue growth in core China market slowed considerably in Q224
• Cash Flow and Liquidity both appear ample, little pressure to raise new funds

• Midea Group Co Ltd A (000333 CH), recently filed its PHIP as it aims to raise up to US$3bn in its H-share listing, as per media reports.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• We have covered the company and deal background in our previous notes. In this note, we talk about the updates from its 1H24 results.

• Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.   
• Midea is the world’s largest home appliance company in sales volume and revenue in 2023. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies. 
• The PHIP update shows that the business is in good health, with accelerating growth, rising margins, and strong cash generation. Therefore, a premium multiple to peers is justified. 

• Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
• Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
• Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.

• The market has lingering concern about substantial slowdown in PDD’s growth and has been pricing in the outlook for most part of the year.
• 2Q results did signal imminent growth deceleration, and management’s blunt yet honest comments about the pressure on margin further stoke fears.
• We regard 1/3 market cap wipe-out after the results as over-reaction. While risks have been reflected to large extent, we do not expect a meaningful re-rating until 2H25.

• First Pacific Co (142 HK) is a Southeast Asian conglomerate that has been handicapped by its listing in the Hong Kong market over the last several years.
• As Southeast Asian markets (Indonesia and Philippines) begin to re-rate on the back of a more accommodating Fed policy, First Pacific is beginning to participate in the uptrend.
• Metro Pacific Investments Corp (MPIC), the second largest piece of the company’s NAV has been active in acquiring more infrastructure assets since being privatized last year.

• 1H24 results were below expectations, with profits halved YoY. Irrational competition with overzealous discounts, and general decline in preference of traditional luxury cars for NEVs is hurting Zhongzheng (ZS)
• Signs of bottoming as industry are trying to stop the discounting madness and instill some level of rationality
• ZS is trading at 0.47x book, its cash = MCAP, and FY25 PE of 3.7x. Ridiculously cheap for a profitable and positive FCF churning company.  

• Despite slower top-line growth, Trip.com posted firmer margins in Q224
• Cash Operating Expenses as a % of Net Revenue fell by around -250 bps Y/Y
• Post-Covid, Trip.com has less competition; BUY with target of US$58 per ADS

• Dream International (1126 HK) reported revenues/profits of -7.8%/-17% YoY for H1 FY24 due to prolonged destocking of plastic/plush toys, resulting in weak (-18% YoY) North American sales (43% of revenues).
• With over 1.26 bn HKD net cash (43% of the market cap), the company paid another generous dividend of 20 cents (we believe H2 will be higher).
• The company has deep value, trading at 3.9x FY24e PE/1.1x EV-EBITDA, with a 12.7% yield. 

• NetEase reported C2Q24 top line, GAAP operating profit and GAAP net income in line, (5.6%) and (7.3%) vs. our estimates, and in line, (4.0%) and (5.5%) vs. consensus. 
• We believe game growth will materially accelerate in C2H24 and 2025, based on our projection for Naraka Mobile, Where Winds Meet and the two Marvel games. 
• We keep TP of US$122 unchanged and maintain BUY .

• In a previous insight we have postulated that a pullback may be behind the corner for the Hang Seng Index (HSI INDEX).
• We said the pullback could come the week after the insight was published, or the following week (i.e. this week). Last week closed up, the index could retrace this week.
• In this insight we want to update the levels to buy LONG for this week, to benefit from a highly probable continuation of the rally in September.

• The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
• There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
• The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.

• There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
• There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
• The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.

• 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: Yichang HEC Changjiang Pharma (1558 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK). 
• Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Alps Logistics (9055 JP). 

• Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
• While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process. 
• The return on Huarui Offer isn’t attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.

• Recap of 1H 24 on two of the largest and most influential EV makers; Tesla (TSLA US) and BYD (1211 HK) .
• BYD performance is superior to Tesla yet it trades at a discount to Tesla, notably 0.2x vs 3x PEG.
• BYD faces tailwinds in North America and the EU, but those are not its main destinations.

• SOUTHBOUND was a net seller the prior week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
• This week, they reverted to net buying. Financials and Utilities were strong net buys. ETFs again a net sell. Total SOUTHBOUND volumes also picked up. 
• SOEs, SOE Banks, Energy, Utilities, and finally Anta Sports Products (2020 HK) saw net buying after salutary earnings.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, we looked at Kioxia Holdings (6600 JP), Bajaj Housing Finance (BHF IN) and Niva Bupa Health along with Premier Energies.
• Placement were flowing through again this week, mainly across India and Japan.

• China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.    
• CR Beverage has a product portfolio of 13 brands, including C’estbon, Zhi Ben Qing Run, Mi Shui Series, Holiday Series and Zuo Wei Cha Shi, comprising 56 SKUs.
• The bull case rests on a large TAM, a core business in good health, beverages providing the second growth leg, profitability, and strong cash conversion.

• Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes up, but not high. 
• SOUTHBOUND rebounded cutting its weekly net sell streak at one. ETFs again a net sell. NORTHBOUND net data is not not released on a daily/weekly basis; only quarterly.
• As expected (with AH 20d Premia returns at multi-year highs 3wks ago), AH Premia fell slightly, narrow premia falling more than wide premia. I continue to expect more H-vs-A gains.

• Despite an 11% drop in profit in 1H24, Sinotrans (598 HK) has maintained interim DPS at Rmb0.145. This is a sign that the full-year dividend will stay intact, yielding 8.9%. 
• The logistics segment has experienced pressure, but strategies are in place to boost revenue and reduce costs. Forwarding and e-commerce segments, meanwhile, are resilient. 
• We were too early in turning bearish in 2023. With US rate heads lower, the near-term market focus is that it is a solid yield play.

• Draconian ‘de minimis’ reform proposal in the US has bipartisan support
• In Q224 results, rampant signs of a Chinese X-border retail slowdown
• Other news: plastics laws, new Amazon threat, SHEIN sustainability initiatives

• 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: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) US$530 million IPO.
• Event-Driven developments: ESR Group (1821 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), Shinko Electric Industries (6967 JP). 

• Biotech will continue selling early-stage pipeline in a sluggish market, but this will further lower its valuation as financing won’t improve quickly.
• Pharmaceutical distribution companies are facing challenges, driving ongoing consolidation in the industry. However, this trend will ultimately benefit the growth of leading companies in the long run.
• If investors truly understand “the essence” of HEC Changjiang Pharma, they will be more calm/rational to look at this absorption merger and the inclusion of Hang Seng family of indexes.

• LI Auto (LI) reported C2Q24 top line, non-GAAP operating profit and GAAP net income 5.0%, (5.2%) and (20%) vs. our estimates, and in-line, 53% and 6.8% vs. consensus.
• We believe the market has oversold the company.But in our view,the key question is LI’s next product entry under the backdrop of Xiaomi consolidating its position in the EV sector. 
• We believe LI should continue to explore its “family car” brand niche in entering the sedan market. If so, volume and margin can co-exist.

• 2Q-2024 results is within ours and consensus expectations. Competition is tough, but LiAuto managed to remain profitable   
• Management is boosting R&D expenditure and boost spending on  expanding number of charging stations, all for the benefit of its customers. 
• Our fair value of USD25 implies 16x FY25 PE – average for auto growth stock. A bargain with 3-year CAGR of 38%, net cash, and churns high free cash flow.

• Meituan reported C2Q24 revenue 1.4%/2.3% higher than our estimate/consensus and adjusted net income 17%/28% higher than our estimate/consensus, thanks to lower rider cost and less subsidies to users;
• Although poor economy has plunged Meituan’s merchant base to the loss-making zone, we expect Meituan’s take rate to persist as take-out order represents incremental revenue to offset merchants’ fixed cost.
• We reiterate BUY rating and raise TP to HK$165/share. Catalysts are reduced competition, expansion of Pinhaofan, and overseas expansion.