China

• Food delivery daily order growth gradually recovered in late Dec
• Instashopping continued its growth momentum. Community group purchase has transformed into Next Day Delivery
• With the recovery of restaurants and travel post re-opening, Meituan is expected to be one of the biggest beneficiaries.

• End December was the end of the review cutoff for a lot of indices that will rebalance within the next couple of months.
• PEXA Group (PXA AU) replaces Pendal Group (PDL AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 12 January.
• There were big outflows from Hong Kong and China focused ETFs led by Hang Seng H Share Index ETF (2828 HK) and Tracker Fund of Hong Kong Ltd (2800 HK).

• We expect PDD’s total revenue in C4Q22 to be in line with cons., and non-GAAP net income to beat cons. by 9%.
• Faster-Than-Peers user growth, increase in brand product contribution and newly launched marketing program support PDD’s strong GMV trend and high take rate in the near term.
• Temu is moving to increase order volume and ASP to improve scale and save logistics cost.

• 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,  only the smaller issuers were active with most following through on year end listing plans.
• On placements front, HK market got going in a jiffy, riding on the coattails of China reopening.

• 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 – Quiet week as VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
• Event-Driven developments – Acotec Scientific Holdings (6669 HK), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Warrego Energy (WGO AU), Halcyon Agri (HACL SP). 

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• Stocks mentioned include Tian An China Investment (28 HK), Differ Group Auto (6878 HK), Pharmaron Beijing Co Ltd-H (3759 HK), Joinn Laboratories (H) (6127 HK), and Gushengtang (2273 HK).

• Since we highlighted the compelling asymmetrical risk-return payoff of IQ last November, the stock has surged 200%, compared to 45% gain for KWEB which tracks China ADRs.
• We believe the outperformance was driven by more concrete progress in fundamental turnaround including multiple blockbuster drama released, increase in subscription fee and removal of debt overhang.
• With $7 billion market cap (on diluted basis), IQ already trades at 35 times 2023 earnings, pricing in fair degree of positive prospects. We advise investors to lock in profits.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

• We estimate that NetEase’s 4Q22 revenue/non-GAAP net income will be in line/12% vs cons. Our 2023’s revenue/non-GAAP net income are in line/12% vs cons.
• In 4Q22, several of NetEase’s mid-tier games saw declines in ranking.  We expect that NetEase will have a period of single digit growth in revenue.
• We still rate NetEase BUY and raise TP to US$ 87. But NetEase is not our top pick within China internet space.

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. Fosun International
2. Lippo Karawaci
3. Agile Property Holdings
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

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.

• We remain neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&P 500, and several European indexes still below major resistance.
• We continue to expect rangebound price action in the months ahead on the MSCI ACWI.
• And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US)

• Ping An Insurance (H) (2318 HK) has outperformed Ping An Insurance (601318 CH) by 38% since our last Insight. With the AH premium near parity, we take profit.
• We also reverse the position and go long Ping An Insurance (601318 CH) and short Ping An Insurance (H) (2318 HK) to play the premium expansion trade.
• Northbound holding of Ping An Insurance (601318 CH) has increased over the last couple of months while Southbound holding of Ping An Insurance (H) (2318 HK) has decreased.

• Weimob Inc. (2013 HK) is looking to raise about US$205m in its primary placement to fund R&D, upgrade marketing systems, and for general working capital purposes.
• On an ADV basis, the deal is a relatively small one at just 3.6 days of the firm’s three month ADV.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• Our Tencent 4Q22’s rev. is in line, while non-IFRS net income would beat cons. by 5.2%. We estimate that top and bottom line will grow 13%/14% YoY in 2023.
• We suggest major business lines see turning points in 4Q22, supported by rebound of Peacekeeper Elite’s gross billings, approval of new game codes, monetization of Wechat Video Account, etc.
• Tencent is one of our top picks. Video Account, global game publishing, and margin beat are three major catalysts. Our TP HK$ 407 implies 26.1X PE in 2023.

• Taste Gourmet Group (8371 HK) is an excellent play on China/HK reopening with a 5.7x/4.2x FY23/24 PE and 10+% dividend yield, with 25% of the mkt cap in net cash.
• Reopening of China and HK borders after Jan 8th will provide a boost to the revenue and margins. The company will also resume its expansions in China (3 restaurants). 
• Channel checks suggest a solid Q3 2023, with the company expanding to 38 restaurants in HK (34 in Q2 2023), with a surge in revenue likely due to seasonality. 

• China MeiDong Auto (1268 HK) raised 800mn HKD in a top placement (px~15 HKD/share), resulting in a ~4% dilution, citing an opportunistic raise for M&A.
• While the company asserts there is a well-defined pipeline, it was not very specific on the size and scope of its targets which was not taken well by the market.
• We continue to like the company, trading at a 15x/9x PE FY22e/23e, with a 5.2%/8.8% dividend yield (assuming an 80% payout ratio), with the optionality of M&A potential. 

• Stock is up over 80% from October lows and almost 10% in 2023 already
• Sentiment over fundamentals appears to be driving the rally and stock is back in the worlds top 10 most valuable companies
• We consider some option strategies to roll profits and reduce exposure

• CSRC’s rectification on FUTU to suspend new user registration from mainland China while allow service continuation to existing user is well expected. We believe the market over-reacted;
• FUTU caters to overseas Chinese and populations falling outside of major currency zones. This market supports a paying user growth of 12% and revenue growth of 19% CAGR to 2025.
• We maintain BUY and cut TP from US$58.5 to US$50 due to moderate decline in mainland China users.

• Ant Group Co. Ltd.’s online lending subsidiary has been given the go-ahead from regulators to boost its registered capital by 10.5 billion yuan ($1.5 billion), marking a key step forward in the fintech giant’s government-driven, year-long revamp
• The approval was granted a month and a half after some of the unit’s shareholders disclosed the plan, underscoring the recent pledge by authorities to promote healthy development
• Ant Group, backed by billionaire Jack Ma’s e-commerce giant Alibaba Group Holding Ltd., has been conducting a rectification required by the government since a regulatory storm saw its planned blockbuster IPO suspended in November 2020

• The government has changed its tone and started to encourage social capital to run hospitals, indicating that the previous concerns about the policy risk on Hygeia has been relieved.
• At this stage, Hygeia has more investment value, greater expansion space and higher market demand than Aier Eye Hospital. Meanwhile, the Company performs better in trans provincial expansion than Topchoice. 
• Due to large investment/“heavy asset” model, Hygeia would continue to face capital pressure. Its expansion pace may not be as fast as expected if it hopes to control expansion quality. 

• Loongson Technology Corp. Ltd., a Chinese chip architecture developer, took a major step into the consumer market by opening its first brick-and-mortar pop-up store
• Loongson is also exhibiting its development kits and solutions for printers, smart door locks, and treadmills in the store
• This is not the first time Loongson has attempted to enter the consumer market. The firm opened an online store on e-commerce platform JD.com in October 2021, selling laptops, desktops, and their components like motherboards and memory kits

• Oriental Watch (398 HK) went ex-dividend on the 30th of December, post which there was a slight correction, and now the stock is 7x PE FY23 (~15% dividend yield).
• There is a substantial margin of safety with assets worth 4+ HKD/share ( 2 HKD/share of net cash + 1 HKD/share of inventory and >1 HKD of real estate).
• Trends point to a year of decent profitability as SSSG continues remain stable in China in November/December 2022. HK sales trended lower due to outbound travel.

• On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.  
• Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
• The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration. 

• China MeiDong Auto (1268 HK) is looking to raise US$100m via a top-up placement.
• Proceeds from the offering will be geared towards potential M&A and general working capital purposes.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
• We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
• All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

• Jinxin Fertility Co Ltd (1951 HK) is looking to raise US$122m via a top-up placement. 
• Proceeds from the offering will be used to repay its outstanding convertible bond and general corporate purposes. 
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• The insurance sector should definitely warrant more investor attention going forward as some insurance names in the region have had a very strong year in 2022.
• Two key markets we view positively in 2023 are China’s P&C and Korea’s L&H insurance markets, given their favorable industry catalysts and tailwinds. 
• Among all the insurance stocks in these two markets, we believe PICC P&C and Samsung Life will continue to have an exciting year ahead.

• Hisense announced the long-awaited equity incentive scheme on Jan 2. 
• For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level. 
• We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company. 

• There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.
• We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.
• We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.

• The three recent transactions of China Power International (2380 HK) provide solid evidences that it is accelerating its progress in transformation into a giant green energy play.
• Partial disposal of coal-fired assets will generate significant disposal gain and reduce exposure to loss-making business. Introduction of CCB Investment as green power shareholder will improve cash flow.  
• Acquisition of 579MW of wind power capacity will raise proportion of clean energy in its total installed capacity by 0.9pp. This also showcases strong support from its parent SPIC. 

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.

• Times China

• Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now open. The IFA opines it to be fair and reasonable.
• The partial offer is conditional on the offeror hitting 50.01% voting rights. Irrevocables ensure that it will be declared unconditional on or before the first closing date (26 January).
• Based on a minimum proration of 71.31% and at the current share price of HK$17.20 per share, the estimated breakeven price is HK$10.38 per share.

• We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
• We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• We believe it was a wise move for PDD to launch the overseas online marketplace TEMU first off the U.S., because of its massive, lucrative and integrated retail markets.
• Still, the adventure lacks some of the recipe for successes PDD made during its early days, and the failure of Wish suggests pricing not come at the expense of quality.
• We expect TEMU to lose US$2bn in 2024 (1/3 of PDD’s FY22 earnings) and won’t generate meaningful profit probably until 2026, reinforcing our view on PDD’s near-term earnings risk.

• For the month of December, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
• The average premium for the new deals announced (or first discussed) in December was ~46%, giving an average for 2022 of 41%.
• This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

• Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
• We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.

• On 30 December, Super Hi International Holding (9658 HK) completed its separate listing in HK from Haidilao by the way of introduction. The trading has been highly volatile so far.
• Our base case valuation of Super Hi International is target price of HKD13.6 per share, which represents a 40% upside from current levels.
• The same store sales at Super Hi improved significantly in nearly all major regions in 1H 2022. 

• Sales has been weak since October, mainly due to price hike.
• Technology leadership may not be sustainable with limited R&D investments.
• EREV version may not be the right solution for the company’s long-term growth. 

• There could be some catalyst for Hengrui, such as the NRDL negotiation in early January 2023, the slowing down of the negative impact of VBP and the increasing outpatient volume. 
• Hengrui’s performance low point was in 2022, and it would gradually recover after that. If investors want to invest in Hengrui, 2023 is a good time to take action.
• However, Hengrui could be hard to return to its peak. Without the next PD-1 level blockbuster product, it would be difficult for Hengrui to achieve complete performance reversal. 

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.

• Anton Oilfield
• Japfa Comfeed Indonesia
• Sands China
• Times China

• We expect one change to the Hang Seng China Enterprises Index (HSCEI INDEX) in March, though there is a possibility of a second change.
• The change in the index handling treatment for Secondary Listings and Dual Primary Listings will also result in some big float changes resulting in inflows to some stocks.
• If there are two changes to the index, estimated one-way turnover is 2.39% resulting in a one-way trade of HK$1,536m.

• After bouncing more than 60% from a near-all-time low, Alibaba Group (9988 HK)’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.
• Meanwhile, the company’s cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.
• With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.

• We expect at least one change to the Hang Seng Tech Index (HSTECH INDEX) in March – though there could be another change as well.
• Changes to the index handling for Dual Primary Listings should result in an increase in free float and passive inflows to Li Auto (2015 HK) and XPeng (9868 HK). 
• Estimated one-way turnover is 5.83% resulting in a one-way trade of HK$4.87bn and this is mainly driven by float and capping changes.

• China’s U-turn on COVID policy has led to skyrocketed infection cases/mortality. Demand for funeral services due to additional deaths would surge, so positive sentiment on Fu Shou Yuan could continue.
• Fu Shou Yuan’s performance is expected to rebound in 22H2 and 23H1 driven by high demand and relaxation of COVID-19 control measures. It’s a good short-term trade with strong catalyst.
• The acceleration and resonance of population aging trend, the new urbanization process and the increase of cremation rate of remains provide objective conditions for Fu Shou Yuan’s long-term upward performance.  

• Alibaba’s CEO will lead the cloud business himself, because the retailing business faces headwind.
• Tencent will enter the short video market again, because the online game is till stagnant.
• Douyin will launch a car-hailing platform, which will compete with Meituan.

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.

• Zoomlion Heavy Industry H

• December GMV was below expectations, due to elevated case counts after the relaxation of the covid restriction
• With high return rate and more merchant supports, gap between GMV growth and CRM growth remained large in 4Q. 
• Long-Term wise, Alibaba will continue losing market share while PDD’s market share may potentially surpass JD. 

• 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

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
• These insights may flag those companies where shares have been pledged. Stocks mentioned include Apac Resources (1104 HK), Ausnutria (1717 HK), Pharmaron Beijing (3759 HK), and Joinn Laboratories (6127 HK).

• The Stock Exchange of Thailand SET 50 Index (SET50 INDEX) rebalance was implemented at the close on Friday and there were a bunch of review cutoffs on the same day.
• Passive Hang Seng trackers need to sell Meituan (3690 HK) at the close on 4 January following Tencent (700 HK) in-specie distribution.
• We take a look at flows to Asian focused ETFs over the course of 2022. A lot of winners in terms of AUM, but a few losers too.

• YFO has played a relatively upfront game for Toyo Construction (1890 JP) – badly at first, then better. 
• With Takashimaya (8233 JP) and H2O (8242 JP) now more secure and cross-shareholdings more problematic, they will sell off their equity in each other but continue to work on joint projects.
• Skyworth Group Limited (751 HK)‘s latest buyback offers a minimum proration of 7.8%, although applying the last buyback two years ago, it’s likely to be 13%+.

• Sinopharm Group Co Ltd H (1099 HK) remains a beneficiary of both VBP and China reopening. Consensus expects double-digit revenue and earnings growth for the company in 2023 and 2024.
• SinoPharm’s acquisition of VBP varieties constantly stood in the leading position in the industry. Through June 2022, China carried out seven batches of VBP, with 294 categories being included.
• With China gradually re-opening, SinoPharm should record accelerated growth in its pharma distribution business. With subsiding COVID-19 cases in Q3, SinoPharm reported 10% YoY and 8% QoQ revenue growth.

• Freetech Intelligent Systems, a China-based autonomous driving firm, has raised nearly US$100 million in its series B round, Nikkei Asia reported.
• Chaos Investment led the round, with TCL Industries Holdings, BAIC Capital, and Hengxu Capital participating, among other investors.
• Founded in 2016, Freetech creates a full-stack solution for autonomous vehicles, creating both software and hardware components to power cars.

• China just announced game approval for December batch. The number of games approved is slightly higher than the previous three months.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• In both December batch, as well as over the past year, we see Tencent behind its smaller peers in terms of receiving game approval.