China

• The 4Q21 revenue is HK$6.2bn (US$796.3mn), a 43.9% increase YoY. GM 41.3% is a 1,051bps increase YoY. 
• Some memory market customers, like Samsung and Hynix, are adopting ASMP’s mainstream wire bond and advanced packaging tools for high volume manufacturing requirements. 
• Full year 2021 dividend per share of HK$3.90, a 44.4% YoY increase.

• Based on our analysis, the logic of ClouDr Group’s business model is more solid and feasible than that of Ping An Good Doctor, indicating better outlook.
• If compared with JD Health and Alibaba Health,besides the sales of pharmacy supplies and hospital supplies, ClouDr also provides hospital/pharmacy SaaS services, indicating wider business scope and broader development space.
• In terms of valuation, Neusoft Xikang Holdings (NXH HK) is a good comparable company for ClouDr,but investors need to be aware of the market sentiment to new IPOs at that time.

• FTSE announced the changes to the All-World/All-Cap indices post market close on Friday. There were changes to the number of shares and free floats for quite a few stocks too.
• There are a few stocks where the passive flow and impact is large and quite a few of these stocks have moved today. They could move more till implementation.
• At the close on 4 March, HSI trackers will sell CK Infrastructure Holdings (1038 HK) due to a float reduction. Then the FTSE trackers will sell on 18 March.

• Todays closing prices will be used to determine the inclusions and exclusions at the March rebalance. We see PSBC and Bank of Ningbo replacing EVE Energy and Aier Eye.
• There will also be changes to the investability weight of the stocks following the Ground Rule change that will cap stocks at their Foreign Ownership Limits.
• Change to the index constituents and FOL changes will result in a one-way turnover estimated at 16.64% and will result in a one-way trade of CNY 9,322m.

• China Banking and Insurance Regulatory Commission warned on Friday against fund-raising and investment products related to the metaverse concept given the speculative nature of these investments.
• The Office of the United States Trade Representatives (USTR) announced on Thursday that e-commerce sites operated by Tencent have been placed on US government’s “notorious markets” list of entities.
• Tencent’s shares have dropped 5.2% during today’s trade following speculation that fresh regulatory crackdowns are possible following the warning on metaverse.

• We expect Nongfu Spring (9633), China Overseas Land & Investment (688) and XPeng (9868) to replace Geely Auto (175), China Tower (788) and JD Health (6618) in the index.
• There will also be some big capping changes that will result in one-way turnover estimated at 9.2% and in a one-way trade of HK$4,910m.
• Nongfu Spring (9633 HK) is a triple inclusion – HSI at the close on 4 March, FTSE All-World at the close on 18 March and possibly the FTSE China50 too.

• NTES is exploring overseas market by starting studios and selling games.
• We believe NTES has the experience in dealing with the license suspension for new games.
• We believe the stock has an upside of 48% for year end 2022.

• HSI is a top short vehicle and continues to show a heavy bias going into a cycle peak due in March. Short bounce attempts into March.
• Hong Kong tech index is pressuring key support with a fresh down leg expected to the sub 5k level. Bear weight on the HSI. Bearish triangle to break lower.
• HSI re test on 23,100 expected in March with risk to 22,200. 26k is the ideal short barrier.

• Driven by favorable policies on TCM and COVID-19 under control, the performance recovery would be a good signal, making the FY2021 performance worthy of expectation.
• The expansion scope of VBP on TCM and the concerns on TCM injection products cast doubts on China Shineway Pharmaceutical (2877 HK)’s outlook.
• Due to the uncertainties, we choose to be conservative about the Company’s outlook at the current stage.

• While crypto is definitely banned in China, the treatment of NFTs is somewhat unclear in China with state-sponsored backers like the Metaverse Industry Committee and the National Team’s Blockchain
• This weekly explores possible creations of NFTs with Chinese characteristics based on China’s own “permissioned” blockchain technology  to be launched in March
• Meanwhile, China sponsored NFTs like the popular Olympics mascot Bing Dwen Dwen is now straddling unchartered territories as both an officially endorsed product as well as an official banned product 

• There are 29 inclusions and 12 deletions for the HSCI at the March rebalance. 26 of the inclusions will be added to Connect while all deletes will leave Stock Connect.
• Some of the Stock Connect deletions have a lot of mainland holdings and there could unwinding of some of the positions ahead of becoming sell-only on the link.
• Orient Overseas International, United Energy, Cloud Village and Gcl Poly Energy Holdings Limited could also move higher over the next couple of weeks before the stocks enter Stock Connect.

• Hang Seng announced the results of the March rebalance post market close Friday. Two adds for the HSI, one set of changes for HSCEI, three sets for HSTECH.
• An ad hoc rebalance was announced for the KOSDAQ150 following Osstem being designated an ‘Administrative Issue’. In IPO world, we have LIC in India and SBI Sumishin NetBank coming up.
• Friday was the review cutoff date for the March rebalance of the ASX200 Index. The ATO has provided Aventus with the tax ruling and that creates a timing issue.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Life Insurance Corp of India (1248Z IN) and SBI Sumishin Net Bank (7163 JP) are set to keep everyone busy till March.
• On the placement front, Japanese accelerated selldowns continue their stellar record with Persol Holdings (2181 JP). 

• Meituan short near 300 and on the  bear wedge break has paid off. Friday’s price action is disturbing and warrants a downgrade.
• The breakdown below flat range/triangle support is a big negative on the back of sell volume. Bear triangle breaks are often volatile affairs.
• 142 is the fresh downside projection. 200 represents the sell barrier to work with.

• The Hang Seng Index was meant to have 80 constituents by mid-2022 before moving to 100 members. At 66 constituents post the March review, we are not gonna make it.
• Nongfu Spring (9633 HK) and Lenovo (992 HK) will be added to the index. Nongfu’s inclusion was expected while Lenovo is a relative surprise.
• Nongfu Spring (9633 HK) will also be added to the FTSE AW Index at the March SAIR at the close on 18 March. The stock should move higher.

• As expected, Xinyi Solar Holdings (968 HK) replaces Evergrande Property Services (6666 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close of trading on 4 March.
• Using prices from the close on 18 February to cap the stocks, estimated one-way turnover at the rebalance is 4.37% and will result in a one-way trade of HK$3,350m.
• Short interest on Xinyi Solar Holdings (968 HK) is 13 days of ADV to cover. While the inclusion was expected, short covering could take the stock higher.

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.

• Huize’s further acceleration of the “online to offline integration strategy” likely pushes it to compete more directly against China’s insurance giants (e.g., Ping An).
• One key challenge smaller Chinese insurtech players face (when it comes to attracting investors) is that some of the country’s insurance giants are relatively well digitized.
• Ping An still represents a good way to gain exposure to China’s broader insurance/insurtech space, especially given its current low valuation. 

• The sluggish share performance of HKEX (388 HK) underscored the weak trading activities at Hong Kong, its January average daily turnover (ADT) is down 47% year-over-year.
• Hong Kong’s surging COVID cases have already accounted for more confirmed infections than all previous outbreak combined, we believe this will also dampen market sentiment short-term.
• However, we remain bullish on HKEX (388 HK) with the view that China economy will likely rebound in 2022, which will drive the rebound of IPO activities and trading volume. 

• SenseTime Group (20 HK), Li Auto (2015 HK) and XPeng (9868 HK) replace Autohome (2518 HK), Weimob Inc. (2013 HK) and Tongcheng-Elong Holdings Ltd (780 HK) in the HSTECH INDEX. 
• A few changes have been made from the way stocks are treated to ensure the inclusion of Li Auto (2015 HK) and XPeng (9868 HK) in the index.
• SenseTime Group (20 HK) has been included at a much higher float than what it should be and this could take the stock higher in the next couple of weeks.

• At 0.3x price to book, PRC property play Tomson (258 HK) is cheap. 
• It is even cheaper when factoring in its net cash worth 90% of the market cap.
• And it might continue to trade cheaply if not for the fact the controlling family recently privatised a connected company of Tomson’s.

• Huitongda (9878 HK) raised around US$285m in its Hong Kong IPO.
• Overall, we are not comfortable with paying a premium valuation for HTD given its small scale of operations in a highly competitive and fragmented market. 
• In this note, we will look at the trading dynamics and current valuation.

• The world’s largest electric-vehicle battery maker Contemporary Amperex Technology Co. Ltd. (CATL) has announced that it’s considering building more factories overseas
• The news came as CATL (300750.SZ +0.72%), based in East China’s Fujian province, has been trying to ease investor concerns about the recent sell-off of its stock
• The statement also disclosed that the company has been talking with U.S. clients about the possibility of building production lines in the country to bring supplies of CATL products closer to home

• While China Southern Airlines (1055 HK) saw passenger traffic up 17.3% in Jan, this is at the expense of higher capacity, leading to a 1.8pp YoY passenger load contraction. 
• Its cargo traffic underperformed both CEA and Air China with a YoY decline; and this is disappointing in a period of time where airfreight rate is at record-breaking level.  
• We see reduced local travel demand, higher operating costs, weaker cargo business, pressure on yield and higher base of comparison key challenges in 2022, and prefer Air China Ltd (753 HK). 

The Asia HY Trade Book for the month of February includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index.