In today’s briefing:
- China Consumption Weekly (19Aug2024): China Literature, BEKE, Alibaba, JD, JD Health, Tencent Music
- FXI Rebalance Preview: China Tower (788 HK) Could Replace CICC (3908 HK)
- HK CEO & Director Dealings (19th Aug 2024): Merlin Selling Swire Pac/Props; Chans Buying Hang Lung
- China A50 ETFs Rebalance Preview: Two High Probability Changes in Sep
- Wharf REIC: Beta Play W Multiple Catalysts, Lower Rates, Weaker Currency and Returning of Shoppers
- JD Logistics (2618 HK): There Are More Rooms
- China Resources Beer Holdings – Interim Results Show Progress but Macro Headwinds Remain
- Pre-IPO Medtide – The Industry, the Business and the Concerns
- Morning Views Asia: Continuum Green Energy, Melco Resorts and Entertainment (Philippines)
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China Consumption Weekly (19Aug2024): China Literature, BEKE, Alibaba, JD, JD Health, Tencent Music
- China Literature’s revenue increased by 28% YoY in 1H24, because four novel copyrights for movies brought box office hits.
- KE revenue increased by 20% YoY in 2Q24 compared with a 19% YoY decrease in 1Q24, as government policies supported existing home transaction.
- Alibaba announced that it will recruit 1,000 fresh graduates for tech positions in 2025.
FXI Rebalance Preview: China Tower (788 HK) Could Replace CICC (3908 HK)
- With the review cutoff done, we expect just one change for the iShares China Large-Cap (FXI) (FXI US) ETF in September.
- China Tower (788 HK) is a high probability inclusion while China International Capital Corporation (3908 HK) is a high probability deletion.
- There has been an increase in cumulative excess volume for both stocks in the last few months, but the pace has slowed noticeably in the recent past.
HK CEO & Director Dealings (19th Aug 2024): Merlin Selling Swire Pac/Props; Chans Buying Hang Lung
- 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.
- The key stocks mentioned in this regular insight include: Swire Pacific (19/87 HK)/Swire Properties (1972 HK) and Hang Lung (10 HK)/Hang Lung Properties (101 HK).
China A50 ETFs Rebalance Preview: Two High Probability Changes in Sep
- With the review cutoff done, there should be two changes for the CSOP FTSE China A50 (HKD) (2822 HK) / iShares FTSE/Xinhua A50 China (2823 HK) ETFs in September.
- Huaneng Lancang River Hydropow (600025 CH) and China National Nuclear Power (601985 CH) should replace China Tourism Group Duty Free Corp (601888 CH) and Yihai Kerry Arawana (300999 CH).
- China Tourism Group Duty Free (1880 HK) will be deleted from a global index later this month and there could be some opportunities to trade the A/H arb.
Wharf REIC: Beta Play W Multiple Catalysts, Lower Rates, Weaker Currency and Returning of Shoppers
- Wharf REIC reported 2% yoy core earnings growth, the first earnings increase since 2019. The results also show Hong Kong retail business is more resilient than expected
- The upcoming catalysts include 1) lower interest rates, 2) weakening currency environment and 3) bottoming out of HK retail market
- Market is forward-looking and we think the worst is behind us. Valuation is very compelling. The stock is a beta play. BUY
JD Logistics (2618 HK): There Are More Rooms
- Even after the 28% surge in share price since the 1H24 result, JD Logistics (2618 HK) still deserves a look as fundamentals have improved, especially with better cost control.
- JDL is riding on scale economies with higher asset utilisation. Quarterly margins have sustained an uptrend, reaching the highest levels since 1Q21 and it will continue.
- We like its lower reliance on JD.com (9618 HK) and net cash of HK$2.83/share (28% of the share price). There is a massive upside in consensus forecasts too.
China Resources Beer Holdings – Interim Results Show Progress but Macro Headwinds Remain
- The company’s strategy of premiumisation continues to be executed to plan
- Despite the derating, investors will wait until seeing concrete signs of a turn in the Chinese consumer
- Continues to be a liquid proxy for Chinese consumption with no technology regulation risk
Pre-IPO Medtide – The Industry, the Business and the Concerns
- Medtide relies heavily on limited number of customers to contribute performance. If there is any significant reduction in demand by its major customers, Medtide’s performance growth would be materially/adversely affected.
- Due to geopolitical conflicts, pharmaceutical companies are becoming more cautious about their reliance on China CXO. So, the development of Medtide’s overseas business would become more uncertain in this context.
- Medtide’s business scale is still small and its position in the global peptide CXO industry is not as strong as described. Valuation of Medtide should be lower than peers.
Morning Views Asia: Continuum Green Energy, Melco Resorts and Entertainment (Philippines)
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.