Daily Brief China: Alibaba Group Holding , Longfor Properties, China Dongxiang, AAC Technologies Holdings, Tong Ren Tang Technologies Co, Ltd., UMP Healthcare and more

• The review period for the December rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 30 September.
• We do not forecast any constituent changes for the index. Capping changes will lead to a one-way turnover of 2.15% and a round-trip trade of HK$6.1bn (US$785m).
• If any stocks have outsized moves on expectations of being added to or deleted from the index, there could be opportunities to enter trades.

• PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
• There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
• There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.

• China Dongxiang (3818 HK) stands on a discount of 82.1% to NAV after factoring in the recent market rally, not limiting to its Alibaba Group Holding (9988 HK) holdings.
• Its listed equities may have gained Rmb314m, but the HK$41m market capitalisation growth has not reflected this. The gains on its unlisted investments have not been included yet.  
• CNDX is now more likely to have a positive swing in the bottom line in FY25. Its tiny sportswear business has also witnessed a sequential moderation in sales decline. 

In our latest Asia Monthly, we discuss the performance of major Asian credit indices and review UST curve movements in September 2024. We also provide a recap of major news and macroeconomic releases, including those from the US, China, India, Indonesia and Japan.

In addition, we summarise the Top/Bottom performers, recent USD bond issuances and rating actions in Asian corporate credit, as well as a list of our recent research. The Asia Monthly publication serves to keep investors updated on developments in the Asian corporate USD bond market.

• Considering 23H1 high base, it can be understood that 24H1 achieved a low single-digit growth. If excluding gain on disposal of subsidiaries, net profit in 24H1 would have negative growth.
• Mainland China contributed about 90% of total revenue, but an imminent risk is VBP, which will pose a challenge to the pricing autonomy of Tong Ren Tang’s OTC TCM drugs. 
• After absorbing the high base impact of 2023 this year, performance growth would return to double digits in 2025. Tong Ren Tang is undervalued. Reasonable valuation is P/E of 15.

• UMP Healthcare (722 HK) reported a tepid FY24 owing to weak sentiment in HK. Revenues were up 3% YoY; profits were down 27% YoY ( adj profits -34% YoY). 
• The environment in HK is gradually improving, and we believe there is a steady recovery on the horizon for the company.
• The stock trades at 7x FY25 PE and more than 58% of its market cap in net cash, with a yield trending towards 9%.