Daily Brief China: Chindata Group, Guangzhou Automobile Group, Haitong International Securities Group, Great Wall Motor, Dongfang Electric, Shenzhen Mindray Bio-Medical Electronics, China Traditional Chinese Medicine, China Vanke and more

• Chindata Group (CD US)’s US$8.60 per ADS offer from Bain Capital is conditional on dissenting shareholders representing less than 12% of outstanding shares. 
• Oasis Management, an activist fund, recently disclosed a shareholding representing 65.9 million ordinary shares, 8.99% of outstanding shares and 1.24% of voting interest. 
• Precedent transactions where the dissent condition was exceeded suggest two possibilities – the offeror waives the condition or persuades sufficient shareholders to withdraw as dissenters.

• The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• Absolutely STONKING performance this past week – +1.62% Friday to Friday across 42 trades. Positive performance in every sector. Portfolio at new high. Southbound inflows. BigCapHighDiv SOE outflows.
• Short sales this week now need 100% in the account for hedge funds. And the MSS claims some are short-selling or talking bearishly on stocks for political reasons.

• 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 – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU), JSR Corp (4185 JP), Orecorp Ltd (ORR AU), Lithium Power.
• Lowest spreads – Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Chindata Group (CD US), Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Allkem. 

• This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• SOUTHBOUND flows the last four weeks clearly indicate a momentum move. The top net sells are all down. The top buys are all up.
• Xiaomi Corp (1810 HK) and Semiconductor Manufacturing International Corp (SMIC) (981 HK) were the top net SOUTHBOUND inflows as SOUTHBOUND bought HK$8.515bn this past week.

• The collapse in share price of Dongfang Electric (1072 HK) is too excessive. The concerns on margin and orders are overplayed and its latest financial result is solid.
• Recurring profit surged 24.8% in 3Q23 and gross margin expanded both YoY and QoQ. For 9M23, new orders rose 19.2% to reach 98% of full-year FY22 level.
• We estimate backlog at Rmb197bn, or 3x consensus FY23F revenue, and this provides excellent protection to forward earnings. Its 5.8x and 4.4x PERs are just too undervalued.

• This is the somewhat-brand-spanking-new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
• The same five names continue at the top of the gross flows list – Kweichow Moutai, Contemporary Amperex, Wuliangye Yibin, Foxconn Industrial, and BYD. Nets are dropping.
• NORTHBOUND saw net inflow for the first time in three months. Small at RMB 557mm, but positive.

• The recovery of concentrated TCM granules business makes us optimistic about China TCM’s 2023 full-year performance growth. The resurgence of pandemic and privatization rumor always attract the attention of investors.
• Pientzehuang’s 23Q3 performance was disappointing. Consumption downgrade makes the strategy of raising prices no longer effective. There is downward pressure on valuation as performance will not turn around soon.
• The investment logic of rigid demand is more convincing than consumption upgrading. So, China TCM is more likely to outperform Pientzehuang. Our view is long China TCM, and short Pientzehuang.

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
• Hopson Development