In today’s briefing:
- CK Hutchison (1 HK): Political Turbulence
- Tencent (700 HK): Expected Move on Profit Announcement and Option Insights
- HKBN (1310 HK): MBK Ups Stake Via VLN Conversion
- HK Connect SOUTHBOUND Flows (To 14 Mar 2025); Big Volumes, Big Net; Tech and Banks Still Leading
- Xiaomi (1810 HK): Overpriced Volatility Ahead of 2024 Results
- A/H Premium Tracker (To 14 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- China Healtchare Weely (Mar.16) – 2025 VBP Instructions, GLP-1s Cooling Down, Zai Lab’s Headwinds
- Xiaomi Earnings: Option Market Expectations, Past Performance and Hedge Opportunities
- Ping An Healthcare and Technology (1833 HK) – Updates on Performance Forecast and Valuation Outlook
- HSI Index Options Weekly (March 10-14): Flat Week but Still and Strong Relative Performer
CK Hutchison (1 HK): Political Turbulence
- On 13 March, Ta Kung Pao, a Hong Kong newspaper owned by the Chinese government and Communist Party, denounced CK Hutchison Holdings (1 HK)’s planned port transaction.
- The opinion piece is mainly political rhetoric, as even if China managed to block the deal, it would still not address the underlying concerns expressed in the article.
- In the near term, the shares will likely be under pressure from a nationalistic backlash. Nevertheless, deal or no deal, the valuation remains undemanding.
Tencent (700 HK): Expected Move on Profit Announcement and Option Insights
- Tencent (700 HK) / Tencent Holdings (ADR) (TCEHY US) is set to announce Annual 2024 Results on 19 March 2025.
- Options pricing implies a 4-6% move after earnings, significantly higher than historical patterns. From an options perspective, calendar spreads offer opportunities.
- Tencent‘s significant index weighting, around 8% in key Hong Kong indices, means its earnings has the potential to impact broader market performance.
HKBN (1310 HK): MBK Ups Stake Via VLN Conversion
- China Mobile (941 HK) has made a pre-conditional HK$5.23/share voluntary Offer for HKBN Ltd (1310 HK). However, a possible separate Offer from I Squared continues to make the news.
- In an unusual move, MBK, via Twin Holding, has converted HK$970.5mn of VLNs, at a whopping HK$11.60/share conversion price, lifting MBK’s stake to 16.39% on a fully diluted basis.
- Speculation is rife that MBK provides an irrevocable to I Squared for its enlarged shareholding. Maybe. I still don’t see China supporting a U.S.-based infrastructure firm over an SOE .
HK Connect SOUTHBOUND Flows (To 14 Mar 2025); Big Volumes, Big Net; Tech and Banks Still Leading
- Gross SOUTHBOUND volumes dropped again somewhat but still high at HK$625bn. NET buying by SOUTHBOUND was HK$61bn which is HUGE.
- The flows here are still striking. >25% of the top 100 most liquid Southbound eligible stocks saw SOUTHBOUND buy more than 10% of weekly traded volume to March 12.
- A summary of important China-related stock news as I saw it this week is included.
Xiaomi (1810 HK): Overpriced Volatility Ahead of 2024 Results
- Xiaomi Corp (1810 HK) is set to announce 2024 results after the close on 18 March.
- Options markets imply a price movement in excess of historic averages, creating trading opportunities through calendar spreads and short straddles that capitalize on March’s elevated implied volatility.
- Xiaomi Corp (1810 HK) is a major constituent in key Hong Kong indices (HSI Index, HSCEI Index, and HSTECH Index). Its post-results move will likely impact the broader market.
A/H Premium Tracker (To 14 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia continue to fall. Spread curve torsion was a barbell this week. Narrow and wide spreads see Hs outperform. Middling spreads outperform less.
- To me, warning signs are flashing on spreads. They are at their narrowest in 5yrs and they are volatile, though volatility is coming down.
- Lots of spreads see the HA premium less than 15%. That is historically tight.
China Healtchare Weely (Mar.16) – 2025 VBP Instructions, GLP-1s Cooling Down, Zai Lab’s Headwinds
- The NHSA has issued clear instructions for VBP in 2025, including two batches of national VBP of drugs and one batch of medical consumables VBP. TCM will also be included.
- The sales growth of GLP-1s has entered a turning point, it will be far from the previously high expectations. The actual market size of GLP-1s could be only US$100 billion.
- Rapid sales growth of Efgartigimod is the key factor for Zai Lab to narrow the losses.But whether it can be breakeven relies on the decline of cost/expenses, not revenue growth.
Xiaomi Earnings: Option Market Expectations, Past Performance and Hedge Opportunities
- Xiaomi earnings are upcoming. We analyze what the options market is pricing and examine historical trends and tendencies.
- Historical earnings reactions show notable differences across quarters, with Q4 standing out for its downside risk.
- We outline a tactical hedge that minimizes jump risk while taking advantage of extended implied volatility.
Ping An Healthcare and Technology (1833 HK) – Updates on Performance Forecast and Valuation Outlook
- PAGD’s 2024 performance beat expectations. The support of Ping An Group remains the key for PAGD to turning losses into profits. A breakthrough point is the Senior care services business.
- The CAGR of PAGD’s revenue could be 12%-15% from 2025 to 2027, and revenue in 2027 may reach RMB6.5-7 billion. The peak revenue scale could be just about RMB8 billion.
- Adjusted net profit could reach RMB250-300 million in 2025 and exceed RMB400 million in 2027.If based on P/S of 2-3x, revenue of RMB6.5-7 billion in 2027, valuation is RMB13-21 billion.
HSI Index Options Weekly (March 10-14): Flat Week but Still and Strong Relative Performer
- We look into whether long or short volatility strategies on the HSI have been the most effective.
- Implied volatility remained under pressure as muted trading and weak price action weighed on implied volatility.
- Despite finishing lower, HSI remained a strong relative performer among global indexes, particularly against SPX.
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