Daily Brief China: CPMC Holdings, WH Group, ENN Natural Gas and more

• On 15 July, the precondition for Changping Industrial’s HK$6.87 offer for CPMC Holdings (906 HK) was satisfied, but the despatch of the offer document was delayed until or before 30 July.
• Since ORG Technology Co., Ltd. A (002701 CH) announced its HK$7.21 offer on 7 June, the shares have traded above Changping Industrial’s offer on all but bar one trading day
• Changping Industrial has three options: launch at unchanged terms (low probability), match ORG’s offer (medium probability) or bump marginally higher than ORG’s offer (high probability).

• Since all the Pre-Conditions have been fulfilled, Baosteel has taken a solid step towards the successful acquisition of CPMC. Comparatively, ORG could encounter resistance and uncertainties in the upcoming process.
• The acquisition of CPMC by ORG cannot be completed by ORG and Zhang Wei alone.Without the “nod” of COFCO/SASAC, what ORG’s going to do is equivalent to a “hostile takeover”. 
• ORG’s acquisition of control of CPMC could go against the national strategy of “building strong alliances between SOEs”. In fact, what ORG wants is for Baosteel to raise its Offer.

• BYD (1211 HK) shares had a breakout relative to the MSCI China index and showing good momentum during the low volume days of summer. 
• POWER ASSETS HOLDINGS (6 HK) has shown a breakout relative to MSCI Hong Kong with a defensive business and 5%+ dividend yield.
  
• WH GROUP (288 HK) has also shown a breakout relative to the MSCI Hong Kong after its announcement of the spinoff of Smithfield Foods in the US.
  

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.

• ENN Natural Gas