Daily Brief China: Flowing Cloud Technology, China Unicom Hong Kong, Orient Overseas International, Alibaba (ADR), Longfor Properties and more

• The review cutoff date for the March rebalance of the HSIII was 29 December. The changes will be announced on 16 February and become effective after the close 1 March.
• We see a high probability of Zx Inc replacing Flowing Cloud Technology (6610 HK) in the index. There is a lower probability of 4Paradigm (6682 HK) replacing CMGE Tech (302 HK). 
• Capping will result in passives buying Meituan (3690 HK) and selling Tencent (700 HK), Kuaishou Technology (1024 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK). 

• China Unicom Hong Kong (762 HK) remains inexpensive with respect to parent China United Network A (600050 CH) – its hybrid domestic A-share twin – and to peers.
• Preceding my comments on Unicom, are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• The Shanghai Containerised Freight Index has popped by 25% in the first two weeks of 2024 due to the Red Sea crisis. Orient Overseas International (316 HK) is a beneficiary.
• There are already signs of bottoming out of realised freight rate and load factor in 4Q23. The spike in freight rate means that consensus forecasts are too bearish. 
• OOIL’s net cash of US$5.6bn equals 58% of its market capitalisation, making its 0.7x P/B and 8% yield attractive. There is also a possibility for a higher dividend payout. 

• In this note, we will look at the Asia Pacific IPO pipeline for 2024, following up with US ADRs, after having looked at HK, India, Japan and Korea earlier.
• This list has been compiled on a best effort basis from tracking the company filings and through various other sources
• The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

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.

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