In today’s briefing:
- RMB Dual Counter Trading Is Coming – This Changes AH Relationships
- HK Connect SOUTHBOUND Flows (To 19 Apr 2024); Strong Net Buying on Energy/Finance/Telco SOEs. Again.
- BYD (1211 HK) 1Q24 Preview: No Concern for Slow Quarter, To Achieve a Strong Year, 60% Upside
- A/H Premium Tracker (To 19 Apr 2024): Liquid AH Premia Even Higher; Lots Of “Carry” In The Market
- China Consumption Weekly (22 Apr 2024): Xiaomi, Transsion, Tims China, Xpeng, Tesla
- Mainland Connect NORTHBOUND Flows (To 19 Apr 2024): NB Net Seller; Semi-Tech Buys, Renewables Sold
- Sichuan Baicha Baidao IPO Trading – Tepid Demand, While Peers Have Corrected
- Remegen (9995.HK/688331.CH) – The Placement Won’t Solve the Problem
RMB Dual Counter Trading Is Coming – This Changes AH Relationships
- A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
- They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
- RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.
HK Connect SOUTHBOUND Flows (To 19 Apr 2024); Strong Net Buying on Energy/Finance/Telco SOEs. Again.
- A shares were up on the week, while Hs were down. BIG divergence among liquid names.
- Net SOUTHBOUND buying was +HK32.1bn. SOUTHBOUND ended its consecutive post-CNY daily net buy streak on 25 March, then started a new one. No net sell days since.
- Little market news. More geopolitical news. SOE bank H-shares are seeing relentless net and gross buying, very very little selling.
BYD (1211 HK) 1Q24 Preview: No Concern for Slow Quarter, To Achieve a Strong Year, 60% Upside
- We believe the revenue growth will be slow in 1Q24, but it will still be rapid for the full year 2024.
- We also believe the operating margin will hit the historical high in 1Q24, but it will be just stable for the year 2024.
- We conclude the stock has an upside of 60% for the year end 2024. Buy.
A/H Premium Tracker (To 19 Apr 2024): Liquid AH Premia Even Higher; Lots Of “Carry” In The Market
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has been selling recently (this week and last buying semi tech, selling renewables)
- Hs fell sharply vs As. AH Premia very wide. Alpha on portfolio vs straight H vs A but a bad week as liquid Hs underperformed liquid As by 2.5+%.
China Consumption Weekly (22 Apr 2024): Xiaomi, Transsion, Tims China, Xpeng, Tesla
- In 1Q24, Xiaomi and Transsion shipments grew rapidly, while Samsung Electronics (005930 KS) and Apple (AAPL US) shrank.
- Tims China’s revenue expanded with new openings, which is encouraging in the competitive market.
- In China, Tesla fired salespeople who had served the company for less than six months.
Mainland Connect NORTHBOUND Flows (To 19 Apr 2024): NB Net Seller; Semi-Tech Buys, Renewables Sold
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
- Last week saw NORTHBOUND net SELL RMB 6.7bn of A-shares on decent volume. A-shares out-performed H-shares quite dramatically, taking back H-share gains from the week before, which reversed prior weeks.
- This week saw net buying of semiconductor/chip names, and net selling of the EV/Solar/Battery space and buying of the Ping Ans, but most notable was liquid A vs H performance.
Sichuan Baicha Baidao IPO Trading – Tepid Demand, While Peers Have Corrected
- Sichuan Baicha Baidao Industrial (2555 HK) (SBBI) raised around US$330m in its HK IPO.
- SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
- We have looked at the company’s performance and valuations in our past note. In this note, we talk about the trading dynamics.
Remegen (9995.HK/688331.CH) – The Placement Won’t Solve the Problem
- Remegen’s product revenue fails to cover R&D expenses and its sales profit is negative, which means that RemeGen’s cost control is disappointing, and the main problem is high selling expenses.
- If RemeGen continues to follow the old path, breakeven will be further out of reach. In other words, we don’t think that the A-share placement will materially change the outlook.
- Remegen’s reasonable market value is RMB12-18 billion. If above RMB18 billion, it’s recommended investors take profits in time. If below RMB12 billion, investors could buy and wait for a rebound.
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