Daily Brief China: PetroChina, Yankuang Energy Group, Biocytogen Pharmaceuticals (Beijing), Swire Pacific Ltd-Cl B, Tencent, Hundsun Technologies Inc A, Orient Overseas International, BeiGene Ltd, WM Motor Technology Co Ltd, Golden Eagle Retail and more

• PetroChina (601857 CH) and EVE Energy (300014 CH) could replace China Pacific Insurance (Group) (601601 CH) and Zhangzhou Pientzehuang Pharmaceutical Co. (600436 CH) in the index at the September rebalance.
• Assuming both changes are implemented, estimated one-way turnover is 2.24% and will result in a one-way trade of CNY 1,180m.
• There has been no announcement from FTSE yet on the potential increase in the number of index constituents from 50 to 100.

• Yankuang Energy Group (1171 HK) is the highest ranked eligible non-constituent and could replace Shenzhou Intl Group Holdings (2313 HK) in the index at the September rebalance.
• Passive trackers will need to buy over 1 day of ADV on Yankuang Energy Group (1171 HK) while selling over 1 days ADV on Shenzhou Intl Group Holdings (2313 HK). 
• Short interest is over 10% of float on Yankuang Energy Group (1171 HK) and there could be short covering as the stock breaks out.

• Biocytogen is a leading animal model player in China expanding into biotech. The company launched a downsized deal to  raise up to USD 70m via a Hong Kong listing.
• In our previous note, we looked at the company business lines and compared the company’s operation with leading animal model players.
• In this note, we provide an update for the book building. We provide our quick thoughts on the valuation and deal dynamics.

• And on the 6th Day, Swire Pacific (A) (19 HK) commenced its buyback. 
• It took until the 6th day for Swire to start its buyback, and now that it has started, we may have a little better idea of the parameters. And impact. 
• So far, they appear to be bending the rules a little, but it is still the way it should be. So there is still a trade here to do.

• Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
• Overall, the net outflow over the past week was ~US$0.21bn, split (-US$0.24bn) for Shanghai and (+US$0.3bn) for Shenzhen.
• The largest inflows were into China International Marine (2039 HK) and Li Ning (2331 HK). The largest outflows were in Meituan (3690 HK)and Kuaishou Technology (1024 HK).

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net inflow over the past week was ~US$1.2bn, split between Shanghai (US$0.9bn) and Shenzhen (US$0.3bn).
• The largest inflows were into CATL (300750 CH) and Hundsun Technologies (600570 CH). The largest outflows were in TBEA Co Ltd A (600089 CH) and Tongwei Co Ltd (600438 CH).

• 1H22 is a fantastic period for Orient Overseas International (316 HK) with record earnings. However, with retreat in freight rates YTD, it is likely to mark the cycle peak.
• OOIL has not seen the usual peak season for transpacific market yet.  Also, supply pressure is mounting as record vessel delivery is scheduled for the next two years.
• The elevated share price has not reflected that profitability will decline in FY23 and FY24. We see significant downside risk as the market becomes more realistic on earnings.

• BeiGene’s product sales in 2022H1 more than doubled YoY, which was a positive sign for commercialization. However, net loss further widened, mainly due to significantly high R&D and SG&A expenses.
• Tislelizumab and zanubrutinib are not enough to support BeiGene’s high valuation. The success or failure of TIGIT project will be the key to determine how far BeiGene will go.
• So far, it is still an indisputable fact that BeiGene has profitability issues. That’s why it’s hard for us to be optimistic about this company. 

• WM Motor Technology Co Ltd (WMT CH) (WMM) is looking to raise about US$1bn in its upcoming Hong Kong IPO.
• WM Motor is a smart EV player in China. As of the latest practicable date, it had a total of four main EV models. 
• In this note, we talk about the positive aspects of the deal.

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.

• Golden Eagle Retail
• KWG Living Group