In today’s briefing:
- CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows
- STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade
- Meituan (3690 HK): Embracing the Slowdown
- CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds
- Quiddity STAR 50/100 Dec 24 Results: US$793mn Capping Outflow for SMIC; 4 Changes for STAR 100
- MT/ Meituan (3690): 3Q24, Excellent Results, Still 46% Upside
- CSI All Share Semiconductor Index Rebalance: Methodology Change Leads to 7 Adds, 29 Deletes
- Quiddity SSE50/180 Dec 24 Results: All SSE 50 ADDs in the LONGs Basket; Positive Start; More to Come
- SHEIN and Temu: Higher Tariffs Under 2nd Trump Admin an Additional Threat Beyond “De Minimis” Reform
- HONG KONG ALPHA PORTFOLIO (November 2024)
CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows
- There is 1 add/ 2 deletions for the CSI Alcoholic Drink Index and no constituent changes for the CSI Liquor Index.
- The largest flows arise as a result of capping of constituents to 15% of the index weight. Impact on the stocks varies from 0.2-0.6 days of ADV.
- WeiLong Grape Wine outperformed the deletes in early October, but the deletes moved higher and closed the gap. The gap has started to open up again in the last week.
STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade
- CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
- There are 3 changes for the index and we estimate passive buying of 0.3-0.65x ADV in the adds and selling of between 0.4-0.6x ADV in the deletes.
- On average, the adds to the index have outperformed the deletes over the last 5 weeks with the adds moving higher and the deletes trending lows.
Meituan (3690 HK): Embracing the Slowdown
- Meituan reported strong 3Q results last Friday which were largely expected by the market. Yet downbeat guidance seemed to have disappointed investors and dragged the stock during US trading session.
- We believe the stock’s significant re-rating since early 2024 has come to end as earnings growth starts normalizing after being boosted by less competition and narrowing losses from new initiatives.
- While the company has strengthened its moat and we expect steady growth ahead, we see near-term price volatility as markets digest the notable slowdown.
CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds
- CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
- There are 3 changes for the index, and we estimate one-way turnover of 1.7% resulting in a round-trip trade of CNY 570m (US$79m).
- Nexchip Semiconductor (688249 CH) and United Nova Technology (688469 CH) are adds to other indices as well and the impact on the stocks will be a lot higher.
Quiddity STAR 50/100 Dec 24 Results: US$793mn Capping Outflow for SMIC; 4 Changes for STAR 100
- The December 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 29th November 2024.
- There will be zero changes for the STAR 50 index and four changes for the STAR 100 index.
- We expect one-way flows of approximately US$793mn and US$136mn for the STAR 50 and STAR 100 index rebal events respectively.
MT/ Meituan (3690): 3Q24, Excellent Results, Still 46% Upside
- Revenue grew by 22% YoY and operating margin improved 8 percentage points YoY in 3Q24.
- All Business lines grew strongly and all expense percentages of total revenue declined YoY in 3Q24.
- We believe the stock has an upside of 46% for the next twelve months.
CSI All Share Semiconductor Index Rebalance: Methodology Change Leads to 7 Adds, 29 Deletes
- Following a methodology change in mid-November for the CSI All Share Semiconductor Index, there are 7 adds and 29 deletes for the index in December.
- Estimated one-way turnover at the rebalance is 6% leading to a round-trip trade of CNY 3.15bn (US$435m).
- The adds outperformed the deletes bigly in the first 2 weeks of November. Some of those gains have been given back but a new uptrend seems to be taking shape.
Quiddity SSE50/180 Dec 24 Results: All SSE 50 ADDs in the LONGs Basket; Positive Start; More to Come
- The December 2024 index review results for the SSE 50 and SSE 180 indices were announced after market close on Friday 29th November 2024.
- There will be 4 changes for SSE 50 and 18 changes for SSE 180 during the December 2024 index rebal event.
- SSE 50 ADDs and DELs will see large index flows while the SSE 180 flow names have fairly insignificant flow expectations.
SHEIN and Temu: Higher Tariffs Under 2nd Trump Admin an Additional Threat Beyond “De Minimis” Reform
- US President-elect Trump has proposed new tariffs on China (and others) by January
- Higher tariffs on Chinese goods could make Chinese imports more expensive in the US
- For SHEIN & Temu, larger threat still comes from potential reform of de minimis rules
HONG KONG ALPHA PORTFOLIO (November 2024)
- Hong Kong Alpha portfolio lost 2.9% in November, but has outperformed its benchmark by 4.9% since inception on October 1st. It has outperformed HSI, HSCI and HSCEI by 9%.
- Hong Kong Alpha has generated idiosyncratic returns during the market correction. The portfolio has no exposure to energy, healthcare and property sectors.
- We exit 4 positions at the end of the month and add positions in software, tech components, travel and restaurant sectors.
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