In today’s briefing:
- SHEIN and Temu: New Rule Could Crush “De Minimis” Imports | New Front In “War” Vs DTC Platforms
- Weekly Deals Digest (15 Sep) – Midea, Seven & I, Raysum, Haitong/GJTA, Dyna-Mac
- Last Week in Event SPACE: Alibaba, Young Poong/Korea Zinc, Shinko Electric, Guotai Junan/Haitong Sec
- China Banks; Challenged on Credit Quality Trends, with Selective Opportunities to Be Found
- Tuhu Car (9690 HK | BUY | TP:HKD24): Poised to Capture China’s Auto Aftersales Service Market
- HK Connect SOUTHBOUND Flows (To 13 Sep 2024); Weak Data, Weak Markets, but BABA and Banks!
- China Healthcare Weekly (Sep15)- Tiantan’s New Deal, BeiGene-AbbVie Lawsuit, BIOSECURE Act Will Pass
- Quiddity Leaderboard HSCEI Dec 24: Two Changes Possible; US$265mn Capping Flows One-Way
- A/H Premium Tracker (To 13 Sep 2024): SB Buying of H Underperformance
SHEIN and Temu: New Rule Could Crush “De Minimis” Imports | New Front In “War” Vs DTC Platforms
- Biden Administration rule would make “de minimis” items subject to tariffs
- Besides adding to landed cost of those items, reporting requirements would rise
- In addition, US/EU governments launch probes of SHEIN/Temu product safety
Weekly Deals Digest (15 Sep) – Midea, Seven & I, Raysum, Haitong/GJTA, Dyna-Mac
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Midea Group Co Ltd A (000333 CH) upsized H Share listing, Terumo Corp (4543 JP) placement.
- Event-Driven developments: Haitong Securities Co Ltd (H) (6837 HK)/Guotai Junan Securities (2611 HK), Seven & I Holdings (3382 JP), Raysum Co Ltd (8890 JP), Dyna Mac Holdings (DMHL SP).
Last Week in Event SPACE: Alibaba, Young Poong/Korea Zinc, Shinko Electric, Guotai Junan/Haitong Sec
- Alibaba Group Holding (9988 HK) was (finally) included in the Shanghai/Shenzhen-HK Connect programs; on the same day a Cayman court uplifted a BABA dissenter’s merger price by 659%.
- MBK has teamed up with Young Poong (000670 KS) to secure control of Korea Zinc (010130 KS) via Partial Tender Offers for Korea Zinc and Young Poong Precision (036560 KS)
- Like all long-dated arbs, Shinko Electric (6967 JP) is really about buying dips, then lightening up when it gets tighter, as long as the opinion about eventual result/path is unchanged.
China Banks; Challenged on Credit Quality Trends, with Selective Opportunities to Be Found
- In this China banks screen, we focus on the credit quality headwinds going forward and which are the better positioned banks to confront the challenge
- China bank shares’ PBV ratios have eroded over time, due to low growth and credit quality concerns; yet through our analysis of these bank, we see selective contrarian positive opportunities
- CCB is a core GEM bank buy for its deeply discounted valuations and strong balance sheet; Ping An Bank is the deep value contrarian pick; Minsheng is our fundamental sell
Tuhu Car (9690 HK | BUY | TP:HKD24): Poised to Capture China’s Auto Aftersales Service Market
- Tuhu Car (9690 HK) is poised to capture the lion share of China’s automotive aftersales service industry that is forecasted to grow at 7.3% CAGR from 2023:30.
- Tuhu is on an inflection of high earnings growth (+30% CAGR) as it has reached scalability, cost efficiency, and its younger shops are maturing profitably.
- Our fair value of HKD24 implies 25x FY25 PE – average for US peers. A bargain with 3-year CAGR of 30%, net cash, and churns high free cash flow.
HK Connect SOUTHBOUND Flows (To 13 Sep 2024); Weak Data, Weak Markets, but BABA and Banks!
- SOUTHBOUND was a net buyer this week. Over five days, it was +HK$12.5bn on high gross volume, but all of that net buying was on Alibaba Group Holding (9988 HK).
- Alibaba Group Holding (9988 HK) became SOUTHBOUND-eligible on Tuesday, and mainland buyers bought US$2.1bn of BABA shares, more than total SOUTHBOUND net buys.
- Gross volumes were highest in months. This was a big week. Even bigger than just BABA. After BABA the story was banks buying.
China Healthcare Weekly (Sep15)- Tiantan’s New Deal, BeiGene-AbbVie Lawsuit, BIOSECURE Act Will Pass
- Tiantan plans to acquire 100% equity of Zhongyuan Ruide from CSL Behring ASIA PACIFIC LIMITED for US$185 million, so as to consolidate its leading position in blood products industry.
- BeiGene is accused of trade secrets theft by AbbVie. Considering AbbVie is good at using legal means to profit for itself, this lawsuit may become full of uncertainty in US.
- The House passed BIOSECURE Act to make drug companies stop doing business with Chinese CXO.The probability of this Bill passing is high. We recommend prepare for worst-case scenario in advance.
Quiddity Leaderboard HSCEI Dec 24: Two Changes Possible; US$265mn Capping Flows One-Way
- The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
- In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in December 2024.
- At present, we see two ADDs/DELs based on the latest available data but the rankings can change until 30th September 2024.
A/H Premium Tracker (To 13 Sep 2024): SB Buying of H Underperformance
- Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. But SOUTHBOUND gross volumes way up.
- AH Premia rose slightly as HK-listed shares outperformed mainland share indices. The HK/mainland spread is consistently better than H/A performance. It’s not clear why. This week no exception.
- This week will see limited H/A action because of the long Mid-Autumn Festival. Hopes are high for non-durables purchases this month. Maybe even homes. But I am skeptical…
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