In today’s briefing:
- HK Connect SOUTHBOUND Flows (To 26 Jan 2024); ETFs and High Div SOEs Again BIG Buys, Tech Sold
- A/H Premium Tracker (To 26 Jan 2024): AH Premia Still Near Multi-Yr Wides, SOEs May See New Action
- Further Opportunities in the Hong Kong Market
- China Consumption Weekly (29 Jan 2024): Great Wall Motor, Huawei, Alibaba, Mixue, Nayuki
- WuXi AppTec (2359.HK/603259.CH) – Behind the Plunge Is a War
- Shouhui Tech Pre-IPO Tearsheet
- China Comm Const (1800 HK): New Contracts Gathering Steam
HK Connect SOUTHBOUND Flows (To 26 Jan 2024); ETFs and High Div SOEs Again BIG Buys, Tech Sold
- A better week for HK stocks as A-shares rebound on National Team buying, a PBOC RRR cut, and potentially other measures to boost the market. Foreigners stopped selling; that helped.
- Southbound saw decent net buying on ETFs late in the week, but otherwise the week was pretty flat in single-stock land – net buying of SOEs, selling of tech.
- Net SOUTHBOUND buying was HK$4.5bn on the week, mostly through Shanghai (interestingly, 90+% of the decent NORTHBOUND buy was also through Shanghai).
A/H Premium Tracker (To 26 Jan 2024): AH Premia Still Near Multi-Yr Wides, SOEs May See New Action
- 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 flows were small positive and NORTHBOUND flows a decent buy. AH premia stopped rising. Chinese shares bounced. SOEs being bought. Tech being sold. Tencent seeing SB outflows, still.
- New article in China Securities Journal hints at new measures on SOEs. Watch this space. Wouldn’t be short SOEs vs Privates on H/A basis.
Further Opportunities in the Hong Kong Market
- If a sustainable bottom was made in January, which sectors are best to invest?
- China State Owned Enterprises fit the current uncertain investment climate
- The Hang Seng China Affiliated Index (red chips) provides some good ideas
China Consumption Weekly (29 Jan 2024): Great Wall Motor, Huawei, Alibaba, Mixue, Nayuki
- Great Wall Motor’s revenue increased by 26%, but its profit increased by less than 5% in 2023.
- Huawei’s shipments increased 36% YoY in 4Q23 and was the only company to witness an increase among the top five sellers.
- Jack Ma, the founder, and Mr. Joe Tsai, the chairman, purchased Alibaba’s shares.
WuXi AppTec (2359.HK/603259.CH) – Behind the Plunge Is a War
- The approval rate of Draft Bill is very low. So, it’s more of a “strangulation” of investment sentiment. But considering the 2024 US presidential election, similar negative proposals may resurface.
- WuXi AppTec has little control over the entire situation.There’s “valuation discount” for China CXOs due to geopolitical conflicts. It’s difficult to completely rule out the possibility of “deliberate short selling”.
- If look deeper, considering “sensitive situations” at present, to some extent, we may have already been in a financial war.The goal of short selling is to pick up cheap chips.
Shouhui Tech Pre-IPO Tearsheet
- Shouhui Tech (SHOU HK) is looking to raise around US$200m in its upcoming Hong Kong IPO. The bookrunners on the deal are CICC, and Huatai International.
- Shouhui Tech (Shouhui) is an online life and health insurance intermediary service provider in China.
- According to F&S, Shouhui was the third largest online insurance intermediary in China in terms of GWPs of long-term life and health insurance in 2022, with a 7.1% market share.
China Comm Const (1800 HK): New Contracts Gathering Steam
- China Communications Construction (1800 HK) saw its 4Q23 new contracts increased 14%, faster than the 13.5% growth in 9M23. Full-year new contracts are 3.5% ahead of its target.
- Our estimated backlog of Rmb4.26trn at end-FY23 is 25.6% higher than end-FY22. Such backlog covers 4.9x FY24F revenue, which is a 0.6pp improvement YoY.
- The inclusion of market cap management as a KPI for senior SOE officials will drive return, while CSRC’s encouragement to raise payout ratio may easily push yield to over 10%.
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