In today’s briefing:
- HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
- Citic Limited – A Deeply Discounted Conglomerate in the Hang Seng Index
- BeiGene (6160.HK/BGNE.US/688235.CH) – 2023 Results Preview and Undervaluation Concerns
- China Consumption Weekly (19 Feb 2024): Ant Group, Great Wall Motor, JD.com, Baidu, Autohome
HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
- We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
- Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.
HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
- Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
- Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.
Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
- Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
- There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.
Citic Limited – A Deeply Discounted Conglomerate in the Hang Seng Index
- Citic Ltd (267 HK) is a well-managed conglomerate trading at a big discount to its constituent parts
- Earnings should move up from here and pays a decent dividend while you wait.
- A member of both the the Hang Seng Index (HSI INDEX) and the HSCCI and will attract inflows once institutional money returns
BeiGene (6160.HK/BGNE.US/688235.CH) – 2023 Results Preview and Undervaluation Concerns
- Since Imbruvica’s sales continued to decline and Calquence hadn’t shown much growth in US since 23Q2, either Zanubrutinib gained more market share or the entire BTK inhibitors market is shrinking.
- BeiGene’s recent sluggish share price could be related to geopolitical conflicts/weak market sentiment.However, innovative drugs don’t involve supply chain security issues. There’s no need for US to sanction China’s biotech.
- We are relatively optimistic about BeiGene’s 23Q4 sales growth. In our view, BeiGene’s reasonable market value is at least about US$18 billion. BeiGene (6160 HK) is undervalued.
China Consumption Weekly (19 Feb 2024): Ant Group, Great Wall Motor, JD.com, Baidu, Autohome
- Overseas traveling revenue recovered strongly in China during the Chinese New Year.
- Great Wall Motor’s vehicle deliveries increased by 69% in January 2024.
- JD.com plans to raise the salaries for customer service employees by 30% in 2024.
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