Daily Brief China: Wharf Holdings, Activision Blizzard, Brilliance China Automotive, Growatt Technology, Haier Smart Home Co Ltd, Jiangsu Expressway (H), Hutchison China MediTech Ltd, Sino-Ocean Group and more

• In a surprise, MSCI announced the deletion of Wharf Holdings (4 HK) from the MSCI China Index at the November SAIR that will be implemented at the close 30 November.
• The stock dropped 14.3% on Friday as volume spiked 26x compared to ADV and 14m shares were shorted on the day.
• Total short interest is estimated to be significantly lower than the estimated selling from passive MSCI trackers and there could be a move lower over the next few days.

• NetEase and Activision Blizzard will possibly terminate their cooperation next January.
• Singles’ Day sales were not very successful for e-commerce apps such as Alibaba and JD.com.
• IQiyi announced a revenue share rule to short TV series producers, including cost per mille and membership fee.

• We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
• Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
• Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

• Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. 
• Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
• In our previous notes, we looked at the company’s past performance. In this note, we undertake a peer comparison.

• Early this year I was quite pessimistic on Hong Kong stocks.
• But since then the Hang Seng is down another 20% or so. A lot of stocks with 9-10%+ dividend yields are laying around.
• I should have been a bit quicker writing this up, but then you are getting it for free.

• Jiangsu Expressway (H) (177 HK) has seen marginally weaker traffic in 4Q22 relative to 3Q22 due to sporadic COVID outbreaks but the magnitude is manageable. 
• We welcome its indication that stable absolute DPS level will be maintained, with additional target to increase gradually. That means secured FY22 and FY23 yield of at least 8.3%.
• Clean energy investment and exit of property business will improve earnings quality. Projected ROE of over 13% also provides good justification for upside to its 0.8x P/B. 

• Hutchison China MediTech Ltd (HCM US) (Hutchmed) didn’t perform well. Its cash holdings could last about two and a half years considering the cash burn rate.
• Hutchmed’s three major commercialized products would all face different challenges. Feedbacks from FDA/MAA cast a shadow on the Company’s internationalization prospects. 
• According to the current speed of pharmaceutical innovation, Hutchmed’s R&D efficiency/productivity is not satisfactory. The current pipeline does not have core competitiveness. Bearish on outlook.

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.

• NagaCorp Ltd
• Sino-Ocean Service