In today’s briefing:
- HSCEI Index Rebalance Preview: Handling Treatment & Changes in March
- Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds
- HSTECH Index Rebalance Preview (March): Handling Treatment Changes Lead to High Turnover
- Fu Shou Yuan (1448.HK)- China’s Soaring COVID-19 Death Rate Ignites High Demand for Funeral Services
- China Internet Weekly (2Jan2023): Alibaba, Tencent, Douyin, Bilibili, Uxin
- Morning Views Asia: Zoomlion Heavy Industry H
HSCEI Index Rebalance Preview: Handling Treatment & Changes in March
- We expect one change to the Hang Seng China Enterprises Index (HSCEI INDEX) in March, though there is a possibility of a second change.
- The change in the index handling treatment for Secondary Listings and Dual Primary Listings will also result in some big float changes resulting in inflows to some stocks.
- If there are two changes to the index, estimated one-way turnover is 2.39% resulting in a one-way trade of HK$1,536m.
Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds
- After bouncing more than 60% from a near-all-time low, Alibaba Group (9988 HK)’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.
- Meanwhile, the company’s cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.
- With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.
HSTECH Index Rebalance Preview (March): Handling Treatment Changes Lead to High Turnover
- We expect at least one change to the Hang Seng Tech Index (HSTECH INDEX) in March – though there could be another change as well.
- Changes to the index handling for Dual Primary Listings should result in an increase in free float and passive inflows to Li Auto (2015 HK) and XPeng (9868 HK).
- Estimated one-way turnover is 5.83% resulting in a one-way trade of HK$4.87bn and this is mainly driven by float and capping changes.
Fu Shou Yuan (1448.HK)- China’s Soaring COVID-19 Death Rate Ignites High Demand for Funeral Services
- China’s U-turn on COVID policy has led to skyrocketed infection cases/mortality. Demand for funeral services due to additional deaths would surge, so positive sentiment on Fu Shou Yuan could continue.
- Fu Shou Yuan’s performance is expected to rebound in 22H2 and 23H1 driven by high demand and relaxation of COVID-19 control measures. It’s a good short-term trade with strong catalyst.
- The acceleration and resonance of population aging trend, the new urbanization process and the increase of cremation rate of remains provide objective conditions for Fu Shou Yuan’s long-term upward performance.
China Internet Weekly (2Jan2023): Alibaba, Tencent, Douyin, Bilibili, Uxin
- Alibaba’s CEO will lead the cloud business himself, because the retailing business faces headwind.
- Tencent will enter the short video market again, because the online game is till stagnant.
- Douyin will launch a car-hailing platform, which will compete with Meituan.
Morning Views Asia: Zoomlion Heavy Industry H
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.
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