In today’s briefing:
- CSI300 Index Rebalance: 14 Changes & A Few Surprises
- KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added
- Quiddity Aggregation of CSI300/500 and SSE50/180 Index Flows for Dec 2023: US$4.2bn One-Way!
- CSI500 Index Rebalance: 50 Changes a Side; Adds Gaining Ground on Deletes
- CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks
- 2024 High Conviction: Long BYD and Short Tesla
- Tongcheng Travel (780 HK): Rides on the Tourism Upswing
- China Healthcare Weekly (Nov.24) – Gold Content Of License-Out Deals, NRDL Pricing Levels, CR Sanjiu
- Pre-IPO Xiamen Yan Palace Bioengineering (PHIP Updates) – Some Points Worth the Attention
- China Consumption Weekly (27 Nov 2023): Trip.com, Xiaomi, IQiyi, Full Truck, Home Appliance Export
CSI300 Index Rebalance: 14 Changes & A Few Surprises
- There are 14 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 8 December.
- While most changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used their discretion.
- The adds outperformed the deletes in the first half of the year with performance staying stable over the second half of the year. Position for outperformance ahead of implementation.
KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added
- The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
- Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
- There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.
Quiddity Aggregation of CSI300/500 and SSE50/180 Index Flows for Dec 2023: US$4.2bn One-Way!
- After market close on Friday 24th November 2023, the December 2023 index review results for CSI 300/500 and SSE 50/180 were announced.
- CSI 300 and CSI will have 14 and 50 changes while SSE 50 and SSE 180 will have 5 and 18 changes respectively. There are many overlapping flows.
- In this insight, I have presented the details of the index changes and aggregated the expected flows attributable to the four indices mentioned above.
CSI500 Index Rebalance: 50 Changes a Side; Adds Gaining Ground on Deletes
- There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 8 December.
- There are 15 stocks that overlap between the CSI 300 Index and the CSI Smallcap 500 Index and there will be opposing flows from passive trackers.
- One way turnover at the rebalance is estimated at 9.56% leading to a one-way trade of CNY 6.04bn. Industrials and Information Technology gain index spots while Materials and Financial lose.
CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks
- There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
- The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
- Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.
2024 High Conviction: Long BYD and Short Tesla
- Tesla Motors (TSLA US) market share in China has decreased and its 3Q23 operational data suggested it offered discounts to defend its market share.
- Albeit losing some market share, BYD (1211 HK) operational data is much more solid, even expanded its profit margin during a difficult environment in China.
- Tesla share price has outpaced BYD’s this year by 70%, it should reverse in the next year.
Tongcheng Travel (780 HK): Rides on the Tourism Upswing
- Tongcheng Travel Holdings (780 HK) is best positioned to capture post-COVID travel, especially in lower-tier cities. This is reflected in a 146.5% growth in 3Q23 adjusted net profit.
- The cooperation with Tencent (700 HK) continues to bear fruits and will drive accelerated momentum as it leverages on QQ Browser, Weixin mini-program, and Tencent Docs.
- 3Q23 net cash increased 1.5x from the end-FY22 level and now represents 10.9% of market capitalisation. Its earnings valuations are attractive relative to both growth and peers.
China Healthcare Weekly (Nov.24) – Gold Content Of License-Out Deals, NRDL Pricing Levels, CR Sanjiu
- It is the upfront payment rather than the total or subsequent milestone payments that indicates the gold content of license-out collaborations. We analyzed our criteria.
- Investors actually don’t need to worry too much about the NRDL negotiation results, because the NRDL price of domestic innovative drugs has become relatively stable. There are basically three levels.
- We analyzed key points about China Resources Sanju. Considering the impact of anti-corruption in 23Q3 and the weak performance of TCM formula granules business, 23H2 performance could be under pressure.
Pre-IPO Xiamen Yan Palace Bioengineering (PHIP Updates) – Some Points Worth the Attention
- From 2020 to 2022, Yan Palace has spent RMB831 million on advertising and promotion, while total net profit of the Company during the same period was only about RMB500 million.
- OneNest is the main product with the highest gross margin, which is driven by price increase strategy.However, raising price may not work. Revenue growth in 2023H2/2024 could further slow down.
- The question is are investors really satisfied with such low-margin business for a company with strong consumption attributes? Valuation of Yan Palace should be lower than Dong E E Jiao.
China Consumption Weekly (27 Nov 2023): Trip.com, Xiaomi, IQiyi, Full Truck, Home Appliance Export
- Trip.com’s domestic hotel bookings increased by 70% over pre-COVID 3Q19.
- Xiaomi’s revenue began to grow in 3Q23 after decreasing for five quarters.
- China home appliance export surged in October, for example, fridge export amount growing by 42% YoY.
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