In today’s briefing:
- Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal
- KWEB Index Rebalance: 1 Add & 4 Deletes in December
- Astra Otoparts (AUTO IJ) – EVs, Modern Retail, and Medical Equipment
- HK Connect SOUTHBOUND Flows (To 29 Nov 2024); SB Trading Volumes Lower, Still Strong Net Buying Tech
- BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 29)
- SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade
- Inter Parfums Inc.: Expanding Brand Portfolio with New Launches To Change The Game! – Major Drivers
- Mostly) Asia-Pac M&A: SG Fleet, Shandong Hi-Speed New Energy, HPI, Capitol Health, Henlius, 7 & I
- Tencent Music Entertainment Group: Technological Innovations & Product Upgrades Driving Our Bullishness! – Major Drivers
- ABC/TI Fluid Systems: Offer Announcement, Interesting Annual Return
Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal
- In this insight, we present the flows to buy and sell for each of the top 6 Hang Seng Index Family indices based on estimated tracking AUM.
- The indices: Hang Seng Index (HSI), HS Tech Index (HSTECH), HS China Enterprise Index (HSCEI), HS HK Biotech (HSHKBIO), HS Internet & Infotech (HSIII), and HS Healthcare Index (HSHCI).
- By Quiddity calculations based on prices of 29 November’s close, there is one-way flow across these six indices of HK$15,894,690,433.49 to trade on 6 December. Roughly speaking.
KWEB Index Rebalance: 1 Add & 4 Deletes in December
- The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 13 December.
- Cloud Village (9899 HK) is an add while Lufax Holding (LU US), Ping An Healthcare and Technology (1833 HK), ZX (9890 HK) and YSB (9885 HK) are deletes.
- The deletions of Ping An Healthcare (1833 HK), ZX (9890 HK) and YSB (9885 HK) were forecast and there will be positioning in the stocks. Lufax was a close delete.
Astra Otoparts (AUTO IJ) – EVs, Modern Retail, and Medical Equipment
- Astra Otoparts (AUTO IJ) looks set to see increasing contributions from its modern retail push, which will boost its trading business and should see margins improving over time.
- AUTO is pushing into both the EV component space and manufacturing public and residential EV charging equipment. It is also venturing into medical devices as local content becomes a requirement.
- AUTO has outperformed the auto market since the pandemic and looks set to continue to do so through new growth segments. Valuations attractive on 5.5x forward PER and 8% yield.
HK Connect SOUTHBOUND Flows (To 29 Nov 2024); SB Trading Volumes Lower, Still Strong Net Buying Tech
- SOUTHBOUND gross trading activity dropped sharply again to the lowest in a few months but net SOUTHBOUND buying remains very strong, with big flows on tech.
- Most of the top names were tech names – both in gross and net buys. Only 1 tech name in top five net sells.
- Last week I said I expect HK-listed tech to continue getting bought. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US. Continue.
BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 29)
- As Hong Kong market continues to consolidate, the consumer discretionary sector is leading in momentum and strength while the energy and materials sectors lag.
- Trip.com Group (9961 HK) , Trip.com (TCOM US) received BUY ratings after a strong 3Q24 announcement on revenue and earnings. China’s tourist numbers are projected to reach Pre-COVID levels soon.
- Yum China Holdings (9987 HK) , Yum China Holdings (YUMC US) received BUY ratings after initial success from its small store/franchising strategy. The company is actively returning capital to shareholders.
SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade
- There are 5 changes for the SSE50 Index (SSE50 INDEX) and 18 changes for the SSE180 Index that will be implemented at the close on 13 December.
- Seres Group (601127 CH) is an add to both indices, plus the CSI 300 Index, and passive trackers will need to buy over US$900m of the stock.
- The adds have outperformed the deletes with a lot of the outperformance coming in the last couple of months. Trim positions in the expected adds/deletes and build positions in surprises.
Inter Parfums Inc.: Expanding Brand Portfolio with New Launches To Change The Game! – Major Drivers
- Interparfums Inc.’s third quarter financial results for 2024 highlight several key aspects of their performance, including strengths and challenges in a fluctuating global market.
- On the positive side, the company reported its best third quarter in history, driven by robust sales across all major markets.
- North America, Western Europe, and Asia Pacific all saw double-digit sales growth, with North America up 12%, Western Europe 25%, and Asia Pacific 15%.
Mostly) Asia-Pac M&A: SG Fleet, Shandong Hi-Speed New Energy, HPI, Capitol Health, Henlius, 7 & I
- I tally 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Three new deals this week: NBIOs for SG Fleet (SGF AU) and AVJennings Ltd (AVJ AU); and Shandong Hi-Speed New Energy (1250 HK)‘s MGO. Fosun Tourism (1992 HK) also suspended.
- Key updates/news took place on: Hotel Property Investments (HPI AU), Capitol Health (CAJ AU), Shanghai Henlius Biotech (2696 HK), Seven & I Holdings (3382 JP) and SAMTY HOLDINGS (187A JP).
Tencent Music Entertainment Group: Technological Innovations & Product Upgrades Driving Our Bullishness! – Major Drivers
- Tencent Music Entertainment Group (Tencent Music) delivered a solid performance for the third quarter of 2024.
- The company demonstrated a balanced strategy that resulted in revenue growth and increased subscriber numbers, emphasizing its broad content ecosystem’s growing influence and user value proposition.
- Tencent Music reported significant growth in its online music services, with a 20% year-over-year increase in revenue, contributing to a 29% enhancement in adjusted net profit.
ABC/TI Fluid Systems: Offer Announcement, Interesting Annual Return
- On November 29 (PUSU deadline), TI Fluid Systems agreed to a £1.04 billion ($1.32 billion) takeover by ABC Technologies, 4.4x EV/NTM EBITDA vs. comparables at 4.6x, 6.7x Fwd P/E.
- Investors have flocked to this deal, as regulatory clearances do not seem particularly demanding.
- Spread is 3.7%/11.98% (gross/annualised, assuming settlement by 30 March 2025). Taking 135.8p break, the implied probability of deal completion is 88.5%. Long.
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