In today’s briefing:
- A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold
- Determining the Cause of the Sluggish ROE Growth Is More Important for Future ROE Increases
- WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?
A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
- Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week.
Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts to play with.
- Last week saw NORTHBOUND net sell RMB 18.6bn of A-shares on slightly lighter activity. Friday saw large NORTHBOUND net buys early in the day but ended a net sell.
- Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.
Determining the Cause of the Sluggish ROE Growth Is More Important for Future ROE Increases
- TSE data (April 2022-October 2023) shows that the correlation between TOPIX and ROE for prime market listed companies is extremely low, while the correlation between TOPIX and BPS is high.
- It may be that a company that can sustainably increase cash flow and build up net assets is more trustworthy than a temporary increase in profits.
- It’s presumed that the company increased EPS to the extent that it did not reduce ROE and implemented a certain degree of shareholder return to slow the increase in BPS.
WuXi AppTec (2359.HK/603259.CH) – How Bad Things Could Be?
- Recent business updates of WuXi Bio led to a decline in WuXi AppTec’s share price and changed investors’ expectations for CXO. Now is the time to adjust forecasts.
- We analyzed the growth rate of various business of WuXi AppTec in 2024. In a neutral scenario, growth next year could fall short of management’s guidance.Reversal in 2025 is uncertain.
- If WuXi AppTec “unexpectedly” receives blockbuster orders, which are large enough to hedge against the downward trend of WuXi AppTec’s other businesses, then it will help to change performance expectations.
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