Brief Healthcare: Shanghai/Shenzhen Connect – $8.4 Bn Inflows in February (Kweichow Moutai, Aier Eye, Luxshare) and more

In this briefing:

1. Shanghai/Shenzhen Connect – $8.4 Bn Inflows in February (Kweichow Moutai, Aier Eye, Luxshare)
2. Snippets #19: Marijuana, Mergers, and More

1. Shanghai/Shenzhen Connect – $8.4 Bn Inflows in February (Kweichow Moutai, Aier Eye, Luxshare)

In our Discover SZ/SH Connect series, we aim to help our investors understand the flow of northbound trades via the Shanghai Connect and Shenzhen Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by offshore investors in the past seven days.

We split the stocks eligible for the northbound trade into three groups: those with a market capitalization of above USD 5 billion, and those with a market capitalization between USD 1 billion and USD 5 billion.

We note that offshore investors were buying all GICS sectors, and had a strong preference for Industrials, Consumer Staples, Consumer Discretionary, and Financials names. We estimate that total inflow into the A-share market via northbound trade amounted to USD 8.4 bn in February.

2. Snippets #19: Marijuana, Mergers, and More

Five interesting trends/developments that could impact Thai equities in the recent period:

• Legalization of medicinal marijuana. Thailand legalized medicinal use of marijuana at end of February and has already received immense interest from potential growers. At some point, pharma and healthcare companies could be beneficiaries of this trend.
• Rumbles in the airline industry. Asia Aviation (AAV TB) , parent company of Thai Air Asia, acquires a stake in competitor Nok Air. This is one of the few signs of industry consolidation in this sector.
• MOU signed between TMB and Thanachart. The deal may take longer than initially expected, but the two sides have agreed on some basics such as 70% equity financing and deal size of roughly Bt130-140bn.
• Read-through from US Election 2020. Some of the Democrat policies advocated by candidates in 2020 could turn out to be positive for Asian equities.
• BGrimm acquires Glow SPP1 for a bargain price of Bt3.3bn, or 55% of the expected price, opening the way for the GPSC-Glow merger, potentially the largest deal of 2019.