China Archives | Page 4 of 164 | Smartkarma

In today’s briefing:

Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet
A/H Premium Tracker (To 6 Dec 2024): AH Premia Lower, Markets Up, Tech Weaker, Materials Up
HK Connect SOUTHBOUND Flows (To 6 Dec 2024); SB Trading Volumes Up, US/China Trade Volleys Up Too
China National Building Material (3323 HK): H Share Buyback Short Changes Minorities
China National Building Materials (3323 HK): Buying Back 9.98% of H-Shares
Lifestyle China (2136 HK): Thomas Lau’s Scheme – The Premium Is Wrong
Innovent Biologics (1801.HK) – Wounds Heal but Scars Remain

Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Lifestyle China (2136 HK), Arcadium Lithium (ALTM US), Shanghai Henlius Biotech (2696 HK), ESR Group (1821 HK), Get Nice Financial Group Ltd (1469 HK), Canvest.
Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Capitol Health (CAJ AU), Elematec Corp (2715 JP).

A/H Premium Tracker (To 6 Dec 2024): AH Premia Lower, Markets Up, Tech Weaker, Materials Up

Mainland share market volumes continue to be better than HK and SOUTHBOUND volumes, but SB volumes rebounded, tech saw limited net buying, BABA was bought but other major tech sold.
The first leg of China’s retaliatory acts against US trade measures appeared with export bans on gallium, germanium, antimony, graphite products, etc. These will not be lifted soon.
China is also retaliating against the Phils, Vietnam, Taiwan and changing tack in Europe. The next couple of years threatens to be “interesting times.

HK Connect SOUTHBOUND Flows (To 6 Dec 2024); SB Trading Volumes Up, US/China Trade Volleys Up Too

SOUTHBOUND gross trading activity rebounded about 20% this week vs the previous week. Net buying was a little lower but still strong. Market volumes overall in HK remain weak.
Alibaba Group Holding (9988 HK) was again the top buy and EV names XPeng (9868 HK) and BYD (1211 HK) were bought, but tech as a whole was sold.
I continue to expect HK-listed tech to see ongoing buying. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US.

China National Building Material (3323 HK): H Share Buyback Short Changes Minorities

China National Building Material (3323 HK) has launched a conditional share buyback to acquire a maximum of 841.7 million H Shares (18.47% of H Shares) at HK$4.03.
The share buyback seems designed to enable the CNBM parent company to bypass the creeper rule and squeeze the shorts.
The buyback is unattractive and will leave minorities short-changed, weakening a stretched balance sheet. Nevertheless, while potentially tricky, the votes should pass.

China National Building Materials (3323 HK): Buying Back 9.98% of H-Shares

By Osbert Tang, CFA

We view China National Building Material (3323 HK)‘s proposal to buy back 9.98% of H-shares as a good opportunity for the shareholders to cash out in their position.
Without further significant government stimulus, CNBM will find it difficult to return to the HK$4.03 offer price. Potential weak FY24 results also mean downside risks.
Other companies with high gearing and low P/B may follow CNBM’s move. We single out the infrastructure construction companies as the likely candidates.

Lifestyle China (2136 HK): Thomas Lau’s Scheme – The Premium Is Wrong

After Lifestyle China (2136 HK) was suspended pursuant to then Takeovers Code, the takeaway was that Thomas Lau with 74.91% of shares out would table a Scheme.
Which is exactly what unfolded. What was not expected was a stingy 21.7% premium to last close.
The Offer Price has not been declared final. Lifestyle China is trading at 0.11x P/B. This Offer deserves a bump. Otherwise minorities should vote this down.

Innovent Biologics (1801.HK) – Wounds Heal but Scars Remain

Innovent did a good job in 24Q3. The 2024 full-year revenue is estimated to reach above RMB8 billion. Peak sales to reach the level of RMB20 billion is entirely possible.
It’s a mistake for Innovent to sell a minority stake in Fortvita to Lostrancos. Alhough the Subscription Agreement has been terminated, the confidence in long-term holding this stock has decreased.
Innovent’s internationalization needs to be based on the parent company as the main body, which is the most suitable and in line with the interests of shareholders/investors/management/employees of the Company.

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Dec 08

Daily Brief China: Lifestyle China, ESR Group , China Traditional Chinese Medicine, Hang Seng Index and more

In today’s briefing:

Lifestyle China (2136 HK): Thomas Lau’s Low-Balled Scheme Offer
Weekly Deals Digest (08 Dec) – ESR, HKBN, Lifestyle China, Seven & I, De Grey, SG Fleet, Kioxia
China Healthcare Weekly (Dec.8) – TCM VBP Update, GLP-1’s Good Story Broke, China TCM’s Sudden Rally
(Mostly) Asia-Pac M&A: De Grey Mining, HPI, SG Fleet, Malaysia Airports, MPHB, Suntec REIT
EQD | Hang Seng (HSI Index) – Most Popular Option Strategies, Calendar Strategies on the Rise

Lifestyle China (2136 HK): Thomas Lau’s Low-Balled Scheme Offer

Lifestyle China (2136 HK) disclosed a Cayman scheme privatisation offer from Mr Thomas Lau at HK$0.913 per share, a 21.7% premium to the last close price of HK$0.75.
The offer is unattractive compared to precedent transactions, peer multiples, and historical trading ranges. It has not been declared final.
While no shareholder holds a blocking stake, the high AGM minority participation rates and emerging retail opposition suggest a high chance of a deal break. Therefore, a bump is probable.

Weekly Deals Digest (08 Dec) – ESR, HKBN, Lifestyle China, Seven & I, De Grey, SG Fleet, Kioxia

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Kioxia Holdings (285A JP) IPO, Hulic Co Ltd (3003 JP) and Sanrio (8136 JP) placements.
Event-Driven developments: ESR Group (1821 HK), HKBN Ltd (1310 HK), Lifestyle China (2136 HK), Seven & I Holdings (3382 JP), De Grey Mining (DEG AU), Sg Fleet (SGF AU).

China Healthcare Weekly (Dec.8) – TCM VBP Update, GLP-1’s Good Story Broke, China TCM’s Sudden Rally

The Medical Insurance Bureau of Hubei Province issued two documents on the VBP of TCM patent medicines.Shineway’s core product Qing Kai Ling is included, which would bring pressure on performance.
It’s time to be cautious about the outlook for GLP-1s. We may need to be mentally prepared in advance that the actual market size of GLP-1s is only US$100 billion.
Recent changes at the top of CNPGC have left some investors hopeful that China TCM will resolve horizontal competition as scheduled next year,but current bet on shares reversal isn’t wise.

(Mostly) Asia-Pac M&A: De Grey Mining, HPI, SG Fleet, Malaysia Airports, MPHB, Suntec REIT

I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Five new deals this week: De Grey Mining (DEG AU)‘s scrip merger; and cash Offers for ESR (1821 HK), HKBN (1310 HK), Lifestyle China (2136 HK), and Suntec (SUN SP).
Key updates/news took place on: Latin Resources (LRS AU), Hotel Property Investments (HPI AU), Sg Fleet (SGF AU), Malaysia Airports (MAHB MK), Greatview Aseptic Packaging (468 HK), and MPHB (MPHB MK).

EQD | Hang Seng (HSI Index) – Most Popular Option Strategies, Calendar Strategies on the Rise

By Gaudenz Schneider

Last week, the Hang Seng Index (HSI INDEX) gained 2.3% an increase while volatility slightly declined by 0.2%. The volatility surface provides the context for last week’s most popular strategies,
Low implied volatility and a flat term structure support long volatility strategies and Calendar Spreads. In a bullish sentiment shift, almost half the strategies reflect a bullish view.
The largest volume trade, an Iron Condor, is a rare example of a strategy generating premium income. This insight provides both aggregate data analysis and drill-down into individual trade parameters.

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Dec 07

Daily Brief China: BYD and more

In today’s briefing:

BYD (1211 HK): Quick Note – Preparing for Price War in 2025

BYD (1211 HK): Quick Note – Preparing for Price War in 2025

By Ming Lu

BYD’ deliveries continued to grow strongly by 68% in November.
BYD required its suppliers to reduce prices by 10% for 2025.
We believe BYD will continue the price war in 2025.

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Dec 06

Daily Brief China: HKBN Ltd, Greatview Aseptic Packaging, NIO and more

In today’s briefing:

HKBN (1310 HK): Just How Likely Is An I Squared Offer?
GAPack (468 HK): No Further Progress On Co-Founder’s Offer. That’s Good For XJF
2025 High Conviction: Short NIO (NIO US/9866 HK)

HKBN (1310 HK): Just How Likely Is An I Squared Offer?

Two hours before China Mobile’s pre-conditional voluntary Offer announcement on the 2 December, HKBN Ltd (1310 HK) flagged a possible separate Offer from I Squared Asia-backed HGC Global Communication (HGC).
No price was mentioned, although HKBN and I Squared “are in discussions on the terms of the proposal (including the price).” The media is reporting a HK$5-HK$6/share price range.
Apart from anti-competition concerns via a HKBN/HGC tie-in; would HGC even get approval from the powers that be to proceed with a merger?

GAPack (468 HK): No Further Progress On Co-Founder’s Offer. That’s Good For XJF

In Greatview Aseptic Packaging (468 HK) (GAPack)’s monthly update, there is no update.
No further progress on the management Offer. Four months and counting. In the meantime, Shandong Xinjufeng Technology (301296 CH) (XJF) secured SAMR approval; and the appointment of two friendly directors.
IF (and when) XJF’s Offer becomes open to acceptance and the IFA is supportive, management should back the Offer if their own Offer is unlikely to materialise.

2025 High Conviction: Short NIO (NIO US/9866 HK)

NIO (NIO US) is a Chinese premium electric vehicle manufacturer listed across three exchanges.
NIO will likely struggle to reignite its growth with its three-brand strategy in a fiercely competitive market. Its promise to reach breakeven in 2026 is likely to be broken.
NIO’s valuation is stretched as it trades at a material premium to median Chinese EV peers’ EV/Sales and growth-adjusted EV/Sales multiples.

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Dec 05

Daily Brief China: ESR Group , Robosense Technology, Freetech Intelligent Systems, Water Oasis, Studio City International Holdings Limited, Dobot, Mao Geping Cosmetics and more

In today’s briefing:

ESR Group (1821 HK): Consortium’s Scheme Cash/Scrip Privatisation Offer
ESR (1821 HK): HK$13.00/Share Offer
Robosense Technology, Driving in the Fast Lane While No One Is Looking
Freetech Intelligent Technology Ltd Pre-IPO Tearsheet
Parsing The Water Oasis (1161 HK) FY24 Profit Warning: Ex-One Offs Indicate Flat To Slight Growth
Lucror Analytics – Morning Views Asia
Shenzhen Yuejiang Technology IPO: PHIP and Valuation Updates, High Valuations and A Higher TAM
Pre-IPO Mao Geping Cosmetics (PHIP Updates) – Some Points Worth the Attention

ESR Group (1821 HK): Consortium’s Scheme Cash/Scrip Privatisation Offer

ESR Group (1821 HK)’s preconditional scheme offer from the consortium is either cash (HK$13.00), scrip or a combination of cash/scrip. The offer is final.
The precondition relates to several regulatory approvals. The precondition satisfaction does not carry the same risk as the China Traditional Chinese Medicine (570 HK) deal break.
The irrevocable (31.03% of outstanding shares) ensure that shareholders with blocking or close to blocking stakes are supportive. This is a done deal, with timing the key risk.

ESR (1821 HK): HK$13.00/Share Offer

HK$13.00/Share (deemed final). That’s the key takeaway here as the Starwood/Warburg Pincus Consortium (finally) tables a firm offer, by way of a pre-conditional Scheme.
Pre-Conditions are extensive, with a long stop date of the 4th September 2025.
HK$13.00 is below prior expectations of a HK$14+ handle. But with irrevocables of 30.79% of the register (and 51.24% of Scheme shares), this is done. A scrip option is afforded.

Robosense Technology, Driving in the Fast Lane While No One Is Looking

Robosense Technology (2498 HK) has seen its sales of LiDAR solution systems grow substantially as it achieved the ability to mass produce for its customers.
The company integrates proprietary hardware and software, creating a barrier to entry for most LiDAR competitors, who produce only the hardware system.
Robosense announced a strong set of results for 3Q24 and expects to be profitable at some time in 2025. The company has been actively buying back shares.

Freetech Intelligent Technology Ltd Pre-IPO Tearsheet

By Rosita Fernandes

Freetech Intelligent Systems (1901036D CH) is planning to raise about US$200m through its upcoming Hong Kong IPO. The lead bookrunners for the deal are CITIC Securities, CICC, Huatai International, HSBC.
Freetech Intelligent Technology Ltd (FITL) is a provider of intelligent driving solutions, focusing on advanced driver assistance systems (ADAS) and autonomous driving systems (ADS) technologies.
It ranks third among domestic suppliers of Level 2 and Level 2+/2++ intelligent driving solutions in China, with a 2023 market share of 14.6%, according to CIC.

Parsing The Water Oasis (1161 HK) FY24 Profit Warning: Ex-One Offs Indicate Flat To Slight Growth

By Sameer Taneja

Headline profit numbers for FY24 indicate a 38-40% decline from 110 mn HKD in FY23 to 65-69 mn HKD, including non-cash impairment/property revaluation losses amounting to 44.2 mn HKD.
The implication is that core profits would have been 109-113 mn HKD for FY24; a slight earnings growth at the upper end is admirable in a weak HK demand environment.
Based on core earnings, the stock trades at 6x PE, >67% of the market capitalization in cash, and a 10% dividend yield. The company will release earnings on December 16th.

Lucror Analytics – Morning Views Asia

By Leonard Law, CFA

In today’s Morning Views publication we comment on developments of the following high yield issuers: Studio City, Yuexiu Property, Rakuten Group
In the US, the October JOLTS job openings came in above estimates at 7.74 mn (7.52 mn e / 7.37 mn p).
Long-end USTs fell yesterday, while the front end outperformed on expectations that a December rate cut remains on the table.

Shenzhen Yuejiang Technology IPO: PHIP and Valuation Updates, High Valuations and A Higher TAM

By Andrei Zakharov

Shenzhen Yuejiang Technology, more commonly known as just Dobot, updated its PHIP and plans to raise fresh capital for technology development for intelligent cobots.
The company did not disclose the proposed size and price range for the offering. Guotai Junan international and ABC International are leading the IPO.
I believe cobot industry can grow faster than third-party forecasts while the integration of AI into cobots will drive the development of smart cobots.

Pre-IPO Mao Geping Cosmetics (PHIP Updates) – Some Points Worth the Attention

Behind MAO GEPING’s high profitability, there are hidden risks. One is the potential quality issues from ODM/OEM model, and the other is excessive reliance on Mr. Mao Geping’s personal IP.
Without strong R&D capabilities, high-end positioning isn’t firm.With increasing downward pressure in the industry, MAO GEPING would become passive in fierce competition and the industry trend of customers pursuing cost-effectiveness.
MAO GEPING’s valuation could be lower than Giant Biogene due to concerns on future sustainable growth prospects and profitability, but higher than industry average due to the strong short-term financial performance.

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Dec 04

Daily Brief China: Meituan, Lifestyle China, Baidu , Greatview Aseptic Packaging, Baidu, Hang Seng Index, New World Development, Mao Geping Cosmetics and more

In today’s briefing:

HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)
Lifestyle China (2136 HK): Thomas Yau Scheme Expected
Lifestyle China (2136 HK): Chairman/CEO to Launch Privatisation Offer?
The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (December 2)
Greatview Aseptic Packaging (468.HK) – Newjf Already Has an Upper Hand
Baidu Inc.: Generative AI & Search Transformation Driving Our Bullishness! – Major Drivers
EQD | The Come Back Of The Hang Seng
[Meituan (3690 HK, BUY, TP HK$165) TP Change]: C3Q24 Review: Buy or Leave?
Lucror Analytics – Morning Views Asia
Mao Geping Cosmetics IPO – Low to Mid-End Looks Reasonable

HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)

The December rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$26.14bn (US$3.4bn).
Alibaba, Tencent, Midea Group, Kuaishou Technology, NIO, HSBC Holdings and New Oriental Education & Techn are the largest buys. Meituan, Xiaomi, JD.com, AIA Group and NetEase are the largest sells.

Lifestyle China (2136 HK): Thomas Yau Scheme Expected

Respectively in 2013 and 2016, Lifestyle International Holdings (1212 HK) spun-off and separately listed Lifestyle Properties Development (2183 HK) and PRC-department store play Lifestyle China (2136 HK).
Lifestyle Props’ listing was cancelled in 2023; and Thomas Yau privatized Lifestyle International late-2023: see Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov.
Lifestyle China is now suspended pursuant to then Takeovers Code. Thomas Yau holds 74.9%. No prizes for guessing what comes next.

Lifestyle China (2136 HK): Chairman/CEO to Launch Privatisation Offer?

Lifestyle China (2136 HK) is on a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers.
Mr Thomas Lau (Chairman and CEO) is likely following up on the privatisation of Lifestyle International Holdings (1212 HK) with the privatisation of Lifestyle China.
We use three methods to triangulate the likely offer price, suggesting a range of HK$1.00-1.45 per share, with an average of HK$1.23 (a 63.3% premium to the last close).

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (December 2)

Hong Kong market breadth stays strong despite market pullback in November. Mainland investors continue to increase exposure to HK market through Southbound Connect platform.
Baidu (9888 HK) , Baidu (BIDU US) , the global leader in Robotaxis, was granted a license to start operating its autonomous cars in Hong Kong.
Vitasoy Intl Holdings (345 HK) shares surged on takeover rumours after Yeo Hiap Seng (YHS SP) increased its stake to more than 12% allowing them to call a Board meeting.

Greatview Aseptic Packaging (468.HK) – Newjf Already Has an Upper Hand

Newjf’s Yuan Xunjun and Guo Xiaohong are both lawyers. They should be more familiar with the Pre-Condition requirements. Newjf has obtained SAMR clearance and we think Newjf will fulfill Pre-Conditions.
Bi Hua and Hong Gang’s “new initiative” based on Nov.28 announcement may not necessarily succeed, since Newjf has a lot of room for rebuttal here and its Offer is attractive.
Greatview’s chairman and Cloudview are in discussions with financial advisers to make a counterbid.Considering that this may be a “noise”,we recommend prioritizing Newjf’s Offer before any higher Offer from Greatview.

Baidu Inc.: Generative AI & Search Transformation Driving Our Bullishness! – Major Drivers

By Baptista Research

Baidu’s third-quarter 2024 financial performance presents a complex picture, showcasing both opportunities and challenges that shape the company’s investment thesis.
The company reported total revenues of RMB 33.6 billion, reflecting a 3% decline year-over-year.
However, Baidu Core’s revenue remained stable at RMB 26.5 billion.

EQD | The Come Back Of The Hang Seng

By Nico Rosti

In a previous insight we presented a forecast where the Hang Seng Index could bounce after a 2-3 weeks pullback. The index started to rally from there.
Currently the index is up for 2 consecutive weeks and from the charts and models that we will present here, you can see that it has room to go higher.
Right now the index has not even reach the 25% (price) resistance level, and this confirms the bullish view.

[Meituan (3690 HK, BUY, TP HK$165) TP Change]: C3Q24 Review: Buy or Leave?

By Ying Pan

Meituan reported C3Q24 revenue/non-IFRS operating profit 2%/12% above consensus, thanks to rising monetization and cost reduction. C4Q24 guidance, however, missed expectation due to low ASP mix and expansion;
We see the following as positive catalysts: (1) consumption stimulus in 2025 that will likely include service coupons, (2) market share gains, (3) overseas expansion in Mid-East bearing quick fruits.
We therefore opt to keep Meituan on our TOP BUY list and maintain TP at HK$165.

Lucror Analytics – Morning Views Asia

By Leonard Law, CFA

In today’s Morning Views publication we comment on developments of the following high yield issuers: New World Development, Indofood CBP, Azure Power, Adani Green Energy, Meituan
In the US, treasuries climbed in a holiday-shortened session on Friday, with yields falling 8-10 bps across the curve. The yield on the 2Y UST dropped 8 bps to 4.15%, while that on the 10Y UST declined 10 bps to 4.17%.
Equities rallied, with the S&P 500 rising 0.6% to a new record high of 6,032.

Mao Geping Cosmetics IPO – Low to Mid-End Looks Reasonable

By Sumeet Singh

Mao Geping Cosmetics is looking to raise up to US$270m in its upcoming Hong Kong IPO.
Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

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Dec 03

Daily Brief China: HKBN Ltd, Jiangsu Hoperun Software, Hwatsing Technology , Baimtec Material , Ping An Healthcare and Technology, Hang Seng Index, Pacific Textiles and more

In today’s briefing:

HKBN (1310 HK): China Mobile’s Half-Baked Preconditional VGO
ChiNext/ChiNext 50 Index Rebalance: US$1.7bn Round-Trip Trade
CNI Semiconductor Chips Index Rebalance: One Change with Big Flow
Quiddity CSI National Defense Dec 24 Results: Seven Changes; US$124mn One-Way
Quiddity ChiNext/ChiNext 50 Dec 24 Results: ~80% Hit Rate; US$1bn+ One-Way Flows
HKBN (1310 HK): China Mobile’s “Fair” Tendering Offer
Ping An Healthcare and Technology (1833 HK) – About The Special Dividend and the Outlook
EQD | Hong Kong Single Stock Options Weekly Nov 25-29
EQD | Hong Kong Index Options Weekly – HSI and HSCEI Nov 25-29
HK-Listed Apparel & Footwear Screener: Attractive Yield & Rapid Expansion Outside China – Dec 2024

HKBN (1310 HK): China Mobile’s Half-Baked Preconditional VGO

HKBN Ltd (1310 HK)‘s preconditional voluntary conditional offer from China Mobile (941 HK) is HK$5.23. Including the HK$0.165 dividend, the total offer is HK$5.395, an 11.0% premium to last close.
The offer seems rushed and a reaction to a potential competing offer from I Squared. The lack of privatisation through a scheme and MBK’s irrevocable suggest the offer is light.
An unattractive offer, a lengthy precondition long-stop date and the irrevocable competing offer clause invite I Squared to enter the fray.

ChiNext/ChiNext 50 Index Rebalance: US$1.7bn Round-Trip Trade

There are 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index at the December rebalance.
We correctly forecast 4/7 and 7/7 for the Chinext Index adds/deletes and were 3/5 and 5/5 for the Chinext50 Index adds/deletes.
Based on the estimated passive tracking AUM, the round-trip trade across both indices is estimated to be CNY 12.24bn (US$1.69bn).

CNI Semiconductor Chips Index Rebalance: One Change with Big Flow

There is 1 change for the CNI Semiconductor Chips Index that will be implemented at the close on 13 December.
Passive trackers are estimated to buy 0.9x ADV in Hwatsing Technology (688120 CH) and sell 0.5x ADV in StarPower Semiconductor (603290 CH).
The add has outperformed the delete, but not by a lot. There could be more outperformance over the next couple of weeks.

Quiddity CSI National Defense Dec 24 Results: Seven Changes; US$124mn One-Way

The December 2024 index review results for the CSI National Defense Industry Index were announced after market close on Friday 29th November 2024.
There will be seven changes for the CSI National Defense Industry Index.
In this insight, we take a look at our flow expectations for the ADDs/DELs involved in the rebalance.

Quiddity ChiNext/ChiNext 50 Dec 24 Results: ~80% Hit Rate; US$1bn+ One-Way Flows

The December 2024 index review results for the ChiNext and ChiNext 50 indices were announced yesterday.
There will be seven changes for the ChiNext index and five changes for the ChiNext 50 index. Some of these names surprised us.
In this insight, we take a look at our final flow expectations for the confirmed index changes.

HKBN (1310 HK): China Mobile’s “Fair” Tendering Offer

China Mobile (941 HK) was a logical suitor for HKBN Ltd (1310 HK). A non-PRC (or government-affiliated) corporation taking over a media/broadband/telco in Hong Kong is probably a non-starter.
China Mobile has a made a pre-conditional voluntary Offer at HK$5.23/share, a 40.97% premium to undisturbed. The price is final.
Pre-Cons are the usual suspects (NDRC, Mofcom & SASAC). The Offer itself conditional on a 50% acceptance hurdle, with 24.96% in the bag. The intention is to maintain HKBN’s listing.

Ping An Healthcare and Technology (1833 HK) – About The Special Dividend and the Outlook

PAGD’s Special Dividend announcement made investors “unhappy”. PAGD’s operation after IPO is a big failure, which is why there were large amounts of funds left that were not used.
Being a “vassal” of Ping An Group won’t bring high valuation due to limited growth potential. There’s still room for stock price/valuation to decline. Investors need not rush to buy.
The Special Dividend will be approved. Ping An’s idea is to increase shareholding ratio by distributing dividends, which can also lower PAGD’s stock price, providing opportunity for a low-price privatization.

EQD | Hong Kong Single Stock Options Weekly Nov 25-29

By John Ley

Put trading was heavy in the Financial sector this week. ICBC and Bank of China were the main contributors to that with 73% and 63% of their volume in Puts.
ANTA Sports Products had a notable pick up in Call activity this past week as the stock bounces around 3 year lows vs the Hang Seng index (graph at bottom)
Energy and Real Estate sectors might be the best area to look for low vol opportunities.

EQD | Hong Kong Index Options Weekly – HSI and HSCEI Nov 25-29

By John Ley

Price jump on Wednesday led implied vol higher but vols were otherwise soft with passing of key events in November.
Large jump in option activity on Wednesday was likely due to positions being closed out as open interest declined for both Puts and Calls on the week.
HSCEI has more support for implied vols at these levels with short term historic vols trading above 1M implied vol.

HK-Listed Apparel & Footwear Screener: Attractive Yield & Rapid Expansion Outside China – Dec 2024

By Sameer Taneja

The HK market is moving, and the share prices of high-yield companies are increasing. Despite the average YTD returns of 38%, stocks are trading at 5-15% dividend yields.
We update investors with results from Nameson Holdings (1982 HK) H1 FY25: 16-17% Dividend Yield Intact and Pacific Textiles (1382 HK), which guided down earnings due to interruptions in Vietnam.
We also flag Yue Yuen Industrial Holdings (551 HK) results, buybacks, and some updates from our conference call with Nameson Holdings (1982 HK) management.

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Dec 02

Daily Brief China: Shanxi Xinghuacun Fen Wine Factory Co, Espressif Systems Shanghai , Meituan, Nexchip Semiconductor , Semiconductor Manufacturing International Corporation (SMIC), United Nova Technology , Seres Group , SHEIN, Kingsoft Corp and more

In today’s briefing:

CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows
STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade
Meituan (3690 HK): Embracing the Slowdown
CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds
Quiddity STAR 50/100 Dec 24 Results: US$793mn Capping Outflow for SMIC; 4 Changes for STAR 100
MT/ Meituan (3690): 3Q24, Excellent Results, Still 46% Upside
CSI All Share Semiconductor Index Rebalance: Methodology Change Leads to 7 Adds, 29 Deletes
Quiddity SSE50/180 Dec 24 Results: All SSE 50 ADDs in the LONGs Basket; Positive Start; More to Come
SHEIN and Temu: Higher Tariffs Under 2nd Trump Admin an Additional Threat Beyond “De Minimis” Reform
HONG KONG ALPHA PORTFOLIO (November 2024)

CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows

There is 1 add/ 2 deletions for the CSI Alcoholic Drink Index and no constituent changes for the CSI Liquor Index.
The largest flows arise as a result of capping of constituents to 15% of the index weight. Impact on the stocks varies from 0.2-0.6 days of ADV.
WeiLong Grape Wine outperformed the deletes in early October, but the deletes moved higher and closed the gap. The gap has started to open up again in the last week.

STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index and we estimate passive buying of 0.3-0.65x ADV in the adds and selling of between 0.4-0.6x ADV in the deletes.
On average, the adds to the index have outperformed the deletes over the last 5 weeks with the adds moving higher and the deletes trending lows.

Meituan (3690 HK): Embracing the Slowdown

By Eric Chen

Meituan reported strong 3Q results last Friday which were largely expected by the market. Yet downbeat guidance seemed to have disappointed investors and dragged the stock during US trading session.
We believe the stock’s significant re-rating since early 2024 has come to end as earnings growth starts normalizing after being boosted by less competition and narrowing losses from new initiatives.
While the company has strengthened its moat and we expect steady growth ahead, we see near-term price volatility as markets digest the notable slowdown.

CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index, and we estimate one-way turnover of 1.7% resulting in a round-trip trade of CNY 570m (US$79m).
Nexchip Semiconductor (688249 CH) and United Nova Technology (688469 CH) are adds to other indices as well and the impact on the stocks will be a lot higher.

Quiddity STAR 50/100 Dec 24 Results: US$793mn Capping Outflow for SMIC; 4 Changes for STAR 100

The December 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 29th November 2024.
There will be zero changes for the STAR 50 index and four changes for the STAR 100 index.
We expect one-way flows of approximately US$793mn and US$136mn for the STAR 50 and STAR 100 index rebal events respectively.

MT/ Meituan (3690): 3Q24, Excellent Results, Still 46% Upside

By Ming Lu

Revenue grew by 22% YoY and operating margin improved 8 percentage points YoY in 3Q24.
All Business lines grew strongly and all expense percentages of total revenue declined YoY in 3Q24.
We believe the stock has an upside of 46% for the next twelve months.

CSI All Share Semiconductor Index Rebalance: Methodology Change Leads to 7 Adds, 29 Deletes

Following a methodology change in mid-November for the CSI All Share Semiconductor Index, there are 7 adds and 29 deletes for the index in December.
Estimated one-way turnover at the rebalance is 6% leading to a round-trip trade of CNY 3.15bn (US$435m).
The adds outperformed the deletes bigly in the first 2 weeks of November. Some of those gains have been given back but a new uptrend seems to be taking shape.

Quiddity SSE50/180 Dec 24 Results: All SSE 50 ADDs in the LONGs Basket; Positive Start; More to Come

The December 2024 index review results for the SSE 50 and SSE 180 indices were announced after market close on Friday 29th November 2024.
There will be 4 changes for SSE 50 and 18 changes for SSE 180 during the December 2024 index rebal event.
SSE 50 ADDs and DELs will see large index flows while the SSE 180 flow names have fairly insignificant flow expectations.

SHEIN and Temu: Higher Tariffs Under 2nd Trump Admin an Additional Threat Beyond “De Minimis” Reform

By Daniel Hellberg

US President-elect Trump has proposed new tariffs on China (and others) by January
Higher tariffs on Chinese goods could make Chinese imports more expensive in the US
For SHEIN & Temu, larger threat still comes from potential reform of de minimis rules

HONG KONG ALPHA PORTFOLIO (November 2024)

Hong Kong Alpha portfolio lost 2.9% in November, but has outperformed its benchmark by 4.9% since inception on October 1st. It has outperformed HSI, HSCI and HSCEI by 9%.
Hong Kong Alpha has generated idiosyncratic returns during the market correction. The portfolio has no exposure to energy, healthcare and property sectors.
We exit 4 positions at the end of the month and add positions in software, tech components, travel and restaurant sectors.

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Dec 01

Daily Brief China: Hainan Jinpan Smart Technology, Alibaba Group Holding , Cloud Village, Sichuan Biokin Pharmaceutical, Trip.com Group , Kanzhun , Sieyuan Electric Co Ltd A, Seres Group , Cosco Shipping Energy Transportation Co. Ltd. (H) and more

In today’s briefing:

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100
Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal
KWEB Index Rebalance: 1 Add & 4 Deletes in December
Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade
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)
[Kanzhun Ltd. (BZ US, BUY, TP US$17) Target Price Change]: Mark Down C4Q24 and 2025 on Weak Demand
CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade
SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade
A/H Premium Tracker (To 29 Nov 2024): AH Premia Flat, Volumes Low; Premia Should Fall More

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100

As forecast, there are no changes for the SSE STAR50 (STAR50 INDEX) in December while there are 4 changes for the STAR100 Index.
There will be big outflows for Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) due to SSE STAR50 (STAR50 INDEX) capping. There will be selling from other index trackers too.
Hainan Jinpan Smart Technology (688676 CH) had been ignored by the index committee at the September rebalance, so this inclusion in the STAR100 Index could come as a surprise.

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.

Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade

The December 2024 index review results for China’s CSI 300 and CSI 500 indices were announced after market close on Friday 29th November 2024.
There will be 16 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.
The CSI 300 and CSI 500 index rebal events could trigger US$4.5bn and US$3.8bn in one-way flows respectively.

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.

[Kanzhun Ltd. (BZ US, BUY, TP US$17) Target Price Change]: Mark Down C4Q24 and 2025 on Weak Demand

By Eric Wen

Kanzhun, along with Kuaishou, Beike and PDD, are we call the “Macro Mauled Champions” (MMC). We suggest long term investors to accumulate;
Weak industrial sector earnings in October bodes ill for manufacturing hiring into C4Q24 and we think may further extend to early 2025 recruiting season;
We expect BZ to grow profit faster than revenues on cost savings, particularly on marketing and gain shares. We cut the TP from US$19 to US$17.

CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade

There are 16 changes for the CSI 300 Index, 50 changes for the CSI 500 Index and 100 changes for the CSI1000 Index that will be implemented on 13 December.
There are 257 unique names that are adds or deletes and the round-trip trade across all 3 indices is close to US$9bn.
Stocks with the largest inflows and impact have outperformed stocks with the largest outflows and impact over the last few weeks. That could continue for the next couple of weeks.

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.

A/H Premium Tracker (To 29 Nov 2024): AH Premia Flat, Volumes Low; Premia Should Fall More

Mainland share market volumes continue to be better than HK and SOUTHBOUND volumes, but SB continues to buy tech.
Stocks in HK and mainland markets bounced a bit this week as Scott Bessent named incoming Treasury Secretary and tariff talk diverges from China. Non-economic China policy matters more near-term.
H/A Pairs were surprisingly un-volatile on the week. There are a fair number of wider spreads. Non-bank financials AH Premia remain at the low end of their 52-week range.

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✓ Company Data and News
✓ Events & Webinars

Nov 30

Daily Brief China: China Boqi Environmental Hol, Baidu, Agora Inc., Shui On Land, SGX Rubber Future TSR20 and more

In today’s briefing:

Boqi Env (2377 HK)’s Partial Offer Now Open. But First The EGM
[Baidu, Inc. (BIDU US, SELL, TP US$78) TP Change]: C3Q24 Review: No Respite in Going Ex-Growth
Agora (API US): Rationalizing All Biz and Zero in on OpenAI
Lucror Analytics – Morning Views Asia
Helixtap China Report: Declining Inventory Could Help Revive Demand

Boqi Env (2377 HK)’s Partial Offer Now Open. But First The EGM