Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

New Oriental Education & Techn / Index Rebalance

<ul>
<li>The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.</li>
<li>In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in September 2024.</li>
<li>Based on the current data, I see two ADDs and two DELs.</li>
</ul>


The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.
In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in September 2024.
Based on the current data, I see two ADDs and two DELs.


Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way

Blue Lotus Research Institute

Andy Fu

China growth and global non-US Internet equities

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

<ul>
<li>As Chinese population ages, healthcare is a major source of consumption. Yet we are the most pessimistic for it to become a pillar of consumption;</li>
<li>Low healthcare spending in China is achieved by underpaying doctors and nurses. Enhancing life quality, instead of only curing disease, can meaningfully improve consumption; </li>
<li>However, consumer healthcare begets a larger and more common economic phenomenon, which is underpricing. The issue of underpricing stems from low compliance cost, in our opinion.</li>
</ul>


As Chinese population ages, healthcare is a major source of consumption. Yet we are the most pessimistic for it to become a pillar of consumption;
Low healthcare spending in China is achieved by underpaying doctors and nurses. Enhancing life quality, instead of only curing disease, can meaningfully improve consumption; 
However, consumer healthcare begets a larger and more common economic phenomenon, which is underpricing. The issue of underpricing stems from low compliance cost, in our opinion.


How to Stimulate China's Consumption, Part III

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.</li>
<li>Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.</li>
<li>WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".</li>
</ul>


The growth of TIDES business slowed down, and revenue decreased QoQ despite increasing production capacity.As the main growth point of WuXi AppTec’s future performance, this is not a good signal.
Due to BIOSECURE Act, US companies have been negotiating with other contract manufacturers so as to reduce reliance on WuXi AppTec.Let’s see the situation of new orders in following quarters.
WuXi AppTec’s performance recovery is closely related to the pace of Fed's interest rate cuts. From the perspective of growth outlook/macro environment/geopolitical conflicts, WuXi AppTec is still in "dangerous period".


WuXi AppTec (2359.HK/603259.CH) - The Pain of 2024 Has Just Begun

<ul>
<li>Innovent’s 24Q1 product sales was up just 6% QoQ. The overall data shows that PD-1 growth has entered a bottleneck. This makes 24H2 YoY growth rate uncertain.</li>
<li>The deal between Hengrui and Hercules is different from traditional license-out cooperation, but belong to asset spin-off in essence, which is a “smart deal” and also a meaningful attempt.</li>
<li>There’re some positive signals in Zai Lab’s 24Q1 performance, but the pain points of business model severely limit its profitability/revenue scale. Zai Lab still has a long way to go.</li>
</ul>


Innovent’s 24Q1 product sales was up just 6% QoQ. The overall data shows that PD-1 growth has entered a bottleneck. This makes 24H2 YoY growth rate uncertain.
The deal between Hengrui and Hercules is different from traditional license-out cooperation, but belong to asset spin-off in essence, which is a “smart deal” and also a meaningful attempt.
There’re some positive signals in Zai Lab’s 24Q1 performance, but the pain points of business model severely limit its profitability/revenue scale. Zai Lab still has a long way to go.


China Healthcare Weekly (Jun.2) - Innovent's Trouble, Hengrui's “smart Deal”, Zai Lab’s Pain Point

Event-Driven

<ul>
<li>There are many rumors about Henlius’s trading halt, but Fosun Pharma had applied for the resumption of trading in H Shares, which makes us confused whether this is really privatization.</li>
<li>Henlius is in “an awkward position” in capital market. Fosun is to blame for Henlius's low valuation. The high debt problem makes the profits generated from drug sales meaningless.</li>
<li>If Henlius cannot break away from the system controlled by Fosun, the complexity of corporate governance brought about by the relationship between Henlius and Fosun would inevitably affect investment judgment.</li>
</ul>


There are many rumors about Henlius’s trading halt, but Fosun Pharma had applied for the resumption of trading in H Shares, which makes us confused whether this is really privatization.
Henlius is in “an awkward position” in capital market. Fosun is to blame for Henlius's low valuation. The high debt problem makes the profits generated from drug sales meaningless.
If Henlius cannot break away from the system controlled by Fosun, the complexity of corporate governance brought about by the relationship between Henlius and Fosun would inevitably affect investment judgment.


Shanghai Henlius Biotech (2696.HK) - Behind the Trading Halt and Privatization Rumor

China

BeiGene, Ltd. operates as a commercial stage biopharmaceutical company. The Company focuses on discovery, development, and commercialization of molecularly targeted and immuno-oncology drugs for the treatment of cancer. BeiGene serves patients worldwide.

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BeOne (ONC US)

Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way

JD Logistics and SenseTime are currently ranked 65th and 64th respectively and we see them as expected DELs. We see PICC Property & Casualty and...

Janaghan Jeyakumar, CFA

How to Stimulate China's Consumption, Part III

China's healthcare system is supply efficient, which leads to underpaying the healthcare professionals' service but overmedicates. To change,...

Blue Lotus Research Institute

WuXi AppTec (2359.HK/603259.CH) - The Pain of 2024 Has Just Begun

HR8333 proposal involving WuXi AppTec/WuXi Bio faced obstacles when included in NDAA.After the presidential election, new legislation process is...

Xinyao (Criss) Wang

China Healthcare Weekly (Jun.2) - Innovent's Trouble, Hengrui's “smart Deal”, Zai Lab’s Pain Point

Innovent's PD-1 growth face bottleneck, with uncertainty in 24H2 growth; Hengrui-Hercules deal a "smart" asset spin-off; Zai Lab has positive...

Xinyao (Criss) Wang

Shanghai Henlius Biotech (2696.HK) - Behind the Trading Halt and Privatization Rumor

Rumors swirl around Henlius's trading halt, raising questions about privatization.Henlius faces challenge in the market due to high debt, with...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way

JD Logistics and SenseTime are currently ranked 65th and 64th respectively and we see them as expected DELs. We see PICC Property & Casualty and...

Janaghan Jeyakumar, CFA

How to Stimulate China's Consumption, Part III

China's healthcare system is supply efficient, which leads to underpaying the healthcare professionals' service but overmedicates. To change,...

Blue Lotus Research Institute

WuXi AppTec (2359.HK/603259.CH) - The Pain of 2024 Has Just Begun

HR8333 proposal involving WuXi AppTec/WuXi Bio faced obstacles when included in NDAA.After the presidential election, new legislation process is...

Xinyao (Criss) Wang

China Healthcare Weekly (Jun.2) - Innovent's Trouble, Hengrui's “smart Deal”, Zai Lab’s Pain Point

​Innovent's PD-1 growth face bottleneck, with uncertainty in 24H2 growth; Hengrui-Hercules deal a "smart" asset spin-off; Zai Lab has positive...

Xinyao (Criss) Wang

Shanghai Henlius Biotech (2696.HK) - Behind the Trading Halt and Privatization Rumor

​Rumors swirl around Henlius's trading halt, raising questions about privatization.Henlius faces challenge in the market due to high debt, with...

Xinyao (Criss) Wang

Innovent's PD-1 growth face bottleneck, with uncertainty in 24H2 growth; Hengrui-Hercules deal a "smart" asset spin-off; Zai Lab has positive...

Rumors swirl around Henlius's trading halt, raising questions about privatization.Henlius faces challenge in the market due to high debt, with...