Analyst

Steve

Equity Bottom-Up

China Beststudy Education Group / Equity Bottom-Up

<ul>
<li>China after-school tutoring remains one of the most attractive and visible sectors in the next 2-3 years time frame. </li>
<li>Even though <a href="https://www.smartkarma.com/entities/new-oriental-education-techn-cc88998e-fe0d-4a03-b544-f3e9836b06a2" target="_blank" data-smartkarma-citation="entities:531:1" rel="noopener">New Oriental Education &amp; Techn (EDU US)</a> had some hiccups in FY3Q24 results, they were mainly due to factors not related to the core after-school tutoring business.</li>
<li>My sector top pick is <a href="https://www.smartkarma.com/entities/china-beststudy-education-group" target="_blank" data-smartkarma-citation="entities:40632:1" rel="noopener">China Beststudy Education Group (3978 HK)</a>, as valuation is lower and growth is higher, though it has a much smaller market cap..</li>
</ul>


China after-school tutoring remains one of the most attractive and visible sectors in the next 2-3 years time frame. 
Even though New Oriental Education &amp; Techn (EDU US) had some hiccups in FY3Q24 results, they were mainly due to factors not related to the core after-school tutoring business.
My sector top pick is China Beststudy Education Group (3978 HK), as valuation is lower and growth is higher, though it has a much smaller market cap..


China After-School Tutoring:  Still In The Early Innings; Prefer China Beststudy Over EDU

Greater China Equity Long/Short Analyst

Eric Chen

<ul>
<li>Koolearn’s successful transformation into a live-streaming e-commerce business showcased outstanding entrepreneurship and leadership of its founder Michael Yu, whom we highly respect.</li>
<li>That said, we expect its growth to decelerate materially after hitting RMB18 billion GMV by 2024. We value Koolearn at RMB36 billion (20% downside), drawing reference to VIPShop growth trajectory.</li>
<li>While high-frequency data on live-streaming business will drive near-term stock price (and potentially to the upside), its current valuation doesn’t pay off for long -term investors in our view.</li>
</ul>


Koolearn’s successful transformation into a live-streaming e-commerce business showcased outstanding entrepreneurship and leadership of its founder Michael Yu, whom we highly respect.
That said, we expect its growth to decelerate materially after hitting RMB18 billion GMV by 2024. We value Koolearn at RMB36 billion (20% downside), drawing reference to VIPShop growth trajectory.
While high-frequency data on live-streaming business will drive near-term stock price (and potentially to the upside), its current valuation doesn’t pay off for long -term investors in our view.


Koolearn (1797 HK): Don't Overpay for Growth

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>
<a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy Holding (1797 HK)</a> was deleted from the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng TECH Index</a> in March and could be deleted from the <a href="https://www.smartkarma.com/entities/kraneshares-csi-china-internet-etf" target="_blank" data-smartkarma-citation="entities:28208:1" rel="noopener">KraneShares CSI China Internet ETF (KWEB US)</a> in June.</li>
<li>There are other ETFs that track the same index (and similar indices), and those trackers will be selling <a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy Holding (1797 HK)</a> too.</li>
<li>There has been some short covering in the stock recently, but short interest is pretty high as a percentage of float. Watch out for short covering that offsets passive selling.</li>
</ul>



East Buy Holding (1797 HK) was deleted from the Hang Seng TECH Index in March and could be deleted from the KraneShares CSI China Internet ETF (KWEB US) in June.
There are other ETFs that track the same index (and similar indices), and those trackers will be selling East Buy Holding (1797 HK) too.
There has been some short covering in the stock recently, but short interest is pretty high as a percentage of float. Watch out for short covering that offsets passive selling.


East Buy Holdings (1797 HK): Potential KWEB Deletion in June

Ping An Healthcare and Technology / Index Rebalance

<ul>
<li>The review period for the December rebalance of the CSI Overseas China Internet Index ended 31 October. The changes should be announced 28 November and implemented close on 12 December.</li>
<li>There could be 6 inclusions for the <a href="https://www.smartkarma.com/entities/kraneshares-csi-china-internet-etf" target="_blank" data-smartkarma-citation="entities:28208:1" rel="noopener">KraneShares CSI China Internet ETF (KWEB US)</a> in December with most inclusions being high probability.</li>
<li>Impact on the inclusions varies between 1.3-5 days of ADV. There will be stocks with float increases and some capping changes.</li>
</ul>


The review period for the December rebalance of the CSI Overseas China Internet Index ended 31 October. The changes should be announced 28 November and implemented close on 12 December.
There could be 6 inclusions for the KraneShares CSI China Internet ETF (KWEB US) in December with most inclusions being high probability.
Impact on the inclusions varies between 1.3-5 days of ADV. There will be stocks with float increases and some capping changes.


KWEB Index Rebalance Preview: Bunch of Potential Inclusions in December

<ul>
<li>Hang Seng Indexes announces changes to the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index</a>, <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng TECH Index</a>, HSIII Index and HSCI Index (among others) post market close today. </li>
<li>The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.</li>
<li>Capping will lead to most inflows to <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> while the largest outflows will be from <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a> and <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>. </li>
</ul>


Hang Seng Indexes announces changes to the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index, HSIII Index and HSCI Index (among others) post market close today. 
The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.
Capping will lead to most inflows to Meituan (3690 HK) while the largest outflows will be from Alibaba Group Holding (9988 HK) and Xiaomi Corp (1810 HK). 


Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)

China

East Buy Holding Limited operates livestreaming platform businesses. The Company provides private label products including agricultural products, food, books, and household goods. East Buy Holding also conducts college education businesses.

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East Buy Holding (1797 HK)

China After-School Tutoring: Still In The Early Innings; Prefer China Beststudy Over EDU

China Beststudy Education (3978 HK) is up 15% today on good volume on the back of raised guidance for FY24 by management. The stock has more than...

Steve

Koolearn (1797 HK): Don't Overpay for Growth

We draw reference to VIPShop and value Koolearn at RMB36 billion by 2024 – 20% downside to its current valuation, based on 20x PE on RMB1.8 billion...

Eric Chen

East Buy Holdings (1797 HK): Potential KWEB Deletion in June

East Buy Holdings could be deleted from the KWEB in June. Shorts have been covering and there has been minimal increase in positioning recently....

Brian Freitas

KWEB Index Rebalance Preview: Bunch of Potential Inclusions in December

There could be 6 adds for the KWEB ETF in Dec, plus float increase for Healthyway and capping changes for the large stocks. CaoCao is newly...

Brian Freitas

Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)

Hang Seng Indexes announces post market close today. There will be changes for the HSI, HSCEI, HSTECH, HSIII and HSCI indices. The net round-trip...

Brian Freitas

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