Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Thematic (Sector/Industry)

China Nepstar's Chairman and his China Neptunus Drugstore Holding Ltd. (54% owner) has offered $2.60/ADS to take the company private (announcement attached). In addition, he has purchased the 25% stake held by private equity firm Capital Eagle Global Limited, giving him nearly 80% of the stock. The shareholder register has a limited amount of institutional investors, so we doubt that a higher offer will surface. The timing of the offer and its relatively small size (US$51 million to buy out the remaining minorities) lead us to conclude that the deal is likely to go through despite the current turmoil in China's stock markets.

China Nepstar's Chairman and his China Neptunus Drugstore Holding Ltd. (54% owner) has offered $2.60/ADS to take the company private (announcement attached). In addition, he has purchased the 25% stake held by private equity firm Capital Eagle Global Limited, giving him nearly 80% of the stock. The shareholder register has a limited amount of institutional investors, so we doubt that a higher offer will surface. The timing of the offer and its relatively small size (US$51 million to buy out the remaining minorities) lead us to conclude that the deal is likely to go through despite the current turmoil in China's stock markets.

Who's Optimistic About Pharmacy's Future in China? China Nepstar's Controlling Shareholder

The stellar performance of China&rsquo;s stock markets over the past twelve months (Shanghai +121%, Shenzhen +161%, and Hong Kong +17%) has led to a sharp uptick in going private transactions involving Chinese ADRs. The wide disparities in valuations between these markets (Shanghai average P/E of 25x; Shenzhen average P/E of 75x) and the US (S&amp;P 500 P/E of 19x) along with the successful re-listings of Luye Pharma (formerly in Singapore) and 3SBio (formerly in the US) in Hong Kong have emboldened the Chairmen/CEOs of other US-listed Chinese companies to engage in what some have called &ldquo;exchange arbitrage.&rdquo;We have commented on the pending WuXi PharmaTech and Mindray deals previously. This Insight discusses the hurdles that special committees face in working on behalf of minority shareholders.&nbsp;

The stellar performance of China&rsquo;s stock markets over the past twelve months (Shanghai +121%, Shenzhen +161%, and Hong Kong +17%) has led to a sharp uptick in going private transactions involving Chinese ADRs. The wide disparities in valuations between these markets (Shanghai average P/E of 25x; Shenzhen average P/E of 75x) and the US (S&amp;P 500 P/E of 19x) along with the successful re-listings of Luye Pharma (formerly in Singapore) and 3SBio (formerly in the US) in Hong Kong have emboldened the Chairmen/CEOs of other US-listed Chinese companies to engage in what some have called &ldquo;exchange arbitrage.&rdquo;We have commented on the pending WuXi PharmaTech and Mindray deals previously. This Insight discusses the hurdles that special committees face in working on behalf of minority shareholders.&nbsp;

China ADR Privatizations: The Challenges of Getting the Best Deal

Numerous press outlets report that China&rsquo;s Food &amp; Drug Administration (CFDA) will release regulations permitting online sales of pharmaceuticals soon. This action should help the Chinese government in its efforts to lower drug costs for its citizens by:<ol><li>Creating a lower-cost channel to undercut the current multi-tier distribution channel that serves state hospitals (70% of the market);</li><li>Addressing the current shortage of pharmacists (China: 1.47/10,000 population; Global average: 6.02) through creation of larger dispensing platforms that increase productivity; and</li><li>Providing a more efficient channel for retail pharmacies to compete with hospital-based pharmacies.</li></ol>The addition of E-commerce should drive much-needed reforms that will benefit leading drug distributors and retail chains. &nbsp;The road will be long and bumpy.

Numerous press outlets report that China&rsquo;s Food &amp; Drug Administration (CFDA) will release regulations permitting online sales of pharmaceuticals soon. This action should help the Chinese government in its efforts to lower drug costs for its citizens by:Creating a lower-cost channel to undercut the current multi-tier distribution channel that serves state hospitals (70% of the market);Addressing the current shortage of pharmacists (China: 1.47/10,000 population; Global average: 6.02) through creation of larger dispensing platforms that increase productivity; andProviding a more efficient channel for retail pharmacies to compete with hospital-based pharmacies.The addition of E-commerce should drive much-needed reforms that will benefit leading drug distributors and retail chains. &nbsp;The road will be long and bumpy.

Opening of E-commerce Channel to Change China's Drug Market

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

Double Medical Technology  / Index Rebalance

<ul>
<li>There could be up to 6 changes for the CSI Medical Service Index at the December rebalance with the number of changes mainly driven by the inclusions.</li>
<li>Estimated one-way turnover is 6.9% and the round-trip trade is estimated at CNY 4.11bn (US$578m). There are 8 stocks with over 1x ADV to trade from passive trackers.</li>
<li>The forecast adds have outperformed the forecast deletes since June but have underperformed in the short-term. With the review period complete and announcement in 3 weeks, positioning could resume.</li>
</ul>


There could be up to 6 changes for the CSI Medical Service Index at the December rebalance with the number of changes mainly driven by the inclusions.
Estimated one-way turnover is 6.9% and the round-trip trade is estimated at CNY 4.11bn (US$578m). There are 8 stocks with over 1x ADV to trade from passive trackers.
The forecast adds have outperformed the forecast deletes since June but have underperformed in the short-term. With the review period complete and announcement in 3 weeks, positioning could resume.


CSI Medical Service Index Rebalance Preview: Six Potential Changes in December

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Shandong Weigao Blood Purification Products / Index Rebalance

Shandong Weigao Blood Purification Products (603014 CH)

Shandong Weigao Blood Purification Products

<ul>
<li>CSI Medical Service represents the top 50 largest and most-liquid stocks involved in medical devices, medical care, medical informatization, and other medical theme from the Shanghai, Shenzhen and Beijing Exchanges.</li>
<li>In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2025.</li>
<li>We expect up to six ADDs and six DELs for the CSI Medical Service index during this index review event based on the latest available data.</li>
</ul>


CSI Medical Service represents the top 50 largest and most-liquid stocks involved in medical devices, medical care, medical informatization, and other medical theme from the Shanghai, Shenzhen and Beijing Exchanges.
In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2025.
We expect up to six ADDs and six DELs for the CSI Medical Service index during this index review event based on the latest available data.


Quiddity Leaderboard CSI Medical Dec25: Some Changes to Expected ADDs/DELs; US$362mn One-Way

China

Porton Pharma Solutions Ltd. is a China-based custom manufacturing services provider(CMO), serving the global pharmaceutical industry with custom and contract chemical development and manufacturing services from preclinical development to commercial supply.

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Porton Pharma Solutions (300363 CH)

Who's Optimistic About Pharmacy's Future in China? China Nepstar's Controlling Shareholder

China Nepstar's Chairman and his China Neptunus Drugstore Holding Ltd. (54% owner) has offered $2.60/ADS to take the company private (announcement...

Kemp Dolliver, CFA

China ADR Privatizations: The Challenges of Getting the Best Deal

The stellar performance of China’s stock markets over the past twelve months (Shanghai +121%, Shenzhen +161%, and Hong Kong +17%) has led to a...

Kemp Dolliver, CFA

Opening of E-commerce Channel to Change China's Drug Market

Numerous press outlets report that China’s Food & Drug Administration (CFDA) will release regulations permitting online sales of...

Kemp Dolliver, CFA

CSI Medical Service Index Rebalance Preview: Six Potential Changes in December

There could be 6 changes for the index in Dec. Estimated one-way turnover is 6.9% and the round-trip trade is estimated at US$578m. There are 8...

Brian Freitas

Quiddity Leaderboard CSI Medical Dec25: Some Changes to Expected ADDs/DELs; US$362mn One-Way

We estimate the CSI Medical December 2025 index rebalance to trigger flows of ~US$362mn one-way. On average, the expected DELs have higher impact...

Janaghan Jeyakumar, CFA

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