HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>NHSA’s new regulation on <em>establishing a mechanism for pricing newly listed chemical drugs and encouraging high-quality innovation</em> attracted widespread attention. However, it’s difficult to interpret this as an optimistic rule.</li>
<li>Although we see increasing interest in products from Chinese pharmaceutical companies, it would be difficult for Chinese biotech to be acquired on a large scale in the foreseeable future.</li>
<li>Based on 2023 results, Medicilon has entered a vicious circle. Multiple sell-offs made us question the moral standards of management. The risk is high for this type of small/lower-tier CXO.</li>
</ul>


NHSA’s new regulation on establishing a mechanism for pricing newly listed chemical drugs and encouraging high-quality innovation attracted widespread attention. However, it’s difficult to interpret this as an optimistic rule.
Although we see increasing interest in products from Chinese pharmaceutical companies, it would be difficult for Chinese biotech to be acquired on a large scale in the foreseeable future.
Based on 2023 results, Medicilon has entered a vicious circle. Multiple sell-offs made us question the moral standards of management. The risk is high for this type of small/lower-tier CXO.


China Healthcare Weekly (Feb.12) - New Pricing Mechanism for Drugs, China Biotech M&A, Medicilon

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

Event-Driven

Hainan Jinpan Smart Technology / Event-Driven

<ul>
<li>The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.</li>
<li>We forecast 10 changes for the index, including migrations between the STAR 100 Index and the <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">SSE STAR50 (STAR50 INDEX)</a>. </li>
<li>Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.</li>
</ul>


The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX). 
Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.


STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform

<ul>
<li>There are three constituent changes for the <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">SSE STAR50 (STAR50 INDEX)</a> at the March rebalance. One inclusion and one non-inclusion are surprises.</li>
<li>One way turnover is estimated at 2.9% and will result in a one-way trade of CNY 4,075m with over 2.5x ADV to trade on all constituent changes.</li>
<li>The adds have outperformed the deletes over the last few months with a jump in the last few trading sessions. There could be more outperformance over the next two weeks.</li>
</ul>


There are three constituent changes for the SSE STAR50 (STAR50 INDEX) at the March rebalance. One inclusion and one non-inclusion are surprises.
One way turnover is estimated at 2.9% and will result in a one-way trade of CNY 4,075m with over 2.5x ADV to trade on all constituent changes.
The adds have outperformed the deletes over the last few months with a jump in the last few trading sessions. There could be more outperformance over the next two weeks.


STAR50 Index Rebalance: Three Changes a Side; One Surprise Change

Suzhou Novosense Microelectron / Event-Driven

<ul>
<li>The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.</li>
<li>We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.</li>
<li>The potential inclusions have dropped but there has been significant outperformance versus the potential deletions. That could continue as positioning continues for the high expected impact on the stocks.</li>
</ul>


The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
The potential inclusions have dropped but there has been significant outperformance versus the potential deletions. That could continue as positioning continues for the high expected impact on the stocks.


STAR50 Index Rebalance Preview: Sustaining Outperformance on Expected Impact

<ul>
<li>The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.</li>
<li>We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.</li>
<li>One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.</li>
</ul>


The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.


STAR50 Index Rebalance Preview: Four High Impact Changes in March

China

Shanghai Medicilon Inc. develops pharmaceutical products. The Company produces acquired immune deficiency syndrome drugs, anticancer drug sensitizers, genetic engineering vaccines, biomedical intermediates, and other products. Shanghai Medicilon also provides biological analysis, drug safety evaluation, and other services.

Shanghai Medicilon (688202 CH)

China Healthcare Weekly (Feb.12) - New Pricing Mechanism for Drugs, China Biotech M&A, Medicilon

NHSA released regulations to establish new mechanism for pricing newly listed chemical drugs. It would be difficult for Chinese biotech to be...

Xinyao (Criss) Wang

STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform

There could be 10 changes for the STAR100 index in June. Excluding the migrations with the STAR50 Index, the potential inclusions have outperformed...

Brian Freitas

STAR50 Index Rebalance: Three Changes a Side; One Surprise Change

There are 3 changes for the STAR50 in March. Estimated one-way turnover is 2.9% resulting in a 1-way trade of CNY 4.08bn with over 2.5x ADV to...

Brian Freitas

STAR50 Index Rebalance Preview: Sustaining Outperformance on Expected Impact

There could be 3 changes for the STAR50 Index in March. One-way turnover is estimated at 2.4% leading to a one-way trade of CNY 2.9bn. The...

Brian Freitas

STAR50 Index Rebalance Preview: Four High Impact Changes in March

There could be 4 changes for the STAR50 Index in March. Passive trackers will need to trade between 1.2-9.7x ADV on the adds/dels. There will be...

Brian Freitas