HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Livzon Pharmaceutical Group In / Equity Bottom-Up

Livzon Pharmaceutical Group In (000513 CH)

<ul>
<li>With rising COVID-19 cases, a pandemic outbreak in late 2024 is likely. Investors should focus on related sectors and stocks again.</li>
<li>Due to BIOSECURE Act, US companies are leaving Chinese partners.If Trump is elected, his sanctions on China's supply chain may intensify. So, there should be “valuation discount” for China CXOs.</li>
<li>Livzon may have negative YoY revenue growth in 24H1, but full-year revenue may have positive low single-digit YoY growth. Due to good dividend/repurchase policy, Livzon deserves more patience from investors.</li>
</ul>


With rising COVID-19 cases, a pandemic outbreak in late 2024 is likely. Investors should focus on related sectors and stocks again.
Due to BIOSECURE Act, US companies are leaving Chinese partners.If Trump is elected, his sanctions on China's supply chain may intensify. So, there should be “valuation discount” for China CXOs.
Livzon may have negative YoY revenue growth in 24H1, but full-year revenue may have positive low single-digit YoY growth. Due to good dividend/repurchase policy, Livzon deserves more patience from investors.


China Healthcare Weekly (Aug.18)- COVID Is Here, BIOSECURE Act Update, Livzon Deserves More Patience

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

Shanghai Rural Commercial Bank / Index Rebalance

Shanghai Rural Commercial Bank (601825 CH)

<ul>
<li>CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.</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 2024.</li>
<li>Our expected ADDs and DELs baskets have changed slightly since our <a href="https://www.smartkarma.com/insights/quiddity-leaderboard-csi-300-500-dec-24-positive-start-to-the-trade-some-changes-to-expectations" target="_blank" rel="noopener">last insight</a>.</li>
</ul>


CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2024.
Our expected ADDs and DELs baskets have changed slightly since our last insight.


Quiddity Leaderboard CSI 300/​​500 Dec 24: US$4.3bn One-Way Flows; Exp.ADDs Vs DELs Rebound Possible

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

<ul>
<li>There could be 18 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 5 spots.</li>
<li>We estimate one-way turnover of 3.3% at the rebalance leading to a one-way trade of CNY 22.07bn (US$3bn). There are a lot of stocks with multiple days ADV to trade.</li>
<li>The potential adds have outperformed the potential deletes. There were ETF inflows last week amid a short selling crackdown as the Third Plenum kicks off.</li>
</ul>


There could be 18 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 5 spots.
We estimate one-way turnover of 3.3% at the rebalance leading to a one-way trade of CNY 22.07bn (US$3bn). There are a lot of stocks with multiple days ADV to trade.
The potential adds have outperformed the potential deletes. There were ETF inflows last week amid a short selling crackdown as the Third Plenum kicks off.


CSI300 Index Rebalance Preview: 18 Changes in Dec; Third Plenum; ETF Inflows; Short Sell Crackdown

Shijiazhuang Yiling Pharmaceutical / Equity Bottom-Up

Shijiazhuang Yiling Pharmaceutical (002603 CH)

<ul>
<li>Due to the overvaluation of pharmaceutical companies in the primary market, only foreign markets are able to “digest” such high valuation. So, various promising drugs are acquired by foreign investors.</li>
<li>The field of RDC/RLT has attracted our attention, which could become the next hot area. Since nuclides are the most important bottleneck, domestic related enterprises will usher in opportunities.</li>
<li>
<a href="https://www.smartkarma.com/entities/shijiazhuang-yiling-pharmaceutical-a" target="_blank" data-smartkarma-citation="entities:16040:1" rel="noopener">Shijiazhuang Yiling Pharmaceutical</a>’s performance would continue to be under pressure in 24H1 but would rebound in 24H2 after “destocking”. Valuation/share price have not yet bottomed out. Don’t rush to bottom-fish.</li>
</ul>


Due to the overvaluation of pharmaceutical companies in the primary market, only foreign markets are able to “digest” such high valuation. So, various promising drugs are acquired by foreign investors.
The field of RDC/RLT has attracted our attention, which could become the next hot area. Since nuclides are the most important bottleneck, domestic related enterprises will usher in opportunities.

Shijiazhuang Yiling Pharmaceutical’s performance would continue to be under pressure in 24H1 but would rebound in 24H2 after “destocking”. Valuation/share price have not yet bottomed out. Don’t rush to bottom-fish.


China Healthcare Weekly (May.5) - Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma

<ul>
<li>Now that the pandemic has passed, Yiling’s performance has to face a sharp decline due to the high base before, but in our view, the situation is not so bad.  </li>
<li>According to the management,sales of cardiovascular and cerebrovascular products would gradually increase to make up for the sales decline of Lianhua Qingwen, which would still be higher than pre-pandemic level.</li>
<li>About 15-20% performance growth is still reachable in the future. PE of 20-30 is a reasonable range for Yiling. Being included in CSI 300 Index helps to improve the liquidity.</li>
</ul>


Now that the pandemic has passed, Yiling’s performance has to face a sharp decline due to the high base before, but in our view, the situation is not so bad.  
According to the management,sales of cardiovascular and cerebrovascular products would gradually increase to make up for the sales decline of Lianhua Qingwen, which would still be higher than pre-pandemic level.
About 15-20% performance growth is still reachable in the future. PE of 20-30 is a reasonable range for Yiling. Being included in CSI 300 Index helps to improve the liquidity.


Shijiazhuang Yiling Pharmaceutical (002603.CH) - Valuation Rebound Is Worth Looking Forward To

China

Shijiangzhuang Yiling Pharmaceutical Co Ltd develops, produces and sells Chinese patent medicine. The Company's major products include Tongxinluo capsules, Shensongyangxin capsules, Lotus Qingwen capsules, Qili Qiangxin capsules and Bazi Bushen capsules.

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Shijiazhuang Yiling Pharmaceutical (002603 CH)

China Healthcare Weekly (Aug.18)- COVID Is Here, BIOSECURE Act Update, Livzon Deserves More Patience

COVID is coming again. So investors can focus on related stocks. US companies leaving Chinese partners due to BIOSECURE Act. Livzon is still worth...

Xinyao (Criss) Wang

Quiddity Leaderboard CSI 300/500 Dec 24: US$4.3bn One-Way Flows; Exp.ADDs Vs DELs Rebound Possible

We expect 16 and 50 changes for CSI 300 and CSI 500 respectively. Collectively, the CSI 300 and CSI 500 expected changes could result in one-way...

Janaghan Jeyakumar, CFA

CSI300 Index Rebalance Preview: 18 Changes in Dec; Third Plenum; ETF Inflows; Short Sell Crackdown

There could be 18 changes in December. The adds have outperformed the deletes but near-term performance has been meh. There were ETF inflows last...

Brian Freitas

China Healthcare Weekly (May.5) - Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma

Only foreign markets are able to “digest” high valuation of China's biotech assets in primary market. RDC/RLT will become the next hot area for...

Xinyao (Criss) Wang