HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

China Traditional Chinese Medicine / Event-Driven

China Traditional Chinese Medicine (570 HK)

<ul>
<li>The Medical Insurance Bureau of Hubei Province issued two documents on the VBP of TCM patent medicines.Shineway’s core product Qing Kai Ling is included, which would bring pressure on performance.</li>
<li>It's time to be cautious about the outlook for GLP-1s. We may need to be mentally prepared in advance that the actual market size of GLP-1s is only US$100 billion.</li>
<li>Recent changes at the top of CNPGC have left some investors hopeful that China TCM will resolve horizontal competition as scheduled next year,but current bet on shares reversal isn't wise.</li>
</ul>


The Medical Insurance Bureau of Hubei Province issued two documents on the VBP of TCM patent medicines.Shineway’s core product Qing Kai Ling is included, which would bring pressure on performance.
It's time to be cautious about the outlook for GLP-1s. We may need to be mentally prepared in advance that the actual market size of GLP-1s is only US$100 billion.
Recent changes at the top of CNPGC have left some investors hopeful that China TCM will resolve horizontal competition as scheduled next year,but current bet on shares reversal isn't wise.


China Healthcare Weekly (Dec.8) - TCM VBP Update, GLP-1's Good Story Broke, China TCM's Sudden Rally

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>Post market close on Friday, Hang Seng Indexes will announce the changes for 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 (HSI INDEX)</a> that will be implemented at the close on 6 December.</li>
<li>With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.</li>
<li>Short interest is especially large in <a href="https://www.smartkarma.com/entities/sinotruk-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:19764:1" rel="noopener">Sinotruk</a>, <a href="https://www.smartkarma.com/entities/giant-biogene-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:35950:1" rel="noopener">Giant Biogene</a>, <a href="https://www.smartkarma.com/entities/kuaishou-technology" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology</a>, <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASMPT</a> and <a href="https://www.smartkarma.com/entities/jd-logistics-inc" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics</a> and inclusion could set off some short covering.</li>
</ul>


Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 December.
With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.
Short interest is especially large in Sinotruk, Giant Biogene, Kuaishou Technology, ASMPT and JD Logistics and inclusion could set off some short covering.


Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for December

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a>’s monthly update notes that the consortium has secured SAMR approval and made progress in obtaining the other regulatory approvals. </li>
<li>As expected, the precondition will not be satisfied before the 18 October long stop date. Unexpectedly, whether the consortium members will consent to the extension remains uncertain.</li>
<li>The extension will be forthcoming as the delay is procedural, there is a reputational risk from a deal break, the time investment is significant, and the warning was legally required.</li>
</ul>



China Traditional Chinese Medicine (570 HK)’s monthly update notes that the consortium has secured SAMR approval and made progress in obtaining the other regulatory approvals. 
As expected, the precondition will not be satisfied before the 18 October long stop date. Unexpectedly, whether the consortium members will consent to the extension remains uncertain.
The extension will be forthcoming as the delay is procedural, there is a reputational risk from a deal break, the time investment is significant, and the warning was legally required.


China Traditional Chinese Medicine (570 HK): Theatre of the Absurd

Equity Bottom-Up

<ul>
<li>2024 would be the low point in performance/valuation of Sinopharm. Due to the low base in 2024, revenue/net profit in 2025 is expected to rebound (e.g. high single-digit positive growth).</li>
<li>Declining financial cost ratio is key driving force for profitability.Since the Fed would cut interest rate, a low interest rate environment helps Sinopharm reduce financial costs, thereby increasing profit margin.</li>
<li>Since China hopes to establish a valuation system with Chinese characteristics, it would help drive up valuation of SOEs.Thus, there’s valuation repair opportunity for Sinopharm (e.g. P/E return to 8).</li>
</ul>


2024 would be the low point in performance/valuation of Sinopharm. Due to the low base in 2024, revenue/net profit in 2025 is expected to rebound (e.g. high single-digit positive growth).
Declining financial cost ratio is key driving force for profitability.Since the Fed would cut interest rate, a low interest rate environment helps Sinopharm reduce financial costs, thereby increasing profit margin.
Since China hopes to establish a valuation system with Chinese characteristics, it would help drive up valuation of SOEs.Thus, there’s valuation repair opportunity for Sinopharm (e.g. P/E return to 8).


Sinopharm Group (1099.HK) - Don't Waste the Low Point of Performance, Valuation Will Bounce Back

YiChang HEC ChangJiang Pharmaceutical / Event-Driven

YiChang HEC ChangJiang Pharmaceutical (1558 HK)

<ul>
<li>Biotech will continue selling early-stage pipeline in a sluggish market, but this will further lower its valuation as financing won't improve quickly.</li>
<li>Pharmaceutical distribution companies are facing challenges, driving ongoing consolidation in the industry. However, this trend will ultimately benefit the growth of leading companies in the long run.</li>
<li>If investors truly understand "the essence" of <a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">HEC Changjiang Pharma</a>, they will be more calm/rational to look at this absorption merger and the inclusion of Hang Seng family of indexes.</li>
</ul>


Biotech will continue selling early-stage pipeline in a sluggish market, but this will further lower its valuation as financing won't improve quickly.
Pharmaceutical distribution companies are facing challenges, driving ongoing consolidation in the industry. However, this trend will ultimately benefit the growth of leading companies in the long run.
If investors truly understand "the essence" of HEC Changjiang Pharma, they will be more calm/rational to look at this absorption merger and the inclusion of Hang Seng family of indexes.


China Healthcare Weekly (Sep.1)-Biotech Sell Asset,Pharmaceutical Distribution Company,HEC CJ Pharma

China

Sinopharm Group is a leading Chinese distributor and retailer of pharmaceutical and healthcare products, medical devices, and a supply chain service provider. The company also engages in the production and sale of pharmaceutical products, chemical reagents, and laboratory supplies. It was incorporated in January 2003 and is headquartered in Shanghai, China.

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Sinopharm Group (1099 HK)

China Healthcare Weekly (Dec.8) - TCM VBP Update, GLP-1's Good Story Broke, China TCM's Sudden Rally

Hubei's TCM patent medicine VBP will impact Shineway's performance. Caution needed on GLP-1 market outlook. There's no evidence to support CNPGC’s...

Xinyao (Criss) Wang

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for December

We highlight 10 potential inclusions for the HSI in Dec. The number of constituents has not increased this year and the target to reach 100 members...

Brian Freitas

China Traditional Chinese Medicine (570 HK): Theatre of the Absurd

The update will do little to soothe frayed nerves. The extension will be forthcoming as the delay is procedural, there is a reputational risk from...

Arun George