In today’s briefing:
- CK Hutch (1 HK): Back To Square One
- HKBN (1310 HK): China Mobile Agrees to Acquire TPG’s Stake
- China ETF Inflows & Implications: Central Huijin’s Huge Buying
- STAR Chip Index Rebalance Preview: Potential Changes in June
- Jiangsu Hengrui Pharma A/H Listing – Recent Updates and Thoughts on A/H Premium
- HKBN (1310 HK): TPG Cashes In Early
- Semiconductors and AI Servers in China
- Lucror Analytics – Morning Views Asia
CK Hutch (1 HK): Back To Square One
- The irony is that CKH (1 HK)‘s Panama-port sale was probably prompted, at least in part, by a desire to get out of a situation which was becoming increasingly political.
- Instead, it has thrust the company right into the heart of it. And the share price has now given up all of its initial gains. And then some.
- After Panama’s Attorney General recently determined CK Hutchison’s concessions were unconstitutional, the Comptroller-General has now announced that an audit had found “many breaches” of the concession.
HKBN (1310 HK): China Mobile Agrees to Acquire TPG’s Stake
- China Mobile (941 HK) has entered a share purchase agreement to acquire TPG’s HKBN Ltd (1310 HK) shares and vendor loan note conversion shares by 28 November.
- On completion, TPG will be released from its irrevocable, which has a competing offer clause. China Mobile’s agreement signals its expectation that I Squared will launch a competing proposal.
- The agreement will not change I Squared’s approach as it would not negatively impact regulatory approvals (a key risk) or prevent it from meeting a 50% minimum tendering condition.
China ETF Inflows & Implications: Central Huijin’s Huge Buying
- Nearly US$22bn has flowed into mainland China listed ETFs over the last 3 trading days, reversing outflows that started in mid February.
- Central Huijin has announced that it will be increasing its ETF holdings to maintain smooth operation of China’s capital markets. The rest of the National Team will be buying too.
- There are multiple implications of the huge ETF creations in a short time frame and a reversal of flows will lead to a reversion in a bunch of trades.
STAR Chip Index Rebalance Preview: Potential Changes in June
- There could be 1 constituent change for the STAR Chip Index at the June rebalance. There will also be a few capping changes.
- Estimated one-way turnover is 2.1% resulting in a round-trip trade of CNY 1.04bn (US$141m). Passives need to trade between 0.65-1.65x ADV in the potential changes.
- Jinhong Gas (688106 CH) is also a potential delete from the STAR100 Index and that will lead to increased passive selling in the stock.
Jiangsu Hengrui Pharma A/H Listing – Recent Updates and Thoughts on A/H Premium
- Jiangsu Hengrui Medicine (600276 CH) (JHP), a China-based pharmaceutical company, aims to raise around US$2bn in its H-share listing.
- JHP has been ranked as one of the global Top 50 pharmaceutical companies by Pharm Exec for six consecutive years since 2019.
- We have looked at the company’s past performance in our previous note. In this note, we talk about the recent updates and provide our thoughts on the possible A/H premium.
HKBN (1310 HK): TPG Cashes In Early
- Back in December, China Mobile (941 HK) made a pre-conditional HK$5.23/share voluntary Offer for HKBN (1310 HK). The wild card is whether I Squared launches a counter-proposal.
- This transaction has no shortage of intriguing developments. Last month, MBK mysteriously converted its VLNs. Now TPG has entered into an SPA with Mobile to sell its 15.46% stake.
- IF I Squared were to make a counter-proposal, I doubt it would secure the necessary regulatory approvals. Evidently TPG is not waiting around to find out.
Semiconductors and AI Servers in China
- Semiconductors and AI chips have become a geopolitical tool, between the US and China but also between the US and the Rest of the World (Biden’s Jan-25 limitations by country).
- This has led to an increase in Chinese R&D in Semiconductors since 2020. In particular 3 areas: AI chips, production equipment, small geometries below 7nm. This article reviews recent announcements.
- Rush orders for Nvidia H20 GPU since Jan-25. Loongsoon breakthru AI chip. SMIC starting 5nm production in 2025. SiCarrier announced EUV lithography machine.
Lucror Analytics – Morning Views Asia
- In today’s Morning Views publication we comment on developments of the following high yield issuers: Greentown China
- In the US, the NFIB small business optimism index declined to 97.4 (99.0 e / 100.7 p), just below the 51-year average of 98.
- US President Donald Trump’s tariffs are set to take effect from midnight ET today, according to the US Customs and Border Protection.
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