China

• I was wrong. Loyal Valley Capital (LVC) have stopped buying Shanghai Henlius (2696 HK) – or have not bought since reaching a blocking stake of 7.8295% on the 9th January. 
• LVC could either use that stake as leverage to negotiate with the Offeror on the scrip terms. Or blow up the deal and pick up shares after the deal breaks 
• OR perhaps, as per my initial impression,  LVC tenders. And they may still do that. It should be this straightforward; but the fact that it is not raises questions. 

• The vote on Fosun Pharma’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) is on 22 January. The gross spread has ballooned to 21.8%, which suggests a deal break.
• I previously stated that LVC’s trading behaviour over the coming days will indicate its voting intentions. Unfortunately, this behaviour suggests a high likelihood of blocking the vote.
• Fosun Pharma has two potential options to secure LVC’s backing: increase the share alternative cap or introduce a rollover option. Both have challenges and are, therefore, not viable options.

• Foshan Haitian Flavouring & Food (603288 CH) has filed for a listing on the HKEX (388 HK) and reports indicate that the raise will be at least US$1.5bn.
• In line with the Midea Group (300 HK) and S.F. Holding (6936 HK) H-share listings, the discount on the H-shares could be in the 20-25% range.
• The stock will not get Fast Entry to any indices but there should be inclusions at subsequent rebalances, especially once the cornerstone investor lock-up expires.

• Q424 volume growth for J&T’s two main segments accelerated — but how’d they do it?
• In Chinese domestic segment last year, J&T gained share vs market leader ZTO Express
• We believe J&T’s volatile growth patterns could indicate painful price-volume tradeoffs

• NTT obtains $1B for a Singapore data center REIT, supporting expansion and growth in the region.
• Japan’s Open House acquires Bolder Presence in a $390M stake buy, increasing investment in the company.
• Shimao lowers Sheraton HK Airport hotel price by 30% to attract more customers, adjusting to market demand.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Yuexiu Property, Seazen Group, Vedanta Resources
• In the US, the UST curve bear steepened slightly, amid a rise in oil price and a heavy pipeline of corporate bond issuances. The yield on the 2Y UST was unchanged at 4.38%, while that on the 10Y UST was up 2 bps at 4.78%. Equities were mixed.
• The S&P 500 rebounded 0.2% from last Friday’s selloff to close at 5,836. That said, the Nasdaq fell 0.4% to 19,088, driven by a decline in large tech stocks.

• Hengrui plans to IPO in Hong Kong, but it hasn’t yet completed the business transformation from generic drugs to innovative drugs, and is still facing the negative impact of VBP.
• The key point is whether the innovative drug business has sustained high enough growth rate to offset the decline in generic drug business so as to support the high valuation.
• Hengrui is overvalued in A-Share. We think Hengrui’s valuation should be lower than that of BeiGene (6160 HK) and Hansoh Pharmaceutical Group (3692 HK) in Hong Kong stock market.

• UMP Healthcare (722 HK) will report its results in late February. We estimate low single-digit revenue growth of 3% YoY, in line with the past two semiannuals.
• We flagged cost-cutting initiatives in UMP Healthcare (722 HK): Postcard From Hong Kong and Webinar Updates, which would result in 25% YoY profit growth. 
• Trading at 6.4x FY25e PE, with a 10% dividend yield and 85% of the market capitalization in net cash and investments, the stock has the potential to double. 

• The vote on Fosun Pharma’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) is on 22 January. The gross spread ballooned today due to LVC’s amassing a blocking stake.
• There are valid arguments for LVC to block the vote or to support the offer. LVC’s trading behaviour over the coming days will point to its voting intentions. 
• I continue to believe that LVC will support the offer. At the current price and for a 15 February payment, the gross/annualised spread is 9.1%/160%.

• Through Special Dividend, Ping An has achieved its initial plan at a low price. Ping An ruled out the possibility of privatization, which could be due to the high cost.
• Ping An may hope to further leverage the synergies, increase resource tilt towards PAGD, thereby helping it out of the trough.But we’re not optimistic due to PAGD’s problematic business model.
• The gap between PAGD and JD Health/Alibaba Health will continue to widen. Based on our forecast, we think PAGD is overvalued. Its valuation should be lower than JD Health/Alibaba Health.

• There could be 1 constituent change for the STAR Chip Index at the March rebalance. There will also be a few capping changes.
• Estimated one-way turnover is 6.5% resulting in a round-trip trade of CNY 3.12bn (US$426m). Passives need to trade between 0.24-0.33x ADV in the potential changes.
• There is one very close add and the final list could change depending on price performance over the next 10 trading days.

• Trump plans to put serious tariffs on Mexico and Canada due to immigration and drug issues, impacting Asian currencies
• US and UK CPI data in focus for the week ahead, with expectations of higher inflation
• Currency depreciation pressures in Asia expected to continue, with China and Korea most vulnerable to depreciation pressures

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Tough week with 82% of optionable stocks we survey declining on the week but no sign of panic as investors still prefer Calls over Puts. 
• Tencent was far and away the volume leader, accounting for 37% of all option trading.
• Materials was the only Sector to see price gains and implied vol rose across all Sectors we survey.

• HSI and HSCEI were down every day this past week.
• HSI total Put volume heavier than total Call volume on the two largest down days this week showing rising concern amongst investors.
• Having dropped 5.6% to start the year HSI has already moved well past the implied move at the start of the month.

• Sunac faces financial distress as China Cinda files new wind-up petition due to inability to repay debt.
• Country Garden plans to reduce $11.6B offshore debt as home sales decline in current market conditions.
• UOL from Singapore successfully invests $285M in Sydney office amid market revival, showcasing confidence in growth.

• Freetech Intelligent Systems (1901036D CH) is looking to raise up to US$200m in its upcoming Hong Kong IPO.
• The firm is a leading intelligent driving solutions provider, covering advanced assistance system (ADAS) and autonomous driving system (ADS) technologies.
• In this note, we look at the firm’s past performance.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Longfor Group, Logan Group, Vedanta Resources, Sunny Optical
• In the US, the December 2024 nonfarm payrolls unexpectedly jumped to 256 k (165 k e / 212 k revised p), with November’s data adjusted downwards by 15 k. Average hourly earnings edged down to 0.3% m-o-m (0.3% e / 0.4% p) and 3.9% y-o-y (4.0% e / 4.0% p), while the unemployment rate declined to 4.1% (4.2% e / 4.2% p).
• Separately, the January 2025 (preliminary) University of Michigan consumer sentiment index fell to 73.2 (74.0 e / 74.0 p). The one-year inflation expectation among consumers soared to 3.3% (2.8% e / 2.8% p), the highest since May 2024 and above the 2.3-3.0% range seen in the two years prior to the COVID-19 pandemic.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Smart Share Global (EM US), Pressance Corp (3254 JP), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK). 
• Lowest spreads: Lifestyle China (2136 HK), Makino Milling Machine Co (6135 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Latin Resources (LRS AU).    

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million through a primary/secondary offering.
• Event-Driven developments: Shanghai Henlius Biotech (2696 HK), Greatview Aseptic Packaging (468 HK), Fujitsu General (6755 JP), Fuji Soft Inc (9749 JP), Pressance Corp (3254 JP), Smart Share Global (EM US). 

• SOUTHBOUND gross trading activity was not stronger per day than the previous two weeks. But SB Net Buying was HUGE. The biggest week since global index deletions in January 2021.
• The story was similar. On Tuesday in the US, Tencent was put on a DoD list leading to a possible CMC list appearance (which would lead to index deletions).
• Tencent saw US$4bn of SOUTHBOUND net buying. SMIC, Xiaomi, and China Mobile were another $1bn.

• Ahead of Shanghai Henlius Biotech (2696 HK)‘s EGM and Court Meeting on the 22 January, the focus has shifted to Loyal Valley Capital (LVC)’s continued buying in the market.
• After the close of market last Friday, LVC held 7.8295%, above the 7.826% blocking stake. That % was as at 9th January. I assume LVC are still buying.
• Yet if you analyse how LVC has traded in and out of Henlius, they are not in it to block. They’re in for the back-end scrip option.  

• 95% of the way through the review period, there could be 3 changes for the SSE STAR50 (STAR50 INDEX) and 8 changes for the STAR100 Index.
• We estimate turnover of 4.1% for the STAR50 INDEX and 9.3% for the STAR100 Index. The net round-trip trade is CNY 14.1bn (US$1.9bn).
• The forecast adds to the STAR50 INDEX have outperformed the forecast deletes with steady outperformance over the last 3 months; the performance for the STAR100 Index is a lot better.

• Bloks Group (1850960D CH) was massively oversubscribed, traded 82% higher on Friday and closed its listing day 40% higher than the IPO price.
• Bloks Group (1850960D CH) now has a full market cap of US$2.7bn. However, lock-ups and cornerstone allocations result in a much lower free float.
• Index inclusions could take place in August and September, but the passive buying is a fraction of the number of shares that will come off lock-up expiry in early July.

• AH Premia are lower over the last few weeks of holiday and this past week of heavy SOUTHBOUND buying on Tencent, telcos, and banks.
• Finance and Tech are seeing large buying, but the really big moves over the past few weeks have been on Industrial Names (CRRC), and Materials, and Tech
• The VERY WIDE Tech spreads such as SMIC (981), Shanghai Fudan Microelectric (1385), CHina Rail Signal (3969), and Flat Glass (6865) have been HUGE performers.

• The prices of the construction materials stocks collapsed recently, with China National Building Material (3323 HK) holding firm, thanks to the buyback proposal.
• A sustained drop in cement prices and continued weakness in fixed asset investment revealed the challenging demand environment, making CNBM’s offer attractive.
• The buyback price equals 25.7x and 10.8x PERs for FY24F and FY25F, representing a hefty premium over peers. We continue to believe this is a good exit opportunity. 

• SHEIN’s general counsel frustrated UK lawmakers by refusing to answer certain questions
• It’s the latest in a series of potential obstacles that could derail a planned London IPO
• Add growing concerns over cotton supply chain & new threat from Amazon to existing risks

• Investors haven’t lost their enthusiasm for Tencent. The put/call ratio is a long way from indicating panic.
• Implied vols have risen but are far from panic levels with 1M implied at it’s 39th percentile over the past year and 15th percentile since 2001.
• Skew has risen significantly for out-of-the-money Puts as spot has moved into a range where there is higher Put positioning vs Call positioning. 

• Since the room for China’s medical insurance fund to continue to increase reimbursement for high quality innovative drugs is still large, we are optimistic about 2025 NRDL negotiation.
• Although it’s inevitable trend for commercial insurance to cover innovative drugs, it won’t truly improve the payment end until the contribution of commercial insurance to hospital revenue increase to 10-15%.
• Due to the complexity of the transaction, Haier Biomedical and RAAS terminated their merger. We think disagreements would easily emerge regarding the core issue in this transaction (i.e. the price).

• Yibin City Commercial Bank Co Ltd (2596 HK) is scheduled to debut on the HKEX on 13 January 2025 at a market capitalization of ~$1.6bn.
• The IPO free float is 100% as the offered shares represent all the listed shares. However, the significant amount of unlisted shares result in a low fcap.
• The security can be added at the June 2025 review if the stock price mimics the IPO debut of Bloks (325 HK) and surges by ~84%.

• Hong Kong and China shares have outperformed most Asian markets over the last year.  In HK the consumer discretionary sector has lost strength and momentum over the last 4 weeks.
• CSSC (Hong Kong) Shipping Co Ltd (3877 HK) was rated BUY after reporting strong results.  Analysts have a target price of $2.50 on the stock.
• Bosideng International Holdings (3998 HK) has shown earnings growth exceeding revenue growth for the last seven years. Technically, the stock looks weak near term, but analysts project 60% upside.

• We expect container shipping profits to begin to revert to historical levels in 2025
• Between 2009 and 2019, Evergreen Marine’s mean OpInc margin was negative 0.8%
• We believe path to mean industry returns & near-term risks both misunderstood; AVOID

• Back on the 20 December, VCredit Holdings (2003 HK), a provider of consumer financial services in China, announced a unconditional MGO from Ma Ting Hung, VCredit’s chairman. and concert parties.
• The catch? The Offer Price of HK$1.80/share was a 9.09% discount to undisturbed. It will not be increased. 
• VCredit’s Composite Doc is now out, with the Offer open for tendering, with a 3rd February first close. The IFA says “not fair and not reasonable“. Trading 45% through terms.

• Back on the 9th October, China’s leading state-backed brokerages Guotai Junan Securities (2611 HK) (GJS) and Haitong Securities (6837 HK) announced a scrip merger, with GJS the surviving entity.
• Barring a China Traditional Chinese Medicine (570 HK)-like obstacle/debacle, this transaction was a wrap. Fortunately, key regulatory approvals (SAMR and SASAC) have been ticked off.
• Approval from the Shanghai Stock Exchange was secured overnight. That was a formality. One approval remains – CSRC. Expect that condition to be satisfied shortly. GJS is no longer shortable.

• WuXi AppTec (2359 HK) aims to raise around US$150m via selling around 3% stake in WuXi XDC Cayman (2268 HK).
• WuXi XDC Cayman (WXDC) is a contract research, development, and manufacturing organization (CRDMO) focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Mainland investors continue their record southbound purchases during 2024 and into 2025. 
• GDS Holdings (9698 HK) , GDS Holdings (ADR) (GDS US) had a break out from its triangle formation in its continuation pattern.  The company may list its China REIT assets.
• Tencent (700 HK) had a symmetrical pattern breakdown after the announcement that the US pentagon had placed the company on its blacklist.  The company began a large share buyback.

• Gordon Tang increases buyout offer for Suntec REIT in response to investor dissatisfaction with original bid.
• Texas teachers ramp up real estate investments, committing 61% more funds totaling $1.6 billion by 2024.
• The Cheng family of Hong Kong faces challenges as an Australian casino operator experiences a cash shortage, impacting their holdings.

• Highlights ·       Set to finish 2024 with a 30% rise in rubber sale values YoY ·       Exports tires worth US$772.5 million during Jan-Nov 2024 ·       Minister charts course of action for 2025   Cambodia has made impressive strides in 2024, fueled by higher global rubber prices and exceptional progress in its burgeoning tire production and export industry, marking a pivotal step in its transformation into a key player in the global rubber value chain.
•   The Southeast Asian kingdom earned US$472 million from exports of NR latex during January-October 2024, up 22.5% over the same period the previous year.
• On the other hand, it gained US$568 million from exports of the product during January-November 2024, up 26.7% over the same period in 2023.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Shui On Land, Country Garden
• In the US, the UST curve bull flattened slightly in a shortened trading session. The yield on the 2Y UST fell 2 bps to 4.27%, while that on the 10Y UST was unchanged at 4.69%.
• The US equity market was closed yesterday, in observance of the national day of mourning for former president Jimmy Carter.

• LXJ International Holdings (LXJ HK) is looking to raise atleast US$100m in its upcoming Hong Kong IPO. The deal will be run by CICC and Haitong.
• LXJ International Holdings Limited (LXJIH) is a Chinese-style QSR brand having a chain of fast food restaurants in China.
• It was ranked first in the Chinese-style QSR industry in China by GMV in 2023, according to CIC, making it the largest Chinese-style QSR brand in China.

• Geovis Insighter Technology Co Ltd, the first commercial aerospace company to list on the Beijing Stock Exchange, achieved a successful IPO with a surge of 407.23% on its debut, in contrast to the recent failed listing attempt by another Chinese satellite company.

• Established in 2016, state-backed Geovis Insighter specializes in integrated solutions for spacecraft measurement, control management and aerospace digital simulation. The company’s stock was first listed on China’s New Third Board in February 2023.

• Its price fell 17.6% Monday, leaving the company with a total market value of 4.3 billion yuan ($587 million), surpassing the required 200-million-yuan threshold.

• The exchange ratio for the merger between Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) is 0.62x. 
• The merger closing is subject to several effectiveness and implementation conditions. The latest update suggests that the remaining conditions are CSRC and HKEx approvals.
• The satisfaction of the remaining conditions is a formality. At the last close and for an end February payment, the gross/annualised spread is 3.2%/26.4%. 

• Bloks (325 HK)  is expected to be assigned an index nationality of Hong Kong instead of China due to its incorporation in the Cayman Islands.
• The security is expected to be added at the September 2025 review following the 6-month IPO lock-up expiry which increases the fcap above the APAC threshold.
• The security is ineligible for the other global index until January 2026 because of the free float being below the minimum threshold of 15%.

• Guming Holdings (GUM HK) is looking to raise US$300m in its upcoming Hong Kong IPO.
• Guming Holdings (Guming) sells freshly-made beverages in China. Guming focuses on the mid-priced freshly-made tea beverage market with product prices typically ranging between RMB10-18.
• In our earlier notes, we had looked at the firm’s past performance. In this note, we discuss its refiling updates.

• LXJ International Holdings (LXJ HK) (knowns as Lao Xiang Ji or Home Original Chicken) is getting ready to complete its IPO in Hong Kong in 1H 2025. 
• Founded in 1982 by Shu Congxuan, LXJ International specializes in traditional Chinese style chicken dishes. The company is one of the major local players in China’s fast food industry.
• LXJ’s solid growth in sales and profits in the past several years despite weak Chinese economy is a strong reflection of the company’s loyal customers in China. 

• Centurion is considering an REIT IPO amidst a rebound in Singapore property trusts, indicating positive market sentiment.
• Microsoft plans to make a significant investment of $3 billion in India’s digital infrastructure, the largest commitment in Asia.
• Hong Kong is testing the market by announcing a land tender following the successful sale of an MTR plot, signaling confidence in the property sector.

• Bloks Group (1850960D CH) is looking to raise US$187m in its Hong Kong IPO.
• Bloks Groups (Bloks) operates in the toy segment where it primarily assembles character and brick-based toys.
• We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

• Back on the 14th November, Ping An Healthcare and Technology (1833 HK) (PA Gooddoctor announced a change in use of proceeds, including the payment of a punchy HK$9.70/share special dividend.
• A scrip option was concurrently afforded. The results of that scrip election have now been announced, the completion of which, triggers an unconditional MGO from Ping An Insurance  (601318 CH).
• The MGO price is HK$6.12/share, a price made public last month. For those investors trading the event and who bought PA Gooddoctor cum dividend, it has worked out well.

• Following on from the surprise development that China Mengniu Dairy (2319 HK) had reduced its stake below 5%, I’ve had a few readers asking about hypothetical situations regarding its stake.
• IF Mengniu is a seller, can’t Mengniu simply sell its entire stake to Shandong Xinjufeng Technology Packaging (301296 CH) (XJF)? Can Mengniu sell to XJF above the Offer Price?
• Both questions are addressed in the Takeovers Code. But only one is permitted.

• Tencent (700 HK) shares fell 7.3% on 7 January, after being designated a Chinese Military Company by the U.S. Department of Defense, prompting volatility to spike.
• Given the potential for further downside, or a relief rally, significant price movements and high volatility are to be expected.
• A long straddle is detailed to capitalize on the anticipated volatility in Tencent (700 HK) .

• In this note, we will take a look at the Asia Pacific IPO pipeline for 2025, starting with Hong Kong.
• This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
• The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

• On 6 January, Smart Share Global (EM US) disclosed a non-binding proposal from a Trustar Capital-sponsored MBO at US$1.25 per ADS, a 74.8% premium to the undisturbed price of US$0.72.
• The offer is unattractive to the IPO price (US$8.50), average sell-side price targets (US$1.87) and historical trading ranges. 
• Despite the light offer, the shareholder vote is done (two-thirds voting threshold) as the buyer consortium represents 64.0% of the voting power. A binding proposal will be forthcoming.  

• The review cutoff date for the March rebalance of the HSIII was 31 December. The changes will be announced on 21 February and become effective after the close 7 March.
• There could be 5 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
• Horizon Robotics (9660 HK) is a potential inclusion to the HSCI and the Hang Seng TECH Index (HSTECH INDEX) in March.

• Dream International, a Hong Kong-based company run by a Korean family, has seen significant growth in revenue and earnings per share over the past decade.
• Despite facing challenges such as theft of funds and holding a large cash pile, the company has shown strong performance with an 18% return on equity over the past 15 years.
• Trading at a low multiple of earnings and holding a significant cash reserve, Dream International presents an appealing investment opportunity for value investors due to its potential for continued growth and competitive advantages in the market.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• In 1H24, Hygeia Healthcare Group (6078 HK) reported revenue growth of 35% YoY to RMB2,382 million, mainly driven by a 37% YoY growth in hospital business.
• Hygeia’s gross profit margin contracted 60bps YoY to 31.8%. Lower government grant led to 230bps operating margin squeeze to 21.6%.
• The share price of Hygeia Healthcare has gone down almost 56% in the last one year. Accelerated organic growth and strengthening of margins are crucial to boost valuation.

• X.J. ELECTRICS not only relies on export revenue, but also on ODM/OEM models, with a relatively low proportion of independent brands. Such business model would not bring high profit margin.
• X.J. ELECTRICS’ equity is concentrated in PAN YUN/GUANGSHE PAN, but they have plans to reduce holdings.This makes us feel that actual controllers are more inclined to cash out through IPO.
• Valuation of X.J. ELECTRICS should be lower than Carote, as Carote has established branded business and its revenue proportion in different regions is also “healthier” than that of X.J. ELECTRICS.

• Tire production volumes are declining
• Major tire manufacturers are closing/withdrawing from the Chinese truck tire market
• Emerging competitors are expanding capacity, challenging established suppliers 

• The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
• There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
• If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.

• On 17 November 2024, WH Group (288 HK)  announced an EGM to approve the spin-off and separately list subsidiary Smithfield Foods on the NYSE or NASDAQ. 
• WHG, the world’s largest pork producer, announced on the 6th December the spin-off overwhelmingly gained shareholder approval. 
• Yesterday, the Smithfield NASDAQ IPO doc was made public. As per the filing: “the number and dollar amount of Smithfield Shares to be offered and sold have not been determined“.

• Quite a lot of new news to digest – GAPack (468 HK)‘s IFA, not altogether surprisingly, concluded that shareholders should not accept the Offer – in bold, red caps. 
• But more surprisingly, is the disclosure announcement that China Mengniu Dairy Co (2319 HK) has reduced its stake below 5%.  
• Evidently Mengniu is keeping its options open to tender – or not – and not have to make public disclosures. Keep an eye out on CCASS movements.

• The vote on Fosun Pharma’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) is on 22 January. The gross spread widened after the initial tightening due to the precondition satisfaction.
• Several readers have enquired about my thoughts on the widening spread. Our conversations have raised several potential concerns that could explain it.
• I think these concerns are unwarranted, and the vote should pass. At the last close and for a 15 February payment, the gross/annualised spread is 4.7%/55.0%.

• The U.S. Department of Defense announced that it has added numerous Chinese companies including Tencent and CATL as companies that work with China’s military.
• This is likely to negatively impact Tencent and CATL’s prices in the next several weeks but positively impact on some of the major Korean rechargeable battery and gaming stocks.
• The higher probability scenario at this point is for Tencent and CATL to be officially included in the Chinese Military Industrial Complex list in the coming weeks. 

• Jiangsu Hengrui Medicine (600276 CH) has filed for a listing on the HKEX (388 HK) and reports indicate that the raise will be at least US$2bn.
• In line with the Midea Group (300 HK) and S.F. Holding (6936 HK) H-share listings, the discount on the H-shares could be in the 20-25% range.
• There will be no Fast Entry in any indices but there will be index inclusions in multiple indices if the raise is larger or once the cornerstone investor lock-up ends.

• For Fosun, every major capital operation is the result of careful consideration after a long time. If it is a deal that Mr. Guo fully supports, there’s basically no problem.
• For the privatization, the board of directors of Henlius has no special opposition. We think that this privatization would have no impact on the operation of Henlius in the future,
• As the phenomenon of undervaluation of Henlius is difficult to fundamentally change, the Cancellation Price is attractive for most investors. There’re risks if choosing Share Alternative. Cash Alternative is preferred. 

• In today’s Morning Views publication we comment on developments of the following high yield issuers: China Hongqiao, Adani Green Energy, Fosun International
• In the US, the final services PMI for December 2024 edged up to 56.8 (56.1 p), while the composite PMI rose to 55.4 (54.9 p). Separately in November, factory orders declined 0.4% (-0.3% e / 0.5% revised p), and the final durable goods orders fell 1.2% (-0.5% e / -1.1% p).
• Long-end treasury yields climbed, with the UST curve bear-steepening after a weak auction of 3Y notes and amid a large supply of US corporate bond issuances.

• CPPIB is set to sell a China mall to Dajia Insurance for $163M, showcasing a significant real estate deal in Asia.
• GDS announces rebranding of its international unit as DayOne, reflecting a strategic shift within the company.
• Henderson Land plans expansion in Mid-Levels, Hong Kong, while Schroders markets Kowloon Complex floor after canceled auction. Singapore private home prices surge in Q4 with 3-5% growth predicted for 2025.

• EAF’s 9.875% note due in 2028 is trading at around 75, offering a potential return of over 25% in a 2-year timeframe
• Downside risk is protected with a cushion of under $550 million, while potential upside could reach up to 42% returns in just one year
• Despite past issues and cyclical headwinds, EAF has valuable assets like the Seadrift facility to cover its debt stack, making the credit situation particularly interesting at current levels

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• China Mengniu Dairy Co (2319 HK), Greatview Aseptic Packaging (468 HK)‘s largest customer, has ceased to be a substantial shareholder. Mengniu opposes the Shandong Xinjufeng offer. 
• This development suggests that Mengniu has low confidence in a management competing offer and will likely shift its business away from GA Pack.
• The stake sale will help the Shandong Xinjufeng Technology Packaging (301296 CH) offer turn unconditional as it will nudge minorities to tender, partly due to GA Pack’s uncertain outlook.  

• We see 38 potential and close adds and 51 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
• There have been many new listings in the last weeks of December. Some of them are fairly large and will be added and that increases the number of potential deletions.
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• This Insight analyses Meituan (3690 HK) tailor-made option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility insights are provided.
• The vast majority of traders opt for bearish strategies, but there are examples of contrarian trades.
• Although one-month implied volatility is historically low in its 7th percentile, it is above realized volatility. With an implied just below 40%, option premiums are significant in absolute terms.

• Bloks Group, a founder-led toy maker and owner of trusted brand “Blokees”, will price its IPO this week. Shares are set to begin trading on January 10, 2025.
• I would expect strong first trading-day return as HK public offering was already 5,000+ times oversubscribed at high end of marketed price range.
• I believe investors are rationally optimistic about the company. Bloks Group IPO attracted a surge of retail investors, and the stock may skyrocket above IPO price on first trading-day.

• The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
• In this insight, we take a look at the final rankings of potential ADDs and potential DELs for the March 2025 index rebal event.
• We expect one change for the HSTECH index in March 2025 and combined with capping flows currently see US$475mn one-way flows.

• This Insight analyzes Tencent (700 HK) tailor-made option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility insights are provided.
• Historically low implied volatility favors bullish or bearish long volatility strategies.
• Calendar Spreads are a popular strategy. Bulls and bears are both very active in the market, expressing their views through trades.

• The Hang Seng Index is the benchmark index for Hong Kong stocks. It follows a highly-subjective selection process which makes it difficult to predict index changes.
• In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes during the next review in March 2025.
• The index changes for the March 2025 index rebal event will be announced after market close on 21st February 2025.

• Without the buyback, it’s difficult to obtain reasonable market pricing by simply transferring the equity of Fosun Tourism or the equity of core assets, which is detrimental to Fosun Group.  
• To maximize returns, a wiser approach is to privatize Fosun Tourism first, then at a higher valuation level to spin off, sell, relist, attract strategic investment to “rationalize” the valuation.
• Heavy assets of Taicang/Lijiang projects would be sold. For core assets Club Med/Atlantis, the future plans could be different. It’s necessary to take a look at the Share Alternative Option.

• BYD’s deliveries grew by 51% YoY in December 2024 and 41% in the year 2024.
• The Brazil event will slow down overseas expansion, but overseas deliveries account for only 10% of total vehicles.
• We believe the stock has an upside of 39% and a price target of HK$356 for the next twelve months.

• Back on the 23rd October, flue gas treatment play China Boqi Environmental Hol (2377 HK) announced a buyback of 15% of shares out, at HK$1.20/share, a 16.5% premium to undisturbed.
• The Offer Doc was dispatched on the 28th November, and the Offer closed on the 3rd January.
• 304.6mn shares tendered against the buyback of 150.858mn shares, or a pro-ration of 49.53%. However, how the public shareholders tendered may provide a gauge for future Hong Kong Partial Offers. 

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK),  Arcadium Lithium (LTM AU), ESR Group (1821 HK), Goldlion Holdings (533 HK). 
• Lowest spreads: Lifestyle China (2136 HK), Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP). 

• The review period for the March rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 31 December.
• There could be one constituent change in March. With capping changes, that could lead to a one-way turnover of 2.6% resulting in a round-trip trade of HK$6.88bn (US$884m).
• Horizon Robotics (9660 HK) is also a potential inclusion to the HSCI Index in March, though inclusion in Southbound Stock Connect will only come through in May.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million through a primary/secondary offering.
• Event-Driven developments: Canvest Environmental Protection Group (1381 HK), Get Nice Financial Group Ltd (1469 HK), Greatview Aseptic Packaging (468 HK), Macromill, Inc (3978 JP), Avjennings Ltd (AVJ AU). 

• SOUTHBOUND gross trading activity was quite light the last two weeks of the year. Non-SB trading of HK was even lighter. Net buying was strong.
• Net buying on tech was VERY big but not on Alibaba Group Holding (BABA US) (small positive) or Meituan (3690 HK) (largest outflow). 
• Financials and High Div SOEs are back on the menu. SOUTHBOUND has been a Very Big Percentage of traded volume. 

• All Pre-Conditions of Newjf’s Offer have been satisfied. Based on Offer Document, the latest date for posting of the Response Document is Jan.7, 2025. First Closing Date is Jan.21, 2025.
• Newjf will make every effort to complete the acquisition and regain the control of international business so as to protect shareholders’ interests.So, the logic behind the deal is very solid.
• Mengniu’s attitude could be positive. A higher management offer seems more out of reach because the management lacks sincerity. We advise investors not to walk away from Newjf’s Offer easily.

• Alibaba’s Freshippo remained profitable and double-digit growth in the past nine months.
• Brazil labor authorities are investigating BYD’s construction site for “slave-like condition”.
• Tencent Music will compensate MCSC (Music Copyright Society of China) for the unauthorized usage of music copy rights.

• This Insight analyzes Hang Seng Index (HSI INDEX) tailor-made option strategies over the last five trading days, providing strategy analysis, trends, highlights, and volatility context.
• Despite the holidays and generally low volume, last week saw some interesting strategies traded.
• The highest premium earned was for a January ’25 Butterfly. The largest trade was a January ’25 Bull Call Spread, reflecting the popularity of long volatility strategies and spreads.

• Bloks Group (1850960D CH) is looking to raise US$187m in its Hong Kong IPO.
• Bloks Groups (Bloks) operates in the toy segment where it primarily assembles character and brick-based toys.
• In our previous notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison and discuss our thoughts on valuation.

• Water Oasis (1161 HK) skimped on its final dividend and paid only 2 HK cents (compared to our expectation of ~5 HK cents), sending its share prices down 14% post results.
• Insider buying after the results helped steady the shares, but we see that buying after the declaration of dividends as sending a wrong signal to some minority shareholders.
• There is immense value, trading at 4.4x PE and 0.3x EV-EBITDA, with 485 mn HKD net cash (~90% of the market cap), but we need increased dividends to crystallize it.

• MINISO Group Holding (9896 HK) has surged 34% since announcing strong 9M24 results, backed by robust revenue growth, in end November, 2024.
• With strong growth prospects, the stock could scale further in 2025, driven by rapid store expansion, blind box toys, ACG goods, and collaborations with top IPs like Harry Potter.
• MINISO’s evolution from a value retailer into a lifestyle brand with trademarked IP goods, innovative blind boxes, and creative retail formats enhances its competitive edge and drives growth.