Thematic (Sector/Industry)

• OVERSEAS:  2 Day SPX gain +2.2% (Japan view; Tech leads SOX 2-Day +6.7%; Metals rally on  China normalization  Slower wage growth + falling Used Car prices supports slower Fed hikes
• JAPAN:  NKY Futs +0.8% vs Cash; USDJPY ¥131.89;  Looking for strong Tech/SPE (SOX) + Commodities (China) bid to start; Go-To-Travel resumes; Continued strong news flow on #Decarbonization spending.
• DAILY NUGGET:  Afeela – a winner ? Get used to it. This is the first result of the Sony Honda Mobillity JV. 

• Xinjiang Goldwind Science & Technology (2208 HK) performed badly in 2022 and with sustained pressure on WTG price, earnings will stay under pressure. We will only pick up post-FY22 result.
• Removal of “zero COVID” policy and consumption recovery should revive sportswear business of China Dongxiang Group (3818 HK). Improvement in equity market will boost its investment portfolio value.   
• Valuation retreat for China Longyuan Power (916 HK) has made it more attractive. Rebound in electricity demand, continued green energy push and potential asset injection are drivers. 

What does 2023 have in store for the Chinese healthcare industry? In the next webinar, we speak with Insight Provider Xinyao (Criss) Wang on just that, as she shares with us the landscape of the Chinese healthcare industry in 2023. From its outlook in 2023, to the opportunities present, Criss will share with us her thoughts and insights in this next episode of our Webinar Wednesdays. Have any burning questions about the Chinese healthcare industry for 2023? Get them answered in the live Q&A that will conclude the session. 

The webinar will be hosted on Wednesday, 11 January 2023, 17:00 SGT/HKT.

A Hong Kong/China Healthcare Analyst, Criss has over 13 years’ worth of experience in both finance and healthcare. She covers clinic operations, investment and equity research in both the Chinese and overseas markets.

• We again write about one stock each from the large, mid and small cap portfolios, briefly giving the reasons for their inclusion.
• The three companies we write about this week are Abbvie Inc (ABBV US), Becton Dickinson and Co (BDX US) and Ciena Corp (CIEN US) 
• For the seven weeks since inception ended 6 Jan the combined innovation portfolio was +1.6%, versus DJIA -0.3%, S&P500 -1.8%, Nasdaq -5.2% & MSCI-ACWI-ETF +0.1%, all in US$ terms

• Centralized procurement of interprovincial dental implants would open the bid on Jan.11. Korean brands and European brands are all included. There is “no safe haven” for products with consumption attributes.
• In 2023, we are optimistic that China healthcare would gain more household expenditure in the “Long COVID” effect, thus generating excess returns under the logic of expanding domestic demand.
• 2023 should be better than 2022. There’re strong expectations but weak realities in 2023Q1-Q2, during which more trading opportunities occur. However, in Q3-Q4, investors may need to be careful.

• Many newcomers are trying to replicate Shein’s path, but none has proven to be successful, as Shein’s moat in supply chain requires longterm down-to-earth work. 
• PDD’s Temu will be Shein’s biggest challenger because it is pursuing a different model. Instead of penetrating into the supply chain, Temu offers value-for-money, fair quality products from all categories.
• Although Shein’s foundation remains solid (ladies’ apparel + developed countries), growth is slowing down. We reiterate BUY to PDD and BABA and SELL to SE and VIPS after studying Shein.

• A troubled local government financing vehicle (LGFV) located in Guizhou, one of China’s most indebted provinces, has secured approval from banks to delay repayment.
• Since 2021, Zunyi Road and Bridge has been impacted by the prolonged nationwide housing crisis.
• As of June 2022, the LGFV had accrued 45.9 billion yuan in interest-bearing debts, of which 14.1 billion yuan were due within a year.

• ‘Agflation’ to buoy India’s Ag economy, linking of crop to fuel key inflation catalyst
• Low capital formation, high capital productivity – a paradox, improving cashflows to drive capex led consumption growth
• Companies that cater to farm economy are primed for accelerated multi-year growth and valuations don’t adequately capture future earnings potential

• Douyin eCommerce next important step is Douyin Shopping Mall, an in-app page like Taobao/PDD. 
• We are conservative about Douyin Shopping Mall’s potential, and we suggest that it could only reach 20% of Douyin eCommerce GMV in the long term.  
• We suggest that the slowdown growth of Douyin eCommerce will be positive to BABA mostly, and then followed by PDD and JD. Kuaishou is encountering similar issues with Douyin. 

• We update our China online advertising model and forecast that the industry will reach RMB 1,167 bn with 9.3% YoY in 2023, rebounding from 2.7% YoY in 2022.
• Bytedance’s slowdown, Tencent’s Video Account, and some sectors’ uneven faster-than-expected recoveries will be three key themes that could generate investment opportunities in 2023.
• We recommend BUY Tencent, BABA, PDD, and Meituan within the sector.

• China will manage COVID-19 with measures against Class B infectious diseases, instead of Class A infectious diseases, in a major shift of its pandemic response policies. Zero-COVID policy has ended.
• In 2023H1, China could still be in the period of pandemic adjustment/recovery. However, this does not mean that there is no good trading opportunity. We’re optimistic about the upcoming rebound.
• Due to favorable policies, the market would continue the playbook of economic recovery in short term.Compared with other countries, China’s still one of the few growth engines in the world.

• Anta Sports Products (2020 HK) will likely see its 4Q22 and 1Q23 businesses negatively affected by the increase in infections as China loosens its COVID combating measures.
• The market environment faced by Bosideng International Holdings (3998 HK) is more challenging as peak season demand is affected. However, the positive long-term growth story remains unchanged.
• Haier Smart Home Co Ltd (6690 HK) will be less affected when compared with the other two. We see better margin in FY23 and share buyback is positive. 

• This year’s NRDL negotiations could be a turnaround. If the final result really shows a moderate price decline, it will be “a landmark event” for the innovative drug industry.
• Starting from 23Q2, with the peak of respiratory disease/COVID-19 outbreak past, the demand for related TCM would weaken. Then, the pullback of TCM would really begin.
• Even if biotech initially tells the story of becoming a biopharma to obtain financing, it will not be realized in the end.

• We again write about one stock each from the large, mid and small cap portfolios, briefly giving the reasons behind their inclusion.
• The three companies we write about this week are Samsung Electronics (005930 KS) , Schlumberger Ltd (SLB US) and Whirlpool Corp (WHR US) 
• For the six weeks ended 30 Dec the combined innovation portfolio was -1.7, versus DJIA -1.8%, S&P500 -3.2%, Nasdaq -6.1% & MSCI-ACWI-ETF -2.4%, all in US$ terms

• China’s re-opening in 2023 will lead to gradual economy recovery. GDP growth is expected to rebound to ~4.5% from 3.3% in 2022. 
• China’s earnings growth will resume, and equity market valuation is at an attractive level now.
• Near-Term re-opening related investments opportunities and long-term growth themes of the China market.

• The India-Australia Economic Cooperation and Trade Agreement (INDAUS ECTA) has come into force this week onward.
• Out of the plethora of goods and services to be influenced, we find the wine industry especially in India could be an interesting beneficiary.
• Given that Australia is one of the bigger wine exporters, expansion into the Indian market might change the dynamics of domestic wine industry, and players like Sula Vineyards (1332009D IN). 

• India’s packaged and processed food segment is in limelight with leading consumer companies launching/expanding their branded staples portfolio, and recent acquisitions in the branded spice segment.
• Reliance retail launched packaged staples and food brand Independence; a potential competition to Adani Wilmar, ITC Ltd, and Tata Consumer that have been expanding in this space.
• Dabur (DABUR IN) had announced acquisition of a 51% stake in veteran spice brand Badshah Masala in October this year, now followed by Wipro Consumer’s takeover of spice player Nirapara.

• GEM funds reduce exposure to Taiwanese Semiconductors, switching from overweight to their largest underweight in over a decade.
• Absolute positioning levels still high, with Taiwanese Semiconductors the largest country/industry allocation for 61% of the managers in our analysis and a top 3 allocation for 78%.
• Value investors moved first, switching from near equal weight in early 2020 to -1.95% underweight today.  All Style groups are now positioned underweight the MSCI EM benchmark, on average.