In today’s briefing:
- A/H Premium Tracker (To 21 Feb 2025): AH Premia Continue to Fall; Wider Spreads Narrow Most
- HSCEI Index Rebalance: Beigene, ZTO Replace Sino Biopharma, Li Ning; Surprise for Some
- HSTECH Index Rebalance: Horizon Robotics, Tencent Music Replace East Buy, ZA Online; US$2.3bn Trade
- HK Connect SOUTHBOUND Flows (To 21 Feb 2025); Another HUGE Jump in Value Traded, Consumer Still Bid
- HSI Index Options Weekly (Feb 17-21): Alibaba Reignites Momentum
- Xiaomi (1810 HK) – Riding the Wave. How Option Traders Navigate. Top Trades Analyzed.
- MIXUE Group (2097 HK) IPO: Reasonably Attractive Pricing
- Mixue Group IPO: The Good, The Bad and Valuations
- Monthly Chinese Tourism Tracker | LNY Numbers Just OK | Airlines Filling Up | (February 2025)
- Pre-IPO MIXUE Group (2097.HK) – The IPO Is Attractively Priced
A/H Premium Tracker (To 21 Feb 2025): AH Premia Continue to Fall; Wider Spreads Narrow Most
- AH Premia continue to fall with the widest spreads narrowing more than the narrowest spreads, and liquid pairs seeing more narrowing than illiquid pairs.
- Average AH Premia are at a new 5yr low (longer, actually, but charts below only show 5yrs). The big warning sign? Rolling 52wk performance of A vs H in pairs.
- Momentum is going to work until it does not. A new Trump EO this weekend seems to have potential to lead to more restrictions on US ownership of Chinese stocks.
HSCEI Index Rebalance: Beigene, ZTO Replace Sino Biopharma, Li Ning; Surprise for Some
- BeiGene (6160 HK) and ZTO Express Cayman (2057 HK) will replace Sino Biopharmaceutical (1177 HK) and Li Ning (2331 HK) in the HSCEI INDEX at the close on 7 March.
- Estimated one-way turnover at the rebalance is 5% resulting in a round-trip trade of HK$6.4bn (US$825m). The final capping will use the close of trading on 4 March.
- ZTO Express Cayman (2057 HK) is also an inclusion to a global index with implementation scheduled for the close on 21 March.
HSTECH Index Rebalance: Horizon Robotics, Tencent Music Replace East Buy, ZA Online; US$2.3bn Trade
- As expected, Horizon Robotics (9660 HK) replaces East Buy Holding (1797 HK) in the Hang Seng TECH Index (HSTECH INDEX) in March.
- In a surprise, Tencent Music Entertainment Group (1698 HK) will be added and ZhongAn Online P&C Insurance C (6060 HK) will be deleted.
- Horizon Robotics (9660 HK) is also an inclusion to the HSIII Index and HSCI Index and will be added to Southbound Stock Connect in May.
HK Connect SOUTHBOUND Flows (To 21 Feb 2025); Another HUGE Jump in Value Traded, Consumer Still Bid
- This past week saw SOUTHBOUND Connect clear HK$800bn of gross value traded, and net value was near recent highs at +HK$51bn. Consumer and finance names continue to be the rage.
- Notable is the HUGE back-and-forth. If HK$800bn traded and SOUTHBOUND only bought HK$51bn, HK$375bn was round-tripped for short-term purposes.
- That is twice the “excess” traded seen for the past year. Tencent (700 HK) saw US$14bn traded but net buying was US$121mm.
HSI Index Options Weekly (Feb 17-21): Alibaba Reignites Momentum
- The scorching rally continues with Alibaba saving a lackluster week with huge earnings driven move on Friday.
- Implied vols are in the 85th percentile and struggling to move higher with spot.
- Third week in a row where Call volume as a percent of total slipped indicating that buying fatigue might be setting in.
Xiaomi (1810 HK) – Riding the Wave. How Option Traders Navigate. Top Trades Analyzed.
- This Insight analyses Xiaomi Corp (1810 HK) tailor-made option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility context are provided.
- These traders tailor structures to risk budgets and take calculated bets. Strategies are mostly bullish, and exclusively long volatility despite implied volatility in its 98th percentile.
- Call spreads can indicate where bullish traders expect the rally, driven by its own momentum, to peak. One trade suggests a ceiling of 70 by mid-year.
MIXUE Group (2097 HK) IPO: Reasonably Attractive Pricing
- Mixue Group (MIX HK)‘s IPO price of HK$202.5 looks attractive, as it is priced at 16.6x FY24 and 13.5x FY25 PER, below the mainland China peer average.
- We estimate a P/B of 4.6x, putting it marginally lower than the sector best-fit line. We think there is potential for at least a 20-30% upside after the IPO.
- MIXUE offers the possibility to participate in the spin-off of its overseas businesses in the medium term, which is explicitly spelt out as a plan.
Mixue Group IPO: The Good, The Bad and Valuations
- Mixue Group (MIX HK) is offering 17.1 million shares at a price of HK$202.50 in its Hong Kong IPO aiming to raise up to HK$3.45 Bn.
- The company demonstrated stellar growth in store count, revenue, and profits, focusing on the mass-market freshly made beverage segment despite a sector slow down in 2024.
- Mixue’s pace of store expansion may slow down going forward, however its ultra-low prices (RMB4-10) and scale provide a strong foundation for long-term sustainable performance.
Monthly Chinese Tourism Tracker | LNY Numbers Just OK | Airlines Filling Up | (February 2025)
- Late January timing of LNY holiday boosted last month’s travel and tourism statistics
- Chinese airlines are filling outbound flights, which should lift pricing & margins (eventually)
- Numbers suggest Chinese consumers eager to travel, but spending remains muted
Pre-IPO MIXUE Group (2097.HK) – The IPO Is Attractively Priced
- MIXUE’s valuation should be higher than peers such as Guming and Baicha Baidao Industrial. A comfortable valuation range is 18-20 P/E, higher than peers. So, the IPO pricing is attractive.
- 2024 full-year net profit is HK$4.8 billion.Net profit could reach HK$5.7 billion (up 19% YoY), HK$6.6 billion (up 16% YoY), HK$7.6 billion (up 15% YoY) in 2025, 2026, 2027, respectively.
- Since Nongfu Spring’s revenue scale/net profit margin is higher than MIXUE, MIXUE’s valuation should be lower than Nongfu Spring. Investors need to be alert to the post-IPO performance growth pressure.
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