In today’s briefing:
- STAR50 Index Rebalance: Two Changes in June (As Expected)
- SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
- SSE180 Index Rebalance: Small Impact but Not Widely Tracked
- CSI300 Index Rebalance: 9 Changes as Discretion Used
- China Healthcare Weekly (May.26)- 9th National VBP, China’s Strength in ADC Field, Ovctek, Eyebright
- JD Industrials IPO: The Bull Case
STAR50 Index Rebalance: Two Changes in June (As Expected)
- The index committee has used a 6-month minimum listing history and that results in two changes. This is the first rebalance with less than 5 changes at a review.
- One way turnover is estimated at 1.03% and will result in a one-way trade of CNY 1,025m. Given the adds are new listings, there will be some reverse funding flow.
- There appears to be little pre-positioning on the adds while there is a bigger buildup on the deletes.
SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
- There are 5 changes for the SSE50 Index that will be implemented at the close on 9 June. There is over 1x ADV to sell on a few deletions.
- We estimate a one-way turnover of 5.3% at the June rebalance leading to a one-way trade of CNY 3.84bn. Index arb activity could add to the impact on the stocks.
- The adds outperformed the deletes from February to April but have given up a lot of the outperformance over the last month.
SSE180 Index Rebalance: Small Impact but Not Widely Tracked
- There are 18 changes for the SSE180 Index that will be implemented at the close of trading on 9 June.
- The impact on the stocks is small but this is not a widely tracked index, so there could still be opportunities for some high risk/reward basket trades.
- With Northbound Stock Connect eligibility no longer drawing on the SSE180 Index constituents, the index could lose relevance over time.
CSI300 Index Rebalance: 9 Changes as Discretion Used
- There are 9 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
- While nearly all the changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used discretion.
- The Energy sector is the biggest gainer in terms of index spots, while the Consumer Discretionary and Health Care sectors lose two index spots each.
China Healthcare Weekly (May.26)- 9th National VBP, China’s Strength in ADC Field, Ovctek, Eyebright
- The 9th national VBP is drawing near. As all drugs under national/provincial VBP are scheduled to be executed before 2025/12/31, there should be new policies in 2026 and beyond.
- The capabilities of Chinese pharmaceutical companies in ADC field have at least stepped onto a platform to compete with international giants, which is clearly more progressive than during PD-1 era.
- We analyzed key points of Ovctek. Its investment logic has changed and centralized procurement will break investors’ expectations for Ovctek’s future performance growth. Valuation may continue to be under pressure.
JD Industrials IPO: The Bull Case
- JD Industrials (2231713D CH)/JDI, a leading industrial supply chain technology and service provider in China, has filed for a US$1bn IPO. JD.com Inc (ADR) (JD US) owns a 77.95% stake.
- JDI is the largest industrial supply chain technology and service provider in China in terms of GMV, customer coverage and SKU offerings in 2022, according to CIC.
- The key elements of the bull case rest on large addressable markets, market share gains, robust product revenue growth underpinned by key accounts, improving underlying margin and strong cash generation.
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