In today’s briefing:
- BYD (1211 HK): God’s Eye & Potential HSTECH Index Inclusion
- Skyworth (751 HK): Another Buyback
- A/H Premium Tracker (To 28 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- HK Connect SOUTHBOUND Flows (To 28 Mar 2025); Banks and Divs Bought Again
- Tencent (700 HK): Volatility Plays and Skew Top Trades
- QingSong Health Corporation – Pain Points of the Business Model and the Outlook
- Dongfang Electric (1072 HK): Returning to Growth in 1Q25 Despite Weak FY24
- Longfor Group – Earnings Flash – FY 2024 Results
BYD (1211 HK): God’s Eye & Potential HSTECH Index Inclusion
- BYD (1211 HK) raised US$5.6bn in a secondary offering a few weeks ago and the stock is trading a lot higher than the placement price.
- Buying from global index trackers is done, but there will be more passive buying from Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) trackers later this month.
- With the release of the God’s Eye advanced driver-assistance system (ADAS), the stock could be added to the Hang Seng TECH Index (HSTECH INDEX) in June, bringing more passive inflows.
Skyworth (751 HK): Another Buyback
- On 27 March, Skyworth Group Limited (751 HK) launched a conditional buyback to acquire a maximum of 350.0m shares (15.67% of outstanding) at HK$3.11, a 15.2% premium to undisturbed price.
- Unlike the previous buybacks, the controlling shareholder can vote. Therefore, while the buyback offer is unattractive, the shareholder vote will pass.
- Based on the irrevocables, a 100% share minority participation rate implies a minimum proration of 37.84%. The actual proration was around twice the minimum proration for the previous two.
A/H Premium Tracker (To 28 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia bounce higher. Spread curve torsion was as expected. Narrow spreads saw Hs suffer more. Wide spreads saw H outperformance.
- The last few weeks I said warning signs were flashing and spreads could widen. This week they widened despite big SOUTHBOUND buying.
- I expect the right thing to do is hunker down and be flat H/A risk.
HK Connect SOUTHBOUND Flows (To 28 Mar 2025); Banks and Divs Bought Again
- Q1 saw record quarterly inflows by SOUTHBOUND investors at HK$435bn, beating the previous record of Q1 2021 by more than HK$100bn. This week was +HK$37bn.
- That’s decent net buying still. Keeping that pace would mean a new record. It IS possible this excess flow is state-managed (or state-insisted as insurers up equity investment ratios).
- Included is a summary of important China Stocks-relevant news as I saw it this week, but tariffs, retaliation, US growth prospects, etc will all matter more.
Tencent (700 HK): Volatility Plays and Skew Top Trades
- Over the past five trading days, Tencent (700 HK) multi-leg option strategies showcased a variety of approaches. Strategy highlights and volatility context are provided.
- With short-term implied volatility below its median, long volatility strategies dominate, with a balanced mix of bullish and bearish positions.
- Open interest spread across monthly and quarterly expiries, with some notable strategies taking advantage of longer expiration dates, and a steep negatively sloped skew $475.
QingSong Health Corporation – Pain Points of the Business Model and the Outlook
- The business model of QingSong is a platform offering comprehensive healthcare services and tailored financial resources. By connecting different stakeholders, QingSong can monetize its user base, creating a virtuous cycle.
- Qingsong’s revenue structure has undergone significant changes. However, if Qingsong’s future business focus is on Qingsong Healthcare services, it may be difficult to generate large-scale profits in the end.
- Listed insurance intermediary platforms have been in the shadow of a decline in stock prices. So, there is concerns that future share price performance of QingSong may not be optimistic.
Dongfang Electric (1072 HK): Returning to Growth in 1Q25 Despite Weak FY24
- Dongfang Electric (1072 HK)‘s 1Q25 express report suggested earnings may increase 15-25% YoY, reversing the YoY decline in 4Q24 and FY24. This is encouraging.
- Its signs record new orders in FY24, fuelling its order backlog to Rmb152.6bn, which equals 2x the FY25F revenue. 2H24 new order momentum is better than 1H24.
- The pending A-share placement, while diluting EPS, will enhance book value for the H-share holders. Its 6.4x PER and 7.3% dividend yield are inexpensive.
Longfor Group – Earnings Flash – FY 2024 Results
- Longfor Group’s FY 2024 results were acceptable.
- The earnings decline was in line with expectations, driven by lower revenues and margins from the property development segment.
- We project that Longfor’s contracted sales will continue declining in FY 2025, given the company’s slowdown in land bank replenishment.
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