Daily Brief China: Nexchip Semiconductor , Tencent, Meituan, China South City, Vipshop Holdings and more

• The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
• One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

• We view both Weixin Video Account (WVA) and Douyin China as secondary assets to their respective parents, which in our view, may lead to them forming…(TBC)
• However, rising competition in the short-play (短剧) market may put the two businesses in more direct confrontation, which may delay or diminish the chance for two to work together;
• We view Tencent as the likely winner in the continuing evolution of short video as it considers various options to maximize the value of WVA traffic.

• Local news reported an unnamed expert suggesting ByteDance might be buying Eleme for US$7bn, leading to share of Meituan to fall;
• While we believe (1) buying a food delivery business to complement Douyin’s in-store business makes some sense and…
• (2) ByteDance has been aggressive in pushing the boundary of its businesses, an entry into domestic food delivery is a daunting challenge that yields very little benefits for ByteDance;

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China South City

• Amid demand by consumers for cost effective items, we expect that demand for discounted apparel will sustain into 2024…
• We expect high levels of apparel sales continued in December, as VIPS reported double-digit GMV growth for various types of winter related apparel items during 12/12…
• China’s cost-conscious spending environment favors VIPS, in our view. We maintain BUY and raise TP to US$ 18.1, implying 7x FY24 non-GAAP P/E.