In today’s briefing:
- Prosus Is Elevated Vs. Tencent As The Accretion Trade Unfolds
- CK Hutchison (1 HK): State of Limbo as Exclusivity Deadline Approaches
- Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
- HSI Index Tactical View: How Much Further Can the Rally Run?
- Tencent/Netease: Zero Approval in July
- [JD.com, Inc (JD US, SELL, TP US$24) TP Change]: C2Q25 Preview: Near Term Loss Pressure Imminent
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – July 2025
- GCL Tech (3800): Why Wait?
- Sinotau (先通医药) Pre-IPO: A Niche Radiopharmaceutical Player
- More Breakouts and Risk-On Developments; Monitoring Rotations: Miners, Retail, Lithium, China
Prosus Is Elevated Vs. Tencent As The Accretion Trade Unfolds
- Since unwinding the Naspers (NPN SJ)/Prosus (PRX NA) circularity, Prosus has been selling Tencent shares, and buying back its share. Separately, Tencent is buying its shares to offset Prosus’ selling.
- Prosus’ stake in Tencent has now edged below 23%, a little over seven months since dipping below 24%.
- On an implied stub and relative value, Prosus is elevated to Tencent, suggesting an unwinding of the stub.
CK Hutchison (1 HK): State of Limbo as Exclusivity Deadline Approaches
- The 145-day exclusivity period between CK Hutchison Holdings (1 HK) and the BlackRock-TiL consortium for the politically charged ports deal ends on July 27.
- The transaction is in limbo as China’s preferred pathway for approval (COSCO is included in the consortium as an equal partner) has several issues.
- It is equally probable that the deal will be finalised in some shape or form or fall apart. With shares up 31% and nearing a five-year high, take profits.
Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
- Cloud Village (9899 HK)‘s stock price has doubled over the last quarter and the increased market cap should lead to global index inclusion in August.
- Short interest in Cloud Village (9899 HK) is at an all-time high and has increased in lockstep with the stock price.
- Cloud Village (9899 HK) has outperformed Tencent Music Entertainment Group (1698 HK) and now trades at much higher valuations. A pair trade looks attractive here.
HSI Index Tactical View: How Much Further Can the Rally Run?
- The Hang Seng Index (HSI INDEX) has reached new highs (25538). Our quantitative model says the index has reached a 75% probability of reversal.
- Let’s break down the model’s info: PRICE MODEL 75%, TIME MODEL 75%, combined prob. of reversal is 75%. The fact that both model’s factors are overbought is “bearish”.
- Can the index climb higher? Our detailed analysis is in the insight below, together with screenshots from the model.
Tencent/Netease: Zero Approval in July
- China announced game approval for the July batch. The number of games approved remained at a higher level than 2023.
- The pace of China game approval appears to have accelerated to the same level as pre-tightening.
- In July, 7 listed companies that we tracked received zero domestic game approval. Having said that, overall sentiment is improving and gaming names have performed well YTD.
[JD.com, Inc (JD US, SELL, TP US$24) TP Change]: C2Q25 Preview: Near Term Loss Pressure Imminent
- We expect JD.com to report C2Q25 revenue/adjusted operating profit growth of 16%/(63%) YoY, which is 2%/(50%) vs. cons. due to the takeout subsidies.
- Despite the surge in new users, we remain skeptical on the ST effectiveness of food delivery (FD) cross-selling. We expect 2025 FD losses at RMB29bn.
- We keep JD as SELL and cut TP from US$25 to US$24.
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – July 2025
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- We add Asian Terminals (ATI PM) to our value conviction list. Read Asian Terminals Inc (ATI PM): Steady And Cheap Container Port Terminal Operator
- Our top picks are Asian Terminals (ATI PM), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Philippine Stock Exchange (PSE PM), and Ginebra San Miguel (GSMI PM).
GCL Tech (3800): Why Wait?
- Suffering from overcapacity for a while, the company is a beneficiary of the Chinese government policy to consolidate the solar industry.
- At 0.6x PBR and a share price at HKD 1.3, far from its high at HKD 4, sounds like a bargain.
- Management has conducted one share buy back this year and share price rallied afterwards.
Sinotau (先通医药) Pre-IPO: A Niche Radiopharmaceutical Player
- Sinotau, a China-based clinical-stage biotech, is looking to raise at least USD 100 million via a Hong Kong listing. The book runner is CICC.
- In this insight, we look at the company’s core products, XTR008, XTR006, XTR004, and XTR003, including its mechanism and clinical data.
- We also look at the company’s pre-IPO investors and management team.
More Breakouts and Risk-On Developments; Monitoring Rotations: Miners, Retail, Lithium, China
- We remain near-term bullish since our 4/22/25 Compass, and our intermediate-term outlook remains bullish as well (as of our 5/14/25 Compass).
- Short-Term supports on the SPX include the 20-day MA (currently 6233), 6200, 6100-6150, and 6028-6059, with additional supports at 5804-5854 and 5700-5785. Buy pullbacks to these areas.
- SPX has not closed below its 20-day MA for two months, but even when it does, all we would expect to happen is for a new, less-steep uptrend to form.
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