Daily Brief China: Shanghai Henlius Biotech , Ping An Healthcare and Technology, Cambricon Technologies Lt, CNY, Tencent, Hang Seng Index, Sunac China Holdings, Freetech Intelligent Systems, Longfor Properties and more

• The vote on Fosun Pharma’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) is on 22 January. The gross spread ballooned today due to LVC’s amassing a blocking stake.
• There are valid arguments for LVC to block the vote or to support the offer. LVC’s trading behaviour over the coming days will point to its voting intentions. 
• I continue to believe that LVC will support the offer. At the current price and for a 15 February payment, the gross/annualised spread is 9.1%/160%.

• Through Special Dividend, Ping An has achieved its initial plan at a low price. Ping An ruled out the possibility of privatization, which could be due to the high cost.
• Ping An may hope to further leverage the synergies, increase resource tilt towards PAGD, thereby helping it out of the trough.But we’re not optimistic due to PAGD’s problematic business model.
• The gap between PAGD and JD Health/Alibaba Health will continue to widen. Based on our forecast, we think PAGD is overvalued. Its valuation should be lower than JD Health/Alibaba Health.

• There could be 1 constituent change for the STAR Chip Index at the March rebalance. There will also be a few capping changes.
• Estimated one-way turnover is 6.5% resulting in a round-trip trade of CNY 3.12bn (US$426m). Passives need to trade between 0.24-0.33x ADV in the potential changes.
• There is one very close add and the final list could change depending on price performance over the next 10 trading days.

• Trump plans to put serious tariffs on Mexico and Canada due to immigration and drug issues, impacting Asian currencies
• US and UK CPI data in focus for the week ahead, with expectations of higher inflation
• Currency depreciation pressures in Asia expected to continue, with China and Korea most vulnerable to depreciation pressures

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• Tough week with 82% of optionable stocks we survey declining on the week but no sign of panic as investors still prefer Calls over Puts. 
• Tencent was far and away the volume leader, accounting for 37% of all option trading.
• Materials was the only Sector to see price gains and implied vol rose across all Sectors we survey.

• HSI and HSCEI were down every day this past week.
• HSI total Put volume heavier than total Call volume on the two largest down days this week showing rising concern amongst investors.
• Having dropped 5.6% to start the year HSI has already moved well past the implied move at the start of the month.

• Sunac faces financial distress as China Cinda files new wind-up petition due to inability to repay debt.
• Country Garden plans to reduce $11.6B offshore debt as home sales decline in current market conditions.
• UOL from Singapore successfully invests $285M in Sydney office amid market revival, showcasing confidence in growth.

• Freetech Intelligent Systems (1901036D CH) is looking to raise up to US$200m in its upcoming Hong Kong IPO.
• The firm is a leading intelligent driving solutions provider, covering advanced assistance system (ADAS) and autonomous driving system (ADS) technologies.
• In this note, we look at the firm’s past performance.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Longfor Group, Logan Group, Vedanta Resources, Sunny Optical
• In the US, the December 2024 nonfarm payrolls unexpectedly jumped to 256 k (165 k e / 212 k revised p), with November’s data adjusted downwards by 15 k. Average hourly earnings edged down to 0.3% m-o-m (0.3% e / 0.4% p) and 3.9% y-o-y (4.0% e / 4.0% p), while the unemployment rate declined to 4.1% (4.2% e / 4.2% p).
• Separately, the January 2025 (preliminary) University of Michigan consumer sentiment index fell to 73.2 (74.0 e / 74.0 p). The one-year inflation expectation among consumers soared to 3.3% (2.8% e / 2.8% p), the highest since May 2024 and above the 2.3-3.0% range seen in the two years prior to the COVID-19 pandemic.