In today’s briefing:
- Soundwill (878 HK): Thoughts On The Latest Scheme Fail
- Meituan (3690 HK): 1Q25, Main Businesses Up by 20%
- CSI A500 Index Rebalance Preview: Many Changes Expected; US$1bn Trade
- A/H Premium Tracker (To 23 May 2025): AH Premia Contract, H Premia Names Perform Best; Batteries!
- CSI All Share Real Estate Sector Index Rebalance Preview: Multiple Changes in June
- Foshan Haitian Flavouring H Share Listing: The Investment Case
- PegBio IPO Trading Update
- Connect SOUTHBOUND Flows (To 23 May 2025); Volumes OK, Telecoms & Banks Bought, Tech & Consumer Sold
- Hengrui Pharma (1276 HK): Trying to Achieve Total Global Index Inclusion
- Lucror Analytics – Morning Views Asia
Soundwill (878 HK): Thoughts On The Latest Scheme Fail
- After Goldlion (533 HK)‘s spectacular Scheme fail, Soundwill (878 HK) appeared destined to be the next failure as shares dipped hard ahead of the Scheme vote. And fail it did.
- Just like for Goldlion, Soundwill’s Offer was clearly light. The counter-argument was that terms were, arguably, as good as it gets. And no competing Offer would emerge. Minorities voiced otherwise.
- Hong Kong has been the proverbial graveyard for arb deals of late. However, in a positive sense, minorities in Goldlion and Soundwill simply rejected opportunistic Offers.
Meituan (3690 HK): 1Q25, Main Businesses Up by 20%
- In 1Q25, total revenue grew by 18% YoY, with main businesses up by 20% YoY.
- The operating margin rose by 3.6 ppt YoY by cutting every cost in 1Q25.
- We expect EPS will grow by 37% in 2025 and the stock has an upside of 48%.
CSI A500 Index Rebalance Preview: Many Changes Expected; US$1bn Trade
- There could be 18 changes for the CSI A500 Index at the June rebalance. Turnover is estimated at 1.7% and the round-trip trade is around US$1bn.
- The index was launched in September 2024, and the passive trackers have taken in a chunk of money since then. The flows to the stocks add to other index flows.
- A long add/short deletes trade has been stable over the last few months. The forecast adds could outperform following announcement of the index changes on Friday.
A/H Premium Tracker (To 23 May 2025): AH Premia Contract, H Premia Names Perform Best; Batteries!
- AH spreads are slightly narrower, but performance is concentrated in fewer names and broad spread volatility is up. BYD (1211 HK) now 5% through. CATL 10% through will help.
- It feels like there were some concentrated shorts on H vs A. BYD performance on CATL and Hang Seng upweight/inclusion exacerbate the issue. CATL H less liquid than people think.
- The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Monitor are both there free for SK readers.
CSI All Share Real Estate Sector Index Rebalance Preview: Multiple Changes in June
- There could be up to 8 adds and 3 deletes for the CSI All Share Real Estate Sector Index in June.
- Estimated one-way turnover is 3.2% at the rebalance leading to a round-trip trade of CNY 456m. There are a few stocks with over 0.5x ADV to trade.
- The forecast adds and deletes have performed in line over the last few months, and the announcement of the changes could lead to short-term outperformance.
Foshan Haitian Flavouring H Share Listing: The Investment Case
- Foshan Haitian Flavouring & Food (603288 CH), a leading Chinese pharmaceutical company, has filed its PHIP for an H Share listing to raise US$1 billion.
- Foshan Haitian Flavouring & Food Company (FHF HK) has been China’s leading condiments company in terms of sales volume for 28 consecutive years.
- The investment case rests on its market positioning, return to growth, industry-leading profitability, cash generation and strong balance sheet. However, the valuation of the A Shares is full.
PegBio IPO Trading Update
- PegBio raised HKD 300.8m (USD 38m) from its global offering and will list on the Hong Kong Stock Exchange on Tuesday, May 27th.
- In our previous note, we looked at the company’s GLP-1 product and its valuation.
- In this note, we provide an update for the IPO before trading debut. The free float shares are mostly at the hands of retail investors.
Connect SOUTHBOUND Flows (To 23 May 2025); Volumes OK, Telecoms & Banks Bought, Tech & Consumer Sold
- Gross SOUTHBOUND volumes back below HK$100bn a day this past week, but net buying was nearly HK$19bn, which is decent.
- Among the top buys as a percentage of volume, FINANCIALS and TELECOMS stand out, dramatically. Among top sells, it is CONSUMER and INFO TECH dominating the top 20.
- The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Monitor are both there free for SK readers.
Hengrui Pharma (1276 HK): Trying to Achieve Total Global Index Inclusion
- Jiangsu Hengrui Pharmaceuticals (1276 HK) debuted on the HKEX on 23 May, closing the first day 25% above its offer price, resulting in a market cap of ~$47bn.
- The security is expected to be assigned to Global-M Standard. Uncertainty for inclusion arises due to relatively low float cap even after the lock-up expiry.
- The security is forecasted to be added to Global-F All-World in December 2025 and receive an upweight in March 2025 following the lock-up expiry.
Lucror Analytics – Morning Views Asia
- In today’s Morning Views publication we comment on developments of the following high yield issuers: Sands China, UPL Limited
- US treasury yields ended slightly lower in a holiday-shortened session on Friday. The decline in yields was supported by Treasury Secretary Scott Bessent’s remarks that regulators may be “very close” to easing the supplementary leverage ratio, which could support banks’ trading of treasuries.
- That said, larger yield declines earlier in the day were pared after President Donald Trump issued new tariff threats against the EU and Apple Inc. The yield on the 2Y UST was unchanged at 3.99% (after dropping as much as 9 bps in the day), while the yield on the 10Y UST ended 2 bps lower at 4.51% (after declining up to 8 bps).
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