Daily Brief China: Yum China Holdings Inc, Shanghai Fudan Microelectronics Group, Lygend Resources & Technology, iShares China Large-Cap (FXI), ABM Investama, Alibaba Health Information Technology, Sunshine Insurance, Weilong Delicious Global, WuXi AppTec Co Ltd and more

• JD Health (6618 HK) and Yum China Holdings Inc (9987 HK) will replace Longfor Properties (960 HK) and XPeng (9868 HK) in the FTSE China 50 Index on 16 December.
• The largest flow and impact of passive trading will be on Yum China Holdings Inc (9987 HK). There could be buying on Yum China Holdings, Inc (YUMC US) overnight.
• Short interest on the deletes is over 7% of float and there could be short covering against the passive selling at the close on 16 December.

• There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 December.
• Empyrean Technology, GalaxyCore, Shanghai Fudan Microelectronics and Shanghai Awinic Technology will replace Grinm Advanced Materials, Chengdu Corpro Technology, Shanghai Sinyang Smcndctr Mtls and Espressif Systems Shanghai in the index.
• Shanghai Fudan Microelectronics Group (688385 CH) will be added to the MSCI China Index at the close today and will also be added to the CSI 500 Index in December.

• Lygend Resources & Technology (2245 HK) priced its IPO at HK$15.80 per share to raise net proceeds of HK$3.5 billion (US$450 million). The shares will start trading tomorrow.
• We previously discussed the IPO in Lygend Resources & Technology IPO: Riding the Wave and Lygend Resources & Technology IPO: Valuation Insights.
• Peers have re-rated and the IPO price continues to imply a discount to the median peer CY2023 P/E multiple. Therefore, the IPO price remains attractive.

• Chinese equities have been on a volatile path but are finally gaining some upside momentum
• Dollar seems to have peaked and USDCNH is retreating with renewed optimism for the Chinese economy reopening. 
• We revisit the trade and look at potential restructuring options

The Asia HY Trade Book for November 2022 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

• Alibaba Health reported 1HFY03/2023 results on Monday. Revenue increased 22.9% YoY to RMB11.5bn and reported an adjusted net profit of RMB350m vs net loss of RMB283m reported in 1HFY03/2022.
• Adjusted operating loss for the quarter decreased to RMB30m compared to RMB586m reported in the same quarter last year.
• Ali Health’s fulfilment and S&M costs were the highest among peers and cutting down these costs has helped the company reduce its operating losses.

• Sunshine Insurance (6963 HK) has launched its HKEx listing at HK$5.83-6.45 per share to raise up to US$951 million. Books are open from 30 November to 5 December.
• We previously discussed the IPO in Sunshine Insurance Group IPO: The Bull Case and Sunshine Insurance Group IPO: The Bear Case. 
• At the IPO price range, Sunshine trades at a significant premium to median peer multiples. Therefore, we would avoid the IPO. 

• Lygend Resources & Technology (2245 HK) raised US$470m in its Hong Kong IPO.
• Lygend Resources & Technology (Lygend) is a nickel trading and production firm with a portfolio covering multiple areas across the nickel industry value chain.
• In this note we will talk about the trading dynamics.

• Weilong Delicious Global (WDG HK), a spicy snack food company in China, aims to raise around US$200m in its Hong Kong IPO.
• According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
• In this note, we provide an update to our earlier peer comparison and valuations.

• WuXi AppTec announced its proposed disposal of A Shares again. Investors’re worried about the signal behind – Performance growth has reached certain limit. There’s the possibility of a turning point.
• Such proposed disposal (regardless of share price) could continue to weigh on the valuation performance of the whole CXO sector – There is still “bubble” in share price.
• In fact, Li Ge (Founder of WuXi AppTec) knows CXO industry much better than anyone, when he decides to resolutely reduce his shareholding, it is very telling.