Daily Brief China: Zhuzhou CRRC Times Electric Co., Ltd., Sciclone Pharmaceuticals, Trip.com, Aier Eye Hospital Group, Tencent, WuXi XDC Cayman , Longfor Properties and more

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s consecutive buying streak ended on Monday, and a new buying streak started Tuesday. NORTHBOUND net bought the dip. Last week’s (double long) choice Longyuan Power was up 5.24%.
• Narrow AH premia narrowed some. Wider AH premia saw Hs outperform. There is a LOT of spread left in this market.  7 recommendations this week.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Sciclone Pharmaceuticals (6600 HK), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Southern Cross Media (SXL AU), China Traditional Chinese Medicine (570 HK), QV Equities.
• Lowest spreads: Tietto Minerals Ltd (TIE AU), Roland DG Corp (6789 JP), Chilled & Frozen Logistics Holdings (9099 JP), Pact Group Holdings (PGH AU), Mma Offshore (MRM AU). 

• Chinese outbound travel demand continued to recover nicely in February
• Major airlines’ decision to slow capacity rebuild now looks very prudent
• But the airlines have underperformed, surprisingly; Buy Trip.com below US$43

• After Sciclone Pharmaceuticals (6600 HK) was suspended on the 19th March pursuant to the Takeovers Code, I speculated a Scheme at the March 2021 IPO Price. And that’s what unfolded.
• Li Zhenfu (SciClone’s NED), Assicurazioni Generali (G IM) and concert parties (collectively controlling 36.61%) have made an Offer at $18.80/share, a 33.9% premium to last close. Terms are final.
• The long stop date is the 31 October. That’s too conservative. This could be wrapped up late July. 

• Licensing-Out deals of Chinese pharmaceutical assets are indeed significant milestones, but we should not exaggerate its significance. The product strength itself/subsequent progress are the true sources of clinical benefits/commercial value.
• In the field of weight loss drugs, first-mover advantage may not be that obvious. The possibility of latecomers to disrupt first-mover would not be that low or time-consuming.
• For Aier, 23Q4 results could show an obvious rebound, leading to relatively high growth in 2023 full year. However, Aier’s problems are still there, which means Aier is not undervalued.

• China announced game approval for the Feb 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.
• However, neither Tencent and Netease got any approval in March.

• Theoretically, there’s no need to doubt WuXi XDC’s growth momentum. What needs to be proven is how large the actual ADC market is, which determines how much valuation it deserves.
• However, the biggest problem currently is geopolitical risks, which make performance forecasts groundless. In the context of Sino-US confrontation, there is “a hesitation” towards sustained high growth of WuXi XDC.
• If several pieces of news are put together, this is not just about China CXO/TikTok being sanctioned by US. New balance point in the game between great powers will emerge.

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 Vanke
• First Pacific Co
• Xiaomi Corp

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 Vanke
• First Pacific Co
• Xiaomi Corp