In today’s briefing:
- HSTECH Index Rebalance: No Constituent Changes; Float/Capping Changes Lead to US$4bn Trade
- HSCI Index Rebalance: 24 Adds, 22 Deletes, Changes to Southbound Stock Connect & BIG Outperformance
- Merger Arb Mondays (25 Aug) – Dongfeng, ENN Energy, Shibaura, Santos, Lynch, Smart Share
- A/H Premium Tracker (To 22 Aug 2025): BIG Beautiful Skew Corrects
- HK Connect SOUTHBOUND Flows (To 22 Aug 2025); Big Swing Out of ETFs Into Tech Realised,
- Zhou Liu Fu (6168 HK): 1H25 Is Fine, but Still……
- Merger Arbitrage, Trial Delays, Strategic Reviews, and Buybacks
- Duolingo’s Expansion Beyond Languages With Math
- The New York Times: Expansion of Digital Subscriptions to Support Longer-Term Growth Targets!
- Planet Fitness: Leveraging Younger Demographics to Drive Sustained Membership Growth
HSTECH Index Rebalance: No Constituent Changes; Float/Capping Changes Lead to US$4bn Trade
- There are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in September. However, there are float and capping changes.
- Estimated one-way turnover is 6.3% leading to a round-trip trade of HK$31.1bn (US$4bn). There is plenty to buy in Horizon Robotics (9660 HK), BYD (1211 HK) and Meituan (3690 HK).
- Short interest is elevated in some of the stocks with large flows and shorts could be active in the stocks over the next couple of weeks.
HSCI Index Rebalance: 24 Adds, 22 Deletes, Changes to Southbound Stock Connect & BIG Outperformance
- There are 24 adds and 22 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 504.
- We expect 20 of the 24 HSCI inclusions to be Stock Connect adds from the open on 8 September. 19 of the 22 deletions could be removed from Stock Connect.
- On average, stocks that are expected to be added to Southbound Stock Connect have outperformed stocks that are expected to be removed from Southbound Stock Connect.
Merger Arb Mondays (25 Aug) – Dongfeng, ENN Energy, Shibaura, Santos, Lynch, Smart Share
- I 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: Dongfeng Motor (489 HK), Mayne Pharma (MYX AU), Smart Share Global (EM US), ENN Energy (2688 HK), Santos Ltd (STO AU), Shibaura Electronics (6957 JP).
- Lowest spreads: Bright Smart Securities (1428 HK), Pacific Industrial (7250 JP), Humm Group (HUM AU), Ainsworth Game Technology (AGI AU), Ashimori Industry (3526 JP), PointsBet Holdings (PBH AU).
A/H Premium Tracker (To 22 Aug 2025): BIG Beautiful Skew Corrects
- HUGE, rampaging, “Beautiful Skew”… unwinds. Big swings in H/A ratios continue, this time on average with 2.3% H underperformance vs As, 4% wider on the highest AH premia.
- Last week’s long reco on Guangzhou Automobile Group (2238 HK) was up 1 tick on the week in Hs and Hs underperformed the A by 1.5%.
- The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Pairs Monitor are both there free for SK readers.
HK Connect SOUTHBOUND Flows (To 22 Aug 2025); Big Swing Out of ETFs Into Tech Realised,
- Gross SOUTHBOUND volumes US$20+bn a day this past 5-day week. Net buying much more limited. Big ETF buying turned into ETF selling and tech buying, as suggested.
- Last week’s reco Tencent (700 HK) was the top net buy in SOUTHBOUND this past week, up 2.2%, outperforming major HK benchmarks.
- The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Pairs Monitor are both there free for SK readers.
Zhou Liu Fu (6168 HK): 1H25 Is Fine, but Still……
- Zhou Liu Fu Jewellery (6168 HK)‘s 1H25 results are healthy, but there are challenges, including weak revenue growth and higher R&D costs.
- Growth is almost entirely driven by online sales, but its plan to expand offline stores rapidly may erode net profit in the near term.
- The stock has become the most expensive one in the sector, based on its PERs of 22.4x CY25F and 21.4x CY26F. Its 3-year EPS CAGR of 6.8% is uninspiring.
Merger Arbitrage, Trial Delays, Strategic Reviews, and Buybacks
- Smart Share Global’s management consortium offered $1.25/ADS, with Hillhouse’s competing bid at $1.77/ADS, a 33% spread.
- Mayne Pharma’s trial delayed to September 22, with Harvest Lane trimming its stake; spread to Cosette’s offer is 47%.
- Gore Street Energy Storage faced significant shareholder dissent; RM Funds calls for Chairman’s resignation amid strategic review efforts.
Duolingo’s Expansion Beyond Languages With Math
- Duolingo’s second-quarter 2025 results illustrate a company in a robust growth phase, marked by strong financial performance and promising strategic developments, balanced with some areas requiring further attention.
- On the positive side, Duolingo continues to show impressive financial strength with record profitability and solid top-line growth across all subscription tiers.
- This performance has enabled the company to once again raise its full-year guidance, highlighting confidence in its ongoing strategy.
The New York Times: Expansion of Digital Subscriptions to Support Longer-Term Growth Targets!
- The New York Times Company’s second quarter 2025 earnings report highlights several key outcomes and strategic directions for the renowned media organization, providing both positive aspects and challenges to consider for potential investors.
- The company reported solid revenue growth, with total revenues increasing by nearly 10% year-over-year.
- Digital subscription revenues were a major contributor, growing by over 15% and driving the total subscription revenue up by approximately 10% to $481 million.
Planet Fitness: Leveraging Younger Demographics to Drive Sustained Membership Growth
- Planet Fitness recently reported its quarterly earnings, and the company showcased a blend of optimism and strategic re-evaluations, set against a backdrop of strong growth metrics and a roadmap for future expansion.
- During the quarter, Planet Fitness opened 23 new clubs, taking its global presence to 2,762 locations and 20.8 million members.
- The company experienced an 8.2% systemwide same club sales growth, driven by both rate and membership growth, which highlights their successful expansion strategies and appeal to new demographics, especially Gen Z.
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