In today’s briefing:
- Hang Seng Indexes: FAF Methodology Change for Secondary Listings; Over US$1bn to Buy in NetEase
- Xiaomi (1810 HK)’s US$5bn Placement: Unfavourable Index Dynamics but Strong Momentum
- ENN Energy (2688 HK) Privatization: Details & Index Implications
- Nikkei 225 Index Rebalance: Positioning With a Few Days to Implementation
- Hygeia Healthcare Group (6078 HK): Slower Revenue Growth and Margin Deterioration Are Worrisome
- Prodia (PRDA IJ) – Expanding and Digitally Remastered
- Top 10 Korean Stock Picks and Key Catalysts Bi-Weekly (Starting 31 March 2025)
- JD.com (9618 HK): Strategic Highlights and Market View from HKEX Top Trades
- Ashok Leyland Restructuring: Switch UK Winds Down & Switch India’s Strategic Pivot
- ETF Flows in Q1: Inflows for Taiwan, Outflows for China
Hang Seng Indexes: FAF Methodology Change for Secondary Listings; Over US$1bn to Buy in NetEase
- Hang Seng Indexes has announced a change in the FreeFloat-Adjusted Factor (FAF) methodology for Secondary Listings that will be implemented from the next rebalance in June.
- NetEase (9999 HK), Baidu (9888 HK), Trip.com (9961 HK), NIO (9866 HK), New Oriental Education & Techn (9901 HK) and Weibo (9898 HK) benefit; GDS Holdings (9698 HK) loses out.
- The FAF changes along with capping changes will result in a round-trip trade of HK$34.2bn (US$4.4bn) at the June rebalance with the largest turnover for the Hang Seng TECH Index.
Xiaomi (1810 HK)’s US$5bn Placement: Unfavourable Index Dynamics but Strong Momentum
- Xiaomi Corp (1810 HK) is looking to place 750m shares at a price range of HK$52.8-54.6/share, a 4.2-7.4% discount from last. That could raise up to HK$40.95bn (US$5.27bn).
- There will be limited passive buying near-term. There will be more passive buying at the end of May. Then there will be passive selling early June.
- Shorts will be hurting from the relentless move higher in the stock and there could be short covering if the stock moves lower from these levels.
ENN Energy (2688 HK) Privatization: Details & Index Implications
- ENN Natural Gas has made a pre-conditional proposal to privatise ENN Energy (2688 HK). For each ENN share, shareholders will receive 2.9427 ENN Natural Gas shares and HK$24.5 in cash.
- The ENN Natural Gas H-shares will be listed on the HKEX. The value received by ENN Energy shareholders depends on ENN Natural Gas stock performance and the H-share discount.
- The ENN Natural Gas (600803 CH) H-shares are likely to replace ENN Energy (2688 HK) in global indices and the Hang Seng Index (HSI INDEX).
Nikkei 225 Index Rebalance: Positioning With a Few Days to Implementation
- BayCurrent Consulting (6532 JP) replaces Mitsubishi Logistics (9301 JP) in the Nikkei 225 (NKY INDEX) at the close of trading on 31 March.
- Since announcement, BayCurrent Consulting (6532 JP) stock is up with cumulative excess volume increasing, while Mitsubishi Logistics (9301 JP) is lower on a much bigger increase in cumulative excess volume.
- Some of the forecast adds and deletes have moved as one would expect, but positioning for the September rebalance could lead to reversals over the next few weeks and months.
Hygeia Healthcare Group (6078 HK): Slower Revenue Growth and Margin Deterioration Are Worrisome
- Hygeia Healthcare Group (6078 HK) reported revenue growth of 9% YoY to RMB4,446 million, mainly driven by a 11% YoY growth in hospital business.
- Hygeia’s gross profit margin contracted 170bps YoY to 29.9%. Net profit decreased 13% on higher finance cost despite of income tax expenses being lower.
- Accelerated organic growth and strengthening of margins are crucial to boost valuation.
Prodia (PRDA IJ) – Expanding and Digitally Remastered
- Prodia (PRDA IJ) FY2024 results reflect an impending recovery, with the company aggressively expanding its outlets by adding 73 over the year, and mostly lower cost points of collection.
- The company continues to roll out new tests, with more emphasis on esoteric testing, but also looking at routine testing. It will continue opening new outlets in 2025.
- Prodia also continues to expand its digital capabilities through U by Prodia for patients and Prodia for Doctors, and Prodialink. Valuations look attractive with Prodia trading on a low-single-digit EV/EBITDA,
Top 10 Korean Stock Picks and Key Catalysts Bi-Weekly (Starting 31 March 2025)
- In this insight, we provide the top 10 stocks picks and key catalysts in the Korean stock market for the two weeks starting 31 March.
- The top 10 picks in this bi-weekly include Orion Holdings, Hyundai Wia, KEPCO KPS, Samsung Electronics, KT, Emart, CJ Logistics, APR, Doosan Enerbility, and HD Hyundai Marine Solution.
- The biggest near-term negative catalyst on the Korean stock market remains tariffs. The final legal outcome on President Yoon Seok-Yeol is expected to be made by the end of April.
JD.com (9618 HK): Strategic Highlights and Market View from HKEX Top Trades
- This Insight analyses JD.com (9618 HK) option strategies traded over the last five trading days on the Hong Kong Exchange. Strategy highlights and volatility context are provided.
- Bearish strategies dominate trading activity, outnumbering bullish ones by more than 3:1, with long volatility structures and calendar/diagonal spreads being prevalent.
- Long tail events: Several strategies follow a pattern of minimal upfront cost (0.1% premium), targeting a significant payout in case of large price movements within a short timeframe.
Ashok Leyland Restructuring: Switch UK Winds Down & Switch India’s Strategic Pivot
- Ashok Leyland (AL IN) plans to shut manufacturing at its UK EV subsidiary, Switch Mobility UK, and shift focus to India and UAE plants.
- The UK exit curbs cash burn and earnings drag, while Switch India, driven by rising demand, nears breakeven with 1800+ e-Bus orders and 80%+ e-LCV share.
- This marks a value-accretive pivot, realigning capital to India’s high-growth EV market and improving group-level profitability and return metrics.
ETF Flows in Q1: Inflows for Taiwan, Outflows for China
- The largest ETF inflows in the region have been in Taiwan as investors rush into indices that have higher dividend yields.
- China had large inflows last year as markets floundered. With markets trading in a range over the last 6 months, those flows have reversed in Q1 this year.
- Australia has seen net inflows this year, while there have been net outflows from Hong Kong, India and Japan focused ETFs.
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