China Archives | Page 106 of 199 | Smartkarma

• We expect one change to the Hang Seng China Enterprises Index (HSCEI INDEX) in March, though there is a possibility of a second change.
• The change in the index handling treatment for Secondary Listings and Dual Primary Listings will also result in some big float changes resulting in inflows to some stocks.
• If there are two changes to the index, estimated one-way turnover is 2.39% resulting in a one-way trade of HK$1,536m.

• After bouncing more than 60% from a near-all-time low, Alibaba Group (9988 HK)’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.
• Meanwhile, the company’s cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.
• With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.

• We expect at least one change to the Hang Seng Tech Index (HSTECH INDEX) in March – though there could be another change as well.
• Changes to the index handling for Dual Primary Listings should result in an increase in free float and passive inflows to Li Auto (2015 HK) and XPeng (9868 HK). 
• Estimated one-way turnover is 5.83% resulting in a one-way trade of HK$4.87bn and this is mainly driven by float and capping changes.

• China’s U-turn on COVID policy has led to skyrocketed infection cases/mortality. Demand for funeral services due to additional deaths would surge, so positive sentiment on Fu Shou Yuan could continue.
• Fu Shou Yuan’s performance is expected to rebound in 22H2 and 23H1 driven by high demand and relaxation of COVID-19 control measures. It’s a good short-term trade with strong catalyst.
• The acceleration and resonance of population aging trend, the new urbanization process and the increase of cremation rate of remains provide objective conditions for Fu Shou Yuan’s long-term upward performance.  

• Alibaba’s CEO will lead the cloud business himself, because the retailing business faces headwind.
• Tencent will enter the short video market again, because the online game is till stagnant.
• Douyin will launch a car-hailing platform, which will compete with Meituan.

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.

• Zoomlion Heavy Industry H

• December GMV was below expectations, due to elevated case counts after the relaxation of the covid restriction
• With high return rate and more merchant supports, gap between GMV growth and CRM growth remained large in 4Q. 
• Long-Term wise, Alibaba will continue losing market share while PDD’s market share may potentially surpass JD. 

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
• These insights may flag those companies where shares have been pledged. Stocks mentioned include Apac Resources (1104 HK), Ausnutria (1717 HK), Pharmaron Beijing (3759 HK), and Joinn Laboratories (6127 HK).

• The Stock Exchange of Thailand SET 50 Index (SET50 INDEX) rebalance was implemented at the close on Friday and there were a bunch of review cutoffs on the same day.
• Passive Hang Seng trackers need to sell Meituan (3690 HK) at the close on 4 January following Tencent (700 HK) in-specie distribution.
• We take a look at flows to Asian focused ETFs over the course of 2022. A lot of winners in terms of AUM, but a few losers too.

• YFO has played a relatively upfront game for Toyo Construction (1890 JP) – badly at first, then better. 
• With Takashimaya (8233 JP) and H2O (8242 JP) now more secure and cross-shareholdings more problematic, they will sell off their equity in each other but continue to work on joint projects.
• Skyworth Group Limited (751 HK)‘s latest buyback offers a minimum proration of 7.8%, although applying the last buyback two years ago, it’s likely to be 13%+.

• Sinopharm Group Co Ltd H (1099 HK) remains a beneficiary of both VBP and China reopening. Consensus expects double-digit revenue and earnings growth for the company in 2023 and 2024.
• SinoPharm’s acquisition of VBP varieties constantly stood in the leading position in the industry. Through June 2022, China carried out seven batches of VBP, with 294 categories being included.
• With China gradually re-opening, SinoPharm should record accelerated growth in its pharma distribution business. With subsiding COVID-19 cases in Q3, SinoPharm reported 10% YoY and 8% QoQ revenue growth.

• Freetech Intelligent Systems, a China-based autonomous driving firm, has raised nearly US$100 million in its series B round, Nikkei Asia reported.
• Chaos Investment led the round, with TCL Industries Holdings, BAIC Capital, and Hengxu Capital participating, among other investors.
• Founded in 2016, Freetech creates a full-stack solution for autonomous vehicles, creating both software and hardware components to power cars.

• China just announced game approval for December batch. The number of games approved is slightly higher than the previous three months.
• Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
• In both December batch, as well as over the past year, we see Tencent behind its smaller peers in terms of receiving game approval. 

• The Composite Document for Shandong Fengxiang (9977 HK)‘s unconditional mandatory Offer from PAG Capital is now out.
• Shareholders who tender will be paid within 7 business days. 
• An H-class meeting will be held on the 18 January to vote on whether to delist Fengxiang. There is no guarantee this will occur.

• Kingsoft Cloud (KC US) shares will begin trading on the Main Board of the HKEx on Friday, 30th December by way of an introduction.
• The company’s competitive pricing strategy to onboard customers has impacted its profitability, however, KC has begun to shift focus on profitability by raising prices in the medium term.
• Raising prices in the medium term will likely support KC’s profitability and we have valued the company using potential price hikes to non-key customers.

• Tencent (700 HK)‘s in-specie distribution of Meituan (3690 HK) shares goes ex-dividend next Thursday. Passive Hang Seng trackers will sell Meituan (3690 HK) stock at the close on 4 January.
• The passive impact is not very large but there could be selling from active investors, both before and after settlement of the shares that is scheduled for 24 March.
• Prosus/Naspers will receive 258.93m shares (HK$47.69bn; 6.5x ADV; 4.18% of shares outstanding) of Meituan (3690 HK) and that will be an overhang on the stock for the near future.

• We have seen some positive policies released in China to support assisted reproduction. However, domestic policy support is more of a short-term catalyst and would not fundamentally change Jinxin’s prospects.
• The number of assisted reproductive centers in China is close to supply-demand equilibrium. It’s hard to support Jinxin’s valuation expansion by relying on China market. The breakthrough point is internationalization.
• Jinxin’s 2023 performance wouldn’t rebound largely. Investors could do short-term trade based on positive news/policy related to ARS in China.There’s no signal to support the complete reversal of share price.

• Skyworth Group Limited (751 HK) has announced another partial buyback – this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.  
• On 17 June 2020, Skyworth announced a partial buyback – 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close. 
• Upon successfully completing this partial offer, Stephen Wong & concert parties would hold >50%, prior to the excise of any outstanding options. 

• FY22 results for Water Oasis (1161 HK) were very encouraging, with significant HoH improvement from 26 mn HKD to 70 mn HKD (excluding a 33 mn HKD one-off).
• With only 5 out of 6 operational months for H2 FY22, we see a significant improvement in H1 FY23 if HK should remain operational for all six months. 
• With the reinstatement of dividends as financial conditions improve, the stock trades at 5.2x FY23 PE with a >15% dividend yield conservatively and 25% of the market cap in cash.

• AviChina Industry & Tech (2357 HK) announced plan to consolidate helicopter business by disposing Changhe Aircraft and Harbin Aircraft to its subsidiary Avic Helicopter (600038 CH). 
• AviChina can achieve synergy at its helicopter business, realise capital gains from disposal and enjoy higher valuations on these assets while maintaining its controlling ownership.
• The resultant increase in stake in Avicopter will further widen AviChina’s discount to its holdings in four listed A-share subsidiaries. Its current 66% discount is just too steep.

• Beauty Farm Medical and Health Industry (BFM HK)’s solid growth has indicated that its business model works. But the industry tightening regulation and potential policy risk are our concerns.
• As a downstream company in this industry, we are conservative about Beauty Farm’s profitability. Its profit space could be limited. The Company has weak bargaining power in the whole industrial chain.
• Beauty Farm’s performance could continue to be under pressure due to weak recovery of domestic demand after three years of the pandemic, especially those non-rigid consumption demand. 

• Merck entered into an agreement with Kelun to develop seven new ADC candidates. Merck will pay an upfront payment of US$175 million, with milestone payments worth up to US$9.3 billion.
• It’s a strong signal that Merck gives up acquiring Seagen and fully embraces Kelun. Merck may not just simply recognize Kelun’s ADC candidates but is optimistic about its ADC platform/technology.
• Chinese pharmaceutical enterprises are becoming more pragmatic and peaceful in licensing cooperation, which has more trend significance for the development of industry than the value of a product or an enterprise. 

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
• The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
• Swire had been buying both every day. But they’ve been Buying Bs but no As for the last ten days in a row. This begs a few questions.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Kawasan Industri Jababeka
2. China South City
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Kawasan Industri Jababeka
2. China South City
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

• Chinese equities have continued to outperform versus other global markets
• The HSI Index 200dma has proved to be a barrier to the upside
• We evaluate the call ratio we suggested in November and recommend action

• Holiday Volume and excessive price actions make market analysis less than helpful. HSI daily shares traded volume on 21st was the lowest year to date.
• Thursday saw a pick-up in volume. Word on easing Covid restrictions for international travelers, reopening HK-China Border in January, and a higher close in the US market brought outsized gains.
• The stock was up 4.12% and had the heaviest volume on HKEX on the 22nd, yet the stock volume was well below 21 days’ average volume.