From Midea Group to Stocks in HK's apparel/footwear to JNBY Design here's what you need to know this week.

The Smartkarma Weekly Starter is a newsletter published every Sunday and pulls together the top research notes published over the last 7-days from across our platform.

In this week's edition of the Smartkarma Weekly Starter, we get a quick rundown on the top engaged insights for the week.

Start your week off on the right foot with:

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (September 7)

China Feihe beat estimates for 2Q with higher profits and GW Motor substantially increased international sales of EV's. NWD will take a large asset writedown. CTGDF had a large drop in 2Q profits.

• ETF flows showed subdued activity during the week although the Southbound Connect platform had a minor outflow.
• Great Wall Motor (2333 HK) and China Feihe (6186 HK) both had positive news sentiment helping their share prices rally on better earnings announcements.
• New World Development (17 HK) announced a major asset impairment write-down sending its stock to historic lows. ?China Tourism Group Duty Free (1880 HK) disappointed on 2Q24 sales and profits.

By David Mudd in Equity Bottom-Up

Midea Group: Initial Thoughts on the Hong Kong IPO Listing

In the past five days, Midea's price is down 2.3%. Some investors have been selling shares in Midea due to concerns about higher discount price offered at HK IPO listing.

• Midea Group Co Ltd A (000333 CH) is getting ready for a Hong Kong IPO listing, trying to raise at least US$3 billion.
• Midea Group is trading a relatively attractive valuations. It is trading at P/E of 11.8x, EV/EBITDA of 8.1x, and P/B of 2.5x based on 2024 consensus earnings estimates.
• In the past five days, Midea's price is down 2.3%. Some investors have been selling shares in Midea due to concerns about higher discount price offered at HK IPO listing.??

By Douglas Kim in Equity Capital Markets

Select Sector Indices: Inflows to Apple, Palantir, Dell Will Add to SPX Buying

Constituent changes to the SPX and the market consultation proposals being adopted result in a round-trip trade of US$31.5bn. Apple and Conocophillips are big buys while MSFT and NVIDIA are big sells.

• Constituent changes to the S&P 500 INDEX and weight changes as a result of the market consultation proposals being adopted will result in a round-trip trade of US$31.5bn.
• The largest one-way turnover is expected in the Consumer Staples Select Sector SPDR Fund, Technology Select Sector SPDR, Materials Select Sector SPDR and Communication Services Select Sector SPDR Fund.
• The inflows to Apple (AAPL US), Palantir Technologies (PLTR US) and Dell Technologies (DELL US) will add to the buying from the S&P 500 INDEX (SPX INDEX) trackers.

By Brian Freitas in Event-Driven

Midea Group H Share Listing (300 HK): Valuation Insights

Midea has launched its H Share listing. Our valuation analysis suggests that the range is attractive, so we would participate in the listing.

• Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
• We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views.?
• Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.

By Arun George in Equity Capital Markets

Don't Shoot the Piano Player

The ongoing and emerging financial market intricacies, for better or worse, can potentially influence the unsettled Fed debate.

• The undulating prospect of a 25bps or 50bps cut at the September Fed meeting coupled with a foggy future rate path is weighing on market sentiment
• The state of financial market conditions--broadly and narrowly defined--may abruptly influence the outcome of upcoming Fed meeting/s, or vice versa
• My weekly estimate of market leverage in the US hedge fund sector in total, which remains elevated at this time, warrants more attention

By Thomas Lam in Macroeconomics

HK-Listed Apparel & Footwear Screener: Right Stocks Listed in the Wrong Market - Attractive Yield & Rapid Expansion Outside China - Sep 2024

We compile a list of ten high-yielding/net cash or low-net debt stocks in HK's apparel/footwear value chain. HK is a pariah for investors, and trailing dividend yields are approaching 6-20%.

• We compile a list of ten high-yielding/net cash or low-net debt stocks in the apparel/footwear value chain. Just because HK has become a pariah for investors, trailing dividend yields are approaching 6-20%.
• We track recent developments of these companies; for given their low valuations any incremental recoveries could spark huge share price returns.
• Crystal International (2232 HK), Stella International (1836 HK), and Yue Yuen Industrial Holdings (551 HK) stand out - they have had positive inflections in their earnings/dividend payouts and capital allocation.

By Sameer Taneja in Equity Bottom-Up

JNBY Design (3306 HK): A Cash Cow

JNBY excels in China's niche designer fashion market, with FY24 net profit up 36.4% despite retail challenges. High gross margin and strong cash flow make it a cash cow. FY25 yield is at 10.9%.

• JNBY Design Ltd (3306 HK) is successful in capturing China's niche designer fashion segment. Its FY24 net profit surged 36.4%, despite the challenging retail market.
• Gross margin reached a record high of 67.3% in 2H24 on higher purchases from loyal members. Operating cash flow surged 70.7% YoY, affirming its status as a cash cow.
• Including special dividends, FY24 payout ratio was 95%. At 75% ordinary payout for FY25, it sits on a 10.9% yield. Net cash equals 22% of the share price.

By Osbert Tang, CFA in Equity Bottom-Up

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