M Stanley: CHINA VANKE (02202.HK) Expected to Face Greater Core Losses in 2025 Than Anticipated; Significant Losses Expected to Continue
Profit Warning: CHINA VANKE issued a profit warning, anticipating a core loss of approximately RMB80 billion for 2025, significantly higher than Morgan Stanley's expectations, which represents about 40% of its equity attributable to shareholders.
Revenue Decline: The anticipated massive loss is attributed to a sharp decline in revenue, pressure on gross profit margins, increased asset and credit impairments, and substantial losses from asset disposals.
Market Outlook: Nomura indicated that the easing of the '3 Red Lines' policy for Chinese developers is largely symbolic and may not lead to significant policy relaxation, suggesting that the severe loss situation for CHINA VANKE could persist.
Analyst Rating: Morgan Stanley has rated CHINA VANKE's A-shares as Underweight, setting a target price of RMB2.7, and believes that the chances of a fundamental turnaround in the company's operations and financing in the medium term are very low.
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HSI Drops 242 Points at Midday, Driven by Technology Stocks; CN Developers and WUXI Series Surge
Market Performance: Hong Kong stocks faced a decline, with the HSI dropping 242 points (0.9%) to 27,023, while the HSCEI and HSTECH also fell by nearly 1% and 1.7%, respectively.
Tech Stocks Struggles: Major tech companies like NTES, BABA, and TENCENT saw significant drops in their share prices, with NTES down 3.8% and BABA down 2.1%, amid disappointing earnings reports and ongoing investment strategies.
Chinese Developers' Gains: Some Chinese developers, including CHINA VANKE and RONSHINECHINA, experienced gains due to reports of a potential RMB80 billion rescue package from the Shenzhen municipal government.
WUXI APPTEC's Success: WUXI APPTEC emerged as the best-performing blue chip, rising nearly 4% after Nomura raised its revenue expectations and target price, indicating strong future performance.
<Research> Doubts Raised Over Authenticity of RMB80B Rescue Plan Report for CHINA VANKE (02202.HK)
Market Speculation: Octus reported unverified speculation that the Shenzhen government is planning an RMB80 billion rescue plan for CHINA VANKE, which includes an RMB20 billion share placement to prevent default.
Skepticism from JPMorgan: JPMorgan expressed doubts about the report's authenticity, noting that only one out of nine previous speculations about financial support has been accurate, and questioned the clarity of the RMB80 billion figure.
Default Concerns: Despite the central government's emphasis on avoiding defaults, JPMorgan highlighted that CHINA VANKE's potential default remains significant, especially since most private developers have already defaulted and CHINA VANKE holds only a 1% market share.
Bond Restructuring Outlook: JPMorgan suggested that a comprehensive bond restructuring might be a more viable solution, while anticipating a positive short-term reaction in CHINA VANKE's share price.
CHINA VANKE Rises Approximately 5% Following Reports of RMB80B Rescue Package in Shenzhen
CHINA VANKE Stock Performance: CHINA VANKE's stock opened 0.52% higher, peaking at HKD4.14 before closing at HKD4.02, reflecting a 4.96% increase with significant trading volume.
Government Rescue Package: The Shenzhen government is reportedly planning an RMB80 billion rescue package for CHINA VANKE, which includes an RMB20 billion stock placement aimed at preventing a default.
Impact on Bond Obligations: If the rescue package is confirmed, it is expected to cover CHINA VANKE's outstanding public market bonds estimated at RMB26.9 billion, providing a positive surprise for investors.
Broader Market Effects: Increased policy support in China is anticipated to positively affect other developers like LONGFOR GROUP and SEAZEN, who are reliant on commercial property loans to manage their maturing bonds.
CICC Forecasts Capital Flow Shifts for Stocks with Significant Weight Adjustments in MSCI China Index Quarterly Review (Table)
Stocks with Expected Weighting Increases: Stocks like SENSETIME-W and HESAI-W are expected to see significant increases in weighting, with inflows of US$422 million and US$147 million respectively, despite varying short selling ratios.
Stocks with Expected Weighting Decreases: TENCENT and BABA-W are among the stocks anticipated to experience decreases in weighting, with TENCENT facing a notable outflow of US$293 million due to high short selling activity.
SENSETIME-W and HESAI-W Surge Over 7% Following Inclusion in MSCI China Index
MSCI Index Review Results: MSCI announced its quarterly index review, adding 37 stocks to the MSCI China Index, including HESAI-W, PONY-W, SENSETIME-W, and YOFC, while removing 16 stocks such as CHINA VANKE, GWMOTOR, and FOSUN INTL.
Stock Performance: Following the index changes, SENSETIME-W and HESAI-W saw significant increases in their stock prices, with SENSETIME-W peaking at HK$2.64 and HESAI-W at HK$215.2, while PONY-W also experienced a rise.
Changes to MSCI China Index Constituents: Addition of YOFC, HESAI-W, PONY-W, and SENSETIME-W
MSCI Index Review Results: MSCI announced the results of its index review, effective after market close on February 27, with 37 stocks added and 16 stocks removed from the MSCI China Index.
Stocks Added: Notable additions include HESAI-W, PONY-W, SENSETIME-W, and YOFC, with varying short selling ratios and price changes.
Stocks Removed: Stocks removed from the index include Autohome ADR, CHINACOMSERVICE, CHINA VANKE, FOSUN INTL, ZHEJIANGEXPRESS, and Qfin Holdings, with significant short selling activity noted.
A-Shares Changes: The remaining changes in the index pertained to A-shares, indicating a broader adjustment beyond just Hong Kong stocks and ADRs.
HSI Drops 242 Points at Midday, Driven by Technology Stocks; CN Developers and WUXI Series Surge
Market Performance: Hong Kong stocks faced a decline, with the HSI dropping 242 points (0.9%) to 27,023, while the HSCEI and HSTECH also fell by nearly 1% and 1.7%, respectively.
Tech Stocks Struggles: Major tech companies like NTES, BABA, and TENCENT saw significant drops in their share prices, with NTES down 3.8% and BABA down 2.1%, amid disappointing earnings reports and ongoing investment strategies.
Chinese Developers' Gains: Some Chinese developers, including CHINA VANKE and RONSHINECHINA, experienced gains due to reports of a potential RMB80 billion rescue package from the Shenzhen municipal government.
WUXI APPTEC's Success: WUXI APPTEC emerged as the best-performing blue chip, rising nearly 4% after Nomura raised its revenue expectations and target price, indicating strong future performance.
<Research> Doubts Raised Over Authenticity of RMB80B Rescue Plan Report for CHINA VANKE (02202.HK)
Market Speculation: Octus reported unverified speculation that the Shenzhen government is planning an RMB80 billion rescue plan for CHINA VANKE, which includes an RMB20 billion share placement to prevent default.
Skepticism from JPMorgan: JPMorgan expressed doubts about the report's authenticity, noting that only one out of nine previous speculations about financial support has been accurate, and questioned the clarity of the RMB80 billion figure.
Default Concerns: Despite the central government's emphasis on avoiding defaults, JPMorgan highlighted that CHINA VANKE's potential default remains significant, especially since most private developers have already defaulted and CHINA VANKE holds only a 1% market share.
Bond Restructuring Outlook: JPMorgan suggested that a comprehensive bond restructuring might be a more viable solution, while anticipating a positive short-term reaction in CHINA VANKE's share price.
CHINA VANKE Rises Approximately 5% Following Reports of RMB80B Rescue Package in Shenzhen
CHINA VANKE Stock Performance: CHINA VANKE's stock opened 0.52% higher, peaking at HKD4.14 before closing at HKD4.02, reflecting a 4.96% increase with significant trading volume.
Government Rescue Package: The Shenzhen government is reportedly planning an RMB80 billion rescue package for CHINA VANKE, which includes an RMB20 billion stock placement aimed at preventing a default.
Impact on Bond Obligations: If the rescue package is confirmed, it is expected to cover CHINA VANKE's outstanding public market bonds estimated at RMB26.9 billion, providing a positive surprise for investors.
Broader Market Effects: Increased policy support in China is anticipated to positively affect other developers like LONGFOR GROUP and SEAZEN, who are reliant on commercial property loans to manage their maturing bonds.
CICC Forecasts Capital Flow Shifts for Stocks with Significant Weight Adjustments in MSCI China Index Quarterly Review (Table)
Stocks with Expected Weighting Increases: Stocks like SENSETIME-W and HESAI-W are expected to see significant increases in weighting, with inflows of US$422 million and US$147 million respectively, despite varying short selling ratios.
Stocks with Expected Weighting Decreases: TENCENT and BABA-W are among the stocks anticipated to experience decreases in weighting, with TENCENT facing a notable outflow of US$293 million due to high short selling activity.
SENSETIME-W and HESAI-W Surge Over 7% Following Inclusion in MSCI China Index
MSCI Index Review Results: MSCI announced its quarterly index review, adding 37 stocks to the MSCI China Index, including HESAI-W, PONY-W, SENSETIME-W, and YOFC, while removing 16 stocks such as CHINA VANKE, GWMOTOR, and FOSUN INTL.
Stock Performance: Following the index changes, SENSETIME-W and HESAI-W saw significant increases in their stock prices, with SENSETIME-W peaking at HK$2.64 and HESAI-W at HK$215.2, while PONY-W also experienced a rise.
Changes to MSCI China Index Constituents: Addition of YOFC, HESAI-W, PONY-W, and SENSETIME-W
MSCI Index Review Results: MSCI announced the results of its index review, effective after market close on February 27, with 37 stocks added and 16 stocks removed from the MSCI China Index.
Stocks Added: Notable additions include HESAI-W, PONY-W, SENSETIME-W, and YOFC, with varying short selling ratios and price changes.
Stocks Removed: Stocks removed from the index include Autohome ADR, CHINACOMSERVICE, CHINA VANKE, FOSUN INTL, ZHEJIANGEXPRESS, and Qfin Holdings, with significant short selling activity noted.
A-Shares Changes: The remaining changes in the index pertained to A-shares, indicating a broader adjustment beyond just Hong Kong stocks and ADRs.
