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Market Update

The IPO market had a quiet start in 2024

In January 2024, there were 5 new IPO (Initial Public Offering) listings on the Hong Kong Exchange (HKEX) compared to 14 in last December, the IPO market remain quiet. As of January 31, the stock prices of the five companies listed in January generally performed well, among them, WellCell Holdings (2477.HK) and Zhongshen Jianye Holding (2503.HK) were 208.0% and 25.0% higher than the listing price respectively (closing price, as of 31/1/2024). Only Concord Healthcare Group (2453.HK) was 14.8% lower than the listing price respectively.

 

2024 IPO market outlook

One of the Big Four accounting firms, PricewaterhouseCoopers expects that the amount of IPO funds raised in Hong Kong will gradually stabilize. There will be 80 companies listed in Hong Kong in 2024, and the amount of funds raised is expected to exceed HK$100 billion, including 3 companies with an average amount of funds raised of 15 billion, which has once again ranked among the top three fundraising markets in the world. The official implementation of the additional listing rules “Chapter 18C” that allows specialized technology companies to be listed will help connect specialized technology companies with international funds, will bring new opportunities to technology companies and the Hong Kong stock market, and further promote the long-term development of the entire technology industry. It is expected that 3 to 5 specialized technology companies will be listed in Hong Kong through “Chapter 18C” in 2024.

 

Phillip Hong Kong Newly Listed Equities Index ETF (2835.HK)

 The ETF aims to fully replicate the Solactive Hong Kong Newly Listed Equities Index, a rules-based equity benchmark designed to track the performance of securities that had a recent initial public offering or new listing on the main board of the HKEX. The Index is rebalanced quarterly, incorporating securities with IPOs or new listings within the last 756 business days, aiming for a total of 50 securities based on free-float market capitalization. The Index also undergoes monthly IPO reviews to include recent IPOs, subject to liquidity and market capitalization criteria.

 

January Monthly Review

 During the monthly fast-track mechanism of the Solactive HK Newly Listed Equities Index, there is 1 new constituent was added, which is Productive Tech (650.HK). Besides, a total of 3 existing constituents were removed: Asymchem(6821.HK), Linklogis-W(9959.HK) and Jacobio-B (1167.HK). The current number of constituents has dropped from 50 to 48.

Productive Tech (650.HK) is engaged in the semiconductor and pan-semiconductor business of productivity-driven equipment applied in semiconductor and solar cell businesses. It also operates an oil and gas production project in PRC. Currently, the Company has commenced businesses in the development and manufacturing of innovative Wafer Fabrication Equipment (“WFE”) and solar cell production equipment. WFE comprises high-end single-wafer cleaning and low-pressure chemical vapor deposition (“LPCVD”) equipment for front-end wafer processing. Solar cell production equipment includes wet chemical cleaning equipment and copper plating equipment.

For the six months ended 30 September 2023, the company revenue amounted to HKD 336 million, decreasing 22.3% YoY. Gross profit amounted to HKD 55 million, decreasing 10.0% YoY; Gross profit margin was 16.3%, increasing 2.2 percentage points. Operating loss amounted to HKD 134 million, losses increased significantly by 545.2% YoY. Loss for the period attributable to equity shareholders of the company amounted to HKD 142 million, losses increased significantly by 229.5%. The loss for the period was primarily attributed to the administrative and R&D expenses from the rapid development and expansion of the company’s semiconductor and pan-semiconductor business applied in the semiconductor and solar industry. In addition, the investment loss is caused by changes in the fair value of investment projects.

 

Top 10 holdings

The top ten holdings this month remain the same as last month. The industries that the index currently focuses on include Technology (including Baidu and Kuaishou), Consumer Durables (including EV companies like Li Auto, Nio and X Peng) and Consumer Discretionary (including Trip.com and New Oriental). The following table shows the top 10 holdings and sector breakdown of the Phillip HK Newly Listed Equities Index:

                               

 

Key Components Update

  • Com – S (9961.HK): According to the “2024 Chinese New Year Tourism Market Forecast Report” released by the company, as of January 13, domestic travel, outbound travel, and inbound travel orders have increased significantly during the 8-day Chinese New Year holiday (February 9 to 17). Domestic travel, outbound travel, and inbound travel orders have all increased significantly. Orders for ice and snow travel products have increased more than 10 times YoY. Most of the popular destinations are northern cities, such as Harbin, Changchun, and Baishan.
  • Baidu – SW (9888.HK): Autohome – S (2518.HK) and Baidu Intelligent Cloud, a subsidiary of Baidu – SW (9888.HK), announced a strategic cooperation. Based on Baidu Intelligent Cloud Qianfan large model platform, the two parties will carry out in-depth cooperation in the fields of content creation, intelligent marketing, intelligent customer service, business decision-making and other fields, and jointly explore and promote large model technology innovation and industry application implementation.
  • LI Auto Inc.–W(2015.HK): The company voluntarily announced delivery data for January, announcing that it had delivered a total of 31,165 new vehicles, increasing 105.8% YoY, but decreasing 38.1% MoM. In addition, the company 2024 launches will kick off in March with the official release and commencement of deliveries of the high-tech flagship family MPV, Li MEGA will be launched and delivered, alongside the rollout of the 2024 Li L7, Li L8 and Li9. Furthermore, they will continue to increase their investment in research and development and elevate their technical capabilities in autonomous driving, smart space, and smart electrification. In addition, reinforced by their diverse product lineup, together with the strength of our products and enhanced synergies across their production, supply chain, and sales and servicing network, they will challenge themselves with a target of a new high of 800,000 annual deliveries.
  • Kuaishou – W (1024.HK): Kuaishou Mall’s New Year’s Day order volume increased by 98% YoY, the number of buyers increased by 65% YoY, and the GMV of branded products increased by 77% YoY, the user base continued to expand, and branded products grew steadily. In addition, during the festival, the number of merchants launching broadcasts increased by 67% YoY, and the total duration of e-commerce broadcasts increased by 235% YoY. The three fields of short video, search, and pan-shelf performance were outstanding.
  • New Oriental-S (9901.HK): The Ministry of Education has studied and formed the “Off-campus Training Management Regulations (Draft for Comments)”, which covers a total of 20 articles, expounds the comprehensive regulations on personnel, materials, time, fees, competitions, etc. in the supervision of off-campus training, and providing legal protection for the daily standardized management of off-campus training. The relevant draft clarifies the regulatory guidelines related to off-campus training, which will help companies engaged in off-campus training and education to conduct business in compliance and improve market sentiment.

 

Top Constituent movers in January:

Bottom Constituent movers in January:

 

The Phillip HK Newly Listed Index ETF (2835.HK) Monthly performance for January

 The Phillip HK Newly Listed Index ETF (2835.HK) recorded a monthly loss of 18.6% in price in January, underperforming the Hang Seng Index’s (HSI) 9.2% monthly loss, but outperforming the Hang Seng Tech Index’s (HSTI) 19.1% monthly loss. As of 31 January, it was down 19.5% since listing, outperforming the HSTI (-19.7%) but underperforming HSI (-13.9%).

     

The performance of the IPO market in 2023 is far from satisfactory

In December, there were 14 new IPO (Initial Public Offering) listings on the Hong Kong Exchange (HKEX) Compared to 5 in November. Hong Kong’s IPO fund-raising activities decreased significantly in 2023. A total of 73 new stocks were listed throughout the year, 16 fewer new stocks were listed compared to last year; the total amount of initial financing raised was HK$46.3 billion, a decrease of approximately 57% compared to last year. As of December 31, the 14 companies listed in December had a mixed performance. Among them, DEKON FOOD AND AGRICULTURE GROUP (2419.HK) and SHENGHUI CLEAN (2521.HK) were 39.2% and 15.6% higher than the listing price respectively (closing price, as of 31/12/2023). On the other hand, HENAN JINYUAN HYDROGENATED CHEMICALS Co., Ltd (2502.HK) and YAN PALACE (1497.HK) were 21.7% and 13.2% lower than the listing price respectively (closing price, as of 31/12/2023).


Phillip Hong Kong Newly Listed Equities Index ETF (2835.HK)

 The ETF aims to fully replicate the Solactive Hong Kong Newly Listed Equities Index, a rules-based equity benchmark designed to track the performance of securities that had a recent initial public offering or new listing on the main board of the HKEX. The Index is rebalanced quarterly, incorporating securities with IPOs or new listings within the last 756 business days, aiming for a total of 50 securities based on free-float market capitalization. The Index also undergoes monthly IPO reviews to include recent IPOs, subject to liquidity and market capitalization criteria.


December Monthly Review

During the December quarterly rebalancing of the Solactive HK Newly Listed Equities Index, there are 15 new constituent was added, which are J&T EXPRESS-W (1519.HK), WUXI XDC (2268.HK), SCICLONE PHARMA (6600.HK), CHERVON (2285.HK), ASYMCHEM (6821.HK), PAGODA GP (2411.HK), HUITONGDA NET (9878.HK), FLOWING CLOUD (6610.HK), AINNOVATION (2121.HK), 3D MEDICINES (1244.HK), JACOBIO-B (1167.HK), YH ENT (2306.HK), LINKLOGIS-W (9959.HK), STARPLUS LEGEND (6683.HK) and JOINN (6127.HK).

Besides, a total of 11 existing constituents were removed: YUM CHINA (9987.HK), NONGFU SPRING (9633.HK), HWORLD-S (1179.HK), ZTO EXPRESS-W (2057.HK), ZAI LAB (9688.HK), GDS-SW (9698.HK), SIMCERE PHARMA (2096.HK), EVEREST MED-B (1952.HK), MING YUAN CLOUD (909.HK), STAR CM-100 (6698.HK) and NAYUKI (2150.HK).

Among the 15 new constituents, J&T EXPRESS-W (1519.HK) was the better performer in December. The company is a global logistics service provider with the leading express delivery business. Their express delivery services span 13 countries, which include the largest and fastest-growing express delivery emerging markets globally, especially leading in Southeast Asia. At present, the business has developed to Southeast Asia, China, Latin America and the Middle East. According to Frost & Sullivan, the company became the No.1 express delivery operator in Southeast Asia, with a 22.5% market share in 2022 by parcel volume, more than 3 times of No.2 express delivery operator. In term of Chinese market, the company tapped into the express delivery market in China in 2020, and handled 12025.6 million domestic parcels in 2022, achieving a market share of 10.9% by parcels volume. Nowadays, the company have expanded their cross-border logistics services, which include small parcels, freight forwarding and warehousing solutions.

For the year ended 31 December 2022, the company revenue amounted to USD 7267.4 million, increasing 49.8% YoY. The gross loss amounted to USD 270.2 million, losses narrowed by 50.4% YoY. Operating loss amounted to USD 1389.6 million, losses narrowed by 15.6% YoY. The net profit attributable to owners of the company amounted to USD 1656.2 million, Turning losses into profits YoY. The main reason for the company’s gross losses in recent years is the gross losses related to the company’s business in China, as well as the expansion of market share and expansion into new markets. The company will continue to shift its focus to e-commerce in the future, providing express delivery services to merchants and consumers on major e-commerce platforms, such as PDD, Taobao, Tmall, Shein, Douyin and Kuaishou, to provide express delivery services to merchants and consumers, as well as cross-border logistics services through their expanding global business footprint.


Top 10 holdings

 In December, YUM CHINA (9987.HK), NONGFU SPRING (9633.HK) and HWORLD-S (1179.HK) were removed from the Solactive Hong Kong Newly Listed Equities Index because they have been listed for more than three years. J&T EXPRESS-W (1519.HK),  HAIER SMARTHOME (6990.HK) and JD HEALTH (6618.HK) subsequently entered the top 10 holdings. The industries that the index currently focuses on include Technology (including Baidu and Kuaishou), Consumer Durables (including EV companies like Li Auto, Nio and X Peng) and Consumer Discretionary (including Trip.com and New Oriental). The following table shows the top 10 holdings and sector breakdown of the Phillip HK Newly Listed Equities Index:

       


Key Components Update

  • com – S(9961.HK): The volume of travel bookings (including accommodation, tickets, transportation, etc.) during the 2024 New Year’s Day holiday increased by more than 500% YoY.
  • Baidu Inc – SW(9888.HK): It is reported that a research laboratory with a mainland military background uses Baidu Wenxin models to conduct military research to make military AI more humane. However, Baidu clarified that there is no cooperation between them, nor does it provide any customized services.
  • LI Auto Inc.–W(2015.HK): delivered 50,353 vehicles in December 2023, up 137.1% YoY, and successfully achieved its monthly delivery target of 50,000 vehicles. Total deliveries in 2023 increased by 182.2% year over year to 376,030. As of December 31, 2023, Li Auto’s cumulative deliveries surpassed 600,000 vehicles, the highest among Chinese emerging new energy automakers.
  • Kuaishou–W(1024.HK): As of the end of 2023, the total number of Kuaishou Xingmang short dramas has been nearly 1000 online, 326 dramas have exceeded 100 million, 68 dramas have exceeded 300 million, and 4 super popular dramas have exceeded 1 billion. The number of users of Kuaishou short dramas has also continued to expand. In 2023, the average daily DAU of Kuaishou short dramas reached 270 million, and the number of users who watched more than 10 episodes of serious short dramas every day reached 94 million, increasing 52.6% YoY.
  • NIO Inc-SW(9866.HK): 18000 vehicles were delivered in December 2023, increasing 13.9% YoY. A total of 160,000 vehicles were delivered in 2023, increasing 30.7% YoY. In addition, at NIO Day 2023, NIO’s smart electric administrative flagship ET9 was officially unveiled, and delivery is expected to begin in the first quarter of 2025.


Top Constituent movers in December:

Bottom Constituent movers in December:

 


The Phillip HK Newly Listed Index ETF (2835.HK) Monthly performance for December

 The Phillip HK Newly Listed Index ETF (2835.HK) recorded a monthly loss of 1.44% in price in December, underperforming the Hang Seng Index’s (HSI) 0.03% monthly gain and the Hang Seng Tech Index’s (HSTI) 3.47% monthly loss. It was down 2.8% since listing, outperforming the HSI (-4.9%) but underperforming HSTI (+0.4%). As of December 31, it was down 1.05% since listing, outperforming the HSI (-5.25%) but underperforming HSTI (+0.58%).

         

The Hong Kong IPO market continues to be quiet

In November, there were 7 new IPO (Initial Public Offering) listings on the Hong Kong Exchange (HKEX) compared to 5 in October. As of November 30, a total of 59 new stocks were listed in Hong Kong, a decrease of 10 new stocks compared to the same period last year, reflecting that the market remains quiet. However, as of November 30, the 7 companies’ stock prices that were listed in November have all increased. Among them, XXF(2473.HK) and Huashi Group(1111.HK) were 118.2% and 104.8% higher than the listing price respectively (closing price, as of 30/11/2023).

Besides, the Hong Kong Exchange (HKEX) launched FINI in November. FINI is an innovative electronic platform developed by HKEX, which will enable faster IPO settlement for all Hong Kong IPOs. It will be used by different IPO market participants, such as intermediaries, investment banks, brokers, share registrars and regulators, to handle IPO subscription and settlement processes. FINI shortens the time between the pricing of an IPO and the trading of shares from five business days (“T+5”) to two business days (“T+2”), which greatly reduces the risk of pre-IPO price volatility and enhances overall market operational efficiency. HKEX is also introducing a new pre-funding model in FINI to help reduce the amount of funds locked up in over-subscriptions. For investors, as the time of locking up funds is reduced, the new arrangement will enable investors to trade IPO shares earlier, lowering their funding costs and potentially reducing their exposure to price volatility.

Phillip Hong Kong Newly Listed Equities Index ETF (2835.HK)

The ETF aims to fully replicate the Solactive Hong Kong Newly Listed Equities Index, a rules-based equity benchmark designed to track the performance of securities that had a recent initial public offering or new listing on the main board of the HKEX. The Index is rebalanced quarterly, incorporating securities with IPOs or new listings within the last 756 business days, aiming for a total of 50 securities based on free-float market capitalization. The Index also undergoes monthly IPO reviews to include recent IPOs, subject to liquidity and market capitalization criteria.

November Monthly Review

During the November monthly review of the Solactive HK Newly Listed Equities Index, there is one new constituent was added, which is Tuhu – W(9690.HK), but a total of 2 existing constituents were removed: Keep. Inc (3650.HK) and Yidu Tech (2158.HK).

Tuhu – W(9690.HK) is one of the leading integrated online and offline platforms for automotive service in China. Their platform serves most of the passenger vehicle models sold in China, fulfilling automotive service demands ranging from tire and chassis parts replacement to auto maintenance, repair, detailing, and more. As of 31 March 2023, the company had 100.2 million registered users on their flagship “Tuhu Automotive Service” app and online interfaces. According to the CIC Report, their average MAU reached 10.2 million in the three months ended 31 March 2023, making the company platform the largest car owner community amassed by automotive service providers in China. In addition, their growing service network of over 4700 Tuhu workshops and over 19000 partner stores span the entire country, covering a majority of prefecture-level cities. Besides, the company has three different types of stores, including their self-operated Tuhu workshops, franchised Tuhu workshops, and third-party partner stores.

For the year ended 31 December 2022, the company’s revenue amounted to 11546.9 million, decreasing 1.5% YoY. The gross profit amounted to 2270.2 million, increasing 21.4% YoY; the gross profit margin was 19.7%, increasing 3.7 percentage points YoY. The operating loss amounted to 763.9 million, losses narrowed by 41.9% YoY. Net loss attributable to shareholders amounted to 2138.3 million, losses narrowed by 63.4% YoY. The company store expansion plan includes penetration in tier 2 and below cities and counties and the optimization of the location and density of their store in existing cities. In addition, the company will continue to offer more auto maintenance products and services, which generally have higher margins. The company has also entered into exclusive partnerships with many major suppliers and manufacturing brands to roll out more exclusive products and private-label products with higher gross margins.

Top 10 holdings

In November, there is one new stock entered into the top 10 holdings, which is H World – S(1179.HK), with KE Holdings(2423.HK) dropping out. The industries that currently account for bigger weighting in the index are Technology (including Baidu, Kuaishou and Bilibili), Consumer Durables (including EV companies like Li Auto, Nio and X Peng) and Consumer Discretionary (including Yum China, Trip.com and Nongfu Spring). The following table shows the top 10 holdings and sector breakdown of the Phillip HK Newly Listed Equities Index:

                

The Phillip HK Newly Listed Index ETF (2835.HK) Monthly performance for November

The Phillip HK Newly Listed Index ETF (2835.HK) recorded a monthly gain of 3.2% in price in November, outperforming the Hang Seng Index’s (HSI) 0.4% monthly loss, but underperforming the Hang Seng Tech Index’s (HSTI) 3.7% monthly gain. It was up 0.4% since listing, outperforming the HSI (-5.3%) but underperforming HSTI (+4.2%).