Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

The announcement of 2020 full year results is bringing some certainty to the HSCEI 2021 dividend index points. With <a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a>, <a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a> and <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a> announcing results (and dividends) today, and <a href="https://www.smartkarma.com/entities/postal-savings-bank-of-china" target="_blank" data-smartkarma-citation="entities:22848:1" rel="noopener">Postal Savings Bank of China (1658 HK)</a>, <a href="https://www.smartkarma.com/entities/agricultural-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1120:1" rel="noopener">Agricultural Bank Of China (1288 HK)</a> and <a href="https://www.smartkarma.com/entities/bank-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:656:1" rel="noopener">Bank Of China Ltd (H) (3988 HK)</a> announcing on Monday and Tuesday next week, over 85% of the 2021 dividend index points will be known by end of the month.With <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a> included in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> at the close of trading on 8 April, potential changes to the index at the June review that will be implemented at the close on 4 June, and capping changes that will be implemented at 8% of the index weight for all stocks at the June review, the dividend ex-date for the stocks (and banks in particular) will play a big role in determining the fair value of the 2021 dividend futures.With the SEC pushing forward with the Holding Foreign Companies Accountable Act, US listed Chinese stocks could look to bring forward their plans to Secondary List on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>. <a href="https://www.smartkarma.com/entities/bilibili-inc-83a27302-cd7d-4e6a-a1de-bcf93eb022c3" target="_blank" data-smartkarma-citation="entities:32215:1" rel="noopener">Bilibili Inc (9626 HK)</a> lists on Monday and media indicates that other Chinese companies are evaluating listing in Hong Kong. <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> has already filed papers to list in Hong Kong. Then there are companies like <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a> and <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> that could primary list in Hong Kong in the near future. While this will have minimal impact on the 2021 dividends, the impact on the 2022 and later dividend futures would be a lot higher.We see little downside from the current market on the HSCEI 2021 dividend futures, but believe that the HSCEI 2021/22 dividend steepener is trading too high. Potential changes to the index constituents should put downward pressure on the 2022 dividends with low dividend yield or zero dividend paying companies joining the index at high index weights, and high dividend paying companies being deleted from the index.

The announcement of 2020 full year results is bringing some certainty to the HSCEI 2021 dividend index points. With Bank Of Communications Co H (3328 HK), ICBC (H) (1398 HK) and China Construction Bank H (939 HK) announcing results (and dividends) today, and Postal Savings Bank of China (1658 HK), Agricultural Bank Of China (1288 HK) and Bank Of China Ltd (H) (3988 HK) announcing on Monday and Tuesday next week, over 85% of the 2021 dividend index points will be known by end of the month.With Baidu (9888 HK) included in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close of trading on 8 April, potential changes to the index at the June review that will be implemented at the close on 4 June, and capping changes that will be implemented at 8% of the index weight for all stocks at the June review, the dividend ex-date for the stocks (and banks in particular) will play a big role in determining the fair value of the 2021 dividend futures.With the SEC pushing forward with the Holding Foreign Companies Accountable Act, US listed Chinese stocks could look to bring forward their plans to Secondary List on the HKEX (388 HK). Bilibili Inc (9626 HK) lists on Monday and media indicates that other Chinese companies are evaluating listing in Hong Kong. JD Logistics (JDL HK) has already filed papers to list in Hong Kong. Then there are companies like DiDi Chuxing (1284375D CH), ByteDance (1460967D CH) and Ant Financial Services Group (6688 HK) that could primary list in Hong Kong in the near future. While this will have minimal impact on the 2021 dividends, the impact on the 2022 and later dividend futures would be a lot higher.We see little downside from the current market on the HSCEI 2021 dividend futures, but believe that the HSCEI 2021/22 dividend steepener is trading too high. Potential changes to the index constituents should put downward pressure on the 2022 dividends with low dividend yield or zero dividend paying companies joining the index at high index weights, and high dividend paying companies being deleted from the index.

HSCEI Dividend Futures: June Index Review, Bank Divs, HFCAA - Sell the 2021/22 Steepener

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

China Merchants Bank H / Equity Bottom-Up

*Weak 4Q20 Bottom-Line: China Merchants Bank (3968.HK) [CMB] pre-announced a poor set of 4Q20 results. On March 19, 2020, the finals were disclosed and the results were even uglier than anticipated. While its true that net profit declined CNY 6.1 bn (22.7%) on a linked quarter basis to CNY 20.9 bn –despite having its tax rate decline 790 bp to 15.6% over the period, core operating results came in at just CNY 13.9 bn – declining CNY 9.3 bn or 40.0% linked quarter;  and *Best Retail Franchise Hitting Credit Wall: While CMB has the best retail franchise in mainland China, credit risk has substantially increased in 4Q20. More worrisome is the net new NPL increase of CNY 14.8 bn, representing an annualized increase in net new NPLs of 104.7%. Provided (and its not a stretch) that the net new NPL ratio trajectory holds, reserve cover of NPLs will drop to 213% - suggesting even the mighty are falling.

*Weak 4Q20 Bottom-Line: China Merchants Bank (3968.HK) [CMB] pre-announced a poor set of 4Q20 results. On March 19, 2020, the finals were disclosed and the results were even uglier than anticipated. While its true that net profit declined CNY 6.1 bn (22.7%) on a linked quarter basis to CNY 20.9 bn –despite having its tax rate decline 790 bp to 15.6% over the period, core operating results came in at just CNY 13.9 bn – declining CNY 9.3 bn or 40.0% linked quarter;  and *Best Retail Franchise Hitting Credit Wall: While CMB has the best retail franchise in mainland China, credit risk has substantially increased in 4Q20. More worrisome is the net new NPL increase of CNY 14.8 bn, representing an annualized increase in net new NPLs of 104.7%. Provided (and its not a stretch) that the net new NPL ratio trajectory holds, reserve cover of NPLs will drop to 213% - suggesting even the mighty are falling. 

China Merchants Bank – Pulling On All Levers

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div>Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors include Tencent, GIC and Standard Chartered Bank.</div><div>Linklogis’ cloud-native solutions optimize the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. As per CIC, Linklogis was the leader among technology solution providers in China in terms of supply chain finance transactions processed over 9M20, accounting for 20.5% market share.</div><div>
Linklogis overall revenue grew by 83% YoY in FY19 and was up another 52% over 9M20. While its core function of Supply Chain finance has been registering strong growth of 64.4% YoY in FY19 and 53.8% in 9M20, revenue from its Emerging solutions was up nearly 6x in FY19 and grew by another 38% over 9M20.
We have covered the positive aspects of the deal in our earlier insight, <a href="https://www.smartkarma.com/insights/linklogis-pre-ipo-the-positives-fast-growing-blockchain-driven-supply-chain-financier" target="_blank" rel="noopener">Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier</a>. In this insight, I'll cover the not so pleasant aspects of the deal.
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Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors include Tencent, GIC and Standard Chartered Bank.Linklogis’ cloud-native solutions optimize the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. As per CIC, Linklogis was the leader among technology solution providers in China in terms of supply chain finance transactions processed over 9M20, accounting for 20.5% market share.
Linklogis overall revenue grew by 83% YoY in FY19 and was up another 52% over 9M20. While its core function of Supply Chain finance has been registering strong growth of 64.4% YoY in FY19 and 53.8% in 9M20, revenue from its Emerging solutions was up nearly 6x in FY19 and grew by another 38% over 9M20.
We have covered the positive aspects of the deal in our earlier insight, Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier. In this insight, I'll cover the not so pleasant aspects of the deal.


Linklogis Pre-IPO - The Negatives - Inconsistent Growth and Margins, Well Funded Competitors

Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors include Tencent, GIC and Standard Chartered Bank.Linklogis’ cloud-native solutions optimize the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. As per CIC, Linklogis was the leader among technology solution providers in China in terms of supply chain finance transactions processed over 9M20, accounting for 20.5% market share.Linklogis overall revenue grew by 83% YoY in FY19 and was up another 52% over 9M20. While its core function of Supply Chain finance has been registering strong growth of 64.4% YoY in FY19 and 53.8% in 9M20, revenue from its Emerging solutions was up nearly 6x in FY19 and grew by another 38% over 9M20.In this insight, I'll cover the positive aspects of the deal.

Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors include Tencent, GIC and Standard Chartered Bank.Linklogis’ cloud-native solutions optimize the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. As per CIC, Linklogis was the leader among technology solution providers in China in terms of supply chain finance transactions processed over 9M20, accounting for 20.5% market share.Linklogis overall revenue grew by 83% YoY in FY19 and was up another 52% over 9M20. While its core function of Supply Chain finance has been registering strong growth of 64.4% YoY in FY19 and 53.8% in 9M20, revenue from its Emerging solutions was up nearly 6x in FY19 and grew by another 38% over 9M20.In this insight, I'll cover the positive aspects of the deal.

Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier

Bond market data and technology, BondEvalue

BondEvalue

Bond market data and technology

BondEvalue is a Singapore-based Fintech that specializes in bond market data and technology. The company's information services business offers bond market data on hard-currency corporate & sovereign bonds across Asia, Middle East, Europe and the Americas. The data, which includes bond prices, yields, news and analytics, is offered to end investors via interactive Mobile and Web Apps. Investors can sign up for a free trial of the service either via the company's website (https://bondevalue.com) or by downloading the BondEvalue Mobile App (http://onelink.to/wej7jq). BondEvalue is also developing an electronic bond exchange, BondbloX in Singapore that allows investors to trade bonds electronically in smaller sizes (US$1,000 or equivalent). For more information, visit https://www.bondblox.com/

Bond Market Data and Technology

Credit

S&amp;P ended 0.8% lower while Nasdaq saw a sharp fall of 2.5%. Tesla  fell 8.5% while Apple, Amazon, Microsoft  and other tech stocks were down ~3%. US 10Y Treasury yields were stable despite the negative sentiment in equity markets. Fed Chair Powell is due to appear before the Senate Banking Committee later today for his semi-annual testimony. European equities were also lower ~0.5% and German Bund yields dipped 4bp. US IG CDS spreads were 2.2bp wider and HY was 8bp wider. EU main CDS spreads widened 2.2bp and crossover spreads widened 4.4bp. Asian equity markets have opened flat while Asia ex-Japan CDS spreads are 0.6bp wider.

S&amp;P ended 0.8% lower while Nasdaq saw a sharp fall of 2.5%. Tesla  fell 8.5% while Apple, Amazon, Microsoft  and other tech stocks were down ~3%. US 10Y Treasury yields were stable despite the negative sentiment in equity markets. Fed Chair Powell is due to appear before the Senate Banking Committee later today for his semi-annual testimony. European equities were also lower ~0.5% and German Bund yields dipped 4bp. US IG CDS spreads were 2.2bp wider and HY was 8bp wider. EU main CDS spreads widened 2.2bp and crossover spreads widened 4.4bp. Asian equity markets have opened flat while Asia ex-Japan CDS spreads are 0.6bp wider.

Macquarie, AgBank, ESR Launch $ Bonds; Macro; Rating Changes; New Bond Issues; Talking Heads; Top...

China

Agricultural Bank of China Limited provides a full range of commercial banking services. The Banks services includes RMB and foreign currency deposit, loan, international and domestic settlement, bill discount, currency trading, bank guarantee, and treasury bill underwriting.

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Agricultural Bank Of China (1288 HK)

HSCEI Dividend Futures: June Index Review, Bank Divs, HFCAA - Sell the 2021/22 Steepener

While the HSCEI 2021 dividend futures are trading near our estimated fair, the HSCEI 2021/22 div steepener is not. We recommend selling the...

Brian Freitas

China Merchants Bank – Pulling On All Levers

CHINA MERCHANTS BANK: CMB's core operating results came in at just CNY 13.9 bn – declining 40.0% linked quarter. Negative operating jaws, and net...

Thomas J. Monaco

Linklogis Pre-IPO - The Negatives - Inconsistent Growth and Margins, Well Funded Competitors

Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors...

Sumeet Singh

Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier

Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors...

Sumeet Singh

Macquarie, AgBank, ESR Launch $ Bonds; Macro; Rating Changes; New Bond Issues; Talking Heads; Top...

S&P ended 0.8% lower while Nasdaq saw a sharp fall of 2.5%. Tesla fell 8.5% while Apple, Amazon, Microsoft and other tech stocks were down...

BondEvalue

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