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.

Event-Driven

<ul>
<li>On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.</li>
<li>On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.</li>
<li>In this note, we'll talk about the latest developments and its implications.</li>
</ul>


On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.
On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.
In this note, we'll talk about the latest developments and its implications.


China ADRs Delisting - Tide Is Turning - Non-HK Listed ADRs Are Already Outperforming

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The latest bear market rally came to a close last week after the S&amp;P 500 and Nasdaq 100 (QQQ) broke below their respective flag supports at 4070 and $304. </li>
<li>Last week we noted a break of these levels would likely mean a trip back to YTD lows and downtrend channel support, which is precisely where we are now.</li>
<li>We remain bearish as long as the downtrends remain intact on the S&amp;P 500, Nasdaq 100 (QQQ), Russell 2000 (IWM), S&amp;P 600 (IJR), and Russell Micro-Caps (IWC)</li>
</ul>


The latest bear market rally came to a close last week after the S&amp;P 500 and Nasdaq 100 (QQQ) broke below their respective flag supports at 4070 and $304. 
Last week we noted a break of these levels would likely mean a trip back to YTD lows and downtrend channel support, which is precisely where we are now.
We remain bearish as long as the downtrends remain intact on the S&amp;P 500, Nasdaq 100 (QQQ), Russell 2000 (IWM), S&amp;P 600 (IJR), and Russell Micro-Caps (IWC)


US Dollar & 10-Year Treasury Yield Breaking Out; Stick With Energy, Also Buying China Education Svcs

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a> are still yet to be fully reflected.</li>
<li>The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.</li>
<li>Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.</li>
</ul>


Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of China Education Group (839 HK) are still yet to be fully reflected.
The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.
Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.


China Education Group (839 HK): Further Evidences for Underlying Health

Thematic (Sector/Industry)

<ul>
<li>China Education Sector, specifically <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a>, should see better performance in 2022 as regulatory concerns gradually ease. 1H22 result for higher education segment should be a proof.</li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> could reverse the bad fortune in 2022 on the back of realisation of undervalued assets, expansion of logistics facilities and better performance at Shenzhen Airlines.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang (3818 HK)</a> remains an undervalued asset play. Its ability to realise value of its investment portfolio, potential resumption of dividend payout and recovery of sportswear business are drivers.</li>
</ul>


China Education Sector, specifically China Education Group (839 HK), should see better performance in 2022 as regulatory concerns gradually ease. 1H22 result for higher education segment should be a proof.

Shenzhen International (152 HK) could reverse the bad fortune in 2022 on the back of realisation of undervalued assets, expansion of logistics facilities and better performance at Shenzhen Airlines.

China Dongxiang (3818 HK) remains an undervalued asset play. Its ability to realise value of its investment portfolio, potential resumption of dividend payout and recovery of sportswear business are drivers.


Our Three Worst Calls in Last Year and Any Room for a Reversal in 2022?

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> declared an interim dividend by way of in-specie distribution of JD.com.  That interim dividend is ~ 3.0%. Not phenomenally large, but hints at possibilities to come. </li>
<li>Dye &amp; Durham come over the top with an all-cash bid for <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> as Carlyle remains silent after five weeks of due diligence.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> has priced its A-share IPO at RMB 57.58/share which is slightly disappointing in terms of premium to the H-share.  The "reasoning" is basically hogwash. </li>
</ul>



Tencent (700 HK) declared an interim dividend by way of in-specie distribution of JD.com.  That interim dividend is ~ 3.0%. Not phenomenally large, but hints at possibilities to come. 
Dye &amp; Durham come over the top with an all-cash bid for Link Administration Holdings (LNK AU) as Carlyle remains silent after five weeks of due diligence.

China Mobile (941 HK) has priced its A-share IPO at RMB 57.58/share which is slightly disappointing in terms of premium to the H-share.  The "reasoning" is basically hogwash. 


Last Week in Event SPACE: Tencent /JD.com, Link Admin, China Mobile, Sydney Airport, Katakura

China

TAL Education Group provides educational services. The Company offers comprehensive tutoring services to students covering core academic subjects such as mathematics, English, Chinese, physics, chemistry, political science, history, and biology. TAL Education Group serves students in China.

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TAL Education (TAL US)

China ADRs Delisting - Tide Is Turning - Non-HK Listed ADRs Are Already Outperforming

On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting...

Sumeet Singh

US Dollar & 10-Year Treasury Yield Breaking Out; Stick With Energy, Also Buying China Education Svcs

US Dollar $DXY & 10-Year Treasury Yield $TNX Breaking Out; Broad Equity Market Not Likely to Bottom Until the USD and Treasury Yields Start Moving...

Vermilion Research

China Education Group (839 HK): Further Evidences for Underlying Health

Solid growth in approved top-up degree quota brightens CEG's outlook. Even with share price spike, it still trades on cheap 7.1x PER for FY22, with...

Osbert Tang, CFA

Our Three Worst Calls in Last Year and Any Room for a Reversal in 2022?

China Education Sector, Shenzhen Intl and China Dongxiang are the three worst calls that we made in last year. We believe there is room for a...

Osbert Tang, CFA

Last Week in Event SPACE: Tencent /JD.com, Link Admin, China Mobile, Sydney Airport, Katakura

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

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