Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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 Bottom-Up

<p>We have discussed previously that the Chinese central government could impose tightening measure on online game companies to restrict screen time for the youth. Last night the NPPA announced a notice further tightening the youth playing. In this note, we will take a look at the notice and assess the impact on Tencent and Netease. We are of the view that this policy will have little impact on the two companies. </p>

We have discussed previously that the Chinese central government could impose tightening measure on online game companies to restrict screen time for the youth. Last night the NPPA announced a notice further tightening the youth playing. In this note, we will take a look at the notice and assess the impact on Tencent and Netease. We are of the view that this policy will have little impact on the two companies. 

Tencent/Netease: Online Game Tightening Coming to an End

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>Overnight many Chinese gaming-related names fell ~3% on news that China would be restricting playing time for minors to just three hours a week, specifically 20:00-21:00 on Friday, Saturday and Sunday. The market reaction grossly underestimates how drastic these restrictions will be for gaming companies and seems to simply be superficially looking at the low single-digit revenue contribution percentages of minors.</p>

Overnight many Chinese gaming-related names fell ~3% on news that China would be restricting playing time for minors to just three hours a week, specifically 20:00-21:00 on Friday, Saturday and Sunday. The market reaction grossly underestimates how drastic these restrictions will be for gaming companies and seems to simply be superficially looking at the low single-digit revenue contribution percentages of minors.

China Gaming Restrictions Are FAR More Severe Than the Market Is Assuming

China and US Equity Analyst

Roger Xie

<ul>
<li>The long-awaited China A-share Index future finally received approval from regulators from both Hong Kong and China (<a href="https://www.hkex.com.hk/News/News-Release/2021/210820news?sc_lang=en" target="_blank" rel="noopener">news link</a>). The to-be-launched product is MSCI China A50 Connect Index, which is different from investors' expectation of MSCI China Index future. However, we still believe the move is a game changer for <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> derivative business as investors' increasing exposure in China A-share cash equity market and index future. This will also put a direct competition pressure on <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">SGX (SGX SP)</a> as its popular FTSE A50 Index future accounting around 17% of its total revenue. We believe offshore investors would like to gradually shift their China A-share Index exposure to <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> from <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">SGX (SGX SP)</a> </li>
<li>We estimate that ADV (Average Daily Volume) of MSCI China A50 Connect contract will be ramped up at 1.5-2.0x the volume of FTSE A50 at its launch, given the ADT (Average Daily Turnover) of stock connect northbound (China A-share cash equity market) has reached RMB 120bn. There is increasing demands from offshore investors for hedging and speculation. In a long-run, we believe ADV of MSCI China A50 could be more than 5x of ADV of FTSE A50 as offshore investors' exposure on China A-share cash equity grows. We expect the derivative business contribution to revenue at HKEx will likely grow to 25% from current 16%, which will reshape HKEx with more balanced revenue stream from both cash equity and derivative. </li>
<li>For 1H2021, <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> delivered a broadly in-line results. It reported 2Q2021 profits of HK$2.77bn, down 7% year-over-year. Cash equity ADT was quite strong and up 31% year-over-year, but down 34% from 1Q 2021. But the derivatives business did not have the same volume pick-up with HK derivatives ADV -5% year-over-year and LME ADV -2% year-over-year. We are the believer that HKEx will play a key role on offshore China listings. Ongoing regulatory uncertainty is likely to accelerate the Chinese ADS' to diversify their listing risk and to benefit HKEx as a preferred offshore listing venue.  We forecast <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> Securities ADT of HK$240bn in FY 21 (excluding Stock Connect Northbound volume)  and remain bullish on <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>  and have TP HKD 550. </li>
</ul>


The long-awaited China A-share Index future finally received approval from regulators from both Hong Kong and China (news link). The to-be-launched product is MSCI China A50 Connect Index, which is different from investors' expectation of MSCI China Index future. However, we still believe the move is a game changer for HKEX (388 HK) derivative business as investors' increasing exposure in China A-share cash equity market and index future. This will also put a direct competition pressure on SGX (SGX SP) as its popular FTSE A50 Index future accounting around 17% of its total revenue. We believe offshore investors would like to gradually shift their China A-share Index exposure to HKEX (388 HK) from SGX (SGX SP) 
We estimate that ADV (Average Daily Volume) of MSCI China A50 Connect contract will be ramped up at 1.5-2.0x the volume of FTSE A50 at its launch, given the ADT (Average Daily Turnover) of stock connect northbound (China A-share cash equity market) has reached RMB 120bn. There is increasing demands from offshore investors for hedging and speculation. In a long-run, we believe ADV of MSCI China A50 could be more than 5x of ADV of FTSE A50 as offshore investors' exposure on China A-share cash equity grows. We expect the derivative business contribution to revenue at HKEx will likely grow to 25% from current 16%, which will reshape HKEx with more balanced revenue stream from both cash equity and derivative. 
For 1H2021, HKEX (388 HK) delivered a broadly in-line results. It reported 2Q2021 profits of HK$2.77bn, down 7% year-over-year. Cash equity ADT was quite strong and up 31% year-over-year, but down 34% from 1Q 2021. But the derivatives business did not have the same volume pick-up with HK derivatives ADV -5% year-over-year and LME ADV -2% year-over-year. We are the believer that HKEx will play a key role on offshore China listings. Ongoing regulatory uncertainty is likely to accelerate the Chinese ADS' to diversify their listing risk and to benefit HKEx as a preferred offshore listing venue.  We forecast HKEX (388 HK) Securities ADT of HK$240bn in FY 21 (excluding Stock Connect Northbound volume)  and remain bullish on HKEX (388 HK)  and have TP HKD 550. 


HKEx (388.HK): A-Share Index Future Launch, A Game Changer for HKEx Derivative Business

Quantitative Analysis

<p>Hong Kong SFC reported aggregate short position as of Aug 13. The aggregate short value for equities increased by $1,382m (+2.1%) WoW but decreased by $4,126m (-5.7%) over the preceding four weeks.</p><p>Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($4,799m, -5.1% WoW), China Merchants Bank Co., Ltd./3968 HK($2,264m, +12.3% WoW), Zhongsheng Group Holdings Limited/881 HK($2,083m, +7.3% WoW), Tencent Holdings Limited/700 HK($1,802m, +7.3% WoW), Anta Sports Products Limited/2020 HK($1,671m, -2.5% WoW).</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/225/359/original/Hong_Kong_Market_Short_Position_Value_%28line%29_and_1W_Changes_%28bar%29_%28%24m%292021-08-22+12_32_41.png?1629622471" class="editor-image img-responsive" data-smartkarma-image-id="225359"></figure></section>

Hong Kong SFC reported aggregate short position as of Aug 13. The aggregate short value for equities increased by $1,382m (+2.1%) WoW but decreased by $4,126m (-5.7%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($4,799m, -5.1% WoW), China Merchants Bank Co., Ltd./3968 HK($2,264m, +12.3% WoW), Zhongsheng Group Holdings Limited/881 HK($2,083m, +7.3% WoW), Tencent Holdings Limited/700 HK($1,802m, +7.3% WoW), Anta Sports Products Limited/2020 HK($1,671m, -2.5% WoW).

HK Short Interest: Kuaishou and Netease Short Covers

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a>, <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/cansino-biologics-inc" target="_blank" data-smartkarma-citation="entities:27739:1" rel="noopener">CanSino Biologics Inc (6185 HK)</a> and <a href="https://www.smartkarma.com/entities/zhongan-online-p-c-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:23681:1" rel="noopener">ZhongAn Online P&amp;C Insurance (6060 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> and <a href="https://www.smartkarma.com/entities/china-overseas-land-invest" target="_blank" data-smartkarma-citation="entities:419:1" rel="noopener">China Overseas Land &amp; Investment Ltd (688 HK)</a>. Shorts increased in the Consumer Discretionary, Health Care, Information Technology and Financials sectors while decreasing in the Communication Services, Real Estate and Consumer Staples sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP)</a>, <a href="https://www.smartkarma.com/entities/odakyu-electric-railway-co-ltd" target="_blank" data-smartkarma-citation="entities:5405:1" rel="noopener">Odakyu Electric Railway (9007 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-osk-lines-ltd" target="_blank" data-smartkarma-citation="entities:20717:1" rel="noopener">Mitsui Osk Lines (9104 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>, <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp Corp (6753 JP)</a>, <a href="https://www.smartkarma.com/entities/kawasaki-kisen-kaisha-ltd" target="_blank" data-smartkarma-citation="entities:3548:1" rel="noopener">Kawasaki Kisen Kaisha (9107 JP)</a>, <a href="https://www.smartkarma.com/entities/nabtesco-corp" target="_blank" data-smartkarma-citation="entities:13176:1" rel="noopener">Nabtesco Corp (6268 JP)</a> and <a href="https://www.smartkarma.com/entities/tokyo-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:15457:1" rel="noopener">Tokyo Electric Power Co (9501 JP)</a>. Shorts increased in the Industrials, Financials and Information Technology sectors.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a>, <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a>, <a href="https://www.smartkarma.com/entities/db-hitek-co-ltd" target="_blank" data-smartkarma-citation="entities:18926:1" rel="noopener">DB Hitek Co., Ltd. (000990 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a>, <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS)</a> and <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a>.</p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a> and <a href="https://www.smartkarma.com/entities/nuvoton-technology-corp" target="_blank" data-smartkarma-citation="entities:15913:1" rel="noopener">Nuvoton Technology (4919 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/taiwan-cement" target="_blank" data-smartkarma-citation="entities:19736:1" rel="noopener">Taiwan Cement (1101 TT)</a>, <a href="https://www.smartkarma.com/entities/ctbc-financial-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:436:1" rel="noopener">Ctbc Financial Holding (2891 TT)</a>, <a href="https://www.smartkarma.com/entities/yang-ming-marine-transport" target="_blank" data-smartkarma-citation="entities:8502:1" rel="noopener">Yang Ming Marine Transport (2609 TT)</a>, <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a> and <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Meituan (3690 HK), Geely Auto (175 HK), Postal Savings Bank of China (1658 HK), CanSino Biologics Inc (6185 HK) and ZhongAn Online P&amp;C Insurance (6060 HK) while there was short covering on Ping An Insurance (H) (2318 HK), Kuaishou Technology (1024 HK), NetEase (9999 HK), Country Garden Services Holdings (6098 HK) and China Overseas Land &amp; Investment Ltd (688 HK). Shorts increased in the Consumer Discretionary, Health Care, Information Technology and Financials sectors while decreasing in the Communication Services, Real Estate and Consumer Staples sectors.In Japan, stocks increased on Japan Post Bank (7182 JP), Toshiba Corp (6502 JP), Yaskawa Electric (6506 JP), Odakyu Electric Railway (9007 JP) and Mitsui Osk Lines (9104 JP) while there was short covering on freee (4478 JP), Sharp Corp (6753 JP), Kawasaki Kisen Kaisha (9107 JP), Nabtesco Corp (6268 JP) and Tokyo Electric Power Co (9501 JP). Shorts increased in the Industrials, Financials and Information Technology sectors.In Korea, shorts increased on NCSOFT Corp (036570 KS), Netmarble Corporation (251270 KS), DB Hitek Co., Ltd. (000990 KS), SK Telecom (017670 KS) and Samsung Electronics (005930 KS) while shorts were covered on Amorepacific Corp (090430 KS), Kakao Corp (035720 KS), SK Innovation (096770 KS), LG Household &amp; Health Care (051900 KS) and KT Corp (030200 KS).In Taiwan, shorts increased on Yageo Corporation (2327 TT), Mediatek Inc (2454 TT), Evergreen Marine Corp (2603 TT), Innolux Corp (3481 TT) and Nuvoton Technology (4919 TT) while shorts covered on Taiwan Cement (1101 TT), Ctbc Financial Holding (2891 TT), Yang Ming Marine Transport (2609 TT), Nanya Technology (2408 TT) and Wan Hai Lines (2615 TT).

Asia Shorts: Meituan, Geely, Kuaishou, COLI, Toshiba, Freee, NCSOFT, SK Tel, Yang Ming, Wan Hai, EMC

China

NetEase, Inc. is an Internet technology company that develops applications, services and other Internet technologies in China. The Company's core businesses consist of email service, web portal and online entertainment, including online gaming services. NetEase also offers online advertising, search, mobile applications and e-commerce.

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NetEase Inc (NTES US)

Tencent/Netease: Online Game Tightening Coming to an End

Last night the NPPA announced a notice further tightening the youth playing. In this note, we will take a look at the notice and continue to...

Ke Yan, CFA, FRM

China Gaming Restrictions Are FAR More Severe Than the Market Is Assuming

We believe the market reaction to China's new gaming restrictions grossly underestimates how drastic the long-term impact will be.

Mio Kato

HK Short Interest: Kuaishou and Netease Short Covers

We highlight WoW short cover of Kuaishou and Netease based on the latest Hong Kong SFC short position report. We also highlight 4W short position...

Ke Yan, CFA, FRM

Asia Shorts: Meituan, Geely, Kuaishou, COLI, Toshiba, Freee, NCSOFT, SK Tel, Yang Ming, Wan Hai, EMC

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tencent/Netease: Online Game Tightening Coming to an End

Last night the NPPA announced a notice further tightening the youth playing. In this note, we will take a look at the notice and continue to...

Ke Yan, CFA, FRM

China Gaming Restrictions Are FAR More Severe Than the Market Is Assuming

We believe the market reaction to China's new gaming restrictions grossly underestimates how drastic the long-term impact will be.

Mio Kato

HKEx (388.HK): A-Share Index Future Launch, A Game Changer for HKEx Derivative Business

We expect China A-share index future will reshape HKEx with more balanced revenue stream from both cash equity and derivative. We remain bullish on...

Roger Xie

HK Short Interest: Kuaishou and Netease Short Covers

We highlight WoW short cover of Kuaishou and Netease based on the latest Hong Kong SFC short position report. We also highlight 4W short position...

Ke Yan, CFA, FRM

Asia Shorts: Meituan, Geely, Kuaishou, COLI, Toshiba, Freee, NCSOFT, SK Tel, Yang Ming, Wan Hai, EMC

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas