Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>This party keeps on rocking</li>
<li>More stocks, and students, to make better chips</li>
<li>Abandon engagement with China?</li>
<li>A toast, Good-Neighbourliness!</li>
<li>Western water powers Eastern China</li>
</ul><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
This party keeps on rocking
More stocks, and students, to make better chips
Abandon engagement with China?
A toast, Good-Neighbourliness!
Western water powers Eastern China
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Equity Bottom-Up

<p>In 5M, <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a>  China received ~72K orders for MIC M3, plus 22K backlog orders exiting 2020.  GF3 made 103K M3 in 5M, among which 69K were delivered in China and 29K were exported.  The estimated order backlog exiting May was ~25K, slightly down from 26K backlog exiting April.  Excess production at the GF3 has been exported to markets around the world.  If TSLA China does not implement effective promotional programs and or policies to stimulate demand, we estimate that MIC 3 orders will stagnate around 9K per month, vs. monthly production of ~21K.  In other words, MIC 3 exports are likely to increase MoM due to the lower cost structure including BoM of MIC cars.</p>

In 5M, Tesla Motors (TSLA US)  China received ~72K orders for MIC M3, plus 22K backlog orders exiting 2020.  GF3 made 103K M3 in 5M, among which 69K were delivered in China and 29K were exported.  The estimated order backlog exiting May was ~25K, slightly down from 26K backlog exiting April.  Excess production at the GF3 has been exported to markets around the world.  If TSLA China does not implement effective promotional programs and or policies to stimulate demand, we estimate that MIC 3 orders will stagnate around 9K per month, vs. monthly production of ~21K.  In other words, MIC 3 exports are likely to increase MoM due to the lower cost structure including BoM of MIC cars.

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<p>China’s market regulator, the State Administration for Market Regulation, met with Tesla’s local subsidiaries in February over increased consumer reports of vehicle problems and later on issued a statement saying it places high importance on the Shanghai auto show incident. The authority said it has instructed local regulators to protect consumer interests.</p>
<p>Tesla is mainly a US company but with the growing wealth in China and Tesla's market positioning as the high-end EV, it has managed to gain substantial traction in China and doubled its sales contribution from 20 to 40% by March 2021. </p>
<p>BYD also announced that a total of <strong>1500</strong> Tang SUVs will be delivered to Norway before the end of the year as the company commits to accelerating its European and global strategies. <strong>The initial 100 cars are scheduled for delivery to Norwegian customers in the third quarter of this year</strong>.</p>
<div class="content-highlight">
<p>BYD is added into <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> and <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> at the same time while other names are involved with one or some are two - moving from one to another. </p>
</div>
<p>BYD is trading at 84% PER discount, 83% EV/EBITDA discount, and 73% PBR discount to Tesla while its share price also lagged behind Tesla's in the past 6 months. </p>
<div class="content-highlight">
<p><strong>Given BYD's foray into battery technology has started to yield fruit and Tesla's market share in China may be in danger, it is probably a good time to start shorting Tesla and long BYD. </strong></p>
</div>

China’s market regulator, the State Administration for Market Regulation, met with Tesla’s local subsidiaries in February over increased consumer reports of vehicle problems and later on issued a statement saying it places high importance on the Shanghai auto show incident. The authority said it has instructed local regulators to protect consumer interests.
Tesla is mainly a US company but with the growing wealth in China and Tesla's market positioning as the high-end EV, it has managed to gain substantial traction in China and doubled its sales contribution from 20 to 40% by March 2021. 
BYD also announced that a total of 1500 Tang SUVs will be delivered to Norway before the end of the year as the company commits to accelerating its European and global strategies. The initial 100 cars are scheduled for delivery to Norwegian customers in the third quarter of this year.

BYD is added into Hang Seng China Enterprises Index (HSCEI INDEX) and Hong Kong Hang Seng Index (HSI INDEX) at the same time while other names are involved with one or some are two - moving from one to another. 

BYD is trading at 84% PER discount, 83% EV/EBITDA discount, and 73% PBR discount to Tesla while its share price also lagged behind Tesla's in the past 6 months. 

Given BYD's foray into battery technology has started to yield fruit and Tesla's market share in China may be in danger, it is probably a good time to start shorting Tesla and long BYD. 


BYD (1211) Vs Tesla (TSLA): Fight over China

China Specialist, Auto and Industrial Specialist

Victoria Li

Thematic (Sector/Industry)

<p><strong>We expect market competition in China's BEV segment rise in the next two years. The interesting thing is that most of new models announced/launched lately target C-segment market. The second popular market is A-segment sedan, in which 3 new models were launched and would start delivery by the end of this year.  B-segment has the least new model announced.  Which models would be the best sellers in their target markets? Which OEM/brand would gain solid market position?</strong></p>

We expect market competition in China's BEV segment rise in the next two years. The interesting thing is that most of new models announced/launched lately target C-segment market. The second popular market is A-segment sedan, in which 3 new models were launched and would start delivery by the end of this year.  B-segment has the least new model announced.  Which models would be the best sellers in their target markets? Which OEM/brand would gain solid market position?

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>There were some anxious moments after China's State Administration for Market Regulation (SAMR) <a href="http://www.samr.gov.cn/fldj/ajgs/jzjyajgs/202011/t20201125_323881.html" target="_blank" rel="noopener">announced</a> on the 25 November it was reviewing the MBK/ <a href="https://www.smartkarma.com/entities/car-inc" target="_blank" data-smartkarma-citation="entities:942:1" rel="noopener">Car Inc (699 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1113/2020111301538.pdf" target="_blank" rel="noopener">deal</a> as a simple case  - then promptly took near-on sixty day to assess the transaction rather than the "normal" 30 days. But Car <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0125/2021012501159.pdf" target="_blank" rel="noopener">announced</a> on 25 January the pre-conditions had been fulfilled and the Composite Document would be despatched on or before 29 January. </p>
<p>That despatch was pushed to the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0129/2021012901138.pdf" target="_blank" rel="noopener">1 February</a>, and now the Doc is <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0131/2021013100161.pdf" target="_blank" rel="noopener">out</a>. </p>
<p>The First Closing Date is the 22 February. The IFA (Halcyon) says "fair &amp; reasonable."</p>
</div>
<div>
<p>The Offer is subject to a 50% tendering condition - with MBK holding 47.43% at the completion of its SPA with UCAR, together with irrevocables. Warburg/Amber, holding 4.96% at last count, is a seller. This is done.</p>
</div>
<div>
<p>More thoughts below the fold.</p>
</div>


There were some anxious moments after China's State Administration for Market Regulation (SAMR) announced on the 25 November it was reviewing the MBK/ Car Inc (699 HK) deal as a simple case  - then promptly took near-on sixty day to assess the transaction rather than the "normal" 30 days. But Car announced on 25 January the pre-conditions had been fulfilled and the Composite Document would be despatched on or before 29 January. 
That despatch was pushed to the 1 February, and now the Doc is out. 
The First Closing Date is the 22 February. The IFA (Halcyon) says "fair &amp; reasonable."


The Offer is subject to a 50% tendering condition - with MBK holding 47.43% at the completion of its SPA with UCAR, together with irrevocables. Warburg/Amber, holding 4.96% at last count, is a seller. This is done.


More thoughts below the fold.


Car (699 HK): Doc Out. IFA Says Fair. Done Deal

China

SAIC Motor Corporation Ltd., through joint ventures, manufactures and markets automobiles and related parts and accessories.

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SAIC Motor (600104 CH)

CCP/ Chips/ US-China/ Russia/ Hydro

In my weekly digest, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and...

Diana Choyleva

TSLA China Losing to Chinese NEV OEMs

TSLA will begin to experience excess production of the Y in the next couple of months, as the China order backlog wanes from 43KQ1 to 17K Q2. Y...

JL Warren Capital

BYD (1211) Vs Tesla (TSLA): Fight over China

Given BYD's foray into battery technology has started to yield fruit and Tesla's market share in China may be in danger, it is probably a good time...

Henry Soediarko

China EV: Which Is the Next Best Seller?

We expect market competition in China's BEV segment rise in the next two years. The interesting thing is that most of new models announced/launched...

Victoria Li

Car (699 HK): Doc Out. IFA Says Fair. Done Deal

This is a done deal. Trading tight at 0.5%/6.3% gross/annualised. Watch for any last-minute weakness to pick up a spread o two below here.

David Blennerhassett

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