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

We highlight several positive developments that have occurred since last week’s Int’l Compass report, all of which continue to support our overall constructive outlook. Last week we noted Europe’s STOXX 500 was on the cusp of a breakout above 4040; we got the breakout. WTI and Brent crude oil also broke above key multi-year resistance at $67 and $70, respectively. The MSCI ACWI, ACWI ex-US, and EAFE indexes each hit new all-time highs and remain in uptrends. The MSCI Emerging Markets index (EEM-US) bullishly inflected above short-term resistance at $55.35 and RS is reversing the downtrend. These are all bullish signals for global equities, and our constructive outlook remains appropriate.

We highlight several positive developments that have occurred since last week’s Int’l Compass report, all of which continue to support our overall constructive outlook. Last week we noted Europe’s STOXX 500 was on the cusp of a breakout above 4040; we got the breakout. WTI and Brent crude oil also broke above key multi-year resistance at $67 and $70, respectively. The MSCI ACWI, ACWI ex-US, and EAFE indexes each hit new all-time highs and remain in uptrends. The MSCI Emerging Markets index (EEM-US) bullishly inflected above short-term resistance at $55.35 and RS is reversing the downtrend. These are all bullish signals for global equities, and our constructive outlook remains appropriate.

Major Breakouts For WTI and Brent Crude Oil. Actionable Themes: Energy, Manufacturing, Autos/Parts

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

Full Truck Alliance   / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/full-truck-alliance" target="_blank" data-smartkarma-citation="entities:33429:1" rel="noopener">Full Truck Alliance (YMM US)</a> (FTU),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.5bn via a US listing. It is backed by Softbank and Sequoia.In our earlier note, we spoke about the positive aspects of the deal, <a href="https://www.smartkarma.com/insights/full-truck-alliance-pre-ipo-the-positives-category-leader" target="_blank" rel="noopener">Full Truck Alliance Pre-IPO - The Positives - Category Leader</a>. In this note, we'll talk about the not so positive aspects.

Full Truck Alliance (YMM US) (FTU),  China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.5bn via a US listing. It is backed by Softbank and Sequoia.In our earlier note, we spoke about the positive aspects of the deal, Full Truck Alliance Pre-IPO - The Positives - Category Leader. In this note, we'll talk about the not so positive aspects.

Full Truck Alliance Pre-IPO - The Negatives - Still a Mixed Bag

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

Equity Bottom-Up

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.
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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. 
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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. 
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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. 
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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

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

EM Autos are the 10th largest industry group weight among active EM managers, with average weights of 1.55%.  The more interesting metric however, is the extent to which Autos have become one of the largest industry level underweights across global EM.  The increased underweight has almost exclusively been driven by two stocks, <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> and <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK</a>, with both seeing benchmark weights rise on the back of strong price increases.Such outright volatility has created a challenge for active managers who are benchmarked to the MSCI Emerging Markets Index.   Namely, how do you position yourself in a prominent index component that rises 900% in the space of 12 months?  The temptation might be to add <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> to a portfolio to dampen some of that benchmark risk, and indeed we have seen that happening among managers with low active shares.However, so far, high active managers have remained on the sidelines, sticking instead with more established autos stocks of <a href="https://www.smartkarma.com/entities/kia-motors-corp" target="_blank" data-smartkarma-citation="entities:156:1" rel="noopener">Kia Motors Corp (000270 KS)</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> and <a href="https://www.smartkarma.com/entities/hero-motocorp-ltd" target="_blank" data-smartkarma-citation="entities:2391:1" rel="noopener">Hero Motocorp (HMCL IN)</a>.  Therefore, there is very little peer group risk in avoiding either <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> or <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> .  In fact, if a high active manager decides to invest in either stock, it will represent an out-of-consensus long compared to the majority of your active peers.

EM Autos are the 10th largest industry group weight among active EM managers, with average weights of 1.55%.  The more interesting metric however, is the extent to which Autos have become one of the largest industry level underweights across global EM.  The increased underweight has almost exclusively been driven by two stocks, NIO Inc (NIO US) and BYD (1211 HK, with both seeing benchmark weights rise on the back of strong price increases.Such outright volatility has created a challenge for active managers who are benchmarked to the MSCI Emerging Markets Index.   Namely, how do you position yourself in a prominent index component that rises 900% in the space of 12 months?  The temptation might be to add NIO Inc (NIO US) to a portfolio to dampen some of that benchmark risk, and indeed we have seen that happening among managers with low active shares.However, so far, high active managers have remained on the sidelines, sticking instead with more established autos stocks of Kia Motors Corp (000270 KS) , Geely Auto (175 HK) and Hero Motocorp (HMCL IN).  Therefore, there is very little peer group risk in avoiding either NIO Inc (NIO US) or BYD (1211 HK) .  In fact, if a high active manager decides to invest in either stock, it will represent an out-of-consensus long compared to the majority of your active peers.

EM Autos Underweight:  Ignore Benchmark Risk and Focus on Peers

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 21 May. The constituent changes will be effective after the close of trading on 4 June.For 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>, there are 2 inclusions and 3 exclusions. This brings the number of index constituents back down to 50.The inclusions are <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a>, while <a href="https://www.smartkarma.com/entities/guangdong-investment-ltd" target="_blank" data-smartkarma-citation="entities:12109:1" rel="noopener">Guangdong Investment (270 HK)</a>, <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> and <a href="https://www.smartkarma.com/entities/china-tower-corp-ltd" target="_blank" data-smartkarma-citation="entities:27037:1" rel="noopener">China Tower (788 HK)</a> have been deleted from the index. This is exactly in line with our <a href="https://www.smartkarma.com/insights/hscei-june-2021-index-rebalance-preview-three-adds-four-deletes-possible" target="_blank" rel="noopener">forecast</a>.One-way turnover is estimated at 8.37% and will result in a one-way trade of HK$5.98bn. The largest passive inflows will be on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> as a result of the capping change from 5% to 8%, while the largest outflows will be on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <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> and <a href="https://www.smartkarma.com/entities/china-tower-corp-ltd" target="_blank" data-smartkarma-citation="entities:27037:1" rel="noopener">China Tower (788 HK)</a>.There are only 10 trading days to implementation of the changes and there should be some impact on the stocks even though the changes were largely expected (at least by us). <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> was widely expected to be included but <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> was not on everyone's list. With 4 days ADV to buy on <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a>, the stock could outperform till implementation date.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 21 May. The constituent changes will be effective after the close of trading on 4 June.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 2 inclusions and 3 exclusions. This brings the number of index constituents back down to 50.The inclusions are BYD (1211 HK) and Evergrande Property Services (6666 HK), while Guangdong Investment (270 HK), China Unicom Hong Kong (762 HK) and China Tower (788 HK) have been deleted from the index. This is exactly in line with our forecast.One-way turnover is estimated at 8.37% and will result in a one-way trade of HK$5.98bn. The largest passive inflows will be on Meituan (3690 HK) and Alibaba Group (9988 HK) as a result of the capping change from 5% to 8%, while the largest outflows will be on Tencent (700 HK), China Construction Bank H (939 HK) and China Tower (788 HK).There are only 10 trading days to implementation of the changes and there should be some impact on the stocks even though the changes were largely expected (at least by us). BYD (1211 HK) was widely expected to be included but Evergrande Property Services (6666 HK) was not on everyone's list. With 4 days ADV to buy on Evergrande Property Services (6666 HK), the stock could outperform till implementation date. 

HSCEI Index Rebalance: BYD's Double Inclusion; Capping Changes Lead to High Turnover

China

BYD Company Limited, through its subsidiaries, manufactures and sells automobiles. The Company also researches, develops, manufactures and sells batteries, which are applied on mobile phones, cordless phones, power tools and other kinds of portable electronic devices.

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BYD (1211 HK)

Major Breakouts For WTI and Brent Crude Oil. Actionable Themes: Energy, Manufacturing, Autos/Parts

Today we highlight several positive developments that have occurred since last week’s Int’l Compass report, all of which continue to support our...

Vermilion Research

Full Truck Alliance Pre-IPO - The Negatives - Still a Mixed Bag

Full Truck Alliance (YMM US), China’s largest digital freight platform by gross transaction value, aims to raise up to US$1.5bn via a US listing....

Sumeet Singh

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

EM Autos Underweight: Ignore Benchmark Risk and Focus on Peers

EM Autos have become one of the largest industry level underweights across global EM. The increased underweight has almost exclusively been driven...

Steven Holden

HSCEI Index Rebalance: BYD's Double Inclusion; Capping Changes Lead to High Turnover

The 2 adds and 3 deletes for the HSCEI are just what we expected. BYD is an inclusion in the HSI too and could move higher over the next 2 weeks....

Brian Freitas

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