Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<ul>
<li>The pilot launch of the e-CNY, China’s sovereign digital currency effectively competes with domestic mobile payment apps including Alipay, WeChat and Weixin Pay; the e-CNY registered 261m downloads in 2021</li>
<li>Seven domestic commercial banks are included as the e-CNY’s operators, all of which offer extensive branch networks and large bases of retail customers to accelerate the digital currency’s distribution</li>
<li>The e-CNY’s broader digital payments usage should erode Alipay, WeChat and Weixin Pay market shares; yet we believe that the competitive threat is seemingly well discounted in Alibaba share valuations</li>
</ul>


The pilot launch of the e-CNY, China’s sovereign digital currency effectively competes with domestic mobile payment apps including Alipay, WeChat and Weixin Pay; the e-CNY registered 261m downloads in 2021
Seven domestic commercial banks are included as the e-CNY’s operators, all of which offer extensive branch networks and large bases of retail customers to accelerate the digital currency’s distribution
The e-CNY’s broader digital payments usage should erode Alipay, WeChat and Weixin Pay market shares; yet we believe that the competitive threat is seemingly well discounted in Alibaba share valuations


China’s Central Bank Digital Currency; Is It a Major Threat to Non-Bank Digital Payment Providers?

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

China Merchants Bank H / Equity Bottom-Up

<ul>
<li>
Competitor Call Reveals Numerous Additional Risks Which Will Weigh On Results. </li>
<li>No Clarity On Go Forward Core Bottom-Line, Especially Gains and Loss Provisions. </li>
<li>Reserve to NPLs Looks Overstated, as WMP and Securities Are Included In Loan Reserves. </li>
</ul>



Competitor Call Reveals Numerous Additional Risks Which Will Weigh On Results. 
No Clarity On Go Forward Core Bottom-Line, Especially Gains and Loss Provisions. 
Reserve to NPLs Looks Overstated, as WMP and Securities Are Included In Loan Reserves. 


China Merchants Bank – Accelerating Risk

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

<ul>
<li>An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top100 stocks in the MSCI GEM Index.</li>
<li>The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.</li>
<li>Developed over the past 3 years, and implemented in its current state for 20 months, the model has a solid real-world alpha-generating performance track record, set out in detail below.</li>
</ul>


An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top100 stocks in the MSCI GEM Index.
The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.
Developed over the past 3 years, and implemented in its current state for 20 months, the model has a solid real-world alpha-generating performance track record, set out in detail below.


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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<ul>
<li>The December rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituents at 8%. This will lead to large flows.</li>
<li>The largest passive outflows as a result of capping 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/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> due to their weight exceeding 8% in all three indices.</li>
<li>There are large funding outflows (in terms of days of ADV to trade) on quite a few Hong Kong property stocks as well as stocks from the financials sector.</li>
</ul>


The December rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituents at 8%. This will lead to large flows.
The largest passive outflows as a result of capping will be on Meituan (3690 HK) and Tencent (700 HK) due to their weight exceeding 8% in all three indices.
There are large funding outflows (in terms of days of ADV to trade) on quite a few Hong Kong property stocks as well as stocks from the financials sector.


HSI, HSCEI, HSTECH: December Rebalance Flows Post Capping

*Kaisa Defaults: On November 4, 2021, Kaisa Group Holdings (1638.HK) [Kaisa], which provided a guarantee on a wealth management product (WMP), disclosed that it had missed a payment - citing that “it is facing unprecedented liquidity pressure due to a challenging property market and rating downgrades”.  While the 25th largest developer by home sales in mainland China may not appear to be significant, Kaisa does have the second largest level of short-term debt due (USD 3.2 bn) after China Evergrande Group (3333.HK) [Evergrande] without any meaningful plan for repayment; and*We Await Evergrande’s Next Payments: We await official word on whether Evergrande’s Scenery Journey met its coupon payment of USD 82.5 mn due November 6, 2021, and we look toward the 30-day grace period expiry on a third set of bond interest payments of USD 148 mn due November 10, 2021.

*Kaisa Defaults: On November 4, 2021, Kaisa Group Holdings (1638.HK) [Kaisa], which provided a guarantee on a wealth management product (WMP), disclosed that it had missed a payment - citing that “it is facing unprecedented liquidity pressure due to a challenging property market and rating downgrades”.  While the 25th largest developer by home sales in mainland China may not appear to be significant, Kaisa does have the second largest level of short-term debt due (USD 3.2 bn) after China Evergrande Group (3333.HK) [Evergrande] without any meaningful plan for repayment; and*We Await Evergrande’s Next Payments: We await official word on whether Evergrande’s Scenery Journey met its coupon payment of USD 82.5 mn due November 6, 2021, and we look toward the 30-day grace period expiry on a third set of bond interest payments of USD 148 mn due November 10, 2021.   

China

Bank of China Limited provides banking services. The Company offers deposits, loans, foreign currency transaction, fund settlement, and other services. Bank of China provides its services to individuals, enterprises, and other clients.

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Bank of China (601988 CH)

China’s Central Bank Digital Currency; Is It a Major Threat to Non-Bank Digital Payment Providers?

The digital yuan's growth in digital payments usage could erode Alipay and Tencent app market shares; yet we think the competitive threat is...

Victor Galliano

China Merchants Bank – Accelerating Risk

CHINA MERCHANTS BANK: A discussion over the use of gains and a drop in loss provisions during 3Q21 would have been a better use of time. CMB’s core...

Thomas J. Monaco

Screening for GEMs: January 2022

This insight provides an overview of our, machine learning-driven, proprietary GEM screening model, based on a Multifactor model, a Deep Neural...

Wium Malan, CFA

HSI, HSCEI, HSTECH: December Rebalance Flows Post Capping

The Dec rebalance of the HK indices will use today's closing prices to cap the stocks at 8%. Meituan and Tencent will see large outflows due to...

Brian Freitas

China Evergrande Group – Kaisa Rolled

EVERGRANDE: Kaisa missed a bond payment, and has the second largest level of short-term debt due. We await official word Evergrande’s Scenery...

Thomas J. Monaco

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