Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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

<ul>
<li>Twelve local persons tested positive for COVID-19 in Shanghai. The pandemic might begin to spread in the south of China.</li>
<li>Delivery companies’ competition is close to an end. Prices may rise significantly if some companies exit the market.</li>
<li>News about Tencent’s WeChat, QQ, and Music.</li>
</ul>


Twelve local persons tested positive for COVID-19 in Shanghai. The pandemic might begin to spread in the south of China.
Delivery companies’ competition is close to an end. Prices may rise significantly if some companies exit the market.
News about Tencent’s WeChat, QQ, and Music.


China Internet Weekly (25Jan2021): Community Locked Down in Shanghai, Delivery Companies Polarized

China and US Equity Analyst

Roger Xie

Cross Asset Strategy

<ul>
<li>China mainland funds have accelerated their capital deployment in Hong Kong market in the new year. According to data provider Wind, the fund inflow to Hong Kong has exceeded RMB 150 billion in first three weeks of January. Since the Hong Kong-China Stock Connect program kicked off in 2014, the accumulated funds from China to Hong Kong have reached RMB 1.66 trillion. We estimate the annual fund inflow to Hong Kong market could be as high as RMB 600 billion in next 5 years.</li>
<li>The accelerated fund inflow underscored the attractiveness of Hong Kong market in several aspects. 1) Hong Kong market overall valuation is cheaper than China A-share. For dual-list A and H-shares, Hong Kong listed H-shares are traded at average 35% discount to their A-share peers. 2) Liquidity at both China and Hong Kong market remains abundant. The data analytics firm EPFR reported that there are 20 weeks of consecutive fund inflow to Hong Kong market. 3) <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> has transformed itself to a capital raising and trading venue for China new economy companies. And these particular sectors have become favorite for China domestic funds.</li>
<li>The top-10 holdings of Hong Kong-listed companies for China funds are: <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> , <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/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK) , </a><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><a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener"> </a>, <a href="https://www.smartkarma.com/entities/yihai-int-l-holding-ltd" target="_blank" data-smartkarma-citation="entities:22803:1" rel="noopener">Yihai Int’L Holding (1579 HK)</a> , <a href="https://www.smartkarma.com/entities/kingdee-international-sftwr" target="_blank" data-smartkarma-citation="entities:37:1" rel="noopener">Kingdee International Software (268 HK)</a> , <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> , <a href="https://www.smartkarma.com/entities/kingsoft-corp-ltd" target="_blank" data-smartkarma-citation="entities:492:1" rel="noopener">Kingsoft Corp (3888 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> , <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> </li>
</ul>


China mainland funds have accelerated their capital deployment in Hong Kong market in the new year. According to data provider Wind, the fund inflow to Hong Kong has exceeded RMB 150 billion in first three weeks of January. Since the Hong Kong-China Stock Connect program kicked off in 2014, the accumulated funds from China to Hong Kong have reached RMB 1.66 trillion. We estimate the annual fund inflow to Hong Kong market could be as high as RMB 600 billion in next 5 years.
The accelerated fund inflow underscored the attractiveness of Hong Kong market in several aspects. 1) Hong Kong market overall valuation is cheaper than China A-share. For dual-list A and H-shares, Hong Kong listed H-shares are traded at average 35% discount to their A-share peers. 2) Liquidity at both China and Hong Kong market remains abundant. The data analytics firm EPFR reported that there are 20 weeks of consecutive fund inflow to Hong Kong market. 3) HKEX (388 HK) has transformed itself to a capital raising and trading venue for China new economy companies. And these particular sectors have become favorite for China domestic funds.
The top-10 holdings of Hong Kong-listed companies for China funds are: Tencent Holdings (700 HK) , Meituan (3690 HK) , Wuxi Biologics (2269 HK) , HKEX (388 HK) , Yihai Int’L Holding (1579 HK) , Kingdee International Software (268 HK) , Xinyi Solar Holdings (968 HK) , Kingsoft Corp (3888 HK) , Country Garden Services Holdings (6098 HK) , Xiaomi Corp (1810 HK) 


China Equity Strategy: Domestic Funds Rush to Deploy Capital in Hong Kong Market

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<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/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <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/gcl-poly-energy-holdings-limited" target="_blank" data-smartkarma-citation="entities:3708:1" rel="noopener">Gcl Poly Energy Holdings Limited (3800 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> while there was short covering on <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a>, <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>, <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>, <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/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>. Shorts increased on Financials, Information Technology, Communication Services and Health Care, and decreased on Real Estate.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec Corp (6920 JP)</a>, <a href="https://www.smartkarma.com/entities/seiko-epson-corp" target="_blank" data-smartkarma-citation="entities:16793:1" rel="noopener">Seiko Epson (6724 JP)</a>, <a href="https://www.smartkarma.com/entities/zenkoku-hosho-co-ltd" target="_blank" data-smartkarma-citation="entities:5537:1" rel="noopener">Zenkoku Hosho (7164 JP)</a> and <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a>, <a href="https://www.smartkarma.com/entities/thk-co-ltd" target="_blank" data-smartkarma-citation="entities:19572:1" rel="noopener">Thk Co Ltd (6481 JP)</a> and <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" data-smartkarma-citation="entities:3700:1" rel="noopener">Anritsu Corp (6754 JP)</a>. Sectorally, shorts increased on Consumer Staples and Financials, while decreasing on Information Technology and Industrials.</p></div><div><p>In Korea, there were short positions put on in <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a> and <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> while shorts were covered in <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/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical Co Ltd (003670 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electro-mechanics-co" target="_blank" data-smartkarma-citation="entities:539:1" rel="noopener">Samsung Electro Mechanics Co, Ltd. (009150 KS)</a> and <a href="https://www.smartkarma.com/entities/mirae-asset-daewoo-co-ltd-b50c4d95-1687-46cb-9b58-f79ce0e72670" target="_blank" data-smartkarma-citation="entities:12061:1" rel="noopener">Mirae Asset Daewoo (006800 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/e-sun-financial-holding-co" target="_blank" data-smartkarma-citation="entities:719:1" rel="noopener">E.Sun Financial Holding Co (2884 TT)</a>, <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/cathay-financial-holding-co" target="_blank" data-smartkarma-citation="entities:17677:1" rel="noopener">Cathay Financial Holding Co (2882 TT)</a> and <a href="https://www.smartkarma.com/entities/china-life-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:603:1" rel="noopener">China Life Insurance (2823 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 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/walsin-technology-corp" target="_blank" data-smartkarma-citation="entities:11084:1" rel="noopener">Walsin Technology (2492 TT)</a> and <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 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 Tencent Holdings (700 HK), Xiaomi Corp (1810 HK), Ping An Insurance (H) (2318 HK), Gcl Poly Energy Holdings Limited (3800 HK) and Alibaba Group (9988 HK) while there was short covering on Smoore International (6969 HK), Great Wall Motor (2333 HK), China Mobile (941 HK), BYD (1211 HK) and Haidilao (6862 HK). Shorts increased on Financials, Information Technology, Communication Services and Health Care, and decreased on Real Estate.In Japan, stocks that saw the most shorts were Lasertec Corp (6920 JP), Seiko Epson (6724 JP), Zenkoku Hosho (7164 JP) and Itochu Corp (8001 JP) while shorts decreased on Advantest Corp (6857 JP), Shionogi &amp; Co (4507 JP), Thk Co Ltd (6481 JP) and Anritsu Corp (6754 JP). Sectorally, shorts increased on Consumer Staples and Financials, while decreasing on Information Technology and Industrials.In Korea, there were short positions put on in Celltrion Inc (068270 KS), Hyundai Motor Co (005380 KS), Doosan Infracore (042670 KS) and Kia Motors Corp (000270 KS) while shorts were covered in Amorepacific Corp (090430 KS), Posco Chemical Co Ltd (003670 KS), Samsung Electro Mechanics Co, Ltd. (009150 KS) and Mirae Asset Daewoo (006800 KS). Stocks in Taiwan that saw the highest increase in shorts were E.Sun Financial Holding Co (2884 TT), Taiwan Cement (1101 TT), Cathay Financial Holding Co (2882 TT) and China Life Insurance (2823 TT) while shorts were covered on Largan Precision (3008 TT), Evergreen Marine Corp (2603 TT), Walsin Technology (2492 TT) and TSMC (2330 TT). 

Asia Short Interest: Tencent, Xiaomi, GCL Poly, Mobile, BYD, Lasertec, Advantest, Celltrion, Largan

Equity Research in HK and Mainland China

Li Tang

Alibaba Group Holding  / Equity Bottom-Up

<p>The PBOC published draft regulations on payments services by non-bank institutions for public to solicit public opinions until 19 February that define market dominance and looking to clamp down on monopolies in the third-party payments industry.</p>
<p>The move may indicates that government is preparing to crack down on what it views as antitrust behavior in the payments sector by tech giants such as <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> .Alipay and Tenpay have absolute advantages,Alipay and Tenpay have now monopolized the third-party payment market. The two giants accounted for 82.9% of the mobile third-party payment market in China.</p>

The PBOC published draft regulations on payments services by non-bank institutions for public to solicit public opinions until 19 February that define market dominance and looking to clamp down on monopolies in the third-party payments industry.
The move may indicates that government is preparing to crack down on what it views as antitrust behavior in the payments sector by tech giants such as Alibaba Group (BABA US)and Tencent Holdings (700 HK) .Alipay and Tenpay have absolute advantages,Alipay and Tenpay have now monopolized the third-party payment market. The two giants accounted for 82.9% of the mobile third-party payment market in China.

PBOC Draft Online Payment Rules Provide Clarity on Regulatory Direction

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.

<ul>
<li>PBoC’s latest regulatory proposals point to increased anti-trust focus in non-bank payments</li>
<li>This ups the ante on <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a>, in particular</li>
<li>Alibaba shares have recovered some ground since our 13<sup>th</sup> January report, yet Alibaba has barely narrowed the gap with <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, in market cap-to-revenue terms</li>
<li>This latest PBoC announcement, at best, adds to delay the Ant Group IPO, and adds to bearish sentiment on Alibaba and, to a lesser degree, Tencent shares</li>
<li>We believe that the recent re-emergence of Jack Ma is not, per se, sufficient cause for Alibaba share price relief; we would recommend locking in recent gains on BABA</li>
<li>Risks to our cautious view on Alibaba and Ant Group include an agreement on mutually acceptable regulatory parameters between the PBoC and Ant Group that allows for the Ant IPO to proceed in the relatively near term</li>
</ul>


PBoC’s latest regulatory proposals point to increased anti-trust focus in non-bank payments
This ups the ante on Alibaba Group (BABA US) and Ant Group (6688 HK), in particular
Alibaba shares have recovered some ground since our 13th January report, yet Alibaba has barely narrowed the gap with Tencent Holdings (700 HK), in market cap-to-revenue terms
This latest PBoC announcement, at best, adds to delay the Ant Group IPO, and adds to bearish sentiment on Alibaba and, to a lesser degree, Tencent shares
We believe that the recent re-emergence of Jack Ma is not, per se, sufficient cause for Alibaba share price relief; we would recommend locking in recent gains on BABA
Risks to our cautious view on Alibaba and Ant Group include an agreement on mutually acceptable regulatory parameters between the PBoC and Ant Group that allows for the Ant IPO to proceed in the relatively near term


Alibaba (BABA US) & Ant Group: PBoC Proposals Threaten Tighter Regulations

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent (700 HK)

China Internet Weekly (25Jan2021): Community Locked Down in Shanghai, Delivery Companies Polarized

Twelve local persons tested positive for COVID-19 in Shanghai. Delivery companies’ competition is close to an end. News about Tencent’s WeChat, QQ,...

Ming Lu

China Equity Strategy: Domestic Funds Rush to Deploy Capital in Hong Kong Market

China mainland funds have accelerated their capital deployment in Hong Kong market in the new year. The fund inflow to Hong Kong has exceeded RMB...

Roger Xie

Asia Short Interest: Tencent, Xiaomi, GCL Poly, Mobile, BYD, Lasertec, Advantest, Celltrion, Largan

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

PBOC Draft Online Payment Rules Provide Clarity on Regulatory Direction

The move may indicates that government is preparing to crack down on what it views as antitrust behavior in the payments sector by tech giants such...

Li Tang

Alibaba (BABA US) & Ant Group: PBoC Proposals Threaten Tighter Regulations

Alibaba's share price, post its recent rally, is under threat again, as is the Ant IPO, from the latest regulatory proposals by PBoC; time to take...

Victor Galliano

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