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

Equity Bottom-Up

EM active funds are running a sizeable underweight in <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US).</a>  Despite rising ownership levels, average holding weights are failing to keep up with the benchmark.<a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> has become the 5th largest underweight holding in EM, behind index heavyweights <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>.  At present, the bulk of the holders are low active, benchmark aligned investors.  As prices falter after peaking in early January this year, staying out of the stock has been vindicated.   If prices continue to fall further, expect active managers to chip away at that underweight, but on our analysis, prices have to come down significantly before we see that.

EM active funds are running a sizeable underweight in NIO Inc (NIO US).  Despite rising ownership levels, average holding weights are failing to keep up with the benchmark.NIO Inc (NIO US) has become the 5th largest underweight holding in EM, behind index heavyweights Alibaba Group (BABA US) and Tencent Holdings (700 HK).  At present, the bulk of the holders are low active, benchmark aligned investors.  As prices falter after peaking in early January this year, staying out of the stock has been vindicated.   If prices continue to fall further, expect active managers to chip away at that underweight, but on our analysis, prices have to come down significantly before we see that.  

NIO Inc.  EM Stock Pickers Take Wide Berth

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

The Chinese eCommerce sector has been affected by increased regulatory scrutiny from the State Administration for Market Regulation (SAMR) which has been a headwind to most companies in the sector. However, during this time, <a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a> has meaningfully outperformed peers, driven by an acceleration in active user numbers. <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, in turn, has significantly underperformed peers, driven by an overhaul of regulation affecting, not only, its 33%-owned <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a>, but also its core Chinese marketplace operations. Having previously explored the prospects for Alibaba Group in more detail (<a href="https://www.smartkarma.com/insights/alibaba-a-detailed-look-at-the-sotp-and-what-that-tells-us-about-the-ant-group-and-core-commerce" target="_blank" data-smartkarma-citation="insights:47981" rel="noopener">Alibaba: A Detailed Look at the SOTP, and What that Tells Us About the Ant Group and Core Commerce</a> ), in this insight, I take a closer look at the comparative valuations between Chinese niche apparel flash sales company, Vipshop Holdings, and Chinese marketplace behemoth, Alibaba Group, as it relates to their regulatory challenges, competitive positioning, and medium-term growth outlook.

The Chinese eCommerce sector has been affected by increased regulatory scrutiny from the State Administration for Market Regulation (SAMR) which has been a headwind to most companies in the sector. However, during this time, Vipshop Holdings (VIPS US) has meaningfully outperformed peers, driven by an acceleration in active user numbers. Alibaba Group (9988 HK), in turn, has significantly underperformed peers, driven by an overhaul of regulation affecting, not only, its 33%-owned Ant Financial Services Group (6688 HK), but also its core Chinese marketplace operations. Having previously explored the prospects for Alibaba Group in more detail (Alibaba: A Detailed Look at the SOTP, and What that Tells Us About the Ant Group and Core Commerce ), in this insight, I take a closer look at the comparative valuations between Chinese niche apparel flash sales company, Vipshop Holdings, and Chinese marketplace behemoth, Alibaba Group, as it relates to their regulatory challenges, competitive positioning, and medium-term growth outlook.

Long/Short: Alibaba/Vipshop, a Comparative Valuation

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

<a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> recorded a banner year in 2020 with GMV and active buyer growths re-accelerating from the slower 2019 (see our results highlights). JD too has been a beneficiary of the online consumption burst in 2020.  The stock price more than doubled from 2019 but its valuations do not appear to be stretched unlike some of its peers.  We believe JD's margin expansion story is unwinding.      We are positive on JD’s operating improvements, and we forecast a continued – albeit slightly muted – operating momentum in 2021. Interestingly, <a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> IPO sucked up all the oxygen today. Given the similarity between the two business models, we believe Coupang’s rich valuations make a compelling argument for JD shares, in our view.  We favor JD.com even on growth-adjusted valuations.  In our previous report, <a href="https://www.smartkarma.com/insights/coupang-cpng-us-going-mano-e-mano-with-jd-com" target="_blank" data-smartkarma-citation="insights:49065" rel="noopener">Coupang (CPNG US): Going Mano E Mano with JD.com</a>, we compare JD’s historical valuations with Coupang.  Based on our estimates, JD trades at 0.3x ‘21e EV/GMV, 0.9x EV/Revenue, and only 6.1x Gross Profit as well as 23.2x ‘21e earnings (excluding net cash).  These are attractive valuations, in our view.

JD.com Inc (ADR) (JD US) recorded a banner year in 2020 with GMV and active buyer growths re-accelerating from the slower 2019 (see our results highlights). JD too has been a beneficiary of the online consumption burst in 2020.  The stock price more than doubled from 2019 but its valuations do not appear to be stretched unlike some of its peers.  We believe JD's margin expansion story is unwinding.      We are positive on JD’s operating improvements, and we forecast a continued – albeit slightly muted – operating momentum in 2021. Interestingly, Coupang (CPNG US) IPO sucked up all the oxygen today. Given the similarity between the two business models, we believe Coupang’s rich valuations make a compelling argument for JD shares, in our view.  We favor JD.com even on growth-adjusted valuations.  In our previous report, Coupang (CPNG US): Going Mano E Mano with JD.com, we compare JD’s historical valuations with Coupang.  Based on our estimates, JD trades at 0.3x ‘21e EV/GMV, 0.9x EV/Revenue, and only 6.1x Gross Profit as well as 23.2x ‘21e earnings (excluding net cash).  These are attractive valuations, in our view. 

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

<div><a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> plans to raise around US$3bn in its secondary listing in Hong Kong. I have covered most aspects of the deal in my earlier note, <a href="https://www.smartkarma.com/insights/baidu-secondary-listing-early-look-will-be-one-of-the-largest-secondary-listings-this-year" target="_blank" rel="noopener">Baidu Secondary Listing Early Look - Will Be One of the Largest Secondary Listings This Year</a>.</div><div>In this note, I'll only touch upon the updates since my last note.</div>

Baidu (BIDU US) plans to raise around US$3bn in its secondary listing in Hong Kong. I have covered most aspects of the deal in my earlier note, Baidu Secondary Listing Early Look - Will Be One of the Largest Secondary Listings This Year.In this note, I'll only touch upon the updates since my last note.

Baidu Secondary Listing - Smaller than Expected, Doing the Bare Minimum

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

<ul>
<li>The revenue growth rates accelerated in 4Q20 and 2020.</li>
<li>The operating margins improved in 2020.</li>
<li>Operating cash flow increased 72% in 2020.</li>
<li>Pinduoduo (PDD US) is more likely to compete with Alibaba Group (BABA US)’s Taobao, but not JD.</li>
<li>We believe there will an upside of 15.6% by March 2021.</li>
</ul>


The revenue growth rates accelerated in 4Q20 and 2020.
The operating margins improved in 2020.
Operating cash flow increased 72% in 2020.
Pinduoduo (PDD US) is more likely to compete with Alibaba Group (BABA US)’s Taobao, but not JD.
We believe there will an upside of 15.6% by March 2021.


JD.com (JD): Main Business Accelerated in 4Q20

China

PDD Holdings Inc. is a multinational commerce group that owns and operates a portfolio of businesses. The Company focuses on digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities. PDD Holdings has built a network of sourcing, logistics, and fulfillment capabilities for its underlying businesses.

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PDD Holdings (PDD US)

NIO Inc. EM Stock Pickers Take Wide Berth

EM active funds are running a sizeable underweight in NIO Inc (NIO US). Despite rising ownership levels, average holding weights are failing to...

Steven Holden

Long/Short: Alibaba/Vipshop, a Comparative Valuation

In this insight, I take a closer look at the comparative valuations between Chinese niche apparel flash sales company, Vipshop Holdings, and...

Wium Malan, CFA

JD.com (JD US): The Better-Looking Twin?

We remain positive on JD's accelerating growth and its margin expansion story. In this report, we make a compelling argument for JD's value by...

Mitchell Kim

Baidu Secondary Listing - Smaller than Expected, Doing the Bare Minimum

Baidu plans to raise around US$3bn in its secondary listing in Hong Kong. I have covered most aspects of the deal in my earlier note. In this note,...

Sumeet Singh

JD.com (JD): Main Business Accelerated in 4Q20

The revenue growth rates accelerated in 4Q20 and 2020. The operating margins improved in 2020. Operating cash flow increased 72% in 2020.

Ming Lu

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