Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>We believe it was a wise move for PDD to launch the overseas online marketplace TEMU first off the U.S., because of its massive, lucrative and integrated retail markets.</li>
<li>Still, the adventure lacks some of the recipe for successes PDD made during its early days, and the failure of Wish suggests pricing not come at the expense of quality.</li>
<li>We expect TEMU to lose US$2bn in 2024 (1/3 of PDD’s FY22 earnings) and won’t generate meaningful profit probably until 2026, reinforcing our view on PDD’s near-term earnings risk.</li>
</ul>


We believe it was a wise move for PDD to launch the overseas online marketplace TEMU first off the U.S., because of its massive, lucrative and integrated retail markets.
Still, the adventure lacks some of the recipe for successes PDD made during its early days, and the failure of Wish suggests pricing not come at the expense of quality.
We expect TEMU to lose US$2bn in 2024 (1/3 of PDD’s FY22 earnings) and won’t generate meaningful profit probably until 2026, reinforcing our view on PDD’s near-term earnings risk.


Pinduoduo (PDD US): More Thoughts on TEMU

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Alibaba Group Holding  / Equity Bottom-Up

<ul>
<li>After bouncing more than 60% from a near-all-time low, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.</li>
<li>Meanwhile, the company's cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.</li>
<li>With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.</li>
</ul>


After bouncing more than 60% from a near-all-time low, Alibaba Group (9988 HK)’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.
Meanwhile, the company's cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.
With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.


Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds

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)

<ul>
<li>Active China funds are rotating back in to the Consumer Discretionary sector.  Holding weights bottomed out in early 2022, with an increasing number of managers re-positioning themselves as overweight</li>
<li>Large increases in ownership across key stocks underpin the sector rotation.  Pinduoduo saw an +8.4% increase in the percentage of funds invested, Trip.com Group +6.7% and NIO Inc +5.88%</li>
<li>If the rhetoric is that China is oversold here, then Consumer Discretionary stocks appears well placed to benefit from further inflows.</li>
</ul>


Active China funds are rotating back in to the Consumer Discretionary sector.  Holding weights bottomed out in early 2022, with an increasing number of managers re-positioning themselves as overweight
Large increases in ownership across key stocks underpin the sector rotation.  Pinduoduo saw an +8.4% increase in the percentage of funds invested, Trip.com Group +6.7% and NIO Inc +5.88%
If the rhetoric is that China is oversold here, then Consumer Discretionary stocks appears well placed to benefit from further inflows.


China Consumer Discretionary: Reducing The Underweight

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Continue to support digital economy development </li><li>Encouraging technology breakthroughs, innovations, and overseas expansion. </li><li>Business model robustness, operating leveraging improvement, and ability to expand to new revenue streams will be the key stock alpha drivers.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Continue to support digital economy development Encouraging technology breakthroughs, innovations, and overseas expansion. Business model robustness, operating leveraging improvement, and ability to expand to new revenue streams will be the key stock alpha drivers.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Internet – Quality growth and further digitization penetration provide growth support

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

Alibaba Group Holding  / Equity Capital Markets

<ul>
<li>Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs</li>
<li>On the IPO front,  things are started to cool down in to the year end with some smaller issuers still trying their luck to get listed before the year end.</li>
<li>On placements front, most of the action was in India with Australia seeing a large offering after a while.</li>
</ul>


Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
On the IPO front,  things are started to cool down in to the year end with some smaller issuers still trying their luck to get listed before the year end.
On placements front, most of the action was in India with Australia seeing a large offering after a while.


ECM Weekly (18th Dec 2022) - China ADRs, Skymark, Daiei, Weilong, KFintech, Sula, Endeavour, Adani

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)

Pinduoduo (PDD US): More Thoughts on TEMU

We believe PDD rightly choose the U.S. (versus SE Asia) to launch TEMU, but success is far from guaranteed due to difficulties in copying PDD...

Eric Chen

Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds

Alibaba's cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business...

Oshadhi Kumarasiri

China Consumer Discretionary: Reducing The Underweight

Active China funds are rotating back in to the Consumer Discretionary sector. Holding weights bottomed out in early 2022, with an increasing...

Steven Holden

China Internet – Quality growth and further digitization penetration provide growth support

Continue to support digital economy development. Encouraging technology breakthroughs, innovations, and overseas expansion.

CMB International

ECM Weekly (18th Dec 2022) - China ADRs, Skymark, Daiei, Weilong, KFintech, Sula, Endeavour, Adani

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.

Sumeet Singh

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