HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Pacific Basin Shipping / Equity Bottom-Up

The 3Q21 trading update for <a href="https://www.smartkarma.com/entities/pacific-basin-shipping-ltd" target="_blank" data-smartkarma-citation="entities:929:1" rel="noopener">Pacific Basin Shipping (2343 HK)</a> painted a positive picture for the earnings performance for 2H21 and FY22. There is good QoQ improvement in time-charter equivalents for its Handysize and Supramax fleet in 3Q21, which are 69.3% and 98.6%, respectively, higher than 1H21. On such basis, we estimate that its 3Q21 profit may be some 33% more than 1H21, blowing away market consensus by sizeable margin.Additionally, the growth in minor bulk trade, particularly construction materials, cement and clinker and grains, has underpinned good Handysize and Supramax demand. The supply pressure is also light as net fleet growth is expected to be 3% and 1.8% for FY21 and FY22, respectively. We also think Pacific Basin may take opportunistic disposals of vessel to capture the favourable capital value movements. All in all, we think that having retreated 25% from the peak, the stock has returned to more attractive valuation multiples.

The 3Q21 trading update for Pacific Basin Shipping (2343 HK) painted a positive picture for the earnings performance for 2H21 and FY22. There is good QoQ improvement in time-charter equivalents for its Handysize and Supramax fleet in 3Q21, which are 69.3% and 98.6%, respectively, higher than 1H21. On such basis, we estimate that its 3Q21 profit may be some 33% more than 1H21, blowing away market consensus by sizeable margin.Additionally, the growth in minor bulk trade, particularly construction materials, cement and clinker and grains, has underpinned good Handysize and Supramax demand. The supply pressure is also light as net fleet growth is expected to be 3% and 1.8% for FY21 and FY22, respectively. We also think Pacific Basin may take opportunistic disposals of vessel to capture the favourable capital value movements. All in all, we think that having retreated 25% from the peak, the stock has returned to more attractive valuation multiples.

Pacific Basin Shipping (2343 HK): Stellar 2H21 in the Making

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

Orient Overseas International / Equity Capital Markets

Orient Overseas (OOIL) aims to raise around US$419m via a top-up placement. The stock has been a tear this year owing to the rising freight rates. However, this will be the fourth placement in the name and will be the largest and is being offered at the tightest discount. None of the past deals held on to the deal price in the near term.

Orient Overseas (OOIL) aims to raise around US$419m via a top-up placement. The stock has been a tear this year owing to the rising freight rates. However, this will be the fourth placement in the name and will be the largest and is being offered at the tightest discount. None of the past deals held on to the deal price in the near term.

Orient Overseas Placement - Fourth Deal This Year. Is the Largest and at the Tightest Discount.

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

<h2>Eight new names, SoftBank remains for the 3rd quarter running</h2>
<ul>
<li>
OurQ2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.</li>
<li>
At a static number of 34 stocks our Q3 2021 screen, delivers an interesting composition this quarter, with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.</li>
<li>Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.</li>
<li>
Stock specific focus: We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.</li>
</ul>

Eight new names, SoftBank remains for the 3rd quarter running


OurQ2-2021 All Cap High-Risk screen of stocks produced a market cap-weighted average price decline of 2%. In comparison, the MSCI Asia Pacific Index posted a decline of 1.7% over the same period. The stock quality of our Q2 2021 decreased 2.4 points or 3.8% over the period. Within the mix of 34 stocks in our Q2 2021 (May) list 19 posted negative performance, with an average decline of 14.1%.

At a static number of 34 stocks our Q3 2021 screen, delivers an interesting composition this quarter, with eight (8) new names and strong representation from Hong Kong in terms of geography and Industrials and Basic Materials from a sector perspective. This suggests that the “reopening of the economy” trade may have run its course for now.
Our Q3 2021 screen shows a further reduction in average stock rank (a reading on relative quality amongst the broad market peers with 100 being the highest) to 61 from 65.18 in Q2 2021.

Stock specific focus: We discuss why SoftBank stands out as a stock that presents with additional risk. We also discuss the fact that whilst there is a high representation of Industrials in the list, within this list, there are several names that may warrant not being too bearish towards.


Screening the Silk Road: Q3 2021 High-Risk Names to Avoid

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Quantitative Analysis

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Semiconductor Manufacturing International Corporation (981 HK), Cosco Shipping Holdings Co., Ltd. (1919 HK), Wuxi Biologics (Cayman) Inc. (2269 HK), Geely Automobile Holdings Limited (175 HK), as well as outflows from Tencent Holdings Limited (700 HK), and Meituan (3690 HK).

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Semiconductor Manufacturing International Corporation (981 HK), Cosco Shipping Holdings Co., Ltd. (1919 HK), Wuxi Biologics (Cayman) Inc. (2269 HK), Geely Automobile Holdings Limited (175 HK), as well as outflows from Tencent Holdings Limited (700 HK), and Meituan (3690 HK).

Hong Kong Connect Flows: Inflows into SMIC & Autos

Hong Kong SFC reported aggregate short position as of Jul 9th. The aggregate short value for equities decreased by $-431m (-0.6%) WoW and decreased by $1,110m (-1.5%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($4,870m, -2.9% WoW), Zhongsheng Group Holdings Limited/881 HK($2,251m, +12.9% WoW), Anta Sports Products Limited/2020 HK($1,798m, +9.3% WoW), China Merchants Bank Co., Ltd./3968 HK($1,790m, +3.9% WoW), Tencent Holdings Limited/700 HK($1,673m, -8.1% WoW).<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/219/074/original/Hong_Kong_Market_Short_Position_Value_%28line%29_and_1W_Changes_%28bar%29_%28%24m%292021-07-18+11_37_15.png?1626580166" class="editor-image img-responsive" data-smartkarma-image-id="219074"></figure></section>

Hong Kong SFC reported aggregate short position as of Jul 9th. The aggregate short value for equities decreased by $-431m (-0.6%) WoW and decreased by $1,110m (-1.5%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($4,870m, -2.9% WoW), Zhongsheng Group Holdings Limited/881 HK($2,251m, +12.9% WoW), Anta Sports Products Limited/2020 HK($1,798m, +9.3% WoW), China Merchants Bank Co., Ltd./3968 HK($1,790m, +3.9% WoW), Tencent Holdings Limited/700 HK($1,673m, -8.1% WoW).

HK Short Interest: Short Spiked For COSCO Shipping

China

COSCO SHIPPING Holdings Co., Ltd offers marine freight transportation services.  The Company offers container shipping, dry bulk shipping, logistics services, freight forwarding, and terminal and container leasing services internationally.  COSCO SHIPPING Holdings Co., Ltd operates container ships and terminals, and manufactures shipping containers.

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COSCO Shipping Holdings (1919 HK)

Pacific Basin Shipping (2343 HK): Stellar 2H21 in the Making

Great 3Q21 trading update suggests 2H21 and FY22 outlook remain encouraging. Demand-supply dynamics remain favourable and there is room for...

Osbert Tang, CFA

Orient Overseas Placement - Fourth Deal This Year. Is the Largest and at the Tightest Discount.

Orient Overseas (OOIL) aims to raise around US$419m via a top-up placement. The stock has been a tear this year owing to the rising freight rates

Sumeet Singh

Screening the Silk Road: Q3 2021 High-Risk Names to Avoid

Screening the Silk Road Q3 2021: Asia Pac High-risk names to avoid screening is out now. Eight new names, despite being down 23%, SoftBank remains...

David Lepper

Hong Kong Connect Flows: Inflows into SMIC & Autos

We will highlight weekly top inflows into SMIC (981 HK), Cosco Shipping (1919 HK), Wuxi Biologics (2269 HK), Geely Automobile Holdings Limited (175...

Ke Yan, CFA, FRM

HK Short Interest: Short Spiked For COSCO Shipping

We highlight COSCO Shipping (1919 HK) and Netease (9999 HK) as two companies with big spikes in short interest in the latest Hong Kong SFC short...

Ke Yan, CFA, FRM

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