Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

China Conch Venture Holdings / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> (CCV) has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0928/2021092801185.pdf" target="_blank" rel="noopener">proposed</a> spinning-off and separately listing the shares of Conch Environment Protection (CEEP), a company principally engaged in providing industrial solid and hazardous waste treatment in the PRC. Here is the listing application form (<a href="https://www1.hkexnews.hk/app/sehk/2021/103856/documents/sehk21092801397.pdf" target="_blank" rel="noopener">Form A1</a>).
CEEP comprised ~17% of the unlisted revenue of CCV in FY20 and ~35% of the profit.
The spin-off will be implemented by way of distribution in-specie - CCV will not retain any interest in CEEP. This is a listing by introduction - no IPO proceeds are involved.
Assuming CEEP's listing goes ahead (no shareholder approval is required), the remaining unlisted ops comprise waste incineration projects, energy-saving equipment, and port logistics.
Separately, I see CCV trading at a 6% discount to its NAV, its narrowest inside a year. The implied stub has never been narrower.
More below the fold.

China Conch Venture Holdings (586 HK) (CCV) has proposed spinning-off and separately listing the shares of Conch Environment Protection (CEEP), a company principally engaged in providing industrial solid and hazardous waste treatment in the PRC. Here is the listing application form (Form A1).
CEEP comprised ~17% of the unlisted revenue of CCV in FY20 and ~35% of the profit.
The spin-off will be implemented by way of distribution in-specie - CCV will not retain any interest in CEEP. This is a listing by introduction - no IPO proceeds are involved.
Assuming CEEP's listing goes ahead (no shareholder approval is required), the remaining unlisted ops comprise waste incineration projects, energy-saving equipment, and port logistics.
Separately, I see CCV trading at a 6% discount to its NAV, its narrowest inside a year. The implied stub has never been narrower.
More below the fold.

China Conch Venture (586 HK): Waste Treatment Spin-Off

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Conch Venture Holdings / Equity Bottom-Up

We think the secured project pipeline for <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> should drive encouraging double-digit growth in its core environmental business profit in the next three years. It expects a CAGR of 52.8% in completed waste incineration capacity and 30.2% in completed solid waste and hazardous waste capacity, which in our view, should underpin remarkable earnings outlook.The flat 1H21 profit is masked by a 5% drop in contribution from <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>. which, in flat, core earnings have surged 31.4% YoY. It solid new project win is an excellent demonstration of its competitiveness. Even for Anhui Conch, the 2H21 outlook is getting more positive than 1H21. We believe that at just 5.9x PER (ex-Anhui Conch) for FY21, the market has sharply undervalued Conch Venture's environmental operations, especially given its lower-than-peers gearing of 19.4% only.

We think the secured project pipeline for China Conch Venture Holdings (586 HK) should drive encouraging double-digit growth in its core environmental business profit in the next three years. It expects a CAGR of 52.8% in completed waste incineration capacity and 30.2% in completed solid waste and hazardous waste capacity, which in our view, should underpin remarkable earnings outlook.The flat 1H21 profit is masked by a 5% drop in contribution from Anhui Conch Cement (914 HK). which, in flat, core earnings have surged 31.4% YoY. It solid new project win is an excellent demonstration of its competitiveness. Even for Anhui Conch, the 2H21 outlook is getting more positive than 1H21. We believe that at just 5.9x PER (ex-Anhui Conch) for FY21, the market has sharply undervalued Conch Venture's environmental operations, especially given its lower-than-peers gearing of 19.4% only.

Conch Venture (586 HK): Better Fortunes Going Forward

Event-Driven

Last Week in Event SPACE: SingTel, Bharti Airtel, Kerry Logistics, Milton, Jardine Matheson

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The upcoming rebalances for the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> will be implemented at the close of trading on 3 September. The rebalance will use data from todays close to cap the stocks in the index at a maximum of 8% of the index weight.In this Insight, we show the flows after capping stocks using the close on 30 August. The final numbers will be marginally different based on todays closing prices.For the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> there are 3 inclusions - <a href="https://www.smartkarma.com/entities/xinyi-glass-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11940:1" rel="noopener">Xinyi Glass Holdings (868 HK)</a>, <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> and <a href="https://www.smartkarma.com/entities/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a> and 1 exclusion - <a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a>.For the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>, the inclusions are <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> while the deletions are <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a> and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>.For the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> there is one set of changes with Trip.com (9961 HK) / <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> replacing <a href="https://www.smartkarma.com/entities/koolearn-technology-holding" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">Koolearn (1797 HK)</a>.<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 weight in all 3 indices is higher than 8% following the increase in the number of index shares at the July monthly rebalance. The stock will have the largest passive selling due to capping back to 8%.Capping and float changes will lead to passive buying on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (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> and <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, while there will be passive selling on <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>, <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a>, <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 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> and <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>.There will be selling on a lot of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> constituents due to funding flows.

The upcoming rebalances for the Hong Kong Hang Seng Index (HSI INDEX), Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX) will be implemented at the close of trading on 3 September. The rebalance will use data from todays close to cap the stocks in the index at a maximum of 8% of the index weight.In this Insight, we show the flows after capping stocks using the close on 30 August. The final numbers will be marginally different based on todays closing prices.For the Hong Kong Hang Seng Index (HSI INDEX) there are 3 inclusions - Xinyi Glass Holdings (868 HK), Li Ning Co Ltd (2331 HK) and China Merchants Bank H (3968 HK) and 1 exclusion - Bank Of Communications Co H (3328 HK).For the Hang Seng China Enterprises Index (HSCEI INDEX), the inclusions are JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) while the deletions are Shimao Property Holdings (813 HK) and Anhui Conch Cement (914 HK).For the Hang Seng Tech Index (HSTECH INDEX) there is one set of changes with Trip.com (9961 HK) / Trip.com (TCOM US) replacing Koolearn (1797 HK).Alibaba Group (9988 HK)'s weight in all 3 indices is higher than 8% following the increase in the number of index shares at the July monthly rebalance. The stock will have the largest passive selling due to capping back to 8%.Capping and float changes will lead to passive buying on Tencent (700 HK), Meituan (3690 HK) and Kuaishou Technology (1024 HK), while there will be passive selling on HSBC Holdings (5 HK), AIA Group Ltd (1299 HK), China Construction Bank H (939 HK), Xiaomi Corp (1810 HK) and HKEX (388 HK).There will be selling on a lot of the Hong Kong Hang Seng Index (HSI INDEX) constituents due to funding flows.

HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping

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

Cross Asset Strategy

In this analysis, we provide a detailed overview of investor positioning among 250 active Global Emerging Market funds with combined AUM of $500bn.  Highlights:<ul>
<li>Asia the dominant region but also net underweight.  Managers move to underweight EMEA and strengthen overweight in the Americas.</li>
<li>China the dominant weight but allocations move lower.  Mexico and Russia the key overweights, China, Saudi Arabia and Taiwan the largest underweights.</li>
<li>Allocations in China Consumer Discretionary continue to head lower from their peak in October 2020 of 13.9%.  The underweight of -2.33% is towards the lowest on record and is driven by lighter than benchmark holdings in <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>, <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/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a>.</li>
<li>The rise in Russian Consumer Discretionary ownership driven by Fix Price Group, with 16.1% of funds buying in to the stock after it's IPO back in March.  A quarter of funds now have exposure to the sector, the largest in its history.</li>
<li>Turkish Financials exposure continues to dwindle, with only 16.1% of funds invested.  The most widely held stocks in the sector are <a href="https://www.smartkarma.com/entities/haci-omer-sabanci-holding-as" target="_blank" data-smartkarma-citation="entities:27708:1" rel="noopener">Haci Omer Sabanci Holding AS (SAHOL TI)</a> and <a href="https://www.smartkarma.com/entities/akbank-tas" target="_blank" data-smartkarma-citation="entities:25033:1" rel="noopener">Akbank TAS (AKBNK TI)</a>, but both are held by just 6% of the funds in our analysis.  <a href="https://www.smartkarma.com/entities/turkiye-garanti-bankasi-as" target="_blank" data-smartkarma-citation="entities:25026:1" rel="noopener">Turkiye Garanti Bankasi As (GARAN TI)</a> is now held by 4% of funds after 4% closed positions in the last 6-months. </li>
<li>
<a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1" rel="noopener">CATL (A) (300750 CH).</a> Ownership continues to rise among EM managers, with today's investment levels the highest on record across all metrics.  Recent buyers in to the name include JP Morgan, TT International and American Century.</li>
<li><a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>.  Ownership remains on an upward trajectory with no signs of that slowing down.  Over the last 6-months, a further 6.8% of funds added exposure, including Fidelity EM Opportunity, Aberdeen Emerging Markets and Ashmore EM Active Equity.  GQG Partners was the only closure after cashing in on a position held since early 2020.</li>
<li>
<a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>. Outflows have been severe, with 26.9% of funds invested 6-months ago, now down to just 16.9%.  Among those closing positions were Ashmore Emerging Markets Active, Pictet EM Sustainable and Dunham Emerging Markets.</li>
<li>
<a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US).  </a>Once among the larger holdings in EM active portfolios, <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a> has moved out of favour with EM fund managers.  In a slide that started in late 2019, the percentage of funds with investment in <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a> fell a further 6.4% over the last 6-months.  Closures were led by Liontrust, Matthews and HSBC.</li>
</ul>

In this analysis, we provide a detailed overview of investor positioning among 250 active Global Emerging Market funds with combined AUM of $500bn.  Highlights:
Asia the dominant region but also net underweight.  Managers move to underweight EMEA and strengthen overweight in the Americas.
China the dominant weight but allocations move lower.  Mexico and Russia the key overweights, China, Saudi Arabia and Taiwan the largest underweights.
Allocations in China Consumer Discretionary continue to head lower from their peak in October 2020 of 13.9%.  The underweight of -2.33% is towards the lowest on record and is driven by lighter than benchmark holdings in Alibaba Group (BABA US), Meituan (3690 HK) and NIO Inc (NIO US).
The rise in Russian Consumer Discretionary ownership driven by Fix Price Group, with 16.1% of funds buying in to the stock after it's IPO back in March.  A quarter of funds now have exposure to the sector, the largest in its history.
Turkish Financials exposure continues to dwindle, with only 16.1% of funds invested.  The most widely held stocks in the sector are Haci Omer Sabanci Holding AS (SAHOL TI) and Akbank TAS (AKBNK TI), but both are held by just 6% of the funds in our analysis.  Turkiye Garanti Bankasi As (GARAN TI) is now held by 4% of funds after 4% closed positions in the last 6-months. 

CATL (A) (300750 CH). Ownership continues to rise among EM managers, with today's investment levels the highest on record across all metrics.  Recent buyers in to the name include JP Morgan, TT International and American Century.
Sea Ltd (SE US).  Ownership remains on an upward trajectory with no signs of that slowing down.  Over the last 6-months, a further 6.8% of funds added exposure, including Fidelity EM Opportunity, Aberdeen Emerging Markets and Ashmore EM Active Equity.  GQG Partners was the only closure after cashing in on a position held since early 2020.

Anhui Conch Cement (914 HK). Outflows have been severe, with 26.9% of funds invested 6-months ago, now down to just 16.9%.  Among those closing positions were Ashmore Emerging Markets Active, Pictet EM Sustainable and Dunham Emerging Markets.

Credicorp Ltd (BAP US).  Once among the larger holdings in EM active portfolios, Credicorp Ltd (BAP US) has moved out of favour with EM fund managers.  In a slide that started in late 2019, the percentage of funds with investment in Credicorp Ltd (BAP US) fell a further 6.4% over the last 6-months.  Closures were led by Liontrust, Matthews and HSBC.


EM Fund Positioning:  All You Need to Know

China

Anhui Conch Cement Company Limited manufactures cement products. The Company produces silicate cements, slag silicate cements, composite silicate cements, cement clinkers, and other products. Anhui Conch Cement Cement markets its products throughout China and worldwide.

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Anhui Conch Cement (600585 CH)

China Conch Venture (586 HK): Waste Treatment Spin-Off

CVV's recent price action suggests news leakage ahead of CCEP's spin-off, with shares gaining 14% compared to 5% for Anhui. I'd be inclined to set...

David Blennerhassett

Conch Venture (586 HK): Better Fortunes Going Forward

Good secured pipeline of waste incineration and solid and hazardous waste treatment capacity should underpin very solid outlook for the core...

Osbert Tang, CFA

Last Week in Event SPACE: SingTel, Bharti Airtel, Kerry Logistics, Milton, Jardine Matheson

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping

There are some pretty large flows across the HSI, HSCEI and HSTECH at the September rebalance due to name/float/capping changes. Impact on some...

Brian Freitas

EM Fund Positioning: All You Need to Know

In this analysis, we provide a detailed overview of investor positioning among 250 active Global Emerging Market funds with combined AUM of $500bn.

Steven Holden

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