Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Equity Bottom-Up

<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>'s 2Q21 results may not seem inspirational, but a closer look under the hood reveals a solid business that is continuing to improve.  Considering the regulatory overhang and the near-term losses from the new community group buying business offsetting the overall profit growth, poor investor sentiment may continue for the Chinese e-commerce stocks including JD.  However, I remain constructive on JD's fundamentals, and I believe JD is a good rebound candidate when the overhang is lifted.      What I saw under the hood: <ul>
<li>Solid top-line growth of 26%. </li>
<li>Historic quarterly active user additions.</li>
<li>Rising appeal from lower-tier market users.</li>
<li>Higher engagement from existing users. </li>
<li>Acceleration of order volume growth.</li>
<li>Healthy core JD retail operating profit  </li>
</ul>

JD.com Inc (ADR) (JD US)'s 2Q21 results may not seem inspirational, but a closer look under the hood reveals a solid business that is continuing to improve.  Considering the regulatory overhang and the near-term losses from the new community group buying business offsetting the overall profit growth, poor investor sentiment may continue for the Chinese e-commerce stocks including JD.  However, I remain constructive on JD's fundamentals, and I believe JD is a good rebound candidate when the overhang is lifted.      What I saw under the hood: 
Solid top-line growth of 26%. 
Historic quarterly active user additions.
Rising appeal from lower-tier market users.
Higher engagement from existing users. 
Acceleration of order volume growth.
Healthy core JD retail operating profit  


JD.com (JD US): Solid Growth Flying Under the Radar

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

Alibaba Group Holding  / Equity Bottom-Up

In this analysis, we analyse <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> holdings across Global, GEM, US, Asia Ex-Japan and China equity funds.  We identify a massive holding base in Alibaba Group among active US domestic funds, with $24bn in out-of-benchmark Alibaba holdings as of October 2020, when Alibaba was at it's peak.Since then, although ownership and exposure has dropped across all fund groups, US Mutual Funds have capitulated, closing over $10bn in Alibaba positions since October of last year.   US managers have clearly had the hardest time justifying a holding in Alibaba Group during such a period of intense scrutiny - an out of benchmark, non-US position in an industry beset by regulatory pressure.  A degree of forced selling was inevitable. However, we note that these positions are finite, the selling will come to an end and the overhang will subside.  Our analysis shows a remaining $7.25bn in holdings among US managers, some of which will doubtless be sold, or indeed has already been sold.As the valuation case for Alibaba becomes more compelling, many of the Global, GEM, Asia or China managers in our analysis will be looking to increase exposure, nullifying or reducing underweights after such a period of stock underperformance (or relative outperformance vs their respective benchmarks).  Given these factors, investors should have more confidence in re-engaging with the investment case in Alibaba at this juncture, in our view.

In this analysis, we analyse Alibaba Group (BABA US) holdings across Global, GEM, US, Asia Ex-Japan and China equity funds.  We identify a massive holding base in Alibaba Group among active US domestic funds, with $24bn in out-of-benchmark Alibaba holdings as of October 2020, when Alibaba was at it's peak.Since then, although ownership and exposure has dropped across all fund groups, US Mutual Funds have capitulated, closing over $10bn in Alibaba positions since October of last year.   US managers have clearly had the hardest time justifying a holding in Alibaba Group during such a period of intense scrutiny - an out of benchmark, non-US position in an industry beset by regulatory pressure.  A degree of forced selling was inevitable. However, we note that these positions are finite, the selling will come to an end and the overhang will subside.  Our analysis shows a remaining $7.25bn in holdings among US managers, some of which will doubtless be sold, or indeed has already been sold.As the valuation case for Alibaba becomes more compelling, many of the Global, GEM, Asia or China managers in our analysis will be looking to increase exposure, nullifying or reducing underweights after such a period of stock underperformance (or relative outperformance vs their respective benchmarks).  Given these factors, investors should have more confidence in re-engaging with the investment case in Alibaba at this juncture, in our view.

Alibaba Group Holdings Analysis:  US Funds Capitulate

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:<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/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</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>, <a href="https://www.smartkarma.com/entities/suning-com-co-ltd-a" target="_blank" data-smartkarma-citation="entities:9178:1" rel="noopener">Suning.com (002024 CH)</a>, <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>, <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>, <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a>, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1439927D CH)</a>, <a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener">Reliance Industries (RIL IN)</a>, <a href="https://www.smartkarma.com/entities/saudi-aramco" target="_blank" data-smartkarma-citation="entities:27317:1" rel="noopener">Saudi Aramco (ARAMCO AB)</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Tencent (700 HK), iQIYI Inc (IQ US), Alibaba Group (9988 HK), Suning.com (002024 CH), Trip.com (TCOM US), DiDi Global (DIDI US), NIO Inc (NIO US), ByteDance (1439927D CH), Reliance Industries (RIL IN), Saudi Aramco (ARAMCO AB), Alibaba Health Information Technology (241 HK), JD Health (6618 HK), Ping An Healthcare and Technology Company Limited (1833 HK) 

Global Emerging Markets Weekly: 20 August 2021

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.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>.One-way turnover is estimated at 6.29% and will result in a one-way trade of HK$2.12bn.There will be over 2 days of ADV to trade on Trip.com while the impact of passive fund selling on <a href="https://www.smartkarma.com/entities/koolearn-technology-holding" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">Koolearn (1797 HK)</a> will be a lot smaller.Hang Seng has also announced that a market review and feedback will result in 'Autonomous' being added to the list of eligible technology themes for index inclusion. This means that <a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> and <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a> will be eligible for inclusion in the index at the December rebalance.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.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).One-way turnover is estimated at 6.29% and will result in a one-way trade of HK$2.12bn.There will be over 2 days of ADV to trade on Trip.com while the impact of passive fund selling on Koolearn (1797 HK) will be a lot smaller.Hang Seng has also announced that a market review and feedback will result in 'Autonomous' being added to the list of eligible technology themes for index inclusion. This means that XPeng (9868 HK) and Li Auto (2015 HK) will be eligible for inclusion in the index at the December rebalance.

HSTECH Index Rebalance: One Change; More at the Next Review

<div>The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.</div><div>
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>. This takes the number of index constituents to 60.
Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, <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 will be capped at 8% leading to outflows from the stock. 
One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$13.77bn.
There are only 10 trading days to implementation of the changes. We expect all inclusions to open higher on Monday. <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> are surprise inclusions while <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> is a surprise deletion. The largest passive impact will be on <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> where there will be over 7 days of ADV to sell. <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>has been announced as an inclusion to 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> as well.
Big Tech is conspicuous by its absence among the inclusions in the review. HSIL seems to have consciously avoided the stocks due to the constantly changing regulatory landscape in China. HSIL is also taking its time in moving towards it goal of reaching 80 index constituents by mid-2022. That leaves 20 stocks to be included at the next 3 index reviews.
</div>

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.
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). This takes the number of index constituents to 60.
Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, Alibaba Group (9988 HK)'s weight will be capped at 8% leading to outflows from the stock. 
One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$13.77bn.
There are only 10 trading days to implementation of the changes. We expect all inclusions to open higher on Monday. Li Ning Co Ltd (2331 HK) and China Merchants Bank H (3968 HK) are surprise inclusions while Bank Of Communications Co H (3328 HK) is a surprise deletion. The largest passive impact will be on Bank Of Communications Co H (3328 HK) where there will be over 7 days of ADV to sell. Li Ning Co Ltd (2331 HK)has been announced as an inclusion to the Hang Seng China Enterprises Index (HSCEI INDEX) as well.
Big Tech is conspicuous by its absence among the inclusions in the review. HSIL seems to have consciously avoided the stocks due to the constantly changing regulatory landscape in China. HSIL is also taking its time in moving towards it goal of reaching 80 index constituents by mid-2022. That leaves 20 stocks to be included at the next 3 index reviews.


HSI Index Rebalance: Big Tech Avoided; Few Changes Now Means More Changes Later

China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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Alibaba Group Holding (BABA US)

JD.com (JD US): Solid Growth Flying Under the Radar

JD's results may not seem inspirational, but a closer look under the hood reveals a business growing faster than market expectations. I believe JD...

Mitchell Kim

Alibaba Group Holdings Analysis: US Funds Capitulate

We identify a massive holding base in BABA among US Mutual funds, with $24bn in off-benchmark holdings as of Oct 2020. Since then, US Funds have...

Steven Holden

Global Emerging Markets Weekly: 20 August 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

HSTECH Index Rebalance: One Change; More at the Next Review

Trip.com replaces Koolearn in the HSTECH Index. Alibaba's weight will drop by over 3%. Benchmarked assets have risen a lot. One-way turnover is...

Brian Freitas

HSI Index Rebalance: Big Tech Avoided; Few Changes Now Means More Changes Later

Hang Seng Indexes has avoided adding Big Tech and included Li Ning, Xinyi Glass and CM Bank while deleting BoComm. Tencent will be capped higher,...

Brian Freitas

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