Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

China Life Insurance Co H / Equity Bottom-Up

<p><strong><em>*Reserve Top Ups Weigh On Numbers This Time</em></strong><strong><em>: </em></strong>China Life Insurance (2628.HK) [China Life] reported 2020 bottom-line of CNY 50.3 bn – declining CNY 8.0 bn (13.7%) YOY. Excluding the impact of the 2019 tax refund of CNY 5.2 bn, China Life’s bottom-line performance would have declined only CNY 2.8 bn or 5.3% YOY – but still down; and</p><p>*<strong><em>Value Challenges Ahead:</em></strong> With value challenges ahead in China Life’s illiquid securities portfolio (Challenged Tier 2/3 bank negotiable CDs and alternatives) and the CBIRC’s enabling of insurers to increase their concentration in equities, we not only question solvency margins but the viability of China Life’s full-year dividend per share – not to mention the impact of lower net yields.</p>

*Reserve Top Ups Weigh On Numbers This Time: China Life Insurance (2628.HK) [China Life] reported 2020 bottom-line of CNY 50.3 bn – declining CNY 8.0 bn (13.7%) YOY. Excluding the impact of the 2019 tax refund of CNY 5.2 bn, China Life’s bottom-line performance would have declined only CNY 2.8 bn or 5.3% YOY – but still down; and*Value Challenges Ahead: With value challenges ahead in China Life’s illiquid securities portfolio (Challenged Tier 2/3 bank negotiable CDs and alternatives) and the CBIRC’s enabling of insurers to increase their concentration in equities, we not only question solvency margins but the viability of China Life’s full-year dividend per share – not to mention the impact of lower net yields.

<p><strong><em>*BEA Life Deal: </em></strong>In an effort to reinforce its Greater China franchise, AIA Group (1299.HK) [AIA] has entered into an agreement to purchase Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life, and entered into an exclusive 15-year bancassurance relationship with BEA for HKD 5.07 bn (USD 653 mn) covering Hong Kong and mainland China; and </p><p><strong><em>*Lost Focus: </em></strong>Acquiring a fledgling Hong Kong insurance franchise at a premium when you’re the dominant player and unemployment remains excessive, suggests that AIA is more concerned with growth metrics rather than addressing the risks that AIA is facing in mainland China, Hong Kong, and in its investment portfolio. </p>

*BEA Life Deal: In an effort to reinforce its Greater China franchise, AIA Group (1299.HK) [AIA] has entered into an agreement to purchase Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life, and entered into an exclusive 15-year bancassurance relationship with BEA for HKD 5.07 bn (USD 653 mn) covering Hong Kong and mainland China; and *Lost Focus: Acquiring a fledgling Hong Kong insurance franchise at a premium when you’re the dominant player and unemployment remains excessive, suggests that AIA is more concerned with growth metrics rather than addressing the risks that AIA is facing in mainland China, Hong Kong, and in its investment portfolio. 

AIA Group – Confirming No Organic Growth On Horizon

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>In this Insight, we look at Asian financial pairs that normally trade in a tight band versus each other and are now trading at levels that are close to an extreme, making it likely that there could be a short term reversal. We also recap our earlier ideas and recommend exiting a few positions, especially where there are gains and the price ratios are at turning points.</p></div><div>
<p>These are all large cap financials that trade in excess of US$20m a day, so implementing the strategy should be possible using stock borrow or single stock futures.</p>
<p>These ideas are based purely off the stock price history and we recommend investors use a fundamental overlay to determine if the price action is reflective of changes in the sector that benefit one company at the expense of the other, or benefit one company more than the other.</p>
</div>

In this Insight, we look at Asian financial pairs that normally trade in a tight band versus each other and are now trading at levels that are close to an extreme, making it likely that there could be a short term reversal. We also recap our earlier ideas and recommend exiting a few positions, especially where there are gains and the price ratios are at turning points.
These are all large cap financials that trade in excess of US$20m a day, so implementing the strategy should be possible using stock borrow or single stock futures.
These ideas are based purely off the stock price history and we recommend investors use a fundamental overlay to determine if the price action is reflective of changes in the sector that benefit one company at the expense of the other, or benefit one company more than the other.


<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a>, <a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <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> and <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> while there was short covering on <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/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/haier-smart-home-co-ltd-b3ef445f-0f54-4586-8c58-9073de98d60e" target="_blank" data-smartkarma-citation="entities:31105:1" rel="noopener">Haier Smart Home Co Ltd (6690 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec-co-ltd-bf4a1265-beef-48b6-b82d-29308426030f" target="_blank" data-smartkarma-citation="entities:27795:1" rel="noopener">WuXi AppTec Co. Ltd. (2359 HK)</a> and <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>. Shorts increased in Communication Services, Information Technology and Materials stocks, while decreasing in Utilities, Consumer Staples, Energy, Consumer Discretionary and Health Care stocks.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" data-smartkarma-citation="entities:14211:1" rel="noopener">Monex Group Inc (8698 JP)</a> and <a href="https://www.smartkarma.com/entities/nihon-m-a-center-inc" target="_blank" data-smartkarma-citation="entities:17616:1" rel="noopener">Nihon M&amp;A Center (2127 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a> and <a href="https://www.smartkarma.com/entities/rohm-co-ltd" target="_blank" data-smartkarma-citation="entities:2953:1" rel="noopener">ROHM Co Ltd (6963 JP)</a>. Shorts increased in Consumer Staples, Industrials, Financials and Materials, while shorts covered in the Consumer Discretionary sector.</p></div><div><p>In Korea, short increased on <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a>, <a href="https://www.smartkarma.com/entities/lotte-chemical-corp" target="_blank" data-smartkarma-citation="entities:8757:1" rel="noopener">Lotte Chemical (011170 KS)</a>, <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical Co Ltd (003670 KS)</a> and <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/korea-electric-power-corp" target="_blank" data-smartkarma-citation="entities:16:1" rel="noopener">Korea Electric Power (015760 KS)</a> and <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a>, <a href="https://www.smartkarma.com/entities/fitipower-integrated-tech" target="_blank" data-smartkarma-citation="entities:8712:1" rel="noopener">Fitipower Integrated Tech (4961 TT)</a> and <a href="https://www.smartkarma.com/entities/walsin-technology-corp" target="_blank" data-smartkarma-citation="entities:11084:1" rel="noopener">Walsin Technology (2492 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/taiwan-cement" target="_blank" data-smartkarma-citation="entities:19736:1" rel="noopener">Taiwan Cement (1101 TT)</a>, <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a> and <a href="https://www.smartkarma.com/entities/richwave-technology-corp" target="_blank" data-smartkarma-citation="entities:18629:1" rel="noopener">Richwave Technology (4968 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Xinyi Solar Holdings (968 HK), Lenovo (992 HK), Ping An Insurance (H) (2318 HK), Kuaishou Technology (1024 HK) and JD Health (6618 HK) while there was short covering on Alibaba Group (9988 HK), Xiaomi Corp (1810 HK), Haier Smart Home Co Ltd (6690 HK), WuXi AppTec Co. Ltd. (2359 HK) and AIA Group Ltd (1299 HK). Shorts increased in Communication Services, Information Technology and Materials stocks, while decreasing in Utilities, Consumer Staples, Energy, Consumer Discretionary and Health Care stocks.In Japan, stocks that saw the most shorts were Seven &amp; I Holdings (3382 JP), Toshiba Corp (6502 JP), Monex Group Inc (8698 JP) and Nihon M&amp;A Center (2127 JP) while shorts decreased on Rakuten Inc (4755 JP), Fast Retailing (9983 JP), Itochu Corp (8001 JP) and ROHM Co Ltd (6963 JP). Shorts increased in Consumer Staples, Industrials, Financials and Materials, while shorts covered in the Consumer Discretionary sector.In Korea, short increased on Doosan Infracore (042670 KS), Lotte Chemical (011170 KS), Posco Chemical Co Ltd (003670 KS) and Hyundai Motor Co (005380 KS) while shorts decreased on SK Hynix (000660 KS), Celltrion Inc (068270 KS), Korea Electric Power (015760 KS) and LG Display (034220 KS). Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), Pegatron Corp (4938 TT), Fitipower Integrated Tech (4961 TT) and Walsin Technology (2492 TT) while shorts were covered on Taiwan Cement (1101 TT), Evergreen Marine Corp (2603 TT), Innolux Corp (3481 TT) and Richwave Technology (4968 TT).

Asia Short Interest: Kuaishou, JD Health, Xiaomi, 7&I, Monex, Rakuten, Hynix, Hyundai, Fitipower

<p><strong><em>*A Poor Set Of Results: </em></strong>AIA Group (1299.HK) (AIA) reported 4Q20 Value of New Business (VONB) of USD 2.8 bn -  down 33% YOY, and net profit of USD 5.8 bn – down 3% over the period. 4Q20 VONB amounted to USD 639 mn, down 31% YOY.  The VONB decline can be attributed largely to weaker volumes and margins caused by mainland China’s new withholding tax, expense overruns in Hong Kong, along with product/mix shifts resultant of pandemic restrictions; and</p><p> <strong><em>*No Hong Kong Rebound In Sight:</em></strong> The focus should remain Hong Kong, where a 66% YOY decline in VONB occurred as its border with mainland China continued to remain closed due to COVID-19 restrictions. This should continue to weigh on results over the next few quarters as well.   </p>

*A Poor Set Of Results: AIA Group (1299.HK) (AIA) reported 4Q20 Value of New Business (VONB) of USD 2.8 bn -  down 33% YOY, and net profit of USD 5.8 bn – down 3% over the period. 4Q20 VONB amounted to USD 639 mn, down 31% YOY.  The VONB decline can be attributed largely to weaker volumes and margins caused by mainland China’s new withholding tax, expense overruns in Hong Kong, along with product/mix shifts resultant of pandemic restrictions; and *No Hong Kong Rebound In Sight: The focus should remain Hong Kong, where a 66% YOY decline in VONB occurred as its border with mainland China continued to remain closed due to COVID-19 restrictions. This should continue to weigh on results over the next few quarters as well.   

Hong Kong

AIA Group Limited offers insurance and financial services. The Company writes life insurance for individuals, businesses, accident, and health insurance, as well as retirement planning and wealth management services.

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AIA Group Ltd (1299 HK)

China Life Insurance – Not So Good

CHINA LIFE: China Life reported a 13.7% YOY decline in 2020 bottom-line. With value challenges ahead in China Life’s illiquid securities portfolio,...

Thomas J. Monaco

AIA Group – Confirming No Organic Growth On Horizon

AIA GROUP: AIA entered into an agreement to acquire BEA Life, and entered into a bancassurance relationship with BEA. Acquiring a fledgling Hong...

Thomas J. Monaco

Pair Trading Ideas - Asian Financials

Pair trades on large cap Asian financials that trade in excess of US$20m a day. These pairs trade in bands versus each other and currently offer...

Brian Freitas

Asia Short Interest: Kuaishou, JD Health, Xiaomi, 7&I, Monex, Rakuten, Hynix, Hyundai, Fitipower

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

AIA Group – Low Base Leverage

AIA GROUP: AIA posted a 4Q20 VONB decline of 33% YOY, largely due to weaker volumes and margins, expense overruns, and product/mix shifts due to...

Thomas J. Monaco

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