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

*Continued Weak Great Eastern Core Returns: Great Eastern Holdings (GE.SP) [Great Eastern] reported 2H20 bottom-line results of SGD 688.5 mn, improving SGD 348.6 mn (102.5%) HOH. However, when we exclude 2H20’s net gains on sale of SGD 3.8 bn, core operating results were far from impressive at a loss of SGD 3.1 bn versus operating income SGD 217.3 mn in 1H20; and*Poor Readacross to Regional Insurers: Higher overall costs at Great Eastern during the half driven by claims and a change in contract liability increases would imply a negative readacross to AIA (1299.HK), Prudential (PRU.LN), ManuLife (MFC.CN), and of course the mainland Chinese insurers.

*Continued Weak Great Eastern Core Returns: Great Eastern Holdings (GE.SP) [Great Eastern] reported 2H20 bottom-line results of SGD 688.5 mn, improving SGD 348.6 mn (102.5%) HOH. However, when we exclude 2H20’s net gains on sale of SGD 3.8 bn, core operating results were far from impressive at a loss of SGD 3.1 bn versus operating income SGD 217.3 mn in 1H20; and*Poor Readacross to Regional Insurers: Higher overall costs at Great Eastern during the half driven by claims and a change in contract liability increases would imply a negative readacross to AIA (1299.HK), Prudential (PRU.LN), ManuLife (MFC.CN), and of course the mainland Chinese insurers. 

Oversea Chinese Banking Corp. – Great Eastern HOH Operating Results Flop

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<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.</div><div>Hong Kong saw shorts rise on <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/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 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> and <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a> while there was short covering on <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/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a>, <a href="https://www.smartkarma.com/entities/jinxin-fertility-group-ltd" target="_blank" data-smartkarma-citation="entities:28003:1" rel="noopener">Jinxin Fertility Co Ltd (1951 HK)</a> and <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>. Shorts increased on Real Estate, Communication Services and Information Technology, while decreasing on Consumer Discretionary, Health Care and Financials.</div><div>In Japan, stocks that saw the most shorts were <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/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a>, <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" data-smartkarma-citation="entities:3700:1" rel="noopener">Anritsu Corp (6754 JP)</a> and <a href="https://www.smartkarma.com/entities/hino-motors-ltd" target="_blank" data-smartkarma-citation="entities:2144:1" rel="noopener">Hino Motors Ltd (7205 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP)</a> and <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" data-smartkarma-citation="entities:9924:1" rel="noopener">Taiyo Yuden (6976 JP)</a>. Sectorally, shorts increased marginally in Information Technology and Consumer Staples, while decreasing in Industrials and Communication Services.</div><div>In Korea, short increased on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> and <a href="https://www.smartkarma.com/entities/kia-motors-corp" target="_blank" data-smartkarma-citation="entities:156:1" rel="noopener">Kia Motors Corp (000270 KS)</a> while shorts decreased on <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/gs-engineering-construct" target="_blank" data-smartkarma-citation="entities:15916:1" rel="noopener">GS Engineering &amp; Construction (006360 KS)</a> and <a href="https://www.smartkarma.com/entities/hana-financial-group" target="_blank" data-smartkarma-citation="entities:12843:1" rel="noopener">Hana Financial (086790 KS)</a>. </div><div>Stocks in Taiwan that saw the highest increase in shorts were <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/asmedia-technology-inc" target="_blank" data-smartkarma-citation="entities:15732:1" rel="noopener">Asmedia Technology (5269 TT)</a>, <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> and <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a>, <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">Au Optronics (2409 TT)</a>, <a href="https://www.smartkarma.com/entities/alchip-technologies-ltd" target="_blank" data-smartkarma-citation="entities:20219:1" rel="noopener">Alchip Technologies (3661 TT)</a> and <a href="https://www.smartkarma.com/entities/flexium-interconnect-inc" target="_blank" data-smartkarma-citation="entities:15897:1" rel="noopener">Flexium Interconnect (6269 TT)</a>.</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 Lenovo (992 HK), Tencent Holdings (700 HK), AIA Group Ltd (1299 HK) and Nongfu Spring (9633 HK) while there was short covering on Ping An Insurance (H) (2318 HK), Alibaba Group (9988 HK), Wuxi Biologics (2269 HK), Jinxin Fertility Co Ltd (1951 HK) and JD.com Inc. (9618 HK). Shorts increased on Real Estate, Communication Services and Information Technology, while decreasing on Consumer Discretionary, Health Care and Financials.In Japan, stocks that saw the most shorts were Toshiba Corp (6502 JP), freee (4478 JP), Anritsu Corp (6754 JP) and Hino Motors Ltd (7205 JP) while shorts decreased on Itochu Corp (8001 JP), Canon Inc (7751 JP), Yaskawa Electric (6506 JP) and Taiyo Yuden (6976 JP). Sectorally, shorts increased marginally in Information Technology and Consumer Staples, while decreasing in Industrials and Communication Services.In Korea, short increased on Samsung Electronics (005930 KS), Naver Corp (035420 KS), Samsung SDI (006400 KS) and Kia Motors Corp (000270 KS) while shorts decreased on Celltrion Inc (068270 KS), GS Engineering &amp; Construction (006360 KS) and Hana Financial (086790 KS). Stocks in Taiwan that saw the highest increase in shorts were Pegatron Corp (4938 TT), Asmedia Technology (5269 TT), TSMC (2330 TT) and Largan Precision (3008 TT) while shorts were covered on United Microelectronics Corp (2303 TT), Au Optronics (2409 TT), Alchip Technologies (3661 TT) and Flexium Interconnect (6269 TT).

Asia Short Interest: Lenovo, AIA, Nongfu, Wuxi Bio, Toshiba, Freee, Canon, Samsung, Celltrion, TSMC

*PAL Improves, But Fundamentals Weak: Ping An Insurance (2318.HK)[Ping An] reported a 1H20 operating profit of CNY 74.3 bn, increasing just 1% YOY and 5% below consensus. As a recovery appears underway with Ping An Life (PAL), Ping An results appeared to be well-supported by a HOH improvement of CNY 13.2 bn bn (40.4%) in net profits  - although its value of new business (VONB) declined CNY 3.9 bn (11.9%); *P&amp;C Remains A Challenge: Auto combined ratio reversed course and increased by 250 bp to 100.6%, and certainly warrants watching a driving returns to normal in mainland China. Auto insurance reform will remain a challenge for profitability going forward, and pricing has yet to stabilize. The credit insurance segment remains challenged, due to defaults on underlying loans.*Awful Bank Result: For 4Q20, PAB reported results of CNY 6.5 bn – declining CNY 2.2 bn (25.1%) on a linked quarter basis. In this environment, credit troubles no doubt are a foregone conclusion. However, this was not necessarily PAB’s biggest issue in its most results announcement, where the bulk of the earnings decline was attributed to a CNY 1.9 bn (17.1%) linked quarter increase in costs.

*PAL Improves, But Fundamentals Weak: Ping An Insurance (2318.HK)[Ping An] reported a 1H20 operating profit of CNY 74.3 bn, increasing just 1% YOY and 5% below consensus. As a recovery appears underway with Ping An Life (PAL), Ping An results appeared to be well-supported by a HOH improvement of CNY 13.2 bn bn (40.4%) in net profits  - although its value of new business (VONB) declined CNY 3.9 bn (11.9%); *P&amp;C Remains A Challenge: Auto combined ratio reversed course and increased by 250 bp to 100.6%, and certainly warrants watching a driving returns to normal in mainland China. Auto insurance reform will remain a challenge for profitability going forward, and pricing has yet to stabilize. The credit insurance segment remains challenged, due to defaults on underlying loans.*Awful Bank Result: For 4Q20, PAB reported results of CNY 6.5 bn – declining CNY 2.2 bn (25.1%) on a linked quarter basis. In this environment, credit troubles no doubt are a foregone conclusion. However, this was not necessarily PAB’s biggest issue in its most results announcement, where the bulk of the earnings decline was attributed to a CNY 1.9 bn (17.1%) linked quarter increase in costs.

Ping An Insurance – Hope Is Not A Strategy

*Costs Now An Issue: Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported CNY 6.5 bn – declining CNY 2.2 bn (25.1%) on a linked quarter basis. In this environment, credit troubles no doubt are a foregone conclusion. However, this was not necessarily PAB’s biggest issue in its most results announcement, where the bulk of the earnings decline was attributed to a CNY 1.9 bn (17.1%) linked quarter increase in costs;*Credit Is WEAKER Still:  We find that credit weakness is actually deteriorating at an even more accelerated pace than in 3Q20, as net new NPLs have increased CNY 20.5 bn or a massive 241% (223% in 3Q20) on an annualized basis. We also find that PAB’s reserves still remain quite light by CNY 152 bn if we assume a 2x NPL ratio. This shortfall represents 60% of stated equity; and*Fundamentally Challenged Still: Despite the Investor Day cheerleading session, Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH in 1H20, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans.

*Costs Now An Issue: Ping An Bank (000001.CH) [PAB], the Ping An Insurance (2318.HK) [Ping An] banking subsidiary, reported CNY 6.5 bn – declining CNY 2.2 bn (25.1%) on a linked quarter basis. In this environment, credit troubles no doubt are a foregone conclusion. However, this was not necessarily PAB’s biggest issue in its most results announcement, where the bulk of the earnings decline was attributed to a CNY 1.9 bn (17.1%) linked quarter increase in costs;*Credit Is WEAKER Still:  We find that credit weakness is actually deteriorating at an even more accelerated pace than in 3Q20, as net new NPLs have increased CNY 20.5 bn or a massive 241% (223% in 3Q20) on an annualized basis. We also find that PAB’s reserves still remain quite light by CNY 152 bn if we assume a 2x NPL ratio. This shortfall represents 60% of stated equity; and*Fundamentally Challenged Still: Despite the Investor Day cheerleading session, Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH in 1H20, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans. 

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

As we highlighted in last week’s Int’l Compass, the weight of the evidence suggests commodities are in the early stages of a new secular bull market. Global Materials remains a favorite Sector overweight and we believe outperformance is likely to continue considering the Sector’s long-term bullish RS reversal. Additionally, we are upgrading equal-weighted Energy to overweight due to bullish price and RS inflections -- add exposure with a focus on small- and mid-caps.

As we highlighted in last week’s Int’l Compass, the weight of the evidence suggests commodities are in the early stages of a new secular bull market. Global Materials remains a favorite Sector overweight and we believe outperformance is likely to continue considering the Sector’s long-term bullish RS reversal. Additionally, we are upgrading equal-weighted Energy to overweight due to bullish price and RS inflections -- add exposure with a focus on small- and mid-caps.

Global Commodity-Related Equity Sectors In Secular Bull

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)

Oversea Chinese Banking Corp. – Great Eastern HOH Operating Results Flop

OVERSEA CHINESE BANKING CORP: Great Eastern reported hefty 2H20 core operating losses. Higher overall costs HOH imply a negative readacross to...

Thomas J. Monaco

Asia Short Interest: Lenovo, AIA, Nongfu, Wuxi Bio, Toshiba, Freee, Canon, Samsung, Celltrion, TSMC

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

Ping An Insurance – Hope Is Not A Strategy

PING AN INSURANCE: Ping An reported 2H20 an operating profit decline of 12.2% HOH. Despite bottom-line improvement in Life, results are truly...

Thomas J. Monaco

Ping An Insurance - Awful Bank Result

PING AN INSURANCE: PAB reported a 25.1% lower linked quarter result. The bulk of the earnings decline was attributed to a 17.1% increase in costs;...

Thomas J. Monaco

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52-week Range

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Oversea Chinese Banking Corp. – Great Eastern HOH Operating Results Flop

OVERSEA CHINESE BANKING CORP: Great Eastern reported hefty 2H20 core operating losses. Higher overall costs HOH imply a negative readacross to...

Thomas J. Monaco

Asia Short Interest: Lenovo, AIA, Nongfu, Wuxi Bio, Toshiba, Freee, Canon, Samsung, Celltrion, TSMC

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

Ping An Insurance – Hope Is Not A Strategy

PING AN INSURANCE: Ping An reported 2H20 an operating profit decline of 12.2% HOH. Despite bottom-line improvement in Life, results are truly...

Thomas J. Monaco

Ping An Insurance - Awful Bank Result

PING AN INSURANCE: PAB reported a 25.1% lower linked quarter result. The bulk of the earnings decline was attributed to a 17.1% increase in costs;...

Thomas J. Monaco

Global Commodity-Related Equity Sectors In Secular Bull

We believe commodities are in the early stages of a new secular bull market. Global Materials & Energy remain our favorite Sector overweights - add...

Vermilion Research