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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<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/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/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/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a> and <a href="https://www.smartkarma.com/entities/haier-electronics-group-co" target="_blank" data-smartkarma-citation="entities:4877:1" rel="noopener">Haier Electronics Group Co (1169 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/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 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/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a>. Shorts increased in Real Estate, Health Care, Communication Services and Financial stocks, and decreased on Information Technology and Consumer Discretionary names.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K.K. (4004 JP)</a>, <a href="https://www.smartkarma.com/entities/pigeon-corp" target="_blank" data-smartkarma-citation="entities:3294:1" rel="noopener">Pigeon Corp (7956 JP)</a>, <a href="https://www.smartkarma.com/entities/change-inc" target="_blank" data-smartkarma-citation="entities:27414:1" rel="noopener">Change Inc (3962 JP)</a> and <a href="https://www.smartkarma.com/entities/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a> while shorts decreased on <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/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/tdk-corp" target="_blank" data-smartkarma-citation="entities:18847:1" rel="noopener">TDK Corp (6762 JP)</a> and <a href="https://www.smartkarma.com/entities/aozora-bank-ltd" target="_blank" data-smartkarma-citation="entities:6483:1" rel="noopener">Aozora Bank Ltd (8304 JP)</a>. Sectorally, shorts increased on Materials, Industrials, Real Estate and Consumer Discretionary names.</p></div><div><p>In Korea, the biggest increase in shorts were seen on <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> and <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> while shorts were covered on <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 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/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a> and <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>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <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>, <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/pan-jit-international-inc" target="_blank" data-smartkarma-citation="entities:12501:1" rel="noopener">Pan Jit International (2481 TT)</a> and <a href="https://www.smartkarma.com/entities/elite-semiconductor-memory" target="_blank" data-smartkarma-citation="entities:9373:1" rel="noopener">Elite Semiconductor Memory (3006 TT)</a> while shorts were covered on <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/macronix-international" target="_blank" data-smartkarma-citation="entities:3247:1" rel="noopener">Macronix International (2337 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a> and <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 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 Tencent Holdings (700 HK), Ping An Insurance (H) (2318 HK), Wuxi Biologics (2269 HK) and Haier Electronics Group Co (1169 HK) while there was short covering on Alibaba Group (9988 HK), Meituan (3690 HK), Xiaomi Corp (1810 HK) and Want Want (151 HK). Shorts increased in Real Estate, Health Care, Communication Services and Financial stocks, and decreased on Information Technology and Consumer Discretionary names.In Japan, stocks that saw the most shorts were Showa Denko K.K. (4004 JP), Pigeon Corp (7956 JP), Change Inc (3962 JP) and Nippon Building Fund (8951 JP) while shorts decreased on Fast Retailing (9983 JP), Advantest Corp (6857 JP), TDK Corp (6762 JP) and Aozora Bank Ltd (8304 JP). Sectorally, shorts increased on Materials, Industrials, Real Estate and Consumer Discretionary names.In Korea, the biggest increase in shorts were seen on LG Chem Ltd (051910 KS) and Doosan Infracore (042670 KS) while shorts were covered on Amorepacific Corp (090430 KS), Celltrion Inc (068270 KS), LG Display (034220 KS) and Samsung Electronics (005930 KS). Stocks in Taiwan that saw the highest increase in shorts were Largan Precision (3008 TT), Pegatron Corp (4938 TT), Pan Jit International (2481 TT) and Elite Semiconductor Memory (3006 TT) while shorts were covered on TSMC (2330 TT), Macronix International (2337 TT), Yageo Corporation (2327 TT) and Mediatek Inc (2454 TT). 

Asia Short Interest Weekly: Tencent, Want Want, Showa Denko, NBF, LG Chem, AmoreCorp, Pegatron

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>China claims an end to (extreme) poverty</li>
<li>Defaults and a big choice on debt </li>
<li>Rule of law, according to man who controls courts </li>
<li>Hong Kong leader enjoys obedient legislature</li>
<li>China’s most ambitious moonshot yet</li>
</ul><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
China claims an end to (extreme) poverty
Defaults and a big choice on debt 
Rule of law, according to man who controls courts 
Hong Kong leader enjoys obedient legislature
China’s most ambitious moonshot yet
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Poverty/ Debt/ Xi Jinping/ Hong Kong/ Space

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> gives you deeply discounted exposure to one of the highest quality companies listed in the Emerging Markets, <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>. Should you back out the estimated fair values of all investments outside of Prosus’ 31% holding in Tencent from the current Naspers market cap, you are effectively buying exposure to Tencent for only 16.2x 2021F earnings.</p>
<p>Often overlooked, Naspers also gives exposure to a diverse range of online businesses, in differing stages of development, which are likely to structurally benefited from lasting changes to consumer behaviour in the wake of the COVID-19 pandemic.</p>
<p>Further, Management has signalled their focus on meaningfully reducing its discount to listed net asset value by implementing a $5bn share buyback program, during November 2020, which should also support the share price through volatility in the near term. </p>
<p>The key risk to the investment thesis regards the newly proposed Anti-Monopoly Compliance Guidelines for the Platform Economy released by China’s State Administration for Market Regulation (SAMR), a clear signal of tougher antitrust regulations going forward. Tencent should, however, be able to manage through these better than the large eCommerce players.</p>

Naspers (NPN SJ) gives you deeply discounted exposure to one of the highest quality companies listed in the Emerging Markets, Tencent Holdings (700 HK). Should you back out the estimated fair values of all investments outside of Prosus’ 31% holding in Tencent from the current Naspers market cap, you are effectively buying exposure to Tencent for only 16.2x 2021F earnings.
Often overlooked, Naspers also gives exposure to a diverse range of online businesses, in differing stages of development, which are likely to structurally benefited from lasting changes to consumer behaviour in the wake of the COVID-19 pandemic.
Further, Management has signalled their focus on meaningfully reducing its discount to listed net asset value by implementing a $5bn share buyback program, during November 2020, which should also support the share price through volatility in the near term. 
The key risk to the investment thesis regards the newly proposed Anti-Monopoly Compliance Guidelines for the Platform Economy released by China’s State Administration for Market Regulation (SAMR), a clear signal of tougher antitrust regulations going forward. Tencent should, however, be able to manage through these better than the large eCommerce players.

2021 High Conviction: Naspers, Deeply Discounted Exposure to Accelerating Online Sales

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>On the 18 October, hypermarket operator <a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a> <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1019/2020101900089.pdf" target="_blank" rel="noopener">announced</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> had entered into a SPA with the Mulliez family, the completion of which would give Alibaba's direct/indirect control of 71.98% into Sun Art from 31.13% currently, triggering an Unconditional Mandatory General Offer.</p>
</div>
<div>
<p>The MGO price would be $8.10/share, a 2.14% premium to last close. Any dividend paid or declared would reduce the Offer Price.</p>
</div>
<div>
<p>The SPA had limited conditions and was <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1019/2020101900982.pdf" target="_blank" rel="noopener">completed</a> on the 19 October. The Composite Doc was expected to be issued by the 9 Nov, 21 days from the initial announcement, but owing to usual slippages, the despatch date was delayed.</p>
<p>The Composite Offer and Response Document is now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1127/2020112700011.pdf" target="_blank" rel="noopener">out</a>. The first close is the 18 December, and assuming you tender immediately, payment would be on or around the 8 December. The IFA (Somerley) considers the Offer NOT fair and NOT reasonable.</p>
<p>Sun Art is trading through terms at $8.25/share, although down from its $9.45 close on the day of the Offer announcement. There's nothing to do here on the MGO unless pricing closes in on the near-term hard floor of $8.10, as it did last week.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


On the 18 October, hypermarket operator Sun Art Retail (6808 HK) announced Alibaba Group (9988 HK) had entered into a SPA with the Mulliez family, the completion of which would give Alibaba's direct/indirect control of 71.98% into Sun Art from 31.13% currently, triggering an Unconditional Mandatory General Offer.


The MGO price would be $8.10/share, a 2.14% premium to last close. Any dividend paid or declared would reduce the Offer Price.


The SPA had limited conditions and was completed on the 19 October. The Composite Doc was expected to be issued by the 9 Nov, 21 days from the initial announcement, but owing to usual slippages, the despatch date was delayed.
The Composite Offer and Response Document is now out. The first close is the 18 December, and assuming you tender immediately, payment would be on or around the 8 December. The IFA (Somerley) considers the Offer NOT fair and NOT reasonable.
Sun Art is trading through terms at $8.25/share, although down from its $9.45 close on the day of the Offer announcement. There's nothing to do here on the MGO unless pricing closes in on the near-term hard floor of $8.10, as it did last week.


More below the fold.


Sun Art (6808 HK): Offer Doc Out. Not Fair And Reasonable

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

<p>Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%</p><p>However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  </p><p>In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.</p><p>We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.</p><p>The list is headed by <a href="https://www.smartkarma.com/entities/jiangsu-hengrui-medicine-co-ltd" target="_blank" data-smartkarma-citation="entities:14128:1" rel="noopener">Jiangsu Hengrui Medicine (600276 CH)</a>, one of the standout domestic holdings within the Health Care sector, followed by <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> and <a href="https://www.smartkarma.com/entities/luxshare-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:12310:1" rel="noopener">Luxshare Precision Industry (002475 CH)</a> .</p><p><em>Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  </em></p><p><em>Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn</em></p>

Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.The list is headed by Jiangsu Hengrui Medicine (600276 CH), one of the standout domestic holdings within the Health Care sector, followed by China Tourism Group Duty Free Corp Ltd (601888 CH) and Luxshare Precision Industry (002475 CH) .Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn

China's Next Generation:  Diversifying Away from Tencent and Alibaba.

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)

Asia Short Interest Weekly: Tencent, Want Want, Showa Denko, NBF, LG Chem, AmoreCorp, Pegatron

The Asia short report highlights large movements in weekly short interest across HK, Japan, Korea and Taiwan to be used as an input in trading...

Brian Freitas

Poverty/ Debt/ Xi Jinping/ Hong Kong/ Space

In my weekly digest, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and...

Diana Choyleva

2021 High Conviction: Naspers, Deeply Discounted Exposure to Accelerating Online Sales

Naspers: Deeply discounted exposure to Tencent, a diverse range of online businesses set to benefit from accelerated online activity post-COVID-19...

Wium Malan, CFA

Sun Art (6808 HK): Offer Doc Out. Not Fair And Reasonable

From an arb standpoint, there is very little to do here. Alibaba taking control of this hypermarket chain is positive. Sun Art also appears...

David Blennerhassett

China's Next Generation: Diversifying Away from Tencent and Alibaba.

China exposure is becoming more concentrated in a small number of large cap stocks. We identify the next generation of China stocks by analyzing...

Steven Holden

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