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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>On 3 June, President Biden amended Executive Order 13959 with respect to the threat posed by the military-industrial complex of the People’s Republic of China, and expanded the list of companies to include entities that operate in the defense and related materiel sector or the surveillance technology sector in China, or own, or are owned, or are controlled by persons that operate in the above sectors.</p><p>There were a few entities that appeared in Trump's list that were dropped while there were new entities that were added to the current list.</p><p>Some major changes were that the name of the list was changed from Communist Chinese Military Companies (CCMC) to Chinese Military-Industrial Complex Companies (CMIC), the list would be maintained by the Treasury Department as opposed to the Defense Department, and restrictions on subsidiaries would apply only if the subsidiary was explicitly named in the list.</p><p>It has been reported in the media, quoting senior officials, that the list will be updated on a rolling basis. As we were typing out the Insight, Reuters published an article that says <a href="https://www.reuters.com/article/usa-biden-china-investment/analysis-more-chinese-companies-could-fall-under-bidens-broader-investment-ban-idUSL2N2NM13H" target="_blank" rel="noopener">more Chinese companies could be added to the investment ban</a>.</p><p>In this Insight, we try to identify some of the subsidiaries of companies that could be added to the CMIC list where the parent entity is already included on the list.</p>

On 3 June, President Biden amended Executive Order 13959 with respect to the threat posed by the military-industrial complex of the People’s Republic of China, and expanded the list of companies to include entities that operate in the defense and related materiel sector or the surveillance technology sector in China, or own, or are owned, or are controlled by persons that operate in the above sectors.There were a few entities that appeared in Trump's list that were dropped while there were new entities that were added to the current list.Some major changes were that the name of the list was changed from Communist Chinese Military Companies (CCMC) to Chinese Military-Industrial Complex Companies (CMIC), the list would be maintained by the Treasury Department as opposed to the Defense Department, and restrictions on subsidiaries would apply only if the subsidiary was explicitly named in the list.It has been reported in the media, quoting senior officials, that the list will be updated on a rolling basis. As we were typing out the Insight, Reuters published an article that says more Chinese companies could be added to the investment ban.In this Insight, we try to identify some of the subsidiaries of companies that could be added to the CMIC list where the parent entity is already included on the list.

POTUS Executive Order: Potential Additions to the CMIC List

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<div>
<p data-v-da61000a="" data-v-294dc056="">This update is the latest in a series dating back to <a href="https://skr.ma/c7hcH" target="_blank" rel="noopener">L<em>egend's Conversion of Domestic Shares</em></a> in June 2018.</p>
<p data-v-da61000a="" data-v-294dc056="">To date, 20 companies have sought approval to convert their domestic shares into H shares, which would then be eligible to be listed and traded on Hong Kong's stock exchange.</p>
<p data-v-da61000a="" data-v-294dc056="">13 companies have now been given CSRC and Hong Kong listing approval to convert such shares. Only two of those have seen any noticeable movement in the converted shares.</p>
<p data-v-da61000a="" data-v-294dc056="">In the past four months, two companies have <em>withdrawn</em> their application to convert their domestic shares, citing further improvement in the rules and regulations of the domestic capital market, among other factors.  </p>
</div>
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<p data-v-da61000a="" data-v-294dc056="">As always, more below the fold. </p>
</div>


This update is the latest in a series dating back to Legend's Conversion of Domestic Shares in June 2018.
To date, 20 companies have sought approval to convert their domestic shares into H shares, which would then be eligible to be listed and traded on Hong Kong's stock exchange.
13 companies have now been given CSRC and Hong Kong listing approval to convert such shares. Only two of those have seen any noticeable movement in the converted shares.
In the past four months, two companies have withdrawn their application to convert their domestic shares, citing further improvement in the rules and regulations of the domestic capital market, among other factors.  


As always, more below the fold. 


Full Circulation Of H-Shares: January 2021 Update

Travis Lundy

Thematic (Sector/Industry)

<p>In 1998, before the US and China entered into Permanent Normal Trade Relations with China in 2000, the US Congress enacted a law requiring the Clinton Administration to publish a list of Chinese companies in the US which did business with the People's Liberation Army (Public Law 105-261, Section 1237), and a "Communist Chinese military company" was defined in that law as any company named in to Defense Intelligence Agency documents from 1990 and 1995 and "any other entity owned or controlled by the PLA and engaged in providing commercial services, manufacturing, or exporting."</p><p>That law basically lay dormant until last year when the Pentagon launched a review of such companies following the Trump White House's labelling of China (and Russia) a "revisionist" power in its first National Security Strategy <a href="https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905-2.pdf" target="_blank" rel="noopener">report</a> in 2017. The goal was to investigate and warn about supply-chain vulnerabilities. The Department of Defense published a list in June 2020 of 20 companies which were "Qualified Entities". It updated the list in late August 2020. The former Secretary of Defense was ousted several days ago and the new Secretary of Defense is now responsible for the list. </p><p>There is, as of last night, an Executive Order by the White House blocking US 'persons' investment in any of the names mentioned - a list now 31 names long.</p><p>More below on the impact.</p>

In 1998, before the US and China entered into Permanent Normal Trade Relations with China in 2000, the US Congress enacted a law requiring the Clinton Administration to publish a list of Chinese companies in the US which did business with the People's Liberation Army (Public Law 105-261, Section 1237), and a "Communist Chinese military company" was defined in that law as any company named in to Defense Intelligence Agency documents from 1990 and 1995 and "any other entity owned or controlled by the PLA and engaged in providing commercial services, manufacturing, or exporting."That law basically lay dormant until last year when the Pentagon launched a review of such companies following the Trump White House's labelling of China (and Russia) a "revisionist" power in its first National Security Strategy report in 2017. The goal was to investigate and warn about supply-chain vulnerabilities. The Department of Defense published a list in June 2020 of 20 companies which were "Qualified Entities". It updated the list in late August 2020. The former Secretary of Defense was ousted several days ago and the new Secretary of Defense is now responsible for the list. There is, as of last night, an Executive Order by the White House blocking US 'persons' investment in any of the names mentioned - a list now 31 names long.More below on the impact.

Trump's Executive Order on Chinese Military Companies

AviChina Industry & Technology H / Event-Driven

<p>Civil-aviation and defense play <a href="https://www.smartkarma.com/entities/avichina-industry-tech-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">Avichina Industry &amp; Tech H (2357 HK)</a> is trading at a steep 68% discount to NAV. The implied stub, netting off listed holdings, is also at a multi-year low.</p>
<p>In the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0918/2020091800348.pdf" target="_blank" rel="noopener">2020 interim report</a>, AviChina stated:</p>
<blockquote>
<p>During the first half of 2020, with the strategic goal of building an aviation power in the new era in all respects, the Company has been dedicated to becoming a flagship company to provide high-tech aviation products and services for both military and civil purposes.</p>
</blockquote>
<div data-v-e1aeccf8="">
<h3>The Fifth Plenum</h3>
<p data-v-d6b361f8="" data-v-e1aeccf8="">China concluded a four-day meeting, known as the fifth plenum, on the 29th October, in which the 14th five-year plan and the development goals for 2035 were discussed.</p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">One of the key goals from the communique of the plenum was to turn the People‘s Liberation Army into a modern military force (one on par with the US) by 2027 - in time to mark the centennial founding of the PLA. </p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">Concurrent with China's "dual circularity" development - discussed in <em><a href="https://skr.ma/ANkER" target="_blank" rel="noopener">China's Dual Circulation: Hedged Integration</a></em> - wherein China will primarily depend on “domestic circulation” buttressed by external resources or “international circulation”, timing appears favourable for Chinese defense stocks.</p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">Put another way: why provide spending transparency in a sensitive industry via a listed vehicle? At this multiyear low discount to NAV, AviChina is cheap on a standalone basis. And potentially a take-private candidate. </p>
<p data-v-d6b361f8="" data-v-e1aeccf8="">More below the fold.</p>
</div>

Civil-aviation and defense play Avichina Industry &amp; Tech H (2357 HK) is trading at a steep 68% discount to NAV. The implied stub, netting off listed holdings, is also at a multi-year low.
In the 2020 interim report, AviChina stated:

During the first half of 2020, with the strategic goal of building an aviation power in the new era in all respects, the Company has been dedicated to becoming a flagship company to provide high-tech aviation products and services for both military and civil purposes.


The Fifth Plenum
China concluded a four-day meeting, known as the fifth plenum, on the 29th October, in which the 14th five-year plan and the development goals for 2035 were discussed.
One of the key goals from the communique of the plenum was to turn the People‘s Liberation Army into a modern military force (one on par with the US) by 2027 - in time to mark the centennial founding of the PLA. 
Concurrent with China's "dual circularity" development - discussed in China's Dual Circulation: Hedged Integration - wherein China will primarily depend on “domestic circulation” buttressed by external resources or “international circulation”, timing appears favourable for Chinese defense stocks.
Put another way: why provide spending transparency in a sensitive industry via a listed vehicle? At this multiyear low discount to NAV, AviChina is cheap on a standalone basis. And potentially a take-private candidate. 
More below the fold.


AviChina (2357 HK): Buy The Modern Army Narrative

<div>
<p data-v-da61000a="" data-v-294dc056="">This update is the latest in a series dating back to <em><a href="https://skr.ma/c7hcH" target="_blank" rel="noopener">Legend's Conversion of Domestic Shares</a></em> in June 2018, with the most recent addition <em><a href="https://skr.ma/kJWeU" target="_blank" rel="noopener">CPPCC And Full Circulation Of H-Shares</a></em> speculating the 2020 National People's Congress and Chinese People's Political Consultative may provide guidance on the "<em>full circulation of H shares</em>", which would allow the conversion of domestic shares into H shares, which would then be eligible to be listed and traded on Hong Kong's stock exchange.</p>
<p data-v-da61000a="" data-v-294dc056="">Since that insight, another 6 companies have been given the green light to convert and/or have submitted applications to covert.</p>
<p data-v-da61000a="" data-v-294dc056="">There has also been one noticeable movement in one of the initial pilot companies to have converted domestic shares.</p>
<p data-v-da61000a="" data-v-294dc056="">As always, more below the fold. </p>
</div>
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<p data-v-da61000a="" data-v-294dc056=""></p>
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This update is the latest in a series dating back to Legend's Conversion of Domestic Shares in June 2018, with the most recent addition CPPCC And Full Circulation Of H-Shares speculating the 2020 National People's Congress and Chinese People's Political Consultative may provide guidance on the "full circulation of H shares", which would allow the conversion of domestic shares into H shares, which would then be eligible to be listed and traded on Hong Kong's stock exchange.
Since that insight, another 6 companies have been given the green light to convert and/or have submitted applications to covert.
There has also been one noticeable movement in one of the initial pilot companies to have converted domestic shares.
As always, more below the fold. 






Full Circulation Of H-Shares - July Update

China

AviChina Industry & Technology Co Ltd manufactures and sells aviation tools and aero-parts. The Company's main products include helicopters, regional aircrafts, trainers, general aircrafts, aero-parts and components and aero-electrical products.

AviChina Industry & Technology H (2357 HK)

Price Gauge
52-week Range	0.00 - 0.00
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AviChina Industry & Technology H (2357 HK)

POTUS Executive Order: Potential Additions to the CMIC List

There could be more entities added to Biden's Executive Order if US-China relations continue to worsen. Defense & surveillance stocks, plus subs of...

Brian Freitas

Full Circulation Of H-Shares: January 2021 Update

To date, 20 companies have sought approval to convert their domestic shares into H shares, 13 of which have now been given CSRC and Hong Kong...

David Blennerhassett

Trump's Executive Order on Chinese Military Companies

The White House announced an Executive Order prohibiting "US persons" from "providing capital" to a list of "China Military Cos" which has been...

Travis Lundy

AviChina (2357 HK): Buy The Modern Army Narrative

One would think the "modern army" maxim will catalyse companies such as AviChina (2357 HK). That is positive. But why subject capex to outside...

David Blennerhassett

Full Circulation Of H-Shares - July Update

This update is the latest in a series dating back to Legend's Conversion of Domestic Shares in June 2018, with the most recent addition CPPCC And...

David Blennerhassett

Price Gauge

52-week Range

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