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

PICC Property & Casualty H / Equity Bottom-Up

<p><strong><em>*Weaker 2H20 Results:</em></strong> PICC P&amp;C (2328.HK) [PICC P&amp;C] reported 2H20 earnings of CNY 7.7 bn, which declined CNY 5.5 bn or 41.7% HOH.  PICC P&amp;C reported an underwriting loss during of CNY 1.2 bn in 2H20;</p><p><strong>*<em>Credit Insurance Remains A Trouble Spot</em></strong><em>:</em> Credit insurance line reported the largest deterioration in underwriting results, posting a CNY 2.2 bn underwriting loss. This is most likely attributed to policies sold in 2019, in our view. Credit insurance also reported an astronomical combined ratio of 157.2%; and</p><p><strong>*Auto Enjoying Having No One On The Road: </strong>It’s unfortunate but the auto combined ratio did worsen 350 bp HOH to 98.3% - although still better than the 101.6% reported by that of Ping An P&amp;C (2318.HK).Although the combined ratio worsened, underwriting profits can be attributed to the social distancing measures implemented during 1H20, which has significantly reduced vehicle use - especially commercial vehicles (which tends to have higher claims). We view this as temporary, given how quickly mainland China is turning the page with COVID-19.   </p>

*Weaker 2H20 Results: PICC P&amp;C (2328.HK) [PICC P&amp;C] reported 2H20 earnings of CNY 7.7 bn, which declined CNY 5.5 bn or 41.7% HOH.  PICC P&amp;C reported an underwriting loss during of CNY 1.2 bn in 2H20;*Credit Insurance Remains A Trouble Spot: Credit insurance line reported the largest deterioration in underwriting results, posting a CNY 2.2 bn underwriting loss. This is most likely attributed to policies sold in 2019, in our view. Credit insurance also reported an astronomical combined ratio of 157.2%; and*Auto Enjoying Having No One On The Road: It’s unfortunate but the auto combined ratio did worsen 350 bp HOH to 98.3% - although still better than the 101.6% reported by that of Ping An P&amp;C (2318.HK).Although the combined ratio worsened, underwriting profits can be attributed to the social distancing measures implemented during 1H20, which has significantly reduced vehicle use - especially commercial vehicles (which tends to have higher claims). We view this as temporary, given how quickly mainland China is turning the page with COVID-19.   

<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 Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<div>
<p>Spreads narrowed sharply this week with 68 of 100 liquid spreads narrowing, 32 widening. The big winner on the week was Consumer narrowing 2.46% as every spread in the space narrowed despite five of six stocks falling in Hs (i.e. As fell even more). </p>
<p>The <a href="https://www.smartkarma.com/entities/shandong-chenming-paper-h" target="_blank" data-smartkarma-citation="entities:13775:1" rel="noopener">Shandong Chenming Paper H (1812 HK)</a> situation intruded on the H/S spreads this week as the decision to convert the B shares to Hs (described by <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> in <a href="https://www.smartkarma.com/insights/shandong-chenming-paper-1812-hk-the-h-b-convergence-trade" target="_blank" data-smartkarma-citation="insights:49247" rel="noopener">Shandong Chenming Paper (1812 HK): The H/B Convergence Trade</a> mid-week) caused ructions in the H/A spread.</p>
<p>But overall, it was a decent week. Only two sectors saw spreads widen (Energy and Utilities), both accompanied by net southbound selling in the week to Wednesday (the last day to which we have granular name-by-name data).</p>
<table class="table table-striped"><tbody>
<tr>
<td><p>Sector</p></td>
<td style="text-align: right;"><p>Last Week</p></td>
<td style="text-align: right;"><p>Previous Week</p></td>
<td style="text-align: right;"><p>3wks Ago</p></td>
<td style="text-align: right;"><p>4wks Ago</p></td>
</tr>
<tr>
<td><p>Consumer</p></td>
<td style="text-align: right;"><p>+ 2.46%</p></td>
<td style="text-align: right;"><p>+ 0.74%</p></td>
<td style="text-align: right;"><p>-  0.14%</p></td>
<td style="text-align: right;"><p>-  1.65%</p></td>
</tr>
<tr>
<td><p>Energy</p></td>
<td style="text-align: right;"><p>-  0.39%</p></td>
<td style="text-align: right;"><p>-  0.56%</p></td>
<td style="text-align: right;"><p>-  0.36%</p></td>
<td style="text-align: right;"><p>+ 0.67%</p></td>
</tr>
<tr>
<td><p>Financials &amp; Real Estate</p></td>
<td style="text-align: right;"><p>+ 0.92%</p></td>
<td style="text-align: right;"><p>+ 0.53%</p></td>
<td style="text-align: right;"><p>+ 1.19%</p></td>
<td style="text-align: right;"><p>-  1.12%</p></td>
</tr>
<tr>
<td><p>Health Care &amp; Info Tech</p></td>
<td style="text-align: right;"><p>+ 1.50%</p></td>
<td style="text-align: right;"><p>+ 2.29%</p></td>
<td style="text-align: right;"><p>-  0.54%</p></td>
<td style="text-align: right;"><p>-  2.86%</p></td>
</tr>
<tr>
<td><p>Industrials</p></td>
<td style="text-align: right;"><p>+ 1.19%</p></td>
<td style="text-align: right;"><p>+ 0.15%</p></td>
<td style="text-align: right;"><p>-  0.42%</p></td>
<td style="text-align: right;"><p>-  1.20%</p></td>
</tr>
<tr>
<td><p>Materials</p></td>
<td style="text-align: right;"><p>+ 1.42%</p></td>
<td style="text-align: right;"><p>+ 0.61%</p></td>
<td style="text-align: right;"><p>-  0.33%</p></td>
<td style="text-align: right;"><p>-  0.84%</p></td>
</tr>
<tr>
<td><p>Utilities</p></td>
<td style="text-align: right;"><p>-  0.91%</p></td>
<td style="text-align: right;"><p>-  0.87%</p></td>
<td style="text-align: right;"><p>-  1.25%</p></td>
<td style="text-align: right;"><p>-  0.14%</p></td>
</tr>
<tr>
<td><p><strong>Sector Average</strong></p></td>
<td style="text-align: right;"><p><strong>+ 0.88%</strong></p></td>
<td style="text-align: right;"><p><strong>+ 0.41%</strong></p></td>
<td style="text-align: right;"><p><strong>-  0.26%</strong></p></td>
<td style="text-align: right;"><p><strong>-  1.02%</strong></p></td>
</tr>
<tr>
<td><p><strong>All Market Average</strong></p></td>
<td style="text-align: right;"><p><strong>+ 0.96%</strong></p></td>
<td style="text-align: right;"><p><strong>+ 0.59%</strong></p></td>
<td style="text-align: right;"><p><strong>+ 0.05%</strong></p></td>
<td style="text-align: right;"><p><strong>-  1.22%</strong></p></td>
</tr>
</tbody></table>
</div><div><div></div></div><p><span>10-day cross-market spread volatility continues to fall. This past week ended at 20% down from 23% in the ten days to 12 March. This is down off highs in the low 30s a couple weeks ago, but the long-term average is still under 20%.</span></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/195/770/original/Screenshot+2021-03-20+at+8.25.25+PM.png?1616243179" class="editor-image img-responsive" data-smartkarma-image-id="195770"></figure></section><div><div>
<hr>
<h3>The H/A Spread Market</h3>
</div></div><div><p>The past week has seen H-shares come off, but spreads narrow as Hs outperformed their As pretty dramatically. Interestingly, the narrower the spread, to start with, the better the performance on the week. Ideally, spread players want to see that red line sloping downward from upper left to lower right because even a big spread movement for a 70% discount stock means very large performance is needed to catch up. </p></div><div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/195/724/original/Screenshot+2021-03-20+at+5.41.02+PM.png?1616233277" class="editor-image img-responsive" data-smartkarma-image-id="195724"></figure></section></div><div>
<p>The average discount has started tightening again and we are at 38% which is where the spread rebounded to un Q2 of 2020 after widening in the Covid-crash. </p>
<p>In 2019, spreads spent a fairly long time in the 34-36% average. </p>
</div><section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/195/728/original/Screenshot+2021-03-20+at+5.44.03+PM.png?1616233457" class="editor-image img-responsive" data-smartkarma-image-id="195728"></figure></section></section><hr><div><div><h2>Last Week's Recommendations</h2></div></div><div><ul style="list-style-type: disc;">
<li>There were 81 recommendations last week.</li>
<li>Positive alpha returned. There were 49 long spreads and 32 short spreads which gained on average 27bp against the delta-neutral gain of 0.20%, indicating spread alpha of 7bp on the week. This is back to a good trend after a horrible week the week before.</li>
<li>There are <em>nearly</em> 80 recommendations this week (turnover remains low).  </li>
</ul></div><hr><div><div><h2>Consumer Sector</h2></div></div><div>
<p>The first sector discussed is Consumer. It was a complex week there. </p>
<ul>
<li>Five out of six H-shares were down on the week. <a href="https://www.smartkarma.com/entities/tsingtao-brewery-co-ltd-h" target="_blank" data-smartkarma-citation="entities:1296:1" rel="noopener">Tsingtao Brewery Co Ltd H (168 HK)</a> was up 10.6%.</li>
<li>All six spreads narrowed with the average H-share outperformance of A at 2.46%. It was a strong week for every spread in the group. </li>
<li>Normally when this happens, there is significant net selling by Southbound. This week saw net buying of HK$270mm to Wednesday, halting four straight weeks prior of net selling. </li>
</ul>
</div><div></div><div><div><div class="content-highlight">
<p>Last week, I recommended keeping the shorts (<a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> and <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a>) and the long in <a href="https://www.smartkarma.com/entities/guangzhou-automobile-group-co-ltd" target="_blank" data-smartkarma-citation="entities:11082:1" rel="noopener">Guangzhou Automobile Group (2238 HK)</a> and adding a long on <a href="https://www.smartkarma.com/entities/hisense-home-appliances-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20107:1" rel="noopener">Hisense Home Appliances Group Co., Ltd. H (921 HK)</a> H vs A.</p>
<p>Those trades lost an average of 0.51% last week in spread terms after losing 29bp the week before, and 16bp the week before that. Despite three losing weeks in a row, positioning in the sector is still up 262bp in four weeks. </p>
<p>This week's trade recommendations are below the fold.</p>
</div></div></div><div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/195/729/original/Screenshot+2021-03-20+at+5.44.45+PM.png?1616233498" class="editor-image img-responsive" data-smartkarma-image-id="195729"></figure></section></div><div><section>For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.</section></div>


Spreads narrowed sharply this week with 68 of 100 liquid spreads narrowing, 32 widening. The big winner on the week was Consumer narrowing 2.46% as every spread in the space narrowed despite five of six stocks falling in Hs (i.e. As fell even more). 
The Shandong Chenming Paper H (1812 HK) situation intruded on the H/S spreads this week as the decision to convert the B shares to Hs (described by David Blennerhassett in Shandong Chenming Paper (1812 HK): The H/B Convergence Trade mid-week) caused ructions in the H/A spread.
But overall, it was a decent week. Only two sectors saw spreads widen (Energy and Utilities), both accompanied by net southbound selling in the week to Wednesday (the last day to which we have granular name-by-name data).


Sector
Last Week
Previous Week
3wks Ago
4wks Ago


Consumer
+ 2.46%
+ 0.74%
-  0.14%
-  1.65%


Energy
-  0.39%
-  0.56%
-  0.36%
+ 0.67%


Financials &amp; Real Estate
+ 0.92%
+ 0.53%
+ 1.19%
-  1.12%


Health Care &amp; Info Tech
+ 1.50%
+ 2.29%
-  0.54%
-  2.86%


Industrials
+ 1.19%
+ 0.15%
-  0.42%
-  1.20%


Materials
+ 1.42%
+ 0.61%
-  0.33%
-  0.84%


Utilities
-  0.91%
-  0.87%
-  1.25%
-  0.14%


Sector Average
+ 0.88%
+ 0.41%
-  0.26%
-  1.02%


All Market Average
+ 0.96%
+ 0.59%
+ 0.05%
-  1.22%


10-day cross-market spread volatility continues to fall. This past week ended at 20% down from 23% in the ten days to 12 March. This is down off highs in the low 30s a couple weeks ago, but the long-term average is still under 20%.

The H/A Spread Market
The past week has seen H-shares come off, but spreads narrow as Hs outperformed their As pretty dramatically. Interestingly, the narrower the spread, to start with, the better the performance on the week. Ideally, spread players want to see that red line sloping downward from upper left to lower right because even a big spread movement for a 70% discount stock means very large performance is needed to catch up. 
The average discount has started tightening again and we are at 38% which is where the spread rebounded to un Q2 of 2020 after widening in the Covid-crash. 
In 2019, spreads spent a fairly long time in the 34-36% average. 
Last Week's Recommendations
There were 81 recommendations last week.
Positive alpha returned. There were 49 long spreads and 32 short spreads which gained on average 27bp against the delta-neutral gain of 0.20%, indicating spread alpha of 7bp on the week. This is back to a good trend after a horrible week the week before.
There are nearly 80 recommendations this week (turnover remains low).  
Consumer Sector
The first sector discussed is Consumer. It was a complex week there. 

Five out of six H-shares were down on the week. Tsingtao Brewery Co Ltd H (168 HK) was up 10.6%.
All six spreads narrowed with the average H-share outperformance of A at 2.46%. It was a strong week for every spread in the group. 
Normally when this happens, there is significant net selling by Southbound. This week saw net buying of HK$270mm to Wednesday, halting four straight weeks prior of net selling. 


Last week, I recommended keeping the shorts (BYD (1211 HK) and Fuyao Glass Industry Group (3606 HK)) and the long in Guangzhou Automobile Group (2238 HK) and adding a long on Hisense Home Appliances Group Co., Ltd. H (921 HK) H vs A.
Those trades lost an average of 0.51% last week in spread terms after losing 29bp the week before, and 16bp the week before that. Despite three losing weeks in a row, positioning in the sector is still up 262bp in four weeks. 
This week's trade recommendations are below the fold.
For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.

Quiddity Weekly H/A: Consumer Strong, Spreads Narrowing Masks A-Share Weakness

<div><p>Spreads generally narrowed this week with 63 of 100 liquid spreads narrowing, 37 widening. The big winner on the week was Health Care and Tech narrowing 2.3%. One tech name <a href="https://www.smartkarma.com/entities/flat-glass-group-ltd" target="_blank" data-smartkarma-citation="entities:1108:1" rel="noopener">Flat Glass (6865 HK)</a> moved 10+% while several healthcare names saw spreads narrow 3-7% each, all happening in a somewhat lackluster week for outright performance. Overall, five of seven sectors represented saw spreads narrow.</p></div><div><table class="table table-striped"><tbody>
<tr>
<td><p>Sector</p></td>
<td style="text-align: right;"><p>Last Week</p></td>
<td style="text-align: right;"><p>Previous Week</p></td>
<td style="text-align: right;"><p>3wks Ago</p></td>
<td style="text-align: right;"><p>4wks Ago</p></td>
</tr>
<tr>
<td><p>Consumer</p></td>
<td style="text-align: right;"><p>+ 0.74%</p></td>
<td style="text-align: right;"><p>-  0.14%</p></td>
<td style="text-align: right;"><p>-  1.65%</p></td>
<td style="text-align: right;"><p>-  1.20%</p></td>
</tr>
<tr>
<td><p>Energy</p></td>
<td style="text-align: right;"><p>-  0.56%</p></td>
<td style="text-align: right;"><p>-  0.36%</p></td>
<td style="text-align: right;"><p>+ 0.67%</p></td>
<td style="text-align: right;"><p>+ 1.43%</p></td>
</tr>
<tr>
<td><p>Financials &amp; Real Estate</p></td>
<td style="text-align: right;"><p>+ 0.53%</p></td>
<td style="text-align: right;"><p>+ 1.19%</p></td>
<td style="text-align: right;"><p>-  1.12%</p></td>
<td style="text-align: right;"><p>+ 0.10%</p></td>
</tr>
<tr>
<td><p>Health Care &amp; Info Tech</p></td>
<td style="text-align: right;"><p>+ 2.29%</p></td>
<td style="text-align: right;"><p>-  0.54%</p></td>
<td style="text-align: right;"><p>-  2.86%</p></td>
<td style="text-align: right;"><p>+ 1.45%</p></td>
</tr>
<tr>
<td><p>Industrials</p></td>
<td style="text-align: right;"><p>+ 0.15%</p></td>
<td style="text-align: right;"><p>-  0.42%</p></td>
<td style="text-align: right;"><p>-  1.20%</p></td>
<td style="text-align: right;"><p>+ 0.26%</p></td>
</tr>
<tr>
<td><p>Materials</p></td>
<td style="text-align: right;"><p>+ 0.61%</p></td>
<td style="text-align: right;"><p>-  0.33%</p></td>
<td style="text-align: right;"><p>-  0.84%</p></td>
<td style="text-align: right;"><p>+ 3.08%</p></td>
</tr>
<tr>
<td><p>Utilities</p></td>
<td style="text-align: right;"><p>-  0.87%</p></td>
<td style="text-align: right;"><p>-  1.25%</p></td>
<td style="text-align: right;"><p>-  0.14%</p></td>
<td style="text-align: right;"><p>+ 0.99%</p></td>
</tr>
<tr>
<td><p>Sector Average</p></td>
<td style="text-align: right;"><p>+ 0.41%</p></td>
<td style="text-align: right;"><p>-  0.26%</p></td>
<td style="text-align: right;"><p>-  1.02%</p></td>
<td style="text-align: right;"><p>+ 0.87%</p></td>
</tr>
<tr>
<td><p>All Market Average</p></td>
<td style="text-align: right;"><p>+ 0.59%</p></td>
<td style="text-align: right;"><p>+ 0.05%</p></td>
<td style="text-align: right;"><p>-  1.22%</p></td>
<td style="text-align: right;"><p>+ 0.76%</p></td>
</tr>
</tbody></table></div><div><div></div></div><p>10-day cross-market spread volatility continues to be somewhat high at 23% annualised. This is down off highs in the low 30s a couple weeks ago, but the long-term average is still just under 20%.</p><div><div>
<hr>
<h3>The H/A Spread Market</h3>
</div></div><div><p>The past week has seen H-shares come off sharply and spreads widen reasonably dramatically. </p></div><section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/200/original/Screenshot+2021-03-14+at+9.05.58+AM.png?1615683976" class="editor-image img-responsive" data-smartkarma-image-id="194200"></figure><p></p></section></section><p>The average discount appears not to want to tighten, still. The average spread has kept at around 40.0% plus or minus a small bit for the past eight weeks or so (despite that illiquidity-bump around LNY). This week we narrowed just inside 40%.</p><section><section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/201/original/Screenshot+2021-03-14+at+9.08.22+AM.png?1615684116" class="editor-image img-responsive" data-smartkarma-image-id="194201"></figure></section><p></p></section></section><hr><div><div><h2>Last Week's Recommendations</h2></div></div><div><ul style="list-style-type: disc;">
<li>There were 80 recommendations last week.</li>
<li>This is the second week of negative alpha for the portfolio strategy in as many weeks. The average trade loss 22bp and only 31 of 80 trades recommended was up on the week. Shorts were particularly to blame as spread compression among the names in the 10-25% discount range was much wider than in the 35-60% discount range.</li>
<li>There are <em>nearly</em> 80 recommendations this week (turnover remains low).  </li>
</ul></div><hr><div><div><h2>Consumer Sector</h2></div></div><div><p>The first sector discussed is Consumer, where most H-shares fell on the week. Shares averaged down 1.4% this past week after gaining 0.6% the week before. The two gainers from the prior week both fell this week.</p></div><div><ul style="list-style-type: disc;">
<li>Spreads were less tame, but momentum continues to be strong.</li>
<li>
<a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> ended the week down 2% despite good production numbers out at the end of the week prior. BYD is down 28% in four weeks. </li>
<li>
<a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> continued to fall and the spread continued to widen. It is now 13% wider over 4 weeks, but is still the second-narrowest spread in the sector at 21% vs the average spread in the sector at -30%.</li>
<li>Southbound was a net seller of nearly HK$611mm after selling nearly that amount the prior week and HK$2bn in the two weeks before that. <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a> saw continued net buying by southbound, which added about 60bp of H-share float ownership on the week through Wednesday.</li>
</ul></div><div><div><div class="content-highlight">
<p>Last week, I recommended staying short <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, and <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> H vs A, unwinding the <a href="https://www.smartkarma.com/entities/hisense-home-appliances-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20107:1" rel="noopener">Hisense Home Appliances Group Co., Ltd. H (921 HK)</a> short, and replacing the <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a> long with <a href="https://www.smartkarma.com/entities/guangzhou-automobile-group-co-ltd" target="_blank" data-smartkarma-citation="entities:11082:1" rel="noopener">Guangzhou Automobile Group (2238 HK)</a>. </p>
<p>Those trades lost an average of 0.29% last week in spread terms after losing 16bp the week before, but gaining 3.58% the week before that. </p>
</div></div></div><div>
<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/249/original/Screenshot+2021-03-14+at+11.50.08+AM.png?1615693825" class="editor-image img-responsive" data-smartkarma-image-id="194249"></figure><p></p></section></section><section class="figure">For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.</section>
</div>

Spreads generally narrowed this week with 63 of 100 liquid spreads narrowing, 37 widening. The big winner on the week was Health Care and Tech narrowing 2.3%. One tech name Flat Glass (6865 HK) moved 10+% while several healthcare names saw spreads narrow 3-7% each, all happening in a somewhat lackluster week for outright performance. Overall, five of seven sectors represented saw spreads narrow.

Sector
Last Week
Previous Week
3wks Ago
4wks Ago


Consumer
+ 0.74%
-  0.14%
-  1.65%
-  1.20%


Energy
-  0.56%
-  0.36%
+ 0.67%
+ 1.43%


Financials &amp; Real Estate
+ 0.53%
+ 1.19%
-  1.12%
+ 0.10%


Health Care &amp; Info Tech
+ 2.29%
-  0.54%
-  2.86%
+ 1.45%


Industrials
+ 0.15%
-  0.42%
-  1.20%
+ 0.26%


Materials
+ 0.61%
-  0.33%
-  0.84%
+ 3.08%


Utilities
-  0.87%
-  1.25%
-  0.14%
+ 0.99%


Sector Average
+ 0.41%
-  0.26%
-  1.02%
+ 0.87%


All Market Average
+ 0.59%
+ 0.05%
-  1.22%
+ 0.76%

10-day cross-market spread volatility continues to be somewhat high at 23% annualised. This is down off highs in the low 30s a couple weeks ago, but the long-term average is still just under 20%.

The H/A Spread Market
The past week has seen H-shares come off sharply and spreads widen reasonably dramatically. The average discount appears not to want to tighten, still. The average spread has kept at around 40.0% plus or minus a small bit for the past eight weeks or so (despite that illiquidity-bump around LNY). This week we narrowed just inside 40%.Last Week's Recommendations
There were 80 recommendations last week.
This is the second week of negative alpha for the portfolio strategy in as many weeks. The average trade loss 22bp and only 31 of 80 trades recommended was up on the week. Shorts were particularly to blame as spread compression among the names in the 10-25% discount range was much wider than in the 35-60% discount range.
There are nearly 80 recommendations this week (turnover remains low).  
Consumer SectorThe first sector discussed is Consumer, where most H-shares fell on the week. Shares averaged down 1.4% this past week after gaining 0.6% the week before. The two gainers from the prior week both fell this week.
Spreads were less tame, but momentum continues to be strong.

BYD (1211 HK) ended the week down 2% despite good production numbers out at the end of the week prior. BYD is down 28% in four weeks. 

Fuyao Glass Industry Group (3606 HK) continued to fall and the spread continued to widen. It is now 13% wider over 4 weeks, but is still the second-narrowest spread in the sector at 21% vs the average spread in the sector at -30%.
Southbound was a net seller of nearly HK$611mm after selling nearly that amount the prior week and HK$2bn in the two weeks before that. Great Wall Motor (2333 HK) saw continued net buying by southbound, which added about 60bp of H-share float ownership on the week through Wednesday.

Last week, I recommended staying short BYD (1211 HK), and Fuyao Glass Industry Group (3606 HK) H vs A, unwinding the Hisense Home Appliances Group Co., Ltd. H (921 HK) short, and replacing the Great Wall Motor (2333 HK) long with Guangzhou Automobile Group (2238 HK). 
Those trades lost an average of 0.29% last week in spread terms after losing 16bp the week before, but gaining 3.58% the week before that. 

For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.


Quiddity Weekly H/A: Energy Up, Spreads Wider, Pharmas Down Spreads Narrower

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<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/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <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>, <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> and <a href="https://www.smartkarma.com/entities/gcl-poly-energy-holdings-limited" target="_blank" data-smartkarma-citation="entities:3708:1" rel="noopener">Gcl Poly Energy Holdings Limited (3800 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/china-pacific-insurance-group" target="_blank" data-smartkarma-citation="entities:6177:1" rel="noopener">China Pacific Insurance (2601 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/bank-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:656:1" rel="noopener">Bank Of China Ltd (H) (3988 HK)</a> and <a href="https://www.smartkarma.com/entities/kingdee-international-sftwr" target="_blank" data-smartkarma-citation="entities:37:1" rel="noopener">Kingdee International Software (268 HK)</a>. Shorts increased in almost all sectors, led by Financials, Communication Services, Consumer Discretionary, Health Care and Information Technology.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/cyberagent-inc" target="_blank" data-smartkarma-citation="entities:8197:1" rel="noopener">CyberAgent Inc (4751 JP)</a>, <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/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/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a>, <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-retail-fund-investment" target="_blank" data-smartkarma-citation="entities:735:1" rel="noopener">Japan Retail Fund Investment (8953 JP)</a> and <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>. Shorts increased in almost all sectors led by Industrials, Materials, Information Technology, Financials, and Communication Services, while decreasing only in Real Estate.</p></div><div><p>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/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 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> and <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/iljin-materials-co-ltd" target="_blank" data-smartkarma-citation="entities:7709:1" rel="noopener">Iljin Materials (020150 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>.</p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <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/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 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/macronix-international" target="_blank" data-smartkarma-citation="entities:3247:1" rel="noopener">Macronix International (2337 TT)</a> while shorts were covered on <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/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/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> and <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>. </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), Kuaishou Technology (1024 HK), China Merchants Bank H (3968 HK), JD.com Inc. (9618 HK) and Gcl Poly Energy Holdings Limited (3800 HK) while there was short covering on Alibaba Group (9988 HK), China Pacific Insurance (2601 HK), Xiaomi Corp (1810 HK), Bank Of China Ltd (H) (3988 HK) and Kingdee International Software (268 HK). Shorts increased in almost all sectors, led by Financials, Communication Services, Consumer Discretionary, Health Care and Information Technology.In Japan, stocks that saw the most shorts were CyberAgent Inc (4751 JP), Showa Denko K.K. (4004 JP), Monex Group Inc (8698 JP) and Canon Inc (7751 JP) while shorts decreased on Ryohin Keikaku (7453 JP), Ricoh Company Ltd (7752 JP), Japan Retail Fund Investment (8953 JP) and Toshiba Corp (6502 JP). Shorts increased in almost all sectors led by Industrials, Materials, Information Technology, Financials, and Communication Services, while decreasing only in Real Estate.In Korea, short increased on Samsung Electronics (005930 KS), Samsung SDI (006400 KS), Naver Corp (035420 KS) and Celltrion Inc (068270 KS) while shorts decreased on Iljin Materials (020150 KS) and Doosan Infracore (042670 KS).Stocks in Taiwan that saw the highest increase in shorts were United Microelectronics Corp (2303 TT), Pegatron Corp (4938 TT), TSMC (2330 TT) and Macronix International (2337 TT) while shorts were covered on AU Optronics (2409 TT), Evergreen Marine Corp (2603 TT), Largan Precision (3008 TT) and Fitipower Integrated Tech (4961 TT). 

Asia Short Interest: Kuaishou, CMB, JD, Kingdee, Xiaomi, Monex, Toshiba, Samsung, Naver, UMC, Largan

China

China Pacific Insurance (Group) Company, Ltd. is an integrated insurance services provider. The Company offers life and property insurance products through its subsidiaries.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
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China Pacific Insurance (2601 HK)

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