SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/101/421/original/SunpowerSGX.png?1570598879" class="editor-image img-responsive" data-smartkarma-image-id="101421"></figure>
<div class="content-caption">Sunpower</div>
Engineer Frank Ma strives to live a life in 3D - the three Ds of diligence, determination and discipline, that is.&nbsp; For the Co-Founder and Executive Director of SGX-listed environmental protection solutions provider Sunpower Group Ltd, these defining qualities are touchstones. "Throughout my life, I've always set targets, and worked hard to achieve those goals," said the graduate of Nanjing Chemical Engineering Senior College, who also holds a Master's degree in Engineering Management from the University of Shanghai for Science and Technology. Ma's tenacious spirit was never more obvious than when he taught himself to speak English more than three decades ago. "During my university days, my English was really bad. After graduation, I decided to do something about it," he recalled. Having no teacher, and armed only with a dictionary and a voice recorder, Ma began memorising and reciting 20 English words every day for a year to build up his vocabulary. Today, his command of and fluency in the language belies that self-taught journey. To be sure, Ma's focus and perseverance have stood him in good stead in growing Sunpower, which he founded in 1997 together with his university classmate, Executive Chairman and Chief Executive Officer Guo Hongxin. In the late 90s, China began developing its petrochemical industry through oil and gas enterprises like China Petroleum &amp; Chemical Corporation, or Sinopec. But the need to import equipment - which resulted in long delivery lead times and escalating costs - was a serious bugbear. "We were able to fill the gap in the market by supplying Sinopec with equipment, like pipe supports, that were made with local technology and know-how. This helped them save time and money," he said. That was the milestone that marked the establishment of Sunpower's foundation business - Manufacturing &amp; Services (M&amp;S). This segment makes customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries, ranging from chemicals and petrochemicals to pharmaceuticals and metallurgy.&nbsp; Sunpower has served over 1,500 customers, including top-notch global corporations in more than 30 countries to-date, and about 70% are repeat clients.&nbsp; From its initial business of pipe supports, the Group went on to develop high-efficiency heat exchangers and pressure vessels, as well as heat pipes and heat pipe exchangers for recovery of waste heat in petchem, steel and chemical projects. Much later, it developed proprietary flare and flare gas recovery systems, used to recover petchem by-products from flare gas generated in a refinery during production.
&nbsp;
China's Smog Woes But the petrochemical sector has its downsides, including capacity limitations and a cyclical nature. "We realised we needed to diversify, and expand our technology to other sectors such as pollution control," Ma noted. China has increasingly suffered the scourge of polluted air since the country began industrialising, with inefficient, coal-fired boilers in industrial parks identified as one of the biggest culprits contributing to the heavy smog that regularly blankets its skies.&nbsp; The window of opportunity for Sunpower to break into this market finally widened in 2015, when the Chinese government stepped up efforts to impose stringent environmental protection laws - including compulsory shuttering of small boilers and promotion of clean coal combustion - to improve the nation's air quality. In 2016, Sunpower repositioned itself as an environmental protection services provider through its Green Investments (GI) business. The unit invests in, develops and operates centralised plants to supply steam, heat and electricity on an exclusive basis in industrial parks, replacing existing, inefficient coal-fired plants.&nbsp; While its technology cuts the amount of coal used in power generation, it also supplements with alternative feedstock, such as sludge. Using its proprietary energy-saving and long-distance steam distribution pipeline technologies, energy- and time-efficient delivery to customers is ensured. Sunpower is building a sizeable portfolio of such GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements. This unit - the Group's value creator and growth driver - boasts a fully integrated business model, backed by its own design institute, in-house manufacturing and services solutions, as well as proprietary technologies. With more than 400 researchers and design engineers, the Group owns 154 patents, including 60 invention patents. It has also taken the lead, or has participated, in the drafting of five engineering-related national standards that have become benchmarks for the rest of the industry.&nbsp; The long-term growth potential of its GI business is secured by a robust pipeline of projects in different stages of evaluation, with total value pegged at more than RMB3.2 billion. As at August 2019, eight projects are in operation, while another five are either under construction or in the design phase.&nbsp; Although the GI unit is in early stages of development and still ramping up, it has already contributed significantly to the Group's underlying operating cashflow for the first half of 2019, which has more than doubled year-over-year. GI revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) in 1H 2019 also roughly tripled from the previous year, accounting for more than 36% and 65% of group revenue and EBITDA respectively.&nbsp; For Ma, the GI unit is akin to an expressway toll booth. "Steam is a non-discretionary input for our clients, and we're exclusive suppliers for the industrial parks we operate in. That gives us captive customers and the ability to obtain advance payments from them," he said. "In that sense, we're like toll-keepers, collecting cash regularly." This first-mover advantage, combined with its technological expertise and strong track record, gives Sunpower a significant competitive edge, he noted. "Our stable and growing M&amp;S business complements our GI unit by efficiently controlling the cost of construction and eliminating project delays. This combination provides synergies that sets Sunpower apart from less-integrated firms."
&nbsp;
Targeting Clear Skies In 2019, the Group was recognised as one of the Best Managed Companies in China by Deloitte Touche Tohmatsu, the largest of the "Big Four" accounting and audit firms, in the first year the award was introduced to the country.&nbsp; Listed on Singapore Exchange since 2005, Sunpower has a current market capitalisation of about S$365 million. In the 2019 year-to-date, the stock has generated a total return of 39.1%, outperforming total returns of 6.5% and 8.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively. Looking ahead, prospects are bright, with environmental protection and pollution control continuing to play increasingly pivotal roles in China's national policies. "There's still much to be done to meet the central government's pollution reduction targets, and this offers enormous opportunity for us," Ma added. A case in point is the Ministry of Ecology and Environment's crackdown on Shandong provincial officials for missing air quality targets earlier this year.&nbsp;"Such stringent enforcement by top-level officials will drive the long-term prospects of China's environmental protection industry, in particular, the anti-smog services sector that our GI unit is targeting." To boost its GI operations, Sunpower plans to invest RMB2.5 billion of equity in green assets by 2021, compared to its equity investment and commitment of RMB1.6 billion as at mid-2019.&nbsp; In terms of capacity, which includes plants under construction, the Group aims to grow its current gross annualised steam capacity of 21.5 million tons to 30 million tons, and current gross annualised electricity generation capacity of 2.1 million megawatt hours to 3.5 million megawatt hours.&nbsp; This expansion will be funded internally and via capital from its convertible bond tranches. In 2017 and 2018, two strategic private equity investors - DCP Capital Partners and CDH China Management - invested in Sunpower by subscribing for its convertible bonds.&nbsp; The Group's mergers and acquisitions (M&amp;A) strategy targets projects that serve a diversified customer base in stable, domestic-oriented, and cashflow-generative industries, such as textiles, printing and dyeing, food and beverage.&nbsp; "We're also interested in brownfield projects that can contribute immediately to revenue and earnings, and where we can use our technology to further improve the acquired company's operating and financial performance," Ma noted.
&nbsp;
Promising Potential Currently, the Group remains focused on GI prospects within China. "The market potential is huge, and that's our priority," he said.&nbsp;"The challenge is choosing the right target that will guarantee success according to our financial objectives, and that's where careful analysis and due diligence come in." A self-confessed "control freak", Ma is all about drilling down into the specifics. "I'm a very detailed person, and I always try to prepare, forecast and plan as much as I can," he said with a grin. In this regard, managing a business will always be his first love. "My passion lies in industry - developing strategy, overcoming challenges, driving innovation, and turning that innovation into sustainable cashflows and profits." His fervour for enterprise has its roots in China's industrialisation and urbanisation drive, which kicked off as early as the 1930s - a period in the country's history marred by civil war and political strife. "Back then, many enterprise owners believed manufacturing would form a base for the nation's development, and the setting up of industries would build the fundamentals of our economy, and thereby save our country," Ma said. That belief has also laid the foundation for China's speedy transformation into an industrial powerhouse during the turn of the century.&nbsp;"That's why I have chosen to stay in industry, even though there have been opportunities to break away and do something different," he added. When the 53-year-old is not planning and strategising for the future, he's enjoying the outdoors. "I love nature, and enjoy climbing mountains all over the country. That's why I'm passionate about this business - I want to give China back her blue skies," he added. The wine aficionado also believes in working hard and keeping things simple, a mantra he often shares with his son, 25.&nbsp; "You need to add value to yourself and contribute to society. At the same time, it's important to strike a good work-life balance. After all, life is meant to be enjoyed," he smiled. "And just like good wine, life is beautiful, deep, and full of complexity. Both should be savoured to the last drop."
&nbsp;
Sunpower Group Ltd
Founded in 1997, Sunpower&nbsp;is a China-based environmental protection solutions company specialising in proprietary energy-saving and clean power technologies, with a strong focus on anti-pollution investment projects. The Group operates two segments - Manufacturing &amp; Services (M&amp;S)&nbsp; and Green Investments (GI). The first segment develops customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries. The second segment - GI - focuses on the investment, development and operation of centralised heat, steam and electricity generation plants that replace existing, inefficient coal-fired plants in industrial parks. The Group is building a sizeable portfolio of GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements.
The company website is:&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link8" target="_blank" rel="noopener">en.sunpower.com.cn</a>. Click&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link9" target="_blank" rel="noopener">here</a>&nbsp;for the company's StockFacts page. For the six months ended 30 June 2019 financial results, click&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link10" target="_blank" rel="noopener">here</a>. For SGX's 10 in 10 report on Sunpower Group Ltd, click&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link11" target="_blank" rel="noopener">here</a>.
&nbsp;
About&nbsp;kopi-C: the Company brew
Text: Jennifer LH Tan Photo: Company file
kopi-C&nbsp;&nbsp;is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations. For previous editions of&nbsp;kopi-C: the Company brew,&nbsp;please click&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link12" target="_blank" rel="noopener">here</a>. &nbsp;
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;<a href="mailto:jennifer.tan@sgx.com" target="_blank" rel="noopener">jennifer.tan@sgx.com</a>


Sunpower
Engineer Frank Ma strives to live a life in 3D - the three Ds of diligence, determination and discipline, that is.&nbsp;  For the Co-Founder and Executive Director of SGX-listed environmental protection solutions provider Sunpower Group Ltd, these defining qualities are touchstones.  "Throughout my life, I've always set targets, and worked hard to achieve those goals," said the graduate of Nanjing Chemical Engineering Senior College, who also holds a Master's degree in Engineering Management from the University of Shanghai for Science and Technology.  Ma's tenacious spirit was never more obvious than when he taught himself to speak English more than three decades ago. "During my university days, my English was really bad. After graduation, I decided to do something about it," he recalled.  Having no teacher, and armed only with a dictionary and a voice recorder, Ma began memorising and reciting 20 English words every day for a year to build up his vocabulary. Today, his command of and fluency in the language belies that self-taught journey.  To be sure, Ma's focus and perseverance have stood him in good stead in growing Sunpower, which he founded in 1997 together with his university classmate, Executive Chairman and Chief Executive Officer Guo Hongxin.  In the late 90s, China began developing its petrochemical industry through oil and gas enterprises like China Petroleum &amp; Chemical Corporation, or Sinopec. But the need to import equipment - which resulted in long delivery lead times and escalating costs - was a serious bugbear.  "We were able to fill the gap in the market by supplying Sinopec with equipment, like pipe supports, that were made with local technology and know-how. This helped them save time and money," he said.  That was the milestone that marked the establishment of Sunpower's foundation business - Manufacturing &amp; Services (M&amp;S). This segment makes customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries, ranging from chemicals and petrochemicals to pharmaceuticals and metallurgy.&nbsp;  Sunpower has served over 1,500 customers, including top-notch global corporations in more than 30 countries to-date, and about 70% are repeat clients.&nbsp;  From its initial business of pipe supports, the Group went on to develop high-efficiency heat exchangers and pressure vessels, as well as heat pipes and heat pipe exchangers for recovery of waste heat in petchem, steel and chemical projects. Much later, it developed proprietary flare and flare gas recovery systems, used to recover petchem by-products from flare gas generated in a refinery during production.
&nbsp;
China's Smog Woes  But the petrochemical sector has its downsides, including capacity limitations and a cyclical nature. "We realised we needed to diversify, and expand our technology to other sectors such as pollution control," Ma noted.  China has increasingly suffered the scourge of polluted air since the country began industrialising, with inefficient, coal-fired boilers in industrial parks identified as one of the biggest culprits contributing to the heavy smog that regularly blankets its skies.&nbsp;  The window of opportunity for Sunpower to break into this market finally widened in 2015, when the Chinese government stepped up efforts to impose stringent environmental protection laws - including compulsory shuttering of small boilers and promotion of clean coal combustion - to improve the nation's air quality.  In 2016, Sunpower repositioned itself as an environmental protection services provider through its Green Investments (GI) business. The unit invests in, develops and operates centralised plants to supply steam, heat and electricity on an exclusive basis in industrial parks, replacing existing, inefficient coal-fired plants.&nbsp;  While its technology cuts the amount of coal used in power generation, it also supplements with alternative feedstock, such as sludge. Using its proprietary energy-saving and long-distance steam distribution pipeline technologies, energy- and time-efficient delivery to customers is ensured.  Sunpower is building a sizeable portfolio of such GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements.  This unit - the Group's value creator and growth driver - boasts a fully integrated business model, backed by its own design institute, in-house manufacturing and services solutions, as well as proprietary technologies.  With more than 400 researchers and design engineers, the Group owns 154 patents, including 60 invention patents. It has also taken the lead, or has participated, in the drafting of five engineering-related national standards that have become benchmarks for the rest of the industry.&nbsp;  The long-term growth potential of its GI business is secured by a robust pipeline of projects in different stages of evaluation, with total value pegged at more than RMB3.2 billion. As at August 2019, eight projects are in operation, while another five are either under construction or in the design phase.&nbsp;  Although the GI unit is in early stages of development and still ramping up, it has already contributed significantly to the Group's underlying operating cashflow for the first half of 2019, which has more than doubled year-over-year. GI revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) in 1H 2019 also roughly tripled from the previous year, accounting for more than 36% and 65% of group revenue and EBITDA respectively.&nbsp;  For Ma, the GI unit is akin to an expressway toll booth. "Steam is a non-discretionary input for our clients, and we're exclusive suppliers for the industrial parks we operate in. That gives us captive customers and the ability to obtain advance payments from them," he said.  "In that sense, we're like toll-keepers, collecting cash regularly."  This first-mover advantage, combined with its technological expertise and strong track record, gives Sunpower a significant competitive edge, he noted.  "Our stable and growing M&amp;S business complements our GI unit by efficiently controlling the cost of construction and eliminating project delays. This combination provides synergies that sets Sunpower apart from less-integrated firms."
&nbsp;
Targeting Clear Skies  In 2019, the Group was recognised as one of the Best Managed Companies in China by Deloitte Touche Tohmatsu, the largest of the "Big Four" accounting and audit firms, in the first year the award was introduced to the country.&nbsp;  Listed on Singapore Exchange since 2005, Sunpower has a current market capitalisation of about S$365 million. In the 2019 year-to-date, the stock has generated a total return of 39.1%, outperforming total returns of 6.5% and 8.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively.  Looking ahead, prospects are bright, with environmental protection and pollution control continuing to play increasingly pivotal roles in China's national policies. "There's still much to be done to meet the central government's pollution reduction targets, and this offers enormous opportunity for us," Ma added.  A case in point is the Ministry of Ecology and Environment's crackdown on Shandong provincial officials for missing air quality targets earlier this year.&nbsp;"Such stringent enforcement by top-level officials will drive the long-term prospects of China's environmental protection industry, in particular, the anti-smog services sector that our GI unit is targeting."  To boost its GI operations, Sunpower plans to invest RMB2.5 billion of equity in green assets by 2021, compared to its equity investment and commitment of RMB1.6 billion as at mid-2019.&nbsp;  In terms of capacity, which includes plants under construction, the Group aims to grow its current gross annualised steam capacity of 21.5 million tons to 30 million tons, and current gross annualised electricity generation capacity of 2.1 million megawatt hours to 3.5 million megawatt hours.&nbsp;  This expansion will be funded internally and via capital from its convertible bond tranches. In 2017 and 2018, two strategic private equity investors - DCP Capital Partners and CDH China Management - invested in Sunpower by subscribing for its convertible bonds.&nbsp;  The Group's mergers and acquisitions (M&amp;A) strategy targets projects that serve a diversified customer base in stable, domestic-oriented, and cashflow-generative industries, such as textiles, printing and dyeing, food and beverage.&nbsp;  "We're also interested in brownfield projects that can contribute immediately to revenue and earnings, and where we can use our technology to further improve the acquired company's operating and financial performance," Ma noted.
&nbsp;
Promising Potential  Currently, the Group remains focused on GI prospects within China. "The market potential is huge, and that's our priority," he said.&nbsp;"The challenge is choosing the right target that will guarantee success according to our financial objectives, and that's where careful analysis and due diligence come in."  A self-confessed "control freak", Ma is all about drilling down into the specifics. "I'm a very detailed person, and I always try to prepare, forecast and plan as much as I can," he said with a grin.  In this regard, managing a business will always be his first love. "My passion lies in industry - developing strategy, overcoming challenges, driving innovation, and turning that innovation into sustainable cashflows and profits."  His fervour for enterprise has its roots in China's industrialisation and urbanisation drive, which kicked off as early as the 1930s - a period in the country's history marred by civil war and political strife.  "Back then, many enterprise owners believed manufacturing would form a base for the nation's development, and the setting up of industries would build the fundamentals of our economy, and thereby save our country," Ma said.  That belief has also laid the foundation for China's speedy transformation into an industrial powerhouse during the turn of the century.&nbsp;"That's why I have chosen to stay in industry, even though there have been opportunities to break away and do something different," he added.  When the 53-year-old is not planning and strategising for the future, he's enjoying the outdoors.  "I love nature, and enjoy climbing mountains all over the country. That's why I'm passionate about this business - I want to give China back her blue skies," he added.  The wine aficionado also believes in working hard and keeping things simple, a mantra he often shares with his son, 25.&nbsp;  "You need to add value to yourself and contribute to society. At the same time, it's important to strike a good work-life balance. After all, life is meant to be enjoyed," he smiled.  "And just like good wine, life is beautiful, deep, and full of complexity. Both should be savoured to the last drop."
&nbsp;
Sunpower Group Ltd
Founded in 1997, Sunpower&nbsp;is a China-based environmental protection solutions company specialising in proprietary energy-saving and clean power technologies, with a strong focus on anti-pollution investment projects. The Group operates two segments - Manufacturing &amp; Services (M&amp;S)&nbsp; and Green Investments (GI). The first segment develops customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries. The second segment - GI - focuses on the investment, development and operation of centralised heat, steam and electricity generation plants that replace existing, inefficient coal-fired plants in industrial parks. The Group is building a sizeable portfolio of GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements.
The company website is:&nbsp;en.sunpower.com.cn.  Click&nbsp;here&nbsp;for the company's StockFacts page.  For the six months ended 30 June 2019 financial results, click&nbsp;here.  For SGX's 10 in 10 report on Sunpower Group Ltd, click&nbsp;here.
&nbsp;
About&nbsp;kopi-C: the Company brew
Text: Jennifer LH Tan Photo: Company file
kopi-C&nbsp;&nbsp;is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  For previous editions of&nbsp;kopi-C: the Company brew,&nbsp;please click&nbsp;here. &nbsp;
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;jennifer.tan@sgx.com

Sunpower Eyes Green Assets in Battle for Blue Skies

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

Since we published our earlier Insight, the HSCEI dividends futures expiring in December 2020 have sold-off around 7% mainly driven by a 4% weakening in the CNYHKD FX rate and a 7% drop in the HSCEI index.In this Insight, we update our estimates taking into account the HSCEI constituents half yearly results and the upcoming index rebalances and conclude that the dividend futures are still pricing in a degree of pessimism. The risk/reward is skewed in favour of buying the 2020 dividend futures at these levels in anticipation of a reversion back towards our estimated fair value derived from fundamentals.

Since we published our earlier Insight, the HSCEI dividends futures expiring in December 2020 have sold-off around 7% mainly driven by a 4% weakening in the CNYHKD FX rate and a 7% drop in the HSCEI index.In this Insight, we update our estimates taking into account the HSCEI constituents half yearly results and the upcoming index rebalances and conclude that the dividend futures are still pricing in a degree of pessimism. The risk/reward is skewed in favour of buying the 2020 dividend futures at these levels in anticipation of a reversion back towards our estimated fair value derived from fundamentals.

Quantitative Analysis

Dividend futures give investors exposure to a specific cash flow stream of a company, unlike stocks where investors are exposed to a continuous dividend stream. Dividend futures have started to trade on many exchanges around the world - in Asia, the main indices that have exchange traded dividend futures are the Nikkei225, Hang Seng Index, and the Hang Seng China Enterprises Index.
In this piece, we look at what is a dividend futures contract, the factors affecting the HSCEI dividend futures value, opportunities in the HSCEI dividend futures market based on current market conditions, and see a 5.7% upside in the HSCEI 2020 dividend futures contract.

Dividend futures give investors exposure to a specific cash flow stream of a company, unlike stocks where investors are exposed to a continuous dividend stream. Dividend futures have started to trade on many exchanges around the world - in Asia, the main indices that have exchange traded dividend futures are the Nikkei225, Hang Seng Index, and the Hang Seng China Enterprises Index.
In this piece, we look at what is a dividend futures contract, the factors affecting the HSCEI dividend futures value, opportunities in the HSCEI dividend futures market based on current market conditions, and see a 5.7% upside in the HSCEI 2020 dividend futures contract.

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to help our investors understand the flow of northbound trades via the Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas. 
We split the stocks eligible for the Shanghai/Shenzhen Connect trade into two groups: stocks with a market capitalization above USD 5 billion, as well as between USD 1 billion and USD 5 billion. 
In this insight, we will highlight the consecutive two weeks of inflow into the A-share market. We highlight the inflow reversal into <a href="https://www.smartkarma.com/entities/1553" target="_blank" data-smartkarma-citation="entities:1553:1">Kweichow Moutai Co Ltd A (600519 CH),</a> a leading premium hard liquor manufacturer, as well as <a href="https://www.smartkarma.com/entities/tsingtao-brewery-co-ltd-a" target="_blank" data-smartkarma-citation="entities:846:1">Tsingtao Brewery Co Ltd A (600600 CH)</a>.

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to help our investors understand the flow of northbound trades via the Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas. 
We split the stocks eligible for the Shanghai/Shenzhen Connect trade into two groups: stocks with a market capitalization above USD 5 billion, as well as between USD 1 billion and USD 5 billion. 
In this insight, we will highlight the consecutive two weeks of inflow into the A-share market. We highlight the inflow reversal into Kweichow Moutai Co Ltd A (600519 CH), a leading premium hard liquor manufacturer, as well as Tsingtao Brewery Co Ltd A (600600 CH).

Shanghai/​Shenzhen Connect Ideas: Moutai Inflows Were Back, Tsingtao Too (2019-06-14)

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

<div class="content-highlight"><h2>Rising LNG imports and creation of the national pipeline company.</h2></div><hr>To meet the strong growth in China's natural gas demand, there are several challenges that will need to be tackled to ensure an efficient development of supporting infrastructure and services. The complexity of raising pricing, and improving resource efficiency while continuing to encourage consumers to shift to natural gas may continue to lead to delays. We think the government will still gingerly test changes, but we also think key policy moves are forthcoming including the creation of a national pipeline company, or NPC. As such, we see opportunities arise. In particular, we think LNG importers will benefit from the strong gas demand. As well, companies with substantial pipeline assets, mainly <a href="https://www.smartkarma.com/entities/petrochina-co-ltd" target="_blank" data-smartkarma-citation="entities:24656:1">PetroChina (601857 CH)</a>, should see valuation gains from its divestments.<hr><h2>Key Takeaways</h2><ul>
<li>The creation of an NPC will allow PetroChina and <a href="https://www.smartkarma.com/entities/china-petroleum-chemical-a" target="_blank" data-smartkarma-citation="entities:24650:1">China Petroleum &amp; Chemical-A (600028 CH)</a>, or Sinopec, to realize value for their oil and gas pipeline assets. That said, we would expect the NPC exercise to take around four years given the complexity of the exercise. Between the two, PetroChina stands to gain most as the spin-off will free up capital commitments and allow the company to spend on improving its downstream efficiency and potentially address its aging upstream assets through acquisitions. In addition, the progress toward market-based natural gas pricing should allow the company to gradually see profit from its natural gas imports.</li>
<li>We estimate that the value of the NPC will total CNY 873 billion. This is higher than the CNY 500 billion mentioned in most media reports, which also forms the current consensus view.</li>
<li>PetroChina is the main beneficiary but the one-off revaluation gain is only expected to raise its fair value estimate by 4%. Sinopec also stands to benefit but we expect minimal impact on our fair value estimate as we had already factored in some asset revaluation gain for the firm, following the approval of its marketing segment spin-off. We would wait for more buffer before buying both companies.</li>
<li>We believe <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1">Enn Energy Holdings (2688 HK)</a> is undervalued and the firm is a main beneficiary of rising LNG imports in China. We think ENN could potentially benefit from lower raw material costs following the completion of the Zhoushan LNG receiving terminal (which started operation in end 2018 and is owned by parent, ENN Group). The firm has strategically secured long-term LNG supplies at competitive costs.</li>
</ul>

Rising LNG imports and creation of the national pipeline company.To meet the strong growth in China's natural gas demand, there are several challenges that will need to be tackled to ensure an efficient development of supporting infrastructure and services. The complexity of raising pricing, and improving resource efficiency while continuing to encourage consumers to shift to natural gas may continue to lead to delays. We think the government will still gingerly test changes, but we also think key policy moves are forthcoming including the creation of a national pipeline company, or NPC. As such, we see opportunities arise. In particular, we think LNG importers will benefit from the strong gas demand. As well, companies with substantial pipeline assets, mainly PetroChina (601857 CH), should see valuation gains from its divestments.Key Takeaways
The creation of an NPC will allow PetroChina and China Petroleum &amp; Chemical-A (600028 CH), or Sinopec, to realize value for their oil and gas pipeline assets. That said, we would expect the NPC exercise to take around four years given the complexity of the exercise. Between the two, PetroChina stands to gain most as the spin-off will free up capital commitments and allow the company to spend on improving its downstream efficiency and potentially address its aging upstream assets through acquisitions. In addition, the progress toward market-based natural gas pricing should allow the company to gradually see profit from its natural gas imports.
We estimate that the value of the NPC will total CNY 873 billion. This is higher than the CNY 500 billion mentioned in most media reports, which also forms the current consensus view.
PetroChina is the main beneficiary but the one-off revaluation gain is only expected to raise its fair value estimate by 4%. Sinopec also stands to benefit but we expect minimal impact on our fair value estimate as we had already factored in some asset revaluation gain for the firm, following the approval of its marketing segment spin-off. We would wait for more buffer before buying both companies.
We believe Enn Energy Holdings (2688 HK) is undervalued and the firm is a main beneficiary of rising LNG imports in China. We think ENN could potentially benefit from lower raw material costs following the completion of the Zhoushan LNG receiving terminal (which started operation in end 2018 and is owned by parent, ENN Group). The firm has strategically secured long-term LNG supplies at competitive costs.


Constraints in China's Natural Gas Sector Present Opportunities

China

China Petroleum & Chemical Corporation produces and trades petroleum and petrochemical products. The Company offers gasoline, diesel, jet fuel, kerosene, ethylene, synthetic fibers, synthetic rubber, synthetic resins, and chemical fertilizers. China Petroleum & Chemical markets its products throughout China.

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China Petroleum & Chemical (386 HK)

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