Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<p>This insight re-introduces a weekly monitor for H-Share/A-Share spreads.</p>
<p>The monitor will be published every weekend for the data ending the previous week. It includes all stocks where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...</p>
<ul>
<li>H/A Discount,</li>
<li>movement in H/A Discount over 5 and 20 days,</li>
<li>a 52-week Z-score for the spread,</li>
<li>A chart showing evolution of the H/A spread over the last 20 days,</li>
<li>Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, </li>
<li>There is also a chart showing the narrowest and widest spread and the average spread over the last three years. </li>
</ul>
<p>In the example for the H/A spreads in the <strong>Materials</strong> sector below, spreads were generally flat over the past five days and were wider by 1.5% over the past 20 days. Southbound were net buyers on average on the H side of each pair over both 5 days and 20 days. <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> and <a href="https://www.smartkarma.com/entities/ganfeng-lithium-co-ltd" target="_blank" data-smartkarma-citation="entities:26795:1" rel="noopener">Ganfeng Lithium (1772 HK)</a> are spreads at the relatively narrow end of their 52-week ranges, while <a href="https://www.smartkarma.com/entities/maanshan-iron-steel-h" target="_blank" data-smartkarma-citation="entities:204:1" rel="noopener">Maanshan Iron &amp; Steel H (323 HK)</a>, <a href="https://www.smartkarma.com/entities/bbmg-corp-h" target="_blank" data-smartkarma-citation="entities:2821:1" rel="noopener">BBMG Corp H (2009 HK)</a>, <a href="https://www.smartkarma.com/entities/sinopec-shanghai-petrochemical-co-ltd" target="_blank" data-smartkarma-citation="entities:17576:1" rel="noopener">Sinopec Shanghai Petrochemical (338 HK)</a>, and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement Co Ltd H (914 HK)</a> are at the wider end of their 52-week ranges. The average spread in the sector widened somewhat dramatically in the month of August as seen on the chart, but stabilized at the beginning of September.</p>
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<p></p>
</section>
</section>
<p>Commentary is offered for the major movers and influences along with market observations on the sector rotation movement and particularly significant changes.</p>
<div class="content-highlight">
<p>Recommendations are in highlights like this.</p>
</div>
<section class="figure">
<p>More below the fold.  </p>
<hr>
<p><em>By the way, there are two versions of the Spread Evolution mini charts. Input is welcomed in the Discussion section as to which one is preferred (bars or lines).</em></p>
</section>

This insight re-introduces a weekly monitor for H-Share/A-Share spreads.
The monitor will be published every weekend for the data ending the previous week. It includes all stocks where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...

H/A Discount,
movement in H/A Discount over 5 and 20 days,
a 52-week Z-score for the spread,
A chart showing evolution of the H/A spread over the last 20 days,
Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, 
There is also a chart showing the narrowest and widest spread and the average spread over the last three years. 

In the example for the H/A spreads in the Materials sector below, spreads were generally flat over the past five days and were wider by 1.5% over the past 20 days. Southbound were net buyers on average on the H side of each pair over both 5 days and 20 days. Shandong Gold Mining Co., Ltd. (1787 HK) and Ganfeng Lithium (1772 HK) are spreads at the relatively narrow end of their 52-week ranges, while Maanshan Iron &amp; Steel H (323 HK), BBMG Corp H (2009 HK), Sinopec Shanghai Petrochemical (338 HK), and Anhui Conch Cement Co Ltd H (914 HK) are at the wider end of their 52-week ranges. The average spread in the sector widened somewhat dramatically in the month of August as seen on the chart, but stabilized at the beginning of September.






Commentary is offered for the major movers and influences along with market observations on the sector rotation movement and particularly significant changes.

Recommendations are in highlights like this.


More below the fold.  

By the way, there are two versions of the Spread Evolution mini charts. Input is welcomed in the Discussion section as to which one is preferred (bars or lines).


Quiddity Weekly H/A: Share Spread Monitor 16 Oct 2020

David Blennerhassett

Event-Driven

Last Week in Event SPACE: Northern Star/Saracen, Vedanta, Toyota, Swire

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Communications Construction / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> (CCCC) is definitely one of the worst performing infrastructure-related stocks this year, with 30.2% collapse in its share price YTD. In our view, this should have significantly reflected the concerns on the weak 1H20 result (-37.2% YoY), surge in credit impairment, tight financial position and potential US sanctions. In the post-1H20 result investor call, however, management has already suggested that its profitability should see sequential improvement in 2H20. </p><p>At 4.2x PER and 0.26x P/B on 12-month forward basis, valuations are clearly inexpensive, but there is likely continue pressure on share price in the near term as the market digests negative news. However, we are positive on its prospects with the resumption of toll collection, acceleration of project construction and lower credit impairment. A successful issuance of REIT on its underlying toll road assets will kick-start a re-rating with a narrower discount to book value, in our view.</p>

China Communications Construction (1800 HK) (CCCC) is definitely one of the worst performing infrastructure-related stocks this year, with 30.2% collapse in its share price YTD. In our view, this should have significantly reflected the concerns on the weak 1H20 result (-37.2% YoY), surge in credit impairment, tight financial position and potential US sanctions. In the post-1H20 result investor call, however, management has already suggested that its profitability should see sequential improvement in 2H20. At 4.2x PER and 0.26x P/B on 12-month forward basis, valuations are clearly inexpensive, but there is likely continue pressure on share price in the near term as the market digests negative news. However, we are positive on its prospects with the resumption of toll collection, acceleration of project construction and lower credit impairment. A successful issuance of REIT on its underlying toll road assets will kick-start a re-rating with a narrower discount to book value, in our view.

China Comm Const (1800 HK): Key Takeaways from Post-1H20 Result Investor Call

Last Week in Event SPACE: Leyou, FamilyMart, Softbank, Ootoya, Bank Permata, Naspers, Haw Par/UIC

<p>We believe the valuations of <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> - 0.27x P/B and 3.9x PE (on a 12-month forward basis) - have well factored in concerns including tight cash flow, high gearing, heavy investments and risk of overseas projects. In fact, such valuation multiples are almost at 2 SD below the average in the last five years, and we see further downside limited.</p><p>In our view, there are a number of drivers that can support a re-rating of the stock over the next 12 months: 1.) infrastructure spending and new project momentum, 2.) beneficiary of government's infrastructure REIT program, 3.) resumption of toll road collection and profit recovery in 2H20, and 4.) share buyback.</p>

We believe the valuations of China Communications Construction (1800 HK) - 0.27x P/B and 3.9x PE (on a 12-month forward basis) - have well factored in concerns including tight cash flow, high gearing, heavy investments and risk of overseas projects. In fact, such valuation multiples are almost at 2 SD below the average in the last five years, and we see further downside limited.In our view, there are a number of drivers that can support a re-rating of the stock over the next 12 months: 1.) infrastructure spending and new project momentum, 2.) beneficiary of government's infrastructure REIT program, 3.) resumption of toll road collection and profit recovery in 2H20, and 4.) share buyback.

China Comm Const (1800 HK): Every Dog Has Its Day

China

China Railway Group Limited offers transportation facility construction services. The Company builds railways, roads, tunnels, and bridges. China Railway Group also conducts engineering survey, equipment manufacturing, real estate development, and investment businesses.

Price Gauge
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China Railway Group (601390 CH)

Last Week in Event SPACE: Northern Star/Saracen, Vedanta, Toyota, Swire

Last Week in Event SPACE ... Plus, other events, CCASS movements and Mood Spins. (This insight covers specific insights & comments...

David Blennerhassett

China Comm Const (1800 HK): Key Takeaways from Post-1H20 Result Investor Call

China Communications Construction (1800 HK) is definitely one of the worst pe

Osbert Tang, CFA

Last Week in Event SPACE: Leyou, FamilyMart, Softbank, Ootoya, Bank Permata, Naspers, Haw Par/UIC

Last Week in Event SPACE ... The offer for Leyou Technologies (1089 HK) from Tencent Holdings (700 HK) is a done deal, but trading wide-ish on...

David Blennerhassett

China Comm Const (1800 HK): Every Dog Has Its Day

We believe the valuations of China Communications Construction (1800 HK) - 0.27x P/B and 3.9x PE (on a 12-month forward basis) - have well factored...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Weekly H/A: Share Spread Monitor 16 Oct 2020

Weekly Monitor for H-Share/A-Share spreads showing spread/discount performance, spread Z-scores, southbound buying and selling and net activity...

Travis Lundy

Last Week in Event SPACE: Northern Star/Saracen, Vedanta, Toyota, Swire

Last Week in Event SPACE ... Plus, other events, CCASS movements and Mood Spins. (This insight covers specific insights & comments...

David Blennerhassett

China Comm Const (1800 HK): Key Takeaways from Post-1H20 Result Investor Call

China Communications Construction (1800 HK) is definitely one of the worst pe

Osbert Tang, CFA

Last Week in Event SPACE: Leyou, FamilyMart, Softbank, Ootoya, Bank Permata, Naspers, Haw Par/UIC

Last Week in Event SPACE ... The offer for Leyou Technologies (1089 HK) from Tencent Holdings (700 HK) is a done deal, but trading wide-ish on...

David Blennerhassett

China Comm Const (1800 HK): Every Dog Has Its Day

We believe the valuations of China Communications Construction (1800 HK) - 0.27x P/B and 3.9x PE (on a 12-month forward basis) - have well factored...

Osbert Tang, CFA