Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

China Unicom Hong Kong / Equity Bottom-Up

<ul>
<li>The rapid adoption of cloud computing has led to China boasting the world’s second-largest cloud computing market.</li>
<li>This migration to the cloud is in lock-step with global customer needs: scale, greater efficiency, and availability; together with a reduction in capex and infrastructure complexity.</li>
<li>The big three PRC telcos are firmly in the mix, with each announcing 100%+ growth in revenue for their cloud businesses in 1H22. Expect that trend to continue.</li>
</ul>


The rapid adoption of cloud computing has led to China boasting the world’s second-largest cloud computing market.
This migration to the cloud is in lock-step with global customer needs: scale, greater efficiency, and availability; together with a reduction in capex and infrastructure complexity.
The big three PRC telcos are firmly in the mix, with each announcing 100%+ growth in revenue for their cloud businesses in 1H22. Expect that trend to continue.


Forensic Analyst

Jason Yap, CFA

Forensic Accounting

Incorporated in Beijing in July 2014, <a href="https://www.smartkarma.com/entities/china-tower-corp-ltd" target="_blank" data-smartkarma-citation="entities:27037:1" rel="noopener">China Tower (788 HK)</a> is a state-owned telecommunications company that provides telecommunications tower construction, tower maintenance, ancillary facilities management and related services in China. 
As at 31 December 2020, China Tower operated and managed 2.023 million tower sites and its total assets were RMB337.4 billion, and it was therefore commonly known as the world's largest telecommunications tower infrastructure service provider. 
Amid aggressive 5G rollout in China in 2020, <a href="https://www.smartkarma.com/entities/china-tower-corp-ltd" target="_blank" data-smartkarma-citation="entities:27037:1" rel="noopener">China Tower (788 HK)</a> was initially poised to be a key beneficiary of the 5G secular growth story. Instead, its share price performance has significantly underperformed both the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> and its telecommunication tower infrastructure peers listed internationally over the past 12 to 18 months. 
This was attributed to <a href="https://asia.nikkei.com/Spotlight/5G-networks/Chinese-telecom-operators-cut-back-5G-network-construction" target="_blank" rel="noopener">weaker</a> than expected 5G-related demand for new towers, which was in turn due to a combination of factors, such as:
<ol>
<li>slower than expected 5G adoption;</li>
<li>China telecom operators, namely <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom (H) (728 HK)</a>, <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a>, <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> and new entrant China Broadcast Network, striking partnerships to share network frequency bands; and </li>
<li>where possible, China telecom operators opting for co-location of base stations to save tower deployment capital expenditures. </li>
</ol>
In this Insight, we discuss if China Tower is past its trough and whether the upcoming tower lease negotiations in 2022 will become an overhang. Further, we address potential corporate governance concerns given that its major shareholders - that is, the Big 3 China telecom operators - are also its largest customers and therefore have considerable influence on China Tower's business decisions.

Incorporated in Beijing in July 2014, China Tower (788 HK) is a state-owned telecommunications company that provides telecommunications tower construction, tower maintenance, ancillary facilities management and related services in China. 
As at 31 December 2020, China Tower operated and managed 2.023 million tower sites and its total assets were RMB337.4 billion, and it was therefore commonly known as the world's largest telecommunications tower infrastructure service provider. 
Amid aggressive 5G rollout in China in 2020, China Tower (788 HK) was initially poised to be a key beneficiary of the 5G secular growth story. Instead, its share price performance has significantly underperformed both the Hong Kong Hang Seng Index (HSI INDEX) and its telecommunication tower infrastructure peers listed internationally over the past 12 to 18 months. 
This was attributed to weaker than expected 5G-related demand for new towers, which was in turn due to a combination of factors, such as:

slower than expected 5G adoption;
China telecom operators, namely China Telecom (H) (728 HK), China Unicom Hong Kong (762 HK), China Mobile (941 HK) and new entrant China Broadcast Network, striking partnerships to share network frequency bands; and 
where possible, China telecom operators opting for co-location of base stations to save tower deployment capital expenditures. 

In this Insight, we discuss if China Tower is past its trough and whether the upcoming tower lease negotiations in 2022 will become an overhang. Further, we address potential corporate governance concerns given that its major shareholders - that is, the Big 3 China telecom operators - are also its largest customers and therefore have considerable influence on China Tower's business decisions. 

China Tower (788 HK) - Deep Value, Though Lease Negotiation Overhang Persists

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>After narrowly avoiding deletion at the last two index reviews, <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group</a> will be deleted from the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI INDEX</a> in March and replaced with <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom (762 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> is down 25% for the year while <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> is up 10%.</li>
<li>There appears to be positioning on both stocks though the increase in shorts and jump in cumulative excess volume on <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> point to higher positioning.</li>
</ul>


After narrowly avoiding deletion at the last two index reviews, Zhongsheng Group will be deleted from the HSCEI INDEX in March and replaced with China Unicom (762 HK). 

Zhongsheng Group (881 HK) is down 25% for the year while China Unicom Hong Kong (762 HK) is up 10%.
There appears to be positioning on both stocks though the increase in shorts and jump in cumulative excess volume on Zhongsheng Group (881 HK) point to higher positioning.


HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> remains inexpensive with respect to parent <a href="https://www.smartkarma.com/entities/china-united-network-a" target="_blank" data-smartkarma-citation="entities:12620:1" rel="noopener">China United Network A (600050 CH)</a> - its hybrid domestic A-share twin - and to peers.</li>
<li>Preceding my comments on Unicom, are the current setup/unwind tables for Asia-Pacific Holdcos.</li>
<li>These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.</li>
</ul>



China Unicom Hong Kong (762 HK) remains inexpensive with respect to parent China United Network A (600050 CH) - its hybrid domestic A-share twin - and to peers.
Preceding my comments on Unicom, are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.


<ul>
<li>The bigger question for investors is whether <a href="https://www.smartkarma.com/entities/denso-corp" target="_blank" data-smartkarma-citation="entities:18703:1" rel="noopener">Denso Corp (6902 JP)</a> will keep up with global auto market needs or will they suffer as Toyota may suffer?</li>
<li>The FSS may put the breaks on <a href="https://www.smartkarma.com/entities/korea-zinc-co-ltd" target="_blank" data-smartkarma-citation="entities:17944:1" rel="noopener">Korea Zinc (010130 KS)</a>'s massive capital raise. </li>
<li>Murakami-San has won <a href="https://www.smartkarma.com/entities/exedy-corp" target="_blank" data-smartkarma-citation="entities:6516:1" rel="noopener">Exedy Corp (7278 JP)</a>. The company has decided to up its dividend payout and future dividend payout ratio and buy back a boatload of shares. </li>
</ul>


The bigger question for investors is whether Denso Corp (6902 JP) will keep up with global auto market needs or will they suffer as Toyota may suffer?
The FSS may put the breaks on Korea Zinc (010130 KS)'s massive capital raise. 
Murakami-San has won Exedy Corp (7278 JP). The company has decided to up its dividend payout and future dividend payout ratio and buy back a boatload of shares. 


Last Week in Event SPACE: Denso/Toyota, Korea Zinc, Exedy, Good Drinks, Shinsegae

Hong Kong

China Unicom (Hong Kong) Limited, through its subsidiaries, provides telecommunications services in the People's Republic of China.  The Company's services include cellular, paging, long distance, data, and Internet services.

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China Unicom Hong Kong (Adr) (CHU US)

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Jason Yap, CFA

HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In

China Unicom replaces Zhongsheng in the HSCEI in March. Shorts have started to tick higher and there is positioning in Zhongsheng. Positioning in...

Brian Freitas

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Last Week in Event SPACE: Denso/Toyota, Korea Zinc, Exedy, Good Drinks, Shinsegae

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

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