Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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<p>On the 4 February this year, Hong Kong's Chief Executive Carrie Lam mentioned during the Legislative Council (LegCo) Q&amp;A session, that in order to deal with doxing issues, various government departments will review the legal requirements and administrative arrangements for the Companies Registry search, and make adjustments or even amendments as necessary.</p>
<p>Late last night, the government <a href="https://www.info.gov.hk/gia/general/202103/31/P2021033100993.htm" target="_blank" rel="noopener">released</a> a press statement concerning the implementation of the inspection arrangements for the registry.</p>
<blockquote>
<p>Upon the implementation of the new inspection regime, all searchers (including the media) will continue to be able to access the information of directors on the Companies Register, including their personal correspondence addresses (in place of the current residential addresses) and partial identification numbers (IDN) (the alphabet(s) and three digits in the case of Hong Kong identity card). The availability of other information currently available for inspection on the register will not be in any way hindered. Such information, together with the name of a director, should be sufficient to enable searchers to ascertain the identity of the director concerned.</p>
</blockquote>
<p>The government will consult the LegCo Panel on Financial Affairs on the April 9 to implement the regime by phases. The proposed amendments will go through a negative vetting procedure in the legislature - that is, it will come into effect the day it is gazetted unless amended by LegCo.</p>
<p>In the words of activist investor David Webb:</p>
<blockquote>
<p>I don’t think the public needs to know where a director sleeps at night – that is a matter of personal security. But they do need to know exactly who the director is..... Sunshine is the best disinfectant.</p>
</blockquote>
<p>Below the fold, an overview of events leading to this latest development.</p>
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On the 4 February this year, Hong Kong's Chief Executive Carrie Lam mentioned during the Legislative Council (LegCo) Q&amp;A session, that in order to deal with doxing issues, various government departments will review the legal requirements and administrative arrangements for the Companies Registry search, and make adjustments or even amendments as necessary.
Late last night, the government released a press statement concerning the implementation of the inspection arrangements for the registry.

Upon the implementation of the new inspection regime, all searchers (including the media) will continue to be able to access the information of directors on the Companies Register, including their personal correspondence addresses (in place of the current residential addresses) and partial identification numbers (IDN) (the alphabet(s) and three digits in the case of Hong Kong identity card). The availability of other information currently available for inspection on the register will not be in any way hindered. Such information, together with the name of a director, should be sufficient to enable searchers to ascertain the identity of the director concerned.

The government will consult the LegCo Panel on Financial Affairs on the April 9 to implement the regime by phases. The proposed amendments will go through a negative vetting procedure in the legislature - that is, it will come into effect the day it is gazetted unless amended by LegCo.
In the words of activist investor David Webb:

I don’t think the public needs to know where a director sleeps at night – that is a matter of personal security. But they do need to know exactly who the director is..... Sunshine is the best disinfectant.

Below the fold, an overview of events leading to this latest development.

























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

<p><strong><em>*Mainland Chinese Stock Exchange Powerhouse:</em></strong> According to Reuters, mainland China is contemplating the establishment of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center; and  </p><p><strong><em>*Here Comes The Pain Trade: </em></strong>If mainland China is successful this time around (and we think that they will be), it is probably pretty fair to say that the HKEX/mainland China growth story will have come to an abrupt end. In terms of where we are with valuation, HKEX’s P/E has exploded in the face of weaker volumes on the expectation of future US ADR listings. The increase in the stamp duty to cover Hong Kong’s tax shortfall only adds to the misery that HKEX may encounter.</p>

*Mainland Chinese Stock Exchange Powerhouse: According to Reuters, mainland China is contemplating the establishment of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center; and  *Here Comes The Pain Trade: If mainland China is successful this time around (and we think that they will be), it is probably pretty fair to say that the HKEX/mainland China growth story will have come to an abrupt end. In terms of where we are with valuation, HKEX’s P/E has exploded in the face of weaker volumes on the expectation of future US ADR listings. The increase in the stamp duty to cover Hong Kong’s tax shortfall only adds to the misery that HKEX may encounter.

Hong Kong Exchanges & Clearing – Building The HKEX Coffin

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

<p>The announcement of 2020 full year results is bringing some certainty to the HSCEI 2021 dividend index points. With <a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a>, <a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a> and <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a> announcing results (and dividends) today, and <a href="https://www.smartkarma.com/entities/postal-savings-bank-of-china" target="_blank" data-smartkarma-citation="entities:22848:1" rel="noopener">Postal Savings Bank of China (1658 HK)</a>, <a href="https://www.smartkarma.com/entities/agricultural-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1120:1" rel="noopener">Agricultural Bank Of China (1288 HK)</a> and <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> announcing on Monday and Tuesday next week, over 85% of the 2021 dividend index points will be known by end of the month.</p><p>With <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a> included in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> at the close of trading on 8 April, potential changes to the index at the June review that will be implemented at the close on 4 June, and capping changes that will be implemented at 8% of the index weight for all stocks at the June review, the dividend ex-date for the stocks (and banks in particular) will play a big role in determining the fair value of the 2021 dividend futures.</p><p>With the SEC pushing forward with the Holding Foreign Companies Accountable Act, US listed Chinese stocks could look to bring forward their plans to Secondary List on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>. <a href="https://www.smartkarma.com/entities/bilibili-inc-83a27302-cd7d-4e6a-a1de-bcf93eb022c3" target="_blank" data-smartkarma-citation="entities:32215:1" rel="noopener">Bilibili Inc (9626 HK)</a> lists on Monday and media indicates that other Chinese companies are evaluating listing in Hong Kong. <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> has already filed papers to list in Hong Kong. Then there are companies like <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a> and <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a> that could primary list in Hong Kong in the near future. While this will have minimal impact on the 2021 dividends, the impact on the 2022 and later dividend futures would be a lot higher.</p><p>We see little downside from the current market on the HSCEI 2021 dividend futures, but believe that the HSCEI 2021/22 dividend steepener is trading too high. Potential changes to the index constituents should put downward pressure on the 2022 dividends with low dividend yield or zero dividend paying companies joining the index at high index weights, and high dividend paying companies being deleted from the index.</p>

The announcement of 2020 full year results is bringing some certainty to the HSCEI 2021 dividend index points. With Bank Of Communications Co H (3328 HK), ICBC (H) (1398 HK) and China Construction Bank H (939 HK) announcing results (and dividends) today, and Postal Savings Bank of China (1658 HK), Agricultural Bank Of China (1288 HK) and Bank Of China Ltd (H) (3988 HK) announcing on Monday and Tuesday next week, over 85% of the 2021 dividend index points will be known by end of the month.With Baidu (9888 HK) included in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close of trading on 8 April, potential changes to the index at the June review that will be implemented at the close on 4 June, and capping changes that will be implemented at 8% of the index weight for all stocks at the June review, the dividend ex-date for the stocks (and banks in particular) will play a big role in determining the fair value of the 2021 dividend futures.With the SEC pushing forward with the Holding Foreign Companies Accountable Act, US listed Chinese stocks could look to bring forward their plans to Secondary List on the HKEX (388 HK). Bilibili Inc (9626 HK) lists on Monday and media indicates that other Chinese companies are evaluating listing in Hong Kong. JD Logistics (JDL HK) has already filed papers to list in Hong Kong. Then there are companies like DiDi Chuxing (1284375D CH), ByteDance (1460967D CH) and Ant Financial Services Group (6688 HK) that could primary list in Hong Kong in the near future. While this will have minimal impact on the 2021 dividends, the impact on the 2022 and later dividend futures would be a lot higher.We see little downside from the current market on the HSCEI 2021 dividend futures, but believe that the HSCEI 2021/22 dividend steepener is trading too high. Potential changes to the index constituents should put downward pressure on the 2022 dividends with low dividend yield or zero dividend paying companies joining the index at high index weights, and high dividend paying companies being deleted from the index.

HSCEI Dividend Futures: June Index Review, Bank Divs, HFCAA - Sell the 2021/22 Steepener

Last Week in Event SPACE: Jardines, Xiaomi, Tilt Renew, Kumho Petro, Kunlun Energy, Takeei/Rever

China and US Equity Analyst

Roger Xie

Thematic (Sector/Industry)

<ul>
<li>It is reported that Hong Kong market regulator (Securities and Futures Commission) and market operator <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> are conducting study on the potential SPAC listings (Special-purpose acquisition company).  We believe <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> has always committed to be opened-mind to explore the dynamic and trend of capital market. However, Hong Kong market unlikely adopts the backdoor listings and shell activities such as SPACs. In contrast, regulator intends to simplify listing requirements and encourage more companies to go through regular IPO listing process amid to protect investor interest .</li>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> has achieved a blockbuster year for IPO market in 2020. The total IPO capital raised has reached HK$ 400bn, a jump of 27% year-over-year. Hong Kong has been ranked No. 2 globally by IPO capital raised and No. 4 by number of new IPO deals. We think the trend will continue and reiterate our call that Mega IPO and Chinese ADR homecoming will  reshape the landscape of Hong Kong capital market in long-run.</li>
<li>SPAC,  also known as a ‘blank check company’, is a publicly held investment vehicle created to merge with a company, thereby bringing the company public. Historically, the types of companies that have gone public through a SPAC have tended to be high-growth companies or those who wanted to raise more proceeds than would have been available to them through a traditional IPO.</li>
</ul>


It is reported that Hong Kong market regulator (Securities and Futures Commission) and market operator HKEX (388 HK) are conducting study on the potential SPAC listings (Special-purpose acquisition company).  We believe HKEX (388 HK) has always committed to be opened-mind to explore the dynamic and trend of capital market. However, Hong Kong market unlikely adopts the backdoor listings and shell activities such as SPACs. In contrast, regulator intends to simplify listing requirements and encourage more companies to go through regular IPO listing process amid to protect investor interest .

HKEX (388 HK) has achieved a blockbuster year for IPO market in 2020. The total IPO capital raised has reached HK$ 400bn, a jump of 27% year-over-year. Hong Kong has been ranked No. 2 globally by IPO capital raised and No. 4 by number of new IPO deals. We think the trend will continue and reiterate our call that Mega IPO and Chinese ADR homecoming will  reshape the landscape of Hong Kong capital market in long-run.
SPAC,  also known as a ‘blank check company’, is a publicly held investment vehicle created to merge with a company, thereby bringing the company public. Historically, the types of companies that have gone public through a SPAC have tended to be high-growth companies or those who wanted to raise more proceeds than would have been available to them through a traditional IPO.


SPACs Coming to Hong Kong ? We Don't Think So

Hong Kong

Hong Kong Exchanges & Clearing Limited owns and operates the stock exchange, futures exchange, and their related clearing houses in Hong Kong.  The Company provides the trading platforms for a range of cash and derivatives products and the facilities for processing trades.

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HKEX (388 HK)

Sunshine Is The Best Disinfectant

I don’t think the public needs to know where a director sleeps at night. But they do need to know exactly who the director is..... Sunshine is the...

David Blennerhassett

Hong Kong Exchanges & Clearing – Building The HKEX Coffin

HONG KONG EXCHANGES & CLEARING: Mainland China is contemplating a new stock exchange to attract overseas firms. If mainland China is successful,...

Thomas J. Monaco

HSCEI Dividend Futures: June Index Review, Bank Divs, HFCAA - Sell the 2021/22 Steepener

While the HSCEI 2021 dividend futures are trading near our estimated fair, the HSCEI 2021/22 div steepener is not. We recommend selling the...

Brian Freitas

Last Week in Event SPACE: Jardines, Xiaomi, Tilt Renew, Kumho Petro, Kunlun Energy, Takeei/Rever

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

SPACs Coming to Hong Kong ? We Don't Think So

Hong Kong market unlikely adopts the backdoor listings and shell activities such as SPACs. In contrast, regulator intends to simplify listing...

Roger Xie

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