Quantitative Researcher, MRM Research

Nico Rosti

Quantitative Researcher

MRM Research

Quantitative Research

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI INDEX</a> index closed December (barely) up, no rally, nullifying completely the MONTHLY time bar count pattern suggesting a LONG MONTHLY trade (the 1-bar reversal has already happened).</li>
<li>The index is approaching the Q3 support at 16449. A WEEKLY bounce is possible from that level, but we don't know if the bounce can last more than 1 week. </li>
<li>If the index keeps going down this week, it could find support between 16500 and 16000. A longer correction could end in the 15800-15600 price area. Use tight stops.</li>
</ul>


The HSI INDEX index closed December (barely) up, no rally, nullifying completely the MONTHLY time bar count pattern suggesting a LONG MONTHLY trade (the 1-bar reversal has already happened).
The index is approaching the Q3 support at 16449. A WEEKLY bounce is possible from that level, but we don't know if the bounce can last more than 1 week. 
If the index keeps going down this week, it could find support between 16500 and 16000. A longer correction could end in the 15800-15600 price area. Use tight stops.


EQD | Tears and Despair for the Hang Seng Index May Not Be Over (Yet)

Senior Equity Derivatives Trader

Simon Harris

<ul>
<li>Weekly summary of vol changes and moves across Global Markets</li>
<li>Analysing ATM volatility and skew changes over the last 5 days</li>
<li>We suggest a few trades to take advantage of the implied vol surfaces</li>
</ul>


Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces


EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Taking a Breather

Equity Derivatives Trader and Strategist

Leon Gross

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> Implieds are at Records Low, Cheap to Historic, Buy Options.</li>
<li>Many Asian Indices have Tight Ranges, Flat Returns YTD,  Options Expensive to the Range.</li>
<li>
<a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a> and  <a href="https://www.smartkarma.com/entities/citic-ltd" target="_blank" data-smartkarma-citation="entities:20590:1" rel="noopener">Citic Ltd (267 HK)</a>  are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options</li>
</ul>



Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
Many Asian Indices have Tight Ranges, Flat Returns YTD,  Options Expensive to the Range.

HSBC Holdings (5 HK) and  Citic Ltd (267 HK)  are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options


EQD | Asian Derivative YTD Range Trade Ideas

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<p>In 1992, a TV series aired in Hong Kong on TVB called <a href="https://en.wikipedia.org/wiki/The_Greed_of_Man" target="_blank" rel="noopener">The Greed of Man</a>. The series told the three-plus-decade story of Ting Hai, an "uneducated and pathologically self-righteous brute" (played by Canto pop singer and actor Adam Cheng (born 1947)) and Fong Chun-sun, "an honest, cultured and refined leader of the Asian Stock Exchange" (played by Damian Lau) who were childhood friends, split, and saw Ting kill Fong over a girl.</p><p>Ting Hai fled to Taiwan, was brutish again, spent a decade-plus in prison there. One of Ting Hai's sons pursues a Fong daughter, is rebuffed, the son turns violent. Eventually the three Fong daughters are killed, and Fong's only son (played by Sean Lau) flees to Taiwan and makes it rich through indirect gambling on stocks. In Hong Kong, the Tings have made it rich by being short in the 1987 crash. Ting has come back to Hong Kong, is charged with murder, then buys himself out of a sentence. Fong comes back to Hong Kong, and they duke it out in the stock market in true good guys vs bad guys epic knock-down drag-out drama. Ting and his sons are backed by the triads. Fong is backed by a few HK tycoons. Eventually, Ting is wiped out.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/080/original/the-greed-of-man-big-era%20gif.gif?1666611317" class="editor-image img-responsive" data-smartkarma-image-id="305080"></figure><p></p></section><p>He responds by throwing his four sons off the top of the stock exchange building and following himself. Only Ting survives, now billions in debt, and spends the rest of his life in prison. </p><p>The first episode of the show actually started with that final scene of Ting hurling his sons off the building. TVB got so many calls from disturbed viewers they altered the show, and moved its time slot. Apparently, the re-issues and re-airings of the show all show edited versions. The edited version was re-released on TV in 2015 and was well-received in HK by a younger generation. </p><p>Most importantly to this insight however, is that when the series started in 1992, the Hang Seng Index fell 1200 points in one month - that was almost 20% at the time. It started falling part way through the series, then the index fell 1,000 points (16+%) in four days after the gruesome ending.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/037/original/Screenshot%202022-10-24%20at%202.52.54%20PM.png?1666594385" class="editor-image img-responsive" data-smartkarma-image-id="305037"></figure><p></p></section><p>There were so many complaints about the ending that TVB revised the video release and subsequent re-releases.</p><div class="content-highlight"><p>The sharp fall in the market after Ting Hai went off the building became known as the <em><strong>Ting Hai Effect</strong></em> or the <em><strong>Adam Cheng Effect. </strong></em>Since then, the story goes, whenever a series or movie starring Adam Cheng is aired, the Hang Seng falls sharply. </p></div><p>Two years later, another TVB drama series starring Adam Cheng called '<a href="https://en.wikipedia.org/wiki/Instinct_(Hong_Kong_TV_series)" target="_blank" rel="noopener">Instinct</a>' was aired starting in November 1994. The index started falling a day or two before, after what had been an ugly year-to-date, and fell 20% in 7 weeks while the series aired.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/038/original/Screenshot%202022-10-24%20at%203.00.51%20PM.png?1666594860" class="editor-image img-responsive" data-smartkarma-image-id="305038"></figure></section><p>1996 saw two series starring Adam Cheng air on TVB.</p><p><a href="https://en.wikipedia.org/wiki/Cold_Blood_Warm_Heart" target="_blank" rel="noopener">Cold Blood Warm Heart</a> - a romantic crime thriller series of 65 episodes aired its first episode on 5 February and ended its run on 3 May. The market fell 700+ points or 6% in the period. </p><p>In early September 1996, Adam Cheng starred in another TVB series called <a href="https://en.wikipedia.org/wiki/Once_Upon_a_Time_in_Shanghai_(TV_series)" target="_blank" rel="noopener"><em>Once Upon A Time In Shanghai</em></a> (a remake of a 1980s series called <em><a href="https://en.wikipedia.org/wiki/The_Bund_(TV_series)" target="_blank" rel="noopener">The Bund</a>)</em>, which ran from 2 September through 25 October 1996. The Hang Seng Index fell sharply the next day, and this was blamed on the Ting Hai Effect, but the market did pretty well in the 7-week-long series.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/041/original/Screenshot%202022-10-24%20at%203.12.38%20PM.png?1666595659" class="editor-image img-responsive" data-smartkarma-image-id="305041"></figure></section><p>In late 1997 he starred in a historical drama called Legend of Yung Ching for a Taiwanese production company, covering a period in the mid 18th century of the Kangxi Emperor, the Yongzheng Emperor (Adam Cheng's role), and the Qianlong Emperor in the Qing Dynasty. Apparently, the market dropped the day it aired. </p>
<p>In June 1999, he starred in a four-part series called <em>Lord of Imprisonment</em> (may have been a Taiwanese series) which started <em>apparently</em> late in the month. That <em>apparently</em> started a fall of 6+% in the Hang Seng Index.</p>
<p>In 2000, a series called <em><a href="https://en.wikipedia.org/wiki/Divine_Retribution_(TV_series)" target="_blank" rel="noopener">Divine Retribution</a></em> aired on ATV. It was a sequel to Greed of Man, and was originally called Greed of Man 2000 and actually took place in the near future, not the recent past as had been the case for the original series. It ran from 11 September through 3 November 2000. The Hang Seng Index fell 10% in 6 weeks before rallying in the last two days of the series.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/044/original/Screenshot%202022-10-24%20at%203.31.17%20PM.png?1666596726" class="editor-image img-responsive" data-smartkarma-image-id="305044"></figure></section><p>In March 2004 - from 8 March through 24 April 2004 - a historical drama of 37 episodes (more for the international version) starring Adam Cheng called <a href="https://en.wikipedia.org/wiki/Blade_Heart" target="_blank" rel="noopener">Blade Heart</a> aired on TVB. The opening theme song was performed by Adam Cheng.</p>
<p>You guessed it. The Hang Seng was down more than 10% in 7 weeks.</p>
<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/051/original/Screenshot%202022-10-24%20at%203.58.33%20PM.png?1666598328" class="editor-image img-responsive" data-smartkarma-image-id="305051"></figure><p></p></section><p>Later that year, he was in The Conqueror's Story from 25 October through 4 December - also on TVB. The market fell nearly 200 points the day the series started. </p>
<p>Adam Cheng also starred in a period costume drama called <a href="https://en.wikipedia.org/wiki/The_Prince%27s_Shadow" target="_blank" rel="noopener">The Prince's Shadow</a> from 14 March through 18 April 2005. The market fell on the first day, regained most of its loss, but that was the high price of the series. The market fell over the period of the series.</p>
<p>In 2007, Adam Cheng played a real estate CEO in a TV drama set in contemporary China. The series, named Return Home ran for 33 episodes starting 15 July 2007.</p></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/071/original/Screenshot%202022-10-24%20at%205.55.06%20PM.png?1666605319" class="editor-image img-responsive" data-smartkarma-image-id="305071"></figure></section></section><p>In 2009 he did a TVB series on Hong Kong TV, titled <a href="https://en.wikipedia.org/wiki/The_King_of_Snooker" target="_blank" rel="noopener">The King of Snooker</a>. It was 20 episodes airing on TVB from 30 March 2009 through 24 April 2009. On the first day, the market fell 600+ points or 4.7% on the day. He had also filmed a series in 2008 called The Book and The Sword - a 40-episode period drama aired in China starting 20 March 2009. The HK market fell 2.3% that day.</p><p>On 21 May 2012, a 30-episode psychological thriller titled <a href="https://en.wikipedia.org/wiki/Master_of_Play" target="_blank" rel="noopener">Master of Play</a> starred Adam Cheng. It ran on TVB for 30 episodes through 29 June 2012. The market fell 10% in the 10 days running up to the launch of the new series.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/075/original/Screenshot%202022-10-24%20at%206.04.13%20PM.png?1666605863" class="editor-image img-responsive" data-smartkarma-image-id="305075"></figure><p></p></section><p>A year later, the period drama movie <a href="https://en.wikipedia.org/wiki/Saving_General_Yang" target="_blank" rel="noopener">Saving General Yang</a> was released in Beijing on 4 April 2013 and the next day, the Hang Seng was down 610 points (-2.7%).</p><p>In April 2015, the original 1992 drama <em>The Greed of Man</em> which made the Ting Hai Effect was rerun. The first day of the re-run (20 April) the market fell 2% or 558 points. </p><p>He was interviewed in the South China Morning Post 9 days later and the next morning the <a href="https://www.scmp.com/news/hong-kong/economy/article/1781524/hong-kong-actor-adam-cheng-says-stock-market-influence-just" target="_blank" rel="noopener">article</a> came out (30 April). He said he wasn't to blame for the stock market's falls when his shows aired. </p><p>The market fell five days straight. </p><p>In classic fashion, there was a new series out in 2018 called <a href="https://en.wikipedia.org/wiki/Ever_Night" target="_blank" rel="noopener">Ever Night</a>. It saw advertising the two weeks before and the Hang Seng fell about 1,000 points in the two weeks before the release. People joked days before that the market fall was due to the new show.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/077/original/Screenshot%202022-10-24%20at%207.08.25%20PM.png?1666609720" class="editor-image img-responsive" data-smartkarma-image-id="305077"></figure></section><p>The show was popular in China, so the 60-episode Season 1 started in October 2018 was followed by a 43-episode Season 2 staring 13 January 2020 and running for 3 months and a week. The market fell 25% from the start of Season 2 before rebounding. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/078/original/Screenshot%202022-10-24%20at%207.11.51%20PM.png?1666609983" class="editor-image img-responsive" data-smartkarma-image-id="305078"></figure></section><h3>Which brings us to the present day...</h3><p>Earlier this month, the sequel to The Greed Of Man was released for streaming on Disney+. The market, which had rebounded that day, fell for the next 6 days. </p><p>And today, 25 October, TVB starts re-runs of the 1988 series <a href="https://en.wikipedia.org/wiki/Behind_Silk_Curtains" target="_blank" rel="noopener">Behind Silk Curtains</a> starring Adam Cheng, where he plays the role of the chairman of a bank, and drives a businessman's company to bankruptcy so he can take it over.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/305/079/original/Screenshot%202022-10-24%20at%207.17.33%20PM.png?1666610304" class="editor-image img-responsive" data-smartkarma-image-id="305079"></figure></section><hr><p><em>Notes:</em></p><ul>
<li><em>This is a fun thing. But it appears to be taken somewhat seriously. It ALWAYS comes up. </em></li>
<li><em>Not EVERY movie or tv series appearance causes bad results. <a href="https://en.wikipedia.org/wiki/Bar_Bender" target="_blank" rel="noopener">Bar Bender</a> aired starting on 3 April 2006 on TVB Jade, and the market was up that day, fell back a little in the following days, but not seriously, and then rose 8% by 26 April. </em></li>
<li><em>However, enough do that it retains its name decades later. </em></li>
</ul><p><em>Sources:</em></p><ul>
<li><em>CLSA put out a Hong Kong Market Outlook piece in April 2004 about The Adam Cheng Effect. That is probably the first I heard of it. </em></li>
<li><em>The <a href="https://en.wikipedia.org/wiki/Ting_Hai_effect" target="_blank" rel="noopener">Ting Hai Effect wikipedia page</a> is a place to start. </em></li>
<li><em>There was an article in Chinese on <a href="http://www.chinanews.com" target="_blank" rel="noopener">www.chinanews.com</a> (original source: <a href="http://big5.chinanews.com.cn:89/gate/big5/www.chinanews.com/yl/ypkb/news/2009/04-02/1629867.shtml" target="_blank" rel="noopener">http://big5.chinanews.com.cn:89/gate/big5/www.chinanews.com/yl/ypkb/news/2009/04-02/1629867.shtml</a>) in April 2009 just after the King of Snooker series started which talked about the Tin Hai Effect. It is likely the source of some of the later articles in English because one of the dates is wrong and most later English sources copy that date.</em></li>
<li>Wikipedia has a list of most of the TVB series by year of production. </li>
<li>IMDB has a list of most of his appearances. Wikipedia does too.</li>
</ul>

In 1992, a TV series aired in Hong Kong on TVB called The Greed of Man. The series told the three-plus-decade story of Ting Hai, an "uneducated and pathologically self-righteous brute" (played by Canto pop singer and actor Adam Cheng (born 1947)) and Fong Chun-sun, "an honest, cultured and refined leader of the Asian Stock Exchange" (played by Damian Lau) who were childhood friends, split, and saw Ting kill Fong over a girl.Ting Hai fled to Taiwan, was brutish again, spent a decade-plus in prison there. One of Ting Hai's sons pursues a Fong daughter, is rebuffed, the son turns violent. Eventually the three Fong daughters are killed, and Fong's only son (played by Sean Lau) flees to Taiwan and makes it rich through indirect gambling on stocks. In Hong Kong, the Tings have made it rich by being short in the 1987 crash. Ting has come back to Hong Kong, is charged with murder, then buys himself out of a sentence. Fong comes back to Hong Kong, and they duke it out in the stock market in true good guys vs bad guys epic knock-down drag-out drama. Ting and his sons are backed by the triads. Fong is backed by a few HK tycoons. Eventually, Ting is wiped out.He responds by throwing his four sons off the top of the stock exchange building and following himself. Only Ting survives, now billions in debt, and spends the rest of his life in prison. The first episode of the show actually started with that final scene of Ting hurling his sons off the building. TVB got so many calls from disturbed viewers they altered the show, and moved its time slot. Apparently, the re-issues and re-airings of the show all show edited versions. The edited version was re-released on TV in 2015 and was well-received in HK by a younger generation. Most importantly to this insight however, is that when the series started in 1992, the Hang Seng Index fell 1200 points in one month - that was almost 20% at the time. It started falling part way through the series, then the index fell 1,000 points (16+%) in four days after the gruesome ending.There were so many complaints about the ending that TVB revised the video release and subsequent re-releases.The sharp fall in the market after Ting Hai went off the building became known as the Ting Hai Effect or the Adam Cheng Effect. Since then, the story goes, whenever a series or movie starring Adam Cheng is aired, the Hang Seng falls sharply. Two years later, another TVB drama series starring Adam Cheng called 'Instinct' was aired starting in November 1994. The index started falling a day or two before, after what had been an ugly year-to-date, and fell 20% in 7 weeks while the series aired.1996 saw two series starring Adam Cheng air on TVB.Cold Blood Warm Heart - a romantic crime thriller series of 65 episodes aired its first episode on 5 February and ended its run on 3 May. The market fell 700+ points or 6% in the period. In early September 1996, Adam Cheng starred in another TVB series called Once Upon A Time In Shanghai (a remake of a 1980s series called The Bund), which ran from 2 September through 25 October 1996. The Hang Seng Index fell sharply the next day, and this was blamed on the Ting Hai Effect, but the market did pretty well in the 7-week-long series.In late 1997 he starred in a historical drama called Legend of Yung Ching for a Taiwanese production company, covering a period in the mid 18th century of the Kangxi Emperor, the Yongzheng Emperor (Adam Cheng's role), and the Qianlong Emperor in the Qing Dynasty. Apparently, the market dropped the day it aired. 
In June 1999, he starred in a four-part series called Lord of Imprisonment (may have been a Taiwanese series) which started apparently late in the month. That apparently started a fall of 6+% in the Hang Seng Index.
In 2000, a series called Divine Retribution aired on ATV. It was a sequel to Greed of Man, and was originally called Greed of Man 2000 and actually took place in the near future, not the recent past as had been the case for the original series. It ran from 11 September through 3 November 2000. The Hang Seng Index fell 10% in 6 weeks before rallying in the last two days of the series.
In March 2004 - from 8 March through 24 April 2004 - a historical drama of 37 episodes (more for the international version) starring Adam Cheng called Blade Heart aired on TVB. The opening theme song was performed by Adam Cheng.
You guessed it. The Hang Seng was down more than 10% in 7 weeks.
Later that year, he was in The Conqueror's Story from 25 October through 4 December - also on TVB. The market fell nearly 200 points the day the series started. 
Adam Cheng also starred in a period costume drama called The Prince's Shadow from 14 March through 18 April 2005. The market fell on the first day, regained most of its loss, but that was the high price of the series. The market fell over the period of the series.
In 2007, Adam Cheng played a real estate CEO in a TV drama set in contemporary China. The series, named Return Home ran for 33 episodes starting 15 July 2007.In 2009 he did a TVB series on Hong Kong TV, titled The King of Snooker. It was 20 episodes airing on TVB from 30 March 2009 through 24 April 2009. On the first day, the market fell 600+ points or 4.7% on the day. He had also filmed a series in 2008 called The Book and The Sword - a 40-episode period drama aired in China starting 20 March 2009. The HK market fell 2.3% that day.On 21 May 2012, a 30-episode psychological thriller titled Master of Play starred Adam Cheng. It ran on TVB for 30 episodes through 29 June 2012. The market fell 10% in the 10 days running up to the launch of the new series.A year later, the period drama movie Saving General Yang was released in Beijing on 4 April 2013 and the next day, the Hang Seng was down 610 points (-2.7%).In April 2015, the original 1992 drama The Greed of Man which made the Ting Hai Effect was rerun. The first day of the re-run (20 April) the market fell 2% or 558 points. He was interviewed in the South China Morning Post 9 days later and the next morning the article came out (30 April). He said he wasn't to blame for the stock market's falls when his shows aired. The market fell five days straight. In classic fashion, there was a new series out in 2018 called Ever Night. It saw advertising the two weeks before and the Hang Seng fell about 1,000 points in the two weeks before the release. People joked days before that the market fall was due to the new show.The show was popular in China, so the 60-episode Season 1 started in October 2018 was followed by a 43-episode Season 2 staring 13 January 2020 and running for 3 months and a week. The market fell 25% from the start of Season 2 before rebounding. Which brings us to the present day...Earlier this month, the sequel to The Greed Of Man was released for streaming on Disney+. The market, which had rebounded that day, fell for the next 6 days. And today, 25 October, TVB starts re-runs of the 1988 series Behind Silk Curtains starring Adam Cheng, where he plays the role of the chairman of a bank, and drives a businessman's company to bankruptcy so he can take it over.Notes:
This is a fun thing. But it appears to be taken somewhat seriously. It ALWAYS comes up. 
Not EVERY movie or tv series appearance causes bad results. Bar Bender aired starting on 3 April 2006 on TVB Jade, and the market was up that day, fell back a little in the following days, but not seriously, and then rose 8% by 26 April. 
However, enough do that it retains its name decades later. 
Sources:
CLSA put out a Hong Kong Market Outlook piece in April 2004 about The Adam Cheng Effect. That is probably the first I heard of it. 
The Ting Hai Effect wikipedia page is a place to start. 
There was an article in Chinese on www.chinanews.com (original source: http://big5.chinanews.com.cn:89/gate/big5/www.chinanews.com/yl/ypkb/news/2009/04-02/1629867.shtml) in April 2009 just after the King of Snooker series started which talked about the Tin Hai Effect. It is likely the source of some of the later articles in English because one of the dates is wrong and most later English sources copy that date.
Wikipedia has a list of most of the TVB series by year of production. 
IMDB has a list of most of his appearances. Wikipedia does too.


Seasons & Quirks: The Ting Hai Effect (丁蟹效应)

Forensic Analyst

Jason Yap, CFA

Forensic Accounting

<p>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. </p>
<p>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. </p>
<p>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 <strong>significantly underperformed</strong> 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. </p>
<p>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:</p>
<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>
<p>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. </p>

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

Hong Kong

The Hang Seng Index is a free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindices: Commerce and Industry, Finance, Utilities, and Properties. The index was developed with a base level of 100 as of July 31, 1964.

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