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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<p>After outperforming its global peers over the last year, the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> has had a big drawdown that has brought its performance closer to its peers. Today's drop has closed the gap even further.</p><p>With a backdrop of heightened US-China tensions, increased regulatory pressure from the State Administration for Market Regulation (SAMR) and an increased focus on monopolies (or perceived monopolies), investors have been happy to sell first given the gains they were sitting on, plus the valuation premium.</p><p>With valuations now lining up with their global peers, Hang Seng Indexes has announced that the China Securities Regulatory Commission (CSRC) had approved 7 ETFs and 1 Index Fund that will track the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a>. The mainland ETFs could garner a large amount of assets quickly given that most index members are household names. Additionally, stocks like <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <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> and <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> are not eligible for Southbound Stock Connect and the ETFs will offer investors access to those names.</p><p>With the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> (or the "NASDAQ of the East" as it is called) underperforming the <a href="https://www.smartkarma.com/entities/nasdaq-100-stock-index" target="_blank" data-smartkarma-citation="entities:26197:1" rel="noopener">Nasdaq-100 Stock Index (NDX INDEX)</a> (of the West) over the last few months, there could be an opportunity to buy the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> futures and hedge with <a href="https://www.smartkarma.com/entities/nasdaq-100-stock-index" target="_blank" data-smartkarma-citation="entities:26197:1" rel="noopener">Nasdaq-100 Stock Index (NDX INDEX)</a> futures.</p>

After outperforming its global peers over the last year, the Hang Seng Tech Index (HSTECH INDEX) has had a big drawdown that has brought its performance closer to its peers. Today's drop has closed the gap even further.With a backdrop of heightened US-China tensions, increased regulatory pressure from the State Administration for Market Regulation (SAMR) and an increased focus on monopolies (or perceived monopolies), investors have been happy to sell first given the gains they were sitting on, plus the valuation premium.With valuations now lining up with their global peers, Hang Seng Indexes has announced that the China Securities Regulatory Commission (CSRC) had approved 7 ETFs and 1 Index Fund that will track the Hang Seng Tech Index (HSTECH INDEX). The mainland ETFs could garner a large amount of assets quickly given that most index members are household names. Additionally, stocks like Alibaba Group (9988 HK), Baidu (9888 HK) and JD.com Inc. (9618 HK) are not eligible for Southbound Stock Connect and the ETFs will offer investors access to those names.With the Hang Seng Tech Index (HSTECH INDEX) (or the "NASDAQ of the East" as it is called) underperforming the Nasdaq-100 Stock Index (NDX INDEX) (of the West) over the last few months, there could be an opportunity to buy the Hang Seng Tech Index (HSTECH INDEX) futures and hedge with Nasdaq-100 Stock Index (NDX INDEX) futures.

Hang Seng TECH Index: How Much Lower Can It Go? CSRC Approves 7 ETFs

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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.

Equity Bottom-Up

<ul>
<li>The government warned that Meituan should raise delivery workers’ benefits and reduce their workload.</li>
<li>The CEO quoted a poem on a social media and we believe all media reports misunderstand it.</li>
<li>We reduced the target price to HK$230.</li>
</ul>
<p>Our previous coverage on Meituan:</p>
<ul>
<li><a href="https://www.smartkarma.com/insights/meituan-3690-hk-forthcoming-punishment-will-benefit-alibaba" target="_blank" data-smartkarma-citation="insights:50794" rel="noopener">Meituan (3690 HK): Forthcoming Punishment Will Benefit Alibaba</a></li>
<li>
<a href="https://www.smartkarma.com/insights/meituan-3690-hk-meituan-spending-money-but-agents-accumulating-customers-for-themselves" target="_blank" data-smartkarma-citation="insights:50118" rel="noopener">Meituan (3690 HK): Meituan Spending Money, But Agents Accumulating Customers for Themselves</a> </li>
</ul>


The government warned that Meituan should raise delivery workers’ benefits and reduce their workload.
The CEO quoted a poem on a social media and we believe all media reports misunderstand it.
We reduced the target price to HK$230.

Our previous coverage on Meituan:

Meituan (3690 HK): Forthcoming Punishment Will Benefit Alibaba

Meituan (3690 HK): Meituan Spending Money, But Agents Accumulating Customers for Themselves 


Meituan (3690 HK): CEO's Poem, as Response to Authorities' Sweat Shop Warning, Could Be Disaster

<ul>
<li>Customer service refuses to return repaired graphics card to customers.</li>
<li>The graphics card prices has been rising significantly.</li>
<li>Customers believe customer service sold the repaired cards.</li>
</ul>
<p>Our previous coverage on JD.com:</p>
<p><a href="https://www.smartkarma.com/insights/jd-com-jd-main-business-accelerated-in-4q20" target="_blank" data-smartkarma-citation="insights:49083" rel="noopener">JD.com (JD): Main Business Accelerated in 4Q20</a></p>
<p><a href="https://www.smartkarma.com/insights/jd-com-jd-found-more-exclusive-advantages-but-need-more-reasonable-price" target="_blank" data-smartkarma-citation="insights:48677" rel="noopener">JD.com (JD): Found More Exclusive Advantages, But Need More Reasonable Price</a></p>


Customer service refuses to return repaired graphics card to customers.
The graphics card prices has been rising significantly.
Customers believe customer service sold the repaired cards.

Our previous coverage on JD.com:
JD.com (JD): Main Business Accelerated in 4Q20
JD.com (JD): Found More Exclusive Advantages, But Need More Reasonable Price

JD.com (JD): Customer Service Facing Short Squeeze Due to Bitcoin Surge

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Singapore Press, Tabcorp, Invesco Office, Justbon, IHH Healthcare, JD.com

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> is the largest player in China’s integrated supply chain logistics services market, with a 2.2% revenue market share in 2019, according to CIC. JD Logistics was founded with the formation of <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>’s in-house logistics department in 2007.</p>
<p>JD Logistics is seeking to raise up to $3-4 billion at a $40 billion valuation, according to press reports. Merrill Lynch and Haitong, which are part of the syndicate, have valued JD Logistics at $30.0-45.4 billion and $42.4-44.3 billion, respectively, <a href="https://www.thestandard.com.hk/section-news/section/2/229859/JD-Logistics-gets-ball-rolling-for-US%244b-IPO" target="_blank" rel="noopener">according to press reports</a>. </p>
</div><div>
<p>In <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-initiation-the-flow-of-things" target="_blank" data-smartkarma-citation="insights:48279" rel="noopener">JD Logistics IPO Initiation: The Flow of Things</a>, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand faster and more flexible supply chain logistics services.</p>
<p>In <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-prioritizing-market-share-gains-over-margins" target="_blank" data-smartkarma-citation="insights:50976" rel="noopener">JD Logistics IPO: Prioritizing Market Share Gains over Margins</a>,  we noted that the PHIP which discloses the 2020 results and recent developments underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. We opined that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. </p>
</div><div><div><div class="content-highlight"><p>In this note, we update our forecasts and valuation presented in <a href="https://www.smartkarma.com/insights/jd-logistics-ipo-valuation-first-look" target="_blank" data-smartkarma-citation="insights:48384" rel="noopener">JD Logistics IPO: Valuation First Look</a> for the latest set of results and the margin guidance. Overall, based on valuation analysis, we think that the rumoured $40 billion valuation target is fair, particularly in the context of JD Logistics' positioning and higher than peers forecasted growth. </p></div></div></div>


JD Logistics (JDL HK) is the largest player in China’s integrated supply chain logistics services market, with a 2.2% revenue market share in 2019, according to CIC. JD Logistics was founded with the formation of JD.com Inc (ADR) (JD US)’s in-house logistics department in 2007.
JD Logistics is seeking to raise up to $3-4 billion at a $40 billion valuation, according to press reports. Merrill Lynch and Haitong, which are part of the syndicate, have valued JD Logistics at $30.0-45.4 billion and $42.4-44.3 billion, respectively, according to press reports. 

In JD Logistics IPO Initiation: The Flow of Things, we stated that JD Logistics is an indirect play on the shift of some customer behaviour permanently to online shopping, particularly in fast-moving consumer goods. We concluded that JD Logistics fundamentals are attractive and it remains well-placed to address consumers demand faster and more flexible supply chain logistics services.
In JD Logistics IPO: Prioritizing Market Share Gains over Margins,  we noted that the PHIP which discloses the 2020 results and recent developments underscore the positives which are strong growth, rising margin and cash generation. However, the outlook is mixed as JD Logistics cautions that it will pursue market share gains at the cost of profitability over the medium term. We opined that JD Logistics has the right ingredients to ride out the industry’s current price-competitive dynamics and deliver good shareholder returns over the medium term. 
In this note, we update our forecasts and valuation presented in JD Logistics IPO: Valuation First Look for the latest set of results and the margin guidance. Overall, based on valuation analysis, we think that the rumoured $40 billion valuation target is fair, particularly in the context of JD Logistics' positioning and higher than peers forecasted growth. 

JD Logistics IPO: Valuation and Forecast Update

China

JD.com Inc is an online direct sales company in China.  The Company offers a wide selection of products through its website and mobile applications.  JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

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JD.com Inc (ADR) (JD US)

Hang Seng TECH Index: How Much Lower Can It Go? CSRC Approves 7 ETFs

The Hang Seng TECH Index has had a large drawdown over the last couple of months on regulatory pressure and stretched valuations. With new ETFs...

Brian Freitas

Meituan (3690 HK): CEO's Poem, as Response to Authorities' Sweat Shop Warning, Could Be Disaster

The government warned that Meituan should raise delivery workers’ benefits and reduce their workload. The CEO quoted a poem on a social media and...

Ming Lu

JD.com (JD): Customer Service Facing Short Squeeze Due to Bitcoin Surge

Customer service refuses to return repaired graphics card to customers. The graphics card prices has been rising significantly. Customers believe...

Ming Lu

Last Week in Event SPACE: Singapore Press, Tabcorp, Invesco Office, Justbon, IHH Healthcare, JD.com

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

JD Logistics IPO: Valuation and Forecast Update

JD Logistics is set to launch its IPO to raise $3-4 bn in May. The rumoured $40 bn valuation is fair, particularly in the context of its...

Arun George

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