Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

KWG Living Group / Equity Capital Markets

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<p>This week in StubWorld ...</p>
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<a href="https://www.smartkarma.com/entities/kwg-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:12601:1" rel="noopener">Kwg Property Holding (1813 HK)</a> is trading rich to peers after the in-specie distribution of soon-to-be-listed <a href="https://www.smartkarma.com/entities/kwg-living-group" target="_blank" data-smartkarma-citation="entities:29231:1" rel="noopener">KWG Living Group (3913 HK)</a>. KWG Living itself will need to hit significant earnings growth targets to justify its implied market valuation.</div>
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<p>Preceding my comments on KWG are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % - of at least 20%.</p>
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This week in StubWorld ...



Kwg Property Holding (1813 HK) is trading rich to peers after the in-specie distribution of soon-to-be-listed KWG Living Group (3913 HK). KWG Living itself will need to hit significant earnings growth targets to justify its implied market valuation.

Preceding my comments on KWG are the weekly setup/unwind tables for Asia-Pacific Holdcos.



These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % - of at least 20%.




Event-Driven

Kingboard Laminates Holdings / Event-Driven

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<p>This week in StubWorld ...</p>
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<a href="https://www.smartkarma.com/entities/kingboard-laminates-hldg-ltd" target="_blank" data-smartkarma-citation="entities:10276:1" rel="noopener">Kingboard Laminates Holdings (1888 HK)</a>'s announcement of a possible Chi-Next listing sends <a href="https://www.smartkarma.com/entities/kingboard-holdings-ltd" target="_blank" data-smartkarma-citation="entities:8122:1" rel="noopener">Kingboard Holdings (148 HK)</a>'s implied stub to an all-time low.<br><br><a href="https://www.smartkarma.com/entities/8122" target="_blank" data-smartkarma-citation="entities:8122:1" rel="noopener"></a><a href="https://www.smartkarma.com/entities/people-s-insurance-co-grou-h" target="_blank" data-smartkarma-citation="entities:362:1" rel="noopener">People's Insurance Co (PICC) (1339 HK)</a> trading rich - possibly as the A-share premium rallies. </div>
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<p>Preceding my comments on KBC and PICC are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % - of at least 20%.</p>
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This week in StubWorld ...



Kingboard Laminates Holdings (1888 HK)'s announcement of a possible Chi-Next listing sends Kingboard Holdings (148 HK)'s implied stub to an all-time low.  People's Insurance Co (PICC) (1339 HK) trading rich - possibly as the A-share premium rallies. 


Preceding my comments on KBC and PICC are the weekly setup/unwind tables for Asia-Pacific Holdcos.



These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed as a % - of at least 20%.



StubWorld: Kingboards' All-Time Low Implied Stub; PICC Trading Rich

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<p>The Hang Seng Stock Connect China AH Premium Index (HSAHP) measures the absolute price premium or discount of A-shares over H-shares for the largest and most liquid mainland China companies with both A-share and H-share listings.</p><p>The HSAHP Index has fluctuated a lot over the last 10 years, reaching a high of 149.03 (A-shares trading at a 49% premium to H-shares) in July 2015 and a low of 88.97 (A-shares trading at a discount of 11% to H-shares) in July 2014.</p><p>With retail investors rushing in to equities in China and pushing stocks higher in the mainland versus their Hong Kong line, a correction in markets could see the AH premium revert by around 10% as investors head for the exit. Insurance stocks and brokerages are trading at high AH premiums and near the top of the 5 year range.</p><p>In this Insight, we look at how the HSAHP index has moved over time and identify trading opportunities where the premium is trading near the high and low end of its historical ranges.</p>

The Hang Seng Stock Connect China AH Premium Index (HSAHP) measures the absolute price premium or discount of A-shares over H-shares for the largest and most liquid mainland China companies with both A-share and H-share listings.The HSAHP Index has fluctuated a lot over the last 10 years, reaching a high of 149.03 (A-shares trading at a 49% premium to H-shares) in July 2015 and a low of 88.97 (A-shares trading at a discount of 11% to H-shares) in July 2014.With retail investors rushing in to equities in China and pushing stocks higher in the mainland versus their Hong Kong line, a correction in markets could see the AH premium revert by around 10% as investors head for the exit. Insurance stocks and brokerages are trading at high AH premiums and near the top of the 5 year range.In this Insight, we look at how the HSAHP index has moved over time and identify trading opportunities where the premium is trading near the high and low end of its historical ranges.

China AH Premium: Trade Ideas As We Near Previous Highs

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>* Restructure Of AIA China: </em></strong>The China Bank and Insurance Regulatory Commission (CBIRC) has approved AIA’s (1299.HK) life insurance group December 2019 application to restructure its Shanghai-based life insurance branch into a wholly-owned subsidiary. The new subsidiary will become mainland China’s first 100% foreign-owned company to receive such regulatory permission;</p><p><strong><em>* Long-term Positives:</em></strong> Over time we would anticipate the following: improved operating efficiencies,  widened latitude to invest, and significant growth from new provinces;  and</p><p><strong><em>*Negative Tax Implications:</em></strong> For mainland Chinese subsidiaries, remittances to the AIA parent incur a 5% withholding tax – whereas branch office remittances do not incur any withholding taxes. By our calculation, this could lead to a 5% decline in both VONB and VIF for AIA China.</p>

* Restructure Of AIA China: The China Bank and Insurance Regulatory Commission (CBIRC) has approved AIA’s (1299.HK) life insurance group December 2019 application to restructure its Shanghai-based life insurance branch into a wholly-owned subsidiary. The new subsidiary will become mainland China’s first 100% foreign-owned company to receive such regulatory permission;* Long-term Positives: Over time we would anticipate the following: improved operating efficiencies,  widened latitude to invest, and significant growth from new provinces;  and*Negative Tax Implications: For mainland Chinese subsidiaries, remittances to the AIA parent incur a 5% withholding tax – whereas branch office remittances do not incur any withholding taxes. By our calculation, this could lead to a 5% decline in both VONB and VIF for AIA China.

PICC Property & Casualty H / Equity Bottom-Up

<p><em><strong>* Strong 1Q20 Numbers:</strong></em> PICC Group's 1Q20 earnings amounted to CNY 7.1 bn, increasing 5.8x linked quarter reflective primarily of both a CNY 36.9 bn (32.3%) increase in net earned premium and a CNY 8.8 bn (26.9%) decline in SG&amp;A;  </p><p><em><strong>* Time to Grow Up:</strong></em> Unfortunately, given the level of illiquid securities on balance sheet and the devastating impact that the US trade war and COVID-19 has had on the value of mainland Chinese assets, we simply do not believe that there are no true nor permanent negative marks in PICC's investment portfolio. If the rest of the planet is taking marks, why can't mainland China's insurers; and  </p><p><em><strong>* PICC P&amp;C Strength: </strong></em>We find that PICC P&amp;C’s combined ratio improved from 102.4% to 97.1% - reflecting an improved expense ratio from 37.8% to 30.2% linked quarter. Further, we note that CNY 13 bn in additional claims reserves were provisioned in 1Q20. </p>

* Strong 1Q20 Numbers: PICC Group's 1Q20 earnings amounted to CNY 7.1 bn, increasing 5.8x linked quarter reflective primarily of both a CNY 36.9 bn (32.3%) increase in net earned premium and a CNY 8.8 bn (26.9%) decline in SG&amp;A;  * Time to Grow Up: Unfortunately, given the level of illiquid securities on balance sheet and the devastating impact that the US trade war and COVID-19 has had on the value of mainland Chinese assets, we simply do not believe that there are no true nor permanent negative marks in PICC's investment portfolio. If the rest of the planet is taking marks, why can't mainland China's insurers; and  * PICC P&amp;C Strength: We find that PICC P&amp;C’s combined ratio improved from 102.4% to 97.1% - reflecting an improved expense ratio from 37.8% to 30.2% linked quarter. Further, we note that CNY 13 bn in additional claims reserves were provisioned in 1Q20. 

PICC Group – Investment Returns Appear Non-Sensical

China

The People's Insurance Company (Group) of China Limited, through its subsidiaries, offers a range of property and casualty insurance products. The Company also offers asset management services for a variety of customers throughout China.

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People's Insurance (PICC) (1339 HK)

StubWorld: KWG Living - Crowded In Crowd

Kwg Prop (1813 HK) is trading rich to peers after the in-specie distribution of soon-to-be-listed KWG Living (3913 HK). KWGL will need to hit...

David Blennerhassett

StubWorld: Kingboards' All-Time Low Implied Stub; PICC Trading Rich

This weekly stub wrap covers Kingboard Chemical's (148 HK) all-time low implied stub after Kingboard Laminates (1888 HK) announces a possible...

David Blennerhassett

China AH Premium: Trade Ideas As We Near Previous Highs

The Hang Seng Stock Connect China AH Premium Index (HSAHP) measures the absolute price premium or discount of A-shares over H-shares for the...

Brian Freitas

AIA – Shanghai Restructure Approved

* Restructure Of AIA China: The China Bank and Insurance Regulatory Commission (CBIRC) has approved AIA’s (1299.HK) life insurance group December...

Thomas J. Monaco

PICC Group – Investment Returns Appear Non-Sensical

* Strong 1Q20 Numbers: PICC Group's 1Q20 earnings amounted to CNY 7.1 bn, increasing 5.8x linked quarter reflective primarily of both a CNY 36.9 bn...

Thomas J. Monaco

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