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>Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.</p><p>With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.</p><p>The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.</p><p>We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.</p>

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

Quantitative Analysis

<p>The property sector in China has been in the spotlight over the last few years. Regulators have made various attempts to temper price growth but the silver bullet has been elusive so far.</p><p>The powers that be realise that the lack of affordable housing is one of the reasons for China's birth rate dropping and there is now a renewed effort to ensure that property prices do not continue to run up. As part of the measures that started with the 'Three Red Lines' almost a year ago, Bloomberg reports that China has halted PE funds from raising money to invest in residential property developments.</p><p>We take a look at some of the regulatory changes that have been implemented over the last year and see how the companies in the sector are faring. We then look for stocks with similar characteristics but different stock returns over the last year to find trade opportunities.</p>

The property sector in China has been in the spotlight over the last few years. Regulators have made various attempts to temper price growth but the silver bullet has been elusive so far.The powers that be realise that the lack of affordable housing is one of the reasons for China's birth rate dropping and there is now a renewed effort to ensure that property prices do not continue to run up. As part of the measures that started with the 'Three Red Lines' almost a year ago, Bloomberg reports that China has halted PE funds from raising money to invest in residential property developments.We take a look at some of the regulatory changes that have been implemented over the last year and see how the companies in the sector are faring. We then look for stocks with similar characteristics but different stock returns over the last year to find trade opportunities.

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p>Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.</p><ul><li><a href='#lucror-entity-6159'>China SCE</a></li><li><a href='#lucror-entity-13359'>Lenovo</a></li><li><a href='#lucror-entity-28672'>Powerlong Commercial Management Holdings</a></li><li><a href='#lucror-entity-31037'>Sino-Ocean Service</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.China SCELenovoPowerlong Commercial Management HoldingsSino-Ocean Service

Morning Views Asia: China SCE, Lenovo, Powerlong Commercial Management Holdings, Sino-Ocean Service

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>Back on the 10 February 2021, private hospitals and medical centers operator <a href="https://www.smartkarma.com/entities/new-frontier-health-corp" target="_blank" data-smartkarma-citation="entities:28429:1" rel="noopener">New Frontier Corporation (NFH US)</a> made an <a href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0001737422/16f0d15b-2a3a-4ad0-9ad3-85d84f2c7485.pdf" target="_blank" rel="noopener">announcement</a> it had received a preliminary non-proposal binding letter from a buyer-group, including President Carl Wu, Carnival Investments, Vivo Capital Fund IX, Max Rising International Ltd (a company affiliated with Carl Wu) - among others.</p>
<p>The group offered to acquire shares of New Frontier for $12 in cash, a 27.9% premium to last close.</p>
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<p>New Frontier has now entered into a <a href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0001737422/4394dbb2-ca20-48cd-9bf2-2c1f323694a6.pdf" target="_blank" rel="noopener">definitive merger agreement</a>, also at US$12/share.</p>
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<p>The merger is conditional on an affirmative vote from shareholders representing at least two-thirds of the shares out, and that the aggregate quantity of dissenting shares shall be less than 10% of shares out.</p>
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<p>The announcement is silent on the buyer consortium's % holding, but I estimate it to be at least 37%.</p>
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<p>This looks pretty clean. Possible completion late 4Q21.</p>
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<p>More below the fold.</p>
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Back on the 10 February 2021, private hospitals and medical centers operator New Frontier Corporation (NFH US) made an announcement it had received a preliminary non-proposal binding letter from a buyer-group, including President Carl Wu, Carnival Investments, Vivo Capital Fund IX, Max Rising International Ltd (a company affiliated with Carl Wu) - among others.
The group offered to acquire shares of New Frontier for $12 in cash, a 27.9% premium to last close.

New Frontier has now entered into a definitive merger agreement, also at US$12/share.


The merger is conditional on an affirmative vote from shareholders representing at least two-thirds of the shares out, and that the aggregate quantity of dissenting shares shall be less than 10% of shares out.


The announcement is silent on the buyer consortium's % holding, but I estimate it to be at least 37%.


This looks pretty clean. Possible completion late 4Q21.


More below the fold.


New Frontier (NYSE: NFH): Healthcare Homecoming

<p><br/> In this month’s "In-Focus" section, we discuss Chinese developers’ urban redevelopment businesses, including local governments' role in urban renewal projects and the various redevelopment models, as well as the impact of such projects on companies' financials. We also give an overview of recent bond defaults.<br/><br/> The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.<br/></p>

  In this month’s "In-Focus" section, we discuss Chinese developers’ urban redevelopment businesses, including local governments' role in urban renewal projects and the various redevelopment models, as well as the impact of such projects on companies' financials. We also give an overview of recent bond defaults.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Chinese Developers’ Urban Redevelopment Businesses - Lucror Analytics

Hong Kong

Shimao Property Holdings Limited develops real estate projects in China.

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Shimao Property Holdings (813 HK)

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

We see around 6 points of downside on the HSCEI 2022 dividend futures from the last traded price. There are more negative catalysts for the 2022...

Brian Freitas

China Property Sector: Trading Ideas

The China property sector has been in the regulatory crosshairs and new rules continue to be rolled out. We look for trading opportunities in the...

Brian Freitas

Morning Views Asia: China SCE, Lenovo, Powerlong Commercial Management Holdings, Sino-Ocean Service

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

New Frontier (NYSE: NFH): Healthcare Homecoming

I see the gross/annualised spread at 7.4%/19.8%, assuming late December completion. This looks like a pretty clean deal for around five months of...

David Blennerhassett

Asia HY Monthly - Chinese Developers’ Urban Redevelopment Businesses - Lucror Analytics

In this month’s "In-Focus" section, we discuss Chinese developers’ urban redevelopment businesses, including local governments' role in urban...

Lucror Analytics

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