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-479'>Evergrande Real Estate Group</a></li><li><a href='#lucror-entity-84'>Dalian Wanda Commercial Properties</a></li><li><a href='#lucror-entity-29239'>Sunac Services</a></li><li><a href='#lucror-entity-14152'>Yanlord Land</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.Evergrande Real Estate GroupDalian Wanda Commercial PropertiesSunac ServicesYanlord Land

Morning Views Asia: Evergrande Real Estate Group, Dalian Wanda Commercial Properties, Sunac Services

<p><br/> The Asia HY Trade Book for the month of December includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index.<br/></p>

  The Asia HY Trade Book for the month of December includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - December 2020 - Lucror Analytics

Credit Analyst, Lucror Analytics

Chuanyi Zhou

Credit Analyst

<p><br />  We view Sunac as "High Risk" on the LARA scale. Our assessment reflects the company's: [1] rapid growth (and the associated risk); [2] debt-funded expansion; [3] weak debt maturity profile, with substantial short- and medium-term bank loans; and [4] poor operating margins. These factors are partly mitigated by the company’s fast cash conversion and proven ability to access capital markets. Sunac may remain highly levered as it grows quickly, expanding into other major T1 and T2 cities in southern and western China. The company also continues to seek expansion opportunities through acquisitions, which could further weaken the balance sheet.<br /><br />  Our fundamental Credit Bias on Sunac is "Stable", based on the signs of recovery in contracted sales and the company's progress in deleveraging. We like Sunac's solid saleable resources, good track record of sales execution and access to funding. That said, we remain cautious on the company's liquidity profile, investment discipline and lack of transparency.<br /><br />  We view the company as "Weak" on the LAGA scale, mainly on account of: [1] the poor investment discipline and disclosure; [2] substantial related-party transactions; and [3] Chairman Sun Hongbin's 45.4% control and track record of aggressive management. These negatives are partly offset by the strong Executive Board.<br /></p>

   We view Sunac as "High Risk" on the LARA scale. Our assessment reflects the company's: [1] rapid growth (and the associated risk); [2] debt-funded expansion; [3] weak debt maturity profile, with substantial short- and medium-term bank loans; and [4] poor operating margins. These factors are partly mitigated by the company’s fast cash conversion and proven ability to access capital markets. Sunac may remain highly levered as it grows quickly, expanding into other major T1 and T2 cities in southern and western China. The company also continues to seek expansion opportunities through acquisitions, which could further weaken the balance sheet.    Our fundamental Credit Bias on Sunac is "Stable", based on the signs of recovery in contracted sales and the company's progress in deleveraging. We like Sunac's solid saleable resources, good track record of sales execution and access to funding. That said, we remain cautious on the company's liquidity profile, investment discipline and lack of transparency.    We view the company as "Weak" on the LAGA scale, mainly on account of: [1] the poor investment discipline and disclosure; [2] substantial related-party transactions; and [3] Chairman Sun Hongbin's 45.4% control and track record of aggressive management. These negatives are partly offset by the strong Executive Board. 

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>At long last, Hang Seng Indexes (HSIL) has released the consultation paper on the "Proposal to enhance 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> as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market". Market participants have until 24 January to submit their views to the HSIL.</p><p>There are 5 main proposals in the consultation paper:</p><ol>
<li>Select constituents by industry group based on a target coverage for each industry group</li>
<li>Increase the number of constituents to between 65 to 80</li>
<li>Removal of the Minimum Listing History requirement for eligible candidates</li>
<li>Maintain a certain number of constituents classified as Hong Kong companies to sustain the level of representation of Hong Kong portion in the index</li>
<li>Lower the weighting cap of individual constituents from 10% to 8%, and increase the weighting cap of WVRs and Secondary Listings from 5% to 8%.</li>
</ol><p>The simulated one-way turnover of increasing the number of constituents to between 65-80 is estimated at 15-20% and HSIL proposes to implement the transition to the enhanced methodology within one year.</p><p>In this Insight, we look at the impact on the index from the proposed changes.</p>

At long last, Hang Seng Indexes (HSIL) has released the consultation paper on the "Proposal to enhance the Hong Kong Hang Seng Index (HSI INDEX) as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market". Market participants have until 24 January to submit their views to the HSIL.There are 5 main proposals in the consultation paper:
Select constituents by industry group based on a target coverage for each industry group
Increase the number of constituents to between 65 to 80
Removal of the Minimum Listing History requirement for eligible candidates
Maintain a certain number of constituents classified as Hong Kong companies to sustain the level of representation of Hong Kong portion in the index
Lower the weighting cap of individual constituents from 10% to 8%, and increase the weighting cap of WVRs and Secondary Listings from 5% to 8%.
The simulated one-way turnover of increasing the number of constituents to between 65-80 is estimated at 15-20% and HSIL proposes to implement the transition to the enhanced methodology within one year.In this Insight, we look at the impact on the index from the proposed changes.

HSI Market Consultation - Wide Ranging Changes Proposed

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> and <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a> and <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>. Shorts decreased in most sectors led by Communication Services, Financials, Industrials, Real Estate, Energy and Utilities.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">Ana Holdings (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/suzuki-motor-corp" target="_blank" data-smartkarma-citation="entities:732:1" rel="noopener">Suzuki Motor (7269 JP)</a>, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-group" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi UFJ Financial (MUFG) (8306 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/tdk-corp" target="_blank" data-smartkarma-citation="entities:18847:1" rel="noopener">TDK Corp (6762 JP)</a>. Sectorally, shorts increased on Industrials, Health Care, Financials and Consumer Discretionary names.</p></div><div><p>In Korea, there was large short covering on <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics Co., (207940 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> and <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a>, <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> and <a href="https://www.smartkarma.com/entities/compeq-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:9306:1" rel="noopener">Compeq Manufacturing (2313 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/winbond-electronics-corp" target="_blank" data-smartkarma-citation="entities:9177:1" rel="noopener">Winbond Electronics (2344 TT)</a>, <a href="https://www.smartkarma.com/entities/unimicron-technology-corp" target="_blank" data-smartkarma-citation="entities:18778:1" rel="noopener">Unimicron Technology (3037 TT)</a> and <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Ping An Insurance (H) (2318 HK), Meituan (3690 HK), Xiaomi Corp (1810 HK) and Anta Sports Products (2020 HK) while there was short covering on Tencent Holdings (700 HK), China Construction Bank H (939 HK), Sunac China Holdings (1918 HK) and HSBC Holdings (5 HK). Shorts decreased in most sectors led by Communication Services, Financials, Industrials, Real Estate, Energy and Utilities.In Japan, stocks that saw the most shorts were Ana Holdings (9202 JP), Suzuki Motor (7269 JP), Shionogi &amp; Co (4507 JP) and Mitsubishi UFJ Financial (MUFG) (8306 JP) while shorts decreased on Fast Retailing (9983 JP), Tokyo Electron (8035 JP), Canon Inc (7751 JP) and TDK Corp (6762 JP). Sectorally, shorts increased on Industrials, Health Care, Financials and Consumer Discretionary names.In Korea, there was large short covering on Celltrion Inc (068270 KS), Samsung Biologics Co., (207940 KS), Samsung Electronics (005930 KS) and SK Hynix (000660 KS). Stocks in Taiwan that saw the highest increase in shorts were Evergreen Marine Corp (2603 TT), Largan Precision (3008 TT), United Microelectronics Corp (2303 TT) and Compeq Manufacturing (2313 TT) while shorts were covered on TSMC (2330 TT), Winbond Electronics (2344 TT), Unimicron Technology (3037 TT) and Nanya Technology (2408 TT). 

Asia Short Interest: BIG Covering in HK & Korea

China

Sunac China Holdings Limited is a real estate development company.

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Sunac China Holdings (1918 HK)

Morning Views Asia: Evergrande Real Estate Group, Dalian Wanda Commercial Properties, Sunac Services

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

Lucror Analytics

Asia HY Trade Book - December 2020 - Lucror Analytics

The Asia HY Trade Book for the month of December includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

Sunac - Tear Sheet - Lucror Analytics

We view Sunac as "High Risk" on the LARA scale. Our assessment reflects the company's: [1] rapid growth (and the associated risk); [2]...

Lucror Analytics

HSI Market Consultation - Wide Ranging Changes Proposed

HSIL has announced the market consultation for the Hang Seng Index. The conclusions should be announced in February. If the market agrees to most...

Brian Freitas

Asia Short Interest: BIG Covering in HK & Korea

There was a big drop in short interest in Hong Kong and Korea while shorts rose in Japan mainly led by ANA on the back of the offering. Shorts in...

Brian Freitas

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