Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<ul>
<li>The market is looking for a signal of an easing of regulatory pressures on China BigTech</li>
<li>
<a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> is in the eye of the regulatory storm, first with the crackdown on the Ant IPO, then with the anti-trust restrictions on Big Tech and more recently with China regulatory bodies focusing on US listed China tech</li>
<li>The share price is now close to the pandemic low of March 2020, having fallen a further 20% since the end of April</li>
<li>Alibaba valuations are compelling, even versus its China BigTech peers, and, less surprisingly, compared to <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a>
</li>
<li>Alibaba’s market capitalization to revenue discount to its core peers has narrowed somewhat, as Chinese regulators have extended their focus on BigTech beyond the Alibaba group, but remains elevated</li>
<li>Furthermore, Alibaba’s premium to Amazon in terms of market capitalization to revenue has totally dissipated</li>
<li>We stick with our positive view on Alibaba and we believe that, even though regulatory risks have yet to recede, the secular growth story - albeit dented - in China tech still holds and that in the case of Alibaba, its modest valuations stand out</li>
<li>Risks to our positive view on Alibaba include further regulatory hurdles, such as market share limitations and tighter controls on big data, as well as client loss as a result of these regulatory limitations</li>
</ul>


The market is looking for a signal of an easing of regulatory pressures on China BigTech

Alibaba Group (BABA US) is in the eye of the regulatory storm, first with the crackdown on the Ant IPO, then with the anti-trust restrictions on Big Tech and more recently with China regulatory bodies focusing on US listed China tech
The share price is now close to the pandemic low of March 2020, having fallen a further 20% since the end of April
Alibaba valuations are compelling, even versus its China BigTech peers, and, less surprisingly, compared to Amazon.com Inc (AMZN US)

Alibaba’s market capitalization to revenue discount to its core peers has narrowed somewhat, as Chinese regulators have extended their focus on BigTech beyond the Alibaba group, but remains elevated
Furthermore, Alibaba’s premium to Amazon in terms of market capitalization to revenue has totally dissipated
We stick with our positive view on Alibaba and we believe that, even though regulatory risks have yet to recede, the secular growth story - albeit dented - in China tech still holds and that in the case of Alibaba, its modest valuations stand out
Risks to our positive view on Alibaba include further regulatory hurdles, such as market share limitations and tighter controls on big data, as well as client loss as a result of these regulatory limitations


Alibaba (BABA US) – Looking for a Reprieve from Regulatory Headwinds

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

*What’s Up With WeChat: Mainland China appears to have taken additional action against Tencent Holdings (700.HK) [Tencent], following Monday’s regulatory edict. Tencent is suspending new user registrations for its WeChat services, as it is undergoing a “security technical upgrade” in accordance with relevant laws and regulations. WeChat is Tencent’s most important business, and dominates mainland Chinese social media; and *Pain Trade Coming:Tencent is widely expected pay a large fine. In addition, Tencent may have to give up its exclusive music rights and possibly dispose of Kuwo and Kugou. Further, we have no doubt that Tencent will also follow Alibaba Group (BABA.US) [Alibaba] in their formation of a financial holding company. For Tencent, WeChat Pay and the broader lending/deposit taking business are likely to be reined-in. At CNY 38.5 bn for full year 2020, FinTech represents a growing 28.8% of revenue – and is a key and growing component of Tencent’s current and future results. No matter what spin that Tencent wants to place on its other businesses, an FHC represents significant downside risks. Earnings will compress, as capital requirements increase.

*What’s Up With WeChat: Mainland China appears to have taken additional action against Tencent Holdings (700.HK) [Tencent], following Monday’s regulatory edict. Tencent is suspending new user registrations for its WeChat services, as it is undergoing a “security technical upgrade” in accordance with relevant laws and regulations. WeChat is Tencent’s most important business, and dominates mainland Chinese social media; and *Pain Trade Coming:Tencent is widely expected pay a large fine. In addition, Tencent may have to give up its exclusive music rights and possibly dispose of Kuwo and Kugou. Further, we have no doubt that Tencent will also follow Alibaba Group (BABA.US) [Alibaba] in their formation of a financial holding company. For Tencent, WeChat Pay and the broader lending/deposit taking business are likely to be reined-in. At CNY 38.5 bn for full year 2020, FinTech represents a growing 28.8% of revenue – and is a key and growing component of Tencent’s current and future results. No matter what spin that Tencent wants to place on its other businesses, an FHC represents significant downside risks. Earnings will compress, as capital requirements increase.

Telco/Internet specialist

Kirk Boodry

Redex Research

The more news that comes out, the worse it seems to get for Didi Global. A coalition of regulators descended on Didi headquarters last Friday as the company’s decision to go public despite Cyberspace Administration (CAC) admonishments it should wait have been taken as a challenge to the government. We expect management saw an opportunity to grab a high valuation with super Q1 numbers which in turn was sweetened by a lucrative options award and that may have made them complacent. We don’t know where regulators will take this but we do feel confident in saying that there are no quick fixes here – too many regulators are involved now and it will likely take months for the company to get out from under this level of scrutiny.

The more news that comes out, the worse it seems to get for Didi Global. A coalition of regulators descended on Didi headquarters last Friday as the company’s decision to go public despite Cyberspace Administration (CAC) admonishments it should wait have been taken as a challenge to the government. We expect management saw an opportunity to grab a high valuation with super Q1 numbers which in turn was sweetened by a lucrative options award and that may have made them complacent. We don’t know where regulators will take this but we do feel confident in saying that there are no quick fixes here – too many regulators are involved now and it will likely take months for the company to get out from under this level of scrutiny.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

Tencent short call from 620 targeted 560 and the break below 560 set in motion a fresh sell signal that is showing increasing bear pressure below recent support  at 510 with 410/20 the next major support zone in our cross hairs.Today's gap is important if we cannot muster an uptick to close or partially close, we will head lower with higher momentum.RSI is nearing oversold levels and due to bottom Tuesday or Wednesday and bounce into late July ahead of a more turbulent August cycle.

Tencent short call from 620 targeted 560 and the break below 560 set in motion a fresh sell signal that is showing increasing bear pressure below recent support  at 510 with 410/20 the next major support zone in our cross hairs.Today's gap is important if we cannot muster an uptick to close or partially close, we will head lower with higher momentum.RSI is nearing oversold levels and due to bottom Tuesday or Wednesday and bounce into late July ahead of a more turbulent August cycle.

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

Hong Kong SFC reported aggregate short position as of Jul 16. The aggregate short value for equities increased by $1,542m (+2.2%) WoW and increased by $434m (+0.6%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($5,203m, +6.8% WoW), Zhongsheng Group Holdings Limited/881 HK($2,286m, +1.6% WoW), China Merchants Bank Co., Ltd./3968 HK($2,097m, +17.2% WoW), Tencent Holdings Limited/700 HK($1,977m, +18.2% WoW), Anta Sports Products Limited/2020 HK($1,845m, +2.6% WoW).<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/220/449/original/Hong_Kong_Market_Short_Position_Value_%28line%29_and_1W_Changes_%28bar%29_%28%24m%292021-07-24+11_39_55.png?1627273518" class="editor-image img-responsive" data-smartkarma-image-id="220449"></figure></section>

Hong Kong SFC reported aggregate short position as of Jul 16. The aggregate short value for equities increased by $1,542m (+2.2%) WoW and increased by $434m (+0.6%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($5,203m, +6.8% WoW), Zhongsheng Group Holdings Limited/881 HK($2,286m, +1.6% WoW), China Merchants Bank Co., Ltd./3968 HK($2,097m, +17.2% WoW), Tencent Holdings Limited/700 HK($1,977m, +18.2% WoW), Anta Sports Products Limited/2020 HK($1,845m, +2.6% WoW).

HK Short Interest: Short Spiked for Bilibili

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

Alibaba (BABA US) – Looking for a Reprieve from Regulatory Headwinds

Alibaba remains in the Chinese regulators' sights, with the share price falling further in 3Q21; yet its valuations, relative to its China peers,...

Victor Galliano

Tencent Holdings – Only The Beginning

TENCENT: Mainland China appears to have taken action against Tencent, with suspension of WeChat new user registrations. Tencent is expected pay a...

Thomas J. Monaco

Didi Global - Greed Is Not Always Good

Regulatory pressure has exploded and there are no quick fixes – too many regulators are involved and it will take months to get out from this. A...

Kirk Boodry

Tencent Support Break

Tencent short call from 620 targeted 560 and the break below 560 set in motion a fresh sell signal that shows bear pressure below 510 support. 410...

Thomas Schroeder

HK Short Interest: Short Spiked for Bilibili

We highlight Bilibili (9262 HK) as the stock with the biggest increase in short position on a Week-on-week basis based on our analysis in the...

Ke Yan, CFA, FRM

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