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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

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/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a>, <a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a>, <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> and <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a> while there was short covering on <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/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/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <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> and <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a>. Shorts increased in the Communication Services, Information Technology and Financials sectors, while decreasing in Health Care, Real Estate and Consumer Discretionary.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 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>, <a href="https://www.smartkarma.com/entities/nagoya-railroad-co-ltd" target="_blank" data-smartkarma-citation="entities:8652:1" rel="noopener">Nagoya Railroad (9048 JP)</a>, <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a> and <a href="https://www.smartkarma.com/entities/kyushu-railway-company" target="_blank" data-smartkarma-citation="entities:23609:1" rel="noopener">Kyushu Railway Company (9142 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" data-smartkarma-citation="entities:14211:1" rel="noopener">Monex Group Inc (8698 JP)</a>, <a href="https://www.smartkarma.com/entities/tokyo-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:15457:1" rel="noopener">Tokyo Electric Power Co (9501 JP)</a>, <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp Corp (6753 JP)</a>, <a href="https://www.smartkarma.com/entities/thk-co-ltd" target="_blank" data-smartkarma-citation="entities:19572:1" rel="noopener">Thk Co Ltd (6481 JP)</a> and <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">SBI Holdings (8473 JP)</a>. Shorts increased in almost all sectors led by Information Technology, Consumer Discretionary and Industrials.</p></div><div>
<p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 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/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a> and <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a>, <a href="https://www.smartkarma.com/entities/korea-electric-power-corp" target="_blank" data-smartkarma-citation="entities:16:1" rel="noopener">Korea Electric Power (015760 KS)</a>, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> and <a href="https://www.smartkarma.com/entities/posco" target="_blank" data-smartkarma-citation="entities:208:1" rel="noopener">Posco (005490 KS)</a>.</p>
<p>In Taiwan, shorts increased 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/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a>, <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 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>, <a href="https://www.smartkarma.com/entities/taiwan-cement" target="_blank" data-smartkarma-citation="entities:19736:1" rel="noopener">Taiwan Cement (1101 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a>, <a href="https://www.smartkarma.com/entities/walsin-technology-corp" target="_blank" data-smartkarma-citation="entities:11084:1" rel="noopener">Walsin Technology (2492 TT)</a>, <a href="https://www.smartkarma.com/entities/foxconn-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:11950:1" rel="noopener">Foxconn Technology (2354 TT)</a>, <a href="https://www.smartkarma.com/entities/global-unichip-corp" target="_blank" data-smartkarma-citation="entities:10305:1" rel="noopener">Global Unichip (3443 TT)</a> and <a href="https://www.smartkarma.com/entities/zhen-ding-technology-holding-ltd" target="_blank" data-smartkarma-citation="entities:16830:1" rel="noopener">Zhen Ding Technology Holding (4958 TT)</a>. Short notional in Taiwan is rising fast and outpacing the rise in the market.</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 Tencent (700 HK), ICBC (H) (1398 HK), Sunny Optical (2382 HK), Shenzhou Intl Group Holdings (2313 HK) and AIA Group Ltd (1299 HK) while there was short covering on Alibaba Group (9988 HK), Ping An Insurance (H) (2318 HK), Alibaba Health Information Technology (241 HK), JD.com Inc. (9618 HK) and China International Capital Corporation (3908 HK). Shorts increased in the Communication Services, Information Technology and Financials sectors, while decreasing in Health Care, Real Estate and Consumer Discretionary.In Japan, stocks increased on Oriental Land (4661 JP), Canon Inc (7751 JP), Nagoya Railroad (9048 JP), Renesas Electronics (6723 JP) and Kyushu Railway Company (9142 JP) while there was short covering on Monex Group Inc (8698 JP), Tokyo Electric Power Co (9501 JP), Sharp Corp (6753 JP), Thk Co Ltd (6481 JP) and SBI Holdings (8473 JP). Shorts increased in almost all sectors led by Information Technology, Consumer Discretionary and Industrials.
In Korea, shorts increased on Hyundai Motor Co (005380 KS), Samsung Biologics Co., (207940 KS), LG Display (034220 KS) and SK Innovation (096770 KS) while shorts were covered on HMM Co., Ltd. (011200 KS), Korea Electric Power (015760 KS), Celltrion Inc (068270 KS) and Posco (005490 KS).
In Taiwan, shorts increased on TSMC (2330 TT), Innolux Corp (3481 TT), Wan Hai Lines (2615 TT), United Microelectronics Corp (2303 TT), Taiwan Cement (1101 TT) while shorts covered on Pegatron Corp (4938 TT), Walsin Technology (2492 TT), Foxconn Technology (2354 TT), Global Unichip (3443 TT) and Zhen Ding Technology Holding (4958 TT). Short notional in Taiwan is rising fast and outpacing the rise in the market.


Asia Shorts: Tencent, AIA, JD, CICC, Canon, Renesas, Monex, HMC, LGD, HMM, KEPCO, Innolux, Wan Hai

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<p>Although <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> has still significantly outperformed both <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> and 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> on a 12month basis, it has significantly lagged over, especially, the past 3months as we have witnessed increased anti-monopoly regulatory efforts from the State Administration for Market Regulation (SAMR) as well as the possibility of a regulatory-induced restructuring of its financial services operations along with the prospect for slowing games revenue growth (which still contributes 32% to Group Revenue and &gt;50% to Group Gross Profit). </p><p>In this insight, I take a closer look at the Chinese online games industry, its long-term opportunity in the context of the global games industry, and the relative performance of key games developers and publishers. With online games revenue growth set to decelerate significantly this year, of the high base set during the stay-at-home COVID-19 impacted 2020, Tencent should be able to draw on its competitive advantages to continue its relative outperformance.</p>

Although Tencent (700 HK) has still significantly outperformed both NetEase (9999 HK) and the Hong Kong Hang Seng Index (HSI INDEX) on a 12month basis, it has significantly lagged over, especially, the past 3months as we have witnessed increased anti-monopoly regulatory efforts from the State Administration for Market Regulation (SAMR) as well as the possibility of a regulatory-induced restructuring of its financial services operations along with the prospect for slowing games revenue growth (which still contributes 32% to Group Revenue and &gt;50% to Group Gross Profit). In this insight, I take a closer look at the Chinese online games industry, its long-term opportunity in the context of the global games industry, and the relative performance of key games developers and publishers. With online games revenue growth set to decelerate significantly this year, of the high base set during the stay-at-home COVID-19 impacted 2020, Tencent should be able to draw on its competitive advantages to continue its relative outperformance.

Tencent: A Closer Look at the Online Games Market and Its Relative Strength as Revenue Growth Slows

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

<p><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> displays some underlying chart points of improvement with 620 the hurdle to clear for a green light to avert a re test on the macro bull support at 560. We remain constructive/macro bullish with policy headwinds as China tech still shows a lethargic rally bias. Failing at the 620 resistance sets up a tactical short or fresh down leg.</p><p>620 key resistance and 560 macro buy support are pivot points in focus.</p><p>Underside of broken trendline and price resistance lie at 620.</p><p>Buy volumes are improving.</p>

Tencent (700 HK) displays some underlying chart points of improvement with 620 the hurdle to clear for a green light to avert a re test on the macro bull support at 560. We remain constructive/macro bullish with policy headwinds as China tech still shows a lethargic rally bias. Failing at the 620 resistance sets up a tactical short or fresh down leg.620 key resistance and 560 macro buy support are pivot points in focus.Underside of broken trendline and price resistance lie at 620.Buy volumes are improving.

Tencent Macro Bull Support Met but Staring at 620 Pivot

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>It was reported by several news media outlets that the China’s competition regulator, the State Administration for Market Regulation (SAMR) has ordered <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> to establish a financial holding company to put together the company’s finance related businesses. The motive behind the new structure will be to supervise Tencent’s financial related businesses more closely and will face stringent regulations.</p><p>The SAMR earlier abruptly halted the US$37bn IPO of <a href="https://www.smartkarma.com/entities/ant-group-co-ltd" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial Services Group (6688 HK)</a>  over concerns about the growth of unregulated financial technology services in the country and Ant Group was ordered to restructure itself as a financial holding company.   </p>

It was reported by several news media outlets that the China’s competition regulator, the State Administration for Market Regulation (SAMR) has ordered Tencent (700 HK) to establish a financial holding company to put together the company’s finance related businesses. The motive behind the new structure will be to supervise Tencent’s financial related businesses more closely and will face stringent regulations.The SAMR earlier abruptly halted the US$37bn IPO of Ant Financial Services Group (6688 HK)  over concerns about the growth of unregulated financial technology services in the country and Ant Group was ordered to restructure itself as a financial holding company.   

Tencent: Regulators Order Tencent to Set Up a Financial Holding Company

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

<p><a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)'s</a> share price fell 5.5% in the US market after the company reported a 239% revenue growth YoY.   I believe there are three reasons why the market punished the stock (indeed <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/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK), and </a><a href="https://www.smartkarma.com/entities/vipshop-holdings-ltd-adr" target="_blank" data-smartkarma-citation="entities:1088:1" rel="noopener">Vipshop Holdings (VIPS US)</a><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener"> fell too, but </a><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><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener"> and </a><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>):</p><ul>
<li>The company decided against disclosing the TTM GMV.  Why? </li>
<li>The explosive revenue growth was partly due to the direct sales revenue which was recorded in only the last two quarters and the grocery delivery business, which started in August 2020.</li>
<li>The gross profit margin dropped sequentially while the operating loss ratio expanded. As I have noted in my last note and Webinar, <a href="https://www.smartkarma.com/insights/pin-duo-duo-pdd-us-four-charts-to-make-you-want-to-run" target="_blank" data-smartkarma-citation="insights:49333" rel="noopener">Pin Duo Duo (PDD US): Four Charts To Make You Want to Run</a> and <a href="https://www.smartkarma.com/insights/smartkarma-webinar-pinduoduo-pdd-us-know-when-to-fold" target="_blank" data-smartkarma-citation="insights:49910" rel="noopener">Smartkarma Webinar | Pinduoduo (PDD US): Know When to Fold</a> when revenue growth starts to slow the path to profit much be shown clearly.  </li>
</ul><p>I favor <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> and then <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> as they offer much more attractive value and less exposed to the domestic counterfeit claims risk and the potential fine for aggressive use of subsidies to acquire customers.  </p>

Pinduoduo (PDD US)'s share price fell 5.5% in the US market after the company reported a 239% revenue growth YoY.   I believe there are three reasons why the market punished the stock (indeed Meituan (3690 HK), Tencent (700 HK), and Vipshop Holdings (VIPS US) fell too, but Alibaba Group (BABA US) and JD.com Inc (ADR) (JD US)):
The company decided against disclosing the TTM GMV.  Why? 
The explosive revenue growth was partly due to the direct sales revenue which was recorded in only the last two quarters and the grocery delivery business, which started in August 2020.
The gross profit margin dropped sequentially while the operating loss ratio expanded. As I have noted in my last note and Webinar, Pin Duo Duo (PDD US): Four Charts To Make You Want to Run and Smartkarma Webinar | Pinduoduo (PDD US): Know When to Fold when revenue growth starts to slow the path to profit much be shown clearly.  
I favor Alibaba Group (BABA US) and then JD.com Inc (ADR) (JD US) as they offer much more attractive value and less exposed to the domestic counterfeit claims risk and the potential fine for aggressive use of subsidies to acquire customers.  

Pinduoduo (PDD US): Three Reasons Why PDD Fell 5.5% After a 239% Growth

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 (700 HK)

Asia Shorts: Tencent, AIA, JD, CICC, Canon, Renesas, Monex, HMC, LGD, HMM, KEPCO, Innolux, Wan Hai

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Tencent: A Closer Look at the Online Games Market and Its Relative Strength as Revenue Growth Slows

In this insight, I take a closer look at the Chinese online games industry, its long-term opportunity in a global context, and the relative...

Wium Malan, CFA

Tencent Macro Bull Support Met but Staring at 620 Pivot

Tencent (700 HK) 620 the hurdle/pivot to clear for a green light to avert a re test on the macro bull support at 560. Policy headwinds as China...

Thomas Schroeder

Tencent: Regulators Order Tencent to Set Up a Financial Holding Company

Several news media outlets report that the SAMR has ordered Tencent to establish a financial holding company to put together its finance related...

Shifara Samsudeen, ACMA, CGMA

Pinduoduo (PDD US): Three Reasons Why PDD Fell 5.5% After a 239% Growth

Pinduoduo reported 239% revenue growth in 1Q21, but the stock fell 5.5%. I offer three reasons why the stock fell: GMV, revenue, and loss margins.

Mitchell Kim

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