Research from EqualOcean, EqualOcean

EqualOcean

Research from EqualOcean

EqualOcean is an investment research firm and information service provider focusing on China's Technology, Automotive and Consumer Internet sectors. With unique research and due diligence methodology, we provide tailored insights into a wide range of industries and companies, empowering our clients' value-added decisions.

Founded in 2014, EqualOcean is headquartered in Beijing and has offices in Shanghai, Shenzhen and New York.

Thematic (Sector/Industry)

<ul>
<li>Despite a great Q3 overall, Tesla in China sees demand reduce as competitors begin to catch up.</li>
<li>Domestic brands are gaining on Tesla's share of Chinese EV market</li>
<li>More players both new and old - Nonetheless, as other emerging players begin to throw their hat in the ring like Xiaomi, Evergrande Auto, as well as international makers like Volkswagen and Toyota, there could be less room for Tesla to dominate demand.</li>
</ul>


Despite a great Q3 overall, Tesla in China sees demand reduce as competitors begin to catch up.
Domestic brands are gaining on Tesla's share of Chinese EV market
More players both new and old - Nonetheless, as other emerging players begin to throw their hat in the ring like Xiaomi, Evergrande Auto, as well as international makers like Volkswagen and Toyota, there could be less room for Tesla to dominate demand.


Tesla's Record Revenue in Q3 Reflective of China's Solid EV Foundation

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<ul>
<li>The week that was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights from across South East Asia plus value added commentary</li>
<li>This week includes insights on <a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a>, <a href="https://www.smartkarma.com/entities/xl-axiata-tbk-pt" target="_blank" data-smartkarma-citation="entities:15028:1" rel="noopener">XL Axiata (EXCL IJ)</a>, <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP),</a><a href="https://www.smartkarma.com/entities/synergy-grid-development-philippines" target="_blank" data-smartkarma-citation="entities:23221:1" rel="noopener">Synergy Grid &amp; Development Philippines (SGP PM)</a> IPO, and Philippine Banks</li>
<li>There are also insights on Sea's Internet Economy, <a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press (SPH SP)</a>, <a href="https://www.smartkarma.com/entities/singapore-telecommunications" target="_blank" data-smartkarma-citation="entities:20:1" rel="noopener">Singtel (ST SP)</a>, <a href="https://www.smartkarma.com/entities/cisarua-mountain-dairy-pt-tbk" target="_blank" data-smartkarma-citation="entities:34999:1" rel="noopener">Cisarua Mountain Dairy</a> IPO, <a href="https://www.smartkarma.com/entities/tiki-corp" target="_blank" data-smartkarma-citation="entities:35014:1" rel="noopener">Tiki</a> IPO, <a href="https://www.smartkarma.com/entities/siam-makro-public-co-ltd" target="_blank" data-smartkarma-citation="entities:5577:1" rel="noopener">Siam Makro,</a> and <a href="https://www.smartkarma.com/entities/bank-negara-indonesia-persero" target="_blank" data-smartkarma-citation="entities:8285:1" rel="noopener">Bank Negara Indonesia (BBNI IJ)</a> </li>
</ul>


The week that was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights from across South East Asia plus value added commentary
This week includes insights on Matahari Department Store (LPPF IJ), XL Axiata (EXCL IJ), Comfortdelgro Corp (CD SP),Synergy Grid &amp; Development Philippines (SGP PM) IPO, and Philippine Banks
There are also insights on Sea's Internet Economy, Singapore Press (SPH SP), Singtel (ST SP), Cisarua Mountain Dairy IPO, Tiki IPO, Siam Makro, and Bank Negara Indonesia (BBNI IJ) 


The Week That Was in ASEAN@Smartkarma - Matahari Dept Store, Cimory IPO, and Philippine Banks

Founder & CEO Bond Angle, LLC, Bond Angle, LLC

Vicki Bryan

Founder & CEO Bond Angle, LLC

Bond Angle, LLC

Insightful commentary and analysis on bond markets and market movers, including financial, economic, and industry catalysts and management shenanigans. 

High yield market investment research

Event-Driven

<a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> stock is has been in free fall for days now, in part because investors were alarmed at the report Monday night by the China Passenger Car Association (CPCA) that its October monthly sales in China were much lower than expected.Apparently folks haven’t been paying attention because, as I long have warned clients, Tesla has been losing ground in China for most of the past year—longer than that for MIC Model 3.

Tesla Motors (TSLA US) stock is has been in free fall for days now, in part because investors were alarmed at the report Monday night by the China Passenger Car Association (CPCA) that its October monthly sales in China were much lower than expected.Apparently folks haven’t been paying attention because, as I long have warned clients, Tesla has been losing ground in China for most of the past year—longer than that for MIC Model 3.

Tesla Model 3 Sales Crashed in China in October

Founder of Antler Capital

Stanley Tsai, CFA

Macroeconomics

China's resilient export performance in October was a pleasant surprise amid a confluence of bad news on the domestic front. But export strength may be dwindling and progressively tougher comps are not the only factor to blame.
A record trade surplus. Overseas shipments once again topped estimates in October, driving the country's monthly trade surplus to USD84.5bn, the highest on record. The 27.1% growth in exports was propelled by robust global trade activity. China has also been getting a greater share of export orders thanks to still sluggish outputs from competing nations that have yet to return to full capacity. Early Christmas orders to beat shipment delays provided an extra boost (Exhibit 1).
However, price inflation has become the dominant driver, while unit growth has tailed off. Average export prices began to tick up in July and jumped over 10% y/y in September. Overseas buyers will be feeling the pinch of China's surging factory gate prices this Christmas. But more importantly, rising unit prices may suggest that we are now much farther along in the reopening trade in China's key export markets. Demand has shifted considerably from essential to discretionary items. That story may run out of steam soon.
Europe presents additional uncertainties in the coming months, as a spike in infections threatens to throttle its recovery. The EU was pivotal to China's export strength last month, buffering the deceleration in US orders. It remains to be seen whether a wider outbreak on the continent will be a hit to export demand or a catalyst for resurgent sales of household / electronics merchandise. What's more certain is the eventual rebound of Southeast Asia, which will chip away at orders for Chinese exports, especially if power shortages escalate in the winter months.
Price effects will likely continue to drive exports in machinery, electronics and home appliances as we approach the holiday season. That is bad news for international consumers. The average household appliance unit shipped in September had an invoice price of USD26, up almost 55% from January 2020. On a lighter note, auto exports have been a bright spot all year despite supply chain disruptions, fueled by sales of new energy vehicles. And China has Elon Musk to thank for it. 
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 100%;">Exhibit 1: China's Export / Import Growth and Trade Balance</td>
</tr>
<tr>
<td style="width: 100%;">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/449/original/image_225136958701636405007254.png?1636405007" class="editor-image img-responsive" data-smartkarma-image-id="240449"></figure>
</td>
</tr>
<tr>
<td style="width: 100%;">Sources: General Administration of Customs, Our analysis </td>
</tr>
</tbody>
</table>

China's resilient export performance in October was a pleasant surprise amid a confluence of bad news on the domestic front. But export strength may be dwindling and progressively tougher comps are not the only factor to blame.
A record trade surplus. Overseas shipments once again topped estimates in October, driving the country's monthly trade surplus to USD84.5bn, the highest on record. The 27.1% growth in exports was propelled by robust global trade activity. China has also been getting a greater share of export orders thanks to still sluggish outputs from competing nations that have yet to return to full capacity. Early Christmas orders to beat shipment delays provided an extra boost (Exhibit 1).
However, price inflation has become the dominant driver, while unit growth has tailed off. Average export prices began to tick up in July and jumped over 10% y/y in September. Overseas buyers will be feeling the pinch of China's surging factory gate prices this Christmas. But more importantly, rising unit prices may suggest that we are now much farther along in the reopening trade in China's key export markets. Demand has shifted considerably from essential to discretionary items. That story may run out of steam soon.
Europe presents additional uncertainties in the coming months, as a spike in infections threatens to throttle its recovery. The EU was pivotal to China's export strength last month, buffering the deceleration in US orders. It remains to be seen whether a wider outbreak on the continent will be a hit to export demand or a catalyst for resurgent sales of household / electronics merchandise. What's more certain is the eventual rebound of Southeast Asia, which will chip away at orders for Chinese exports, especially if power shortages escalate in the winter months.
Price effects will likely continue to drive exports in machinery, electronics and home appliances as we approach the holiday season. That is bad news for international consumers. The average household appliance unit shipped in September had an invoice price of USD26, up almost 55% from January 2020. On a lighter note, auto exports have been a bright spot all year despite supply chain disruptions, fueled by sales of new energy vehicles. And China has Elon Musk to thank for it. 



Exhibit 1: China's Export / Import Growth and Trade Balance







Sources: General Administration of Customs, Our analysis 




China Macro: Surging Export Prices and An Incredibly Expensive X'mas

Forensic Analyst

Jason Yap, CFA

Forensic Accounting

On 20 August 2021, the Cyberspace Administration of China and the Ministry of Transport, together with other relevant authorities, jointly issued the Provisions on Management of Automotive Data Security (Trial) ("Auto Data Provisions"). 
The Auto Data Provisions since took effect on 1 October 2021 to limited fanfare, with media headlines instead focused on the Personal Information Protection Law ("PIPL"), which took effect on 1 November 2021, and specific affected sectors, such as <a href="https://www.reuters.com/business/chinese-online-brokers-futu-up-fintech-face-regulatory-risks-peoples-daily-2021-10-14/" target="_blank" rel="noopener">China online brokerages</a>. 
Further, on 29 October 2021, regulators issued <a href="https://asia.nikkei.com/Business/China-tech/China-to-tighten-rules-on-data-transfers-abroad-with-review-trigger" target="_blank" rel="noopener">draft data protection regulations</a> which provide that businesses in China face a national security review prior to transfers outside the country of personal information of 100,000 individuals or more.  The draft consultation period will last through 28 November 2021, following which the directives would likely take effect soon after. 
EVs of today are no longer a mere mode of transport that depend on analog platforms.  As EV companies race to develop autonomous driving technologies, most if not all EV companies now harness vast amounts of users and real-time mobility data.  Think <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>. 
Yet, apart from <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a>, Chinese EV manufacturers (all listed in the US) such as <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a>, <a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a> and <a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" data-smartkarma-citation="entities:28812:1" rel="noopener">Li Auto Inc. (LI US)</a> have remained largely unscathed from the news flow and analysis surrounding data security in China. 
In this Insight, we discuss what the Auto Data Provisions entail, whether Chinese EV companies face any repercussions from tightening of data security laws, and which one is the most at risk.

On 20 August 2021, the Cyberspace Administration of China and the Ministry of Transport, together with other relevant authorities, jointly issued the Provisions on Management of Automotive Data Security (Trial) ("Auto Data Provisions"). 
The Auto Data Provisions since took effect on 1 October 2021 to limited fanfare, with media headlines instead focused on the Personal Information Protection Law ("PIPL"), which took effect on 1 November 2021, and specific affected sectors, such as China online brokerages. 
Further, on 29 October 2021, regulators issued draft data protection regulations which provide that businesses in China face a national security review prior to transfers outside the country of personal information of 100,000 individuals or more.  The draft consultation period will last through 28 November 2021, following which the directives would likely take effect soon after. 
EVs of today are no longer a mere mode of transport that depend on analog platforms.  As EV companies race to develop autonomous driving technologies, most if not all EV companies now harness vast amounts of users and real-time mobility data.  Think DiDi Global (DIDI US). 
Yet, apart from Tesla Motors (TSLA US), Chinese EV manufacturers (all listed in the US) such as NIO Inc (NIO US), Xpeng (XPEV US) and Li Auto Inc. (LI US) have remained largely unscathed from the news flow and analysis surrounding data security in China. 
In this Insight, we discuss what the Auto Data Provisions entail, whether Chinese EV companies face any repercussions from tightening of data security laws, and which one is the most at risk. 

Nio Inc (Nio US) - Automotive Data Security, Delivery Declines and Hefei Investors

United States

Tesla Inc. operates as a multinational automotive and clean energy company. The Company designs and manufactures electric vehicles, battery energy storage from home to grid-scale, solar panels and solar roof tiles, and related products and services. Tesla owns its sales and service network and sells electric power train components to other automobile manufacturers.

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Tesla (TSLA US)

Tesla's Record Revenue in Q3 Reflective of China's Solid EV Foundation

Share prices for Tesla have soared to all-time highs after earnings and amidst reports of a 100,000-car deal with car rental company Hertz.

EqualOcean

The Week That Was in ASEAN@Smartkarma - Matahari Dept Store, Cimory IPO, and Philippine Banks

The week that was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights from across South East...

Angus Mackintosh

Tesla Model 3 Sales Crashed in China in October

Tesla stock is has been in free fall for days now, in part because investors were alarmed that October monthly sales in China were weaker than...

Vicki Bryan

China Macro: Surging Export Prices and An Incredibly Expensive X'mas

China's resilient export performance last month was a pleasant surprise amid a confluence of bad news at home. But export strength may be dwindling...

Stanley Tsai, CFA

Nio Inc (Nio US) - Automotive Data Security, Delivery Declines and Hefei Investors

In this Insight, we discuss the impact of tightening auto data security laws, Oct 2021 delivery declines and residual Hefei investors risks on Nio...

Jason Yap, CFA

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