China

In this briefing:

1. Global Manufacturing PMI Slump at Odds with Equity and Commodity Price Rebound
2. Ctrip (CTRP): Overcame Two Difficulties in Q4, But Market Over-Reacted to “Global No. 1”
3. Taiwan Investors Factor In China Recovery
4. StubWorld: Matheson’s Strategic Buying of Strategic

1. Global Manufacturing PMI Slump at Odds with Equity and Commodity Price Rebound

The slump in the global manufacturing PMIs that is broad-based in major economies and alarming in Japan, Korea and Taiwan, appears to reflect a disruption in global trade that may relate to US tariff policy. Services PMIs, on the other hand, are relatively stable and have recovered recently, and may help the global economy avoid a recession.  India’s PMIs have been relatively strong and may account for solid Indian currency and equity market performance.  The slump in the global manufacturing PMI is at odds with stronger global equities and commodity prices this year.  The market appears to be building confidence that the US-China trade dispute will be resolved, and the Chinese stimulus and a patient Fed will combine to revive manufacturing PMIs is coming months.

2. Ctrip (CTRP): Overcame Two Difficulties in Q4, But Market Over-Reacted to “Global No. 1”

* The recovery in 4Q2018 shows that CTRP has already survived the new law and the new competitor in 2018.
* We believe EPS will grow 12% in 2019.
* However, we believe the market has already over-reacted to the news last November that CTRP became the largest online travel agency.
* We set a target price of USD23.80, which is 32% below the market price.

3. Taiwan Investors Factor In China Recovery

It is time to go increase exposure to Taiwanese equities, if you haven’t already. Like bourses around the region, Taiwan’s stock market has rebounded from its January low and is up over 10% in two months. Underpinning our and investor optimism are expectations that Taiwan stands to benefit disproportionately from the fiscal and monetary policy easing underway in China,  that China and the US will get to some kind of trade deal and a positive reaction to TSMC’s 2019 dividend pay-out plan.

4. StubWorld: Matheson’s Strategic Buying of Strategic

This week in StubWorld …

• Jardine Matheson Hldgs (JM SP)‘s recent buying of Jardine Strategic Hldgs (JS SP) is nothing new and follows a long-term plan to fortify the cross-holding structure.

Preceding my comments on Jardine and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.

In this briefing:

1. Jiangxi Bank: “No Sooner Has One Pushed a Gourd Under Water than Another Pops Up”
2. Quick Take on Tesla Q119 Deliveries: Yes, They Were Bad
3. StubWorld: Naspers’ Restructuring Update
4. Huya Placement: Best Performing Live Streaming Stock but Beware Douyu Is Catching Up
5. China – Soaring Real Estate Loans Makes One Wonder

1. Jiangxi Bank: “No Sooner Has One Pushed a Gourd Under Water than Another Pops Up”

Jiangxi Bank Co Ltd (1916 HK) initially attracted our attention with a subpar PH Score (a quantamental value-quality gauge). The bank only scored positively on Capital Adequacy and Efficiency trends. The latter is almost certainly not a true picture.

Further analysis reveals a bank ratcheting up the credit spigot exuberantly on the back of poor asset quality fundamentals (booming substandard loans and SML expansion) with ensuing elevated asset writedowns weighing on a reducing bottom-line despite gains from securities and a lower tax provision.

2. Quick Take on Tesla Q119 Deliveries: Yes, They Were Bad

Tesla Motors (TSLA US) finally reported first-quarter production and delivery numbers late Wednesday night and, sure enough, results came in closer to my below-market estimates and trailed management guidance and market consensus (see my report Tesla’s Weak QTD Deliveries Signal March Expectation Madness).

Tesla also admitted it delivered half of its total deliveries for the entire quarter in the last nine days of March, blaming “challenges encountered” for delays in getting cars to buyers in Europe and China. But even adding cars “in transit” doesn’t cover the shortfall versus guidance and market expectations.

It also doesn’t ease investors’ concerns about cooling demand for Model 3 in the US, or the alarming drop-off in sales for Models S and X, well, everywhere.

Read on for continued Bond Angle analysis.

3. StubWorld: Naspers’ Restructuring Update

This week in StubWorld …

• Naspers Ltd (NPN SJ)‘s discount to NAV narrows as it teases out more information on spinning-off and separately listing Tencent Holdings (700 HK).

Preceding my comments on Naspers are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.

4. Huya Placement: Best Performing Live Streaming Stock but Beware Douyu Is Catching Up

Huya, a leading live streaming player in China, announced share placement of USD 550 million after market close on April 3rd. In this insight, we will look at recent developments of Huya and score the deal in our ECM Framework.

5. China – Soaring Real Estate Loans Makes One Wonder

China Construction Bank H (939 HK) (CCB) added real estate loans at more than double the amount of total corporate loans during 2018. This is something we see with many of China’s banks in the period. What is also apparent is a sharp drop in real estate NPL ratios during the year – not simply due to a larger denominator. There is nothing anecdotally or otherwise that we have seen, that should suggest a dramatically more healthy China real estate sector, e.g. property development, commercial real estate during 2018 compared with 2017. The risk is that banks are extending substantially more credit here to support weak, frail debtors.  With a weakening economy, this is not likely to last without negative consequences.

In this briefing:

1. Ctrip (CTRP): Overcame Two Difficulties in Q4, But Market Over-Reacted to “Global No. 1”
2. Taiwan Investors Factor In China Recovery
3. StubWorld: Matheson’s Strategic Buying of Strategic

1. Ctrip (CTRP): Overcame Two Difficulties in Q4, But Market Over-Reacted to “Global No. 1”

* The recovery in 4Q2018 shows that CTRP has already survived the new law and the new competitor in 2018.
* We believe EPS will grow 12% in 2019.
* However, we believe the market has already over-reacted to the news last November that CTRP became the largest online travel agency.
* We set a target price of USD23.80, which is 32% below the market price.

2. Taiwan Investors Factor In China Recovery

It is time to go increase exposure to Taiwanese equities, if you haven’t already. Like bourses around the region, Taiwan’s stock market has rebounded from its January low and is up over 10% in two months. Underpinning our and investor optimism are expectations that Taiwan stands to benefit disproportionately from the fiscal and monetary policy easing underway in China,  that China and the US will get to some kind of trade deal and a positive reaction to TSMC’s 2019 dividend pay-out plan.

3. StubWorld: Matheson’s Strategic Buying of Strategic

This week in StubWorld …

• Jardine Matheson Hldgs (JM SP)‘s recent buying of Jardine Strategic Hldgs (JS SP) is nothing new and follows a long-term plan to fortify the cross-holding structure.

Preceding my comments on Jardine and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.

In this briefing:

1. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
2. Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside
3. “Deep Doubts, Deep Wisdom; Small Doubts, Little Wisdom”
4. Bank of China: A Rich Dividend Yield Backed by the PRC.
5. What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?

1. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact

Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!

So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.

Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing. 

2. Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside

* Youku, the online TV subsidiary of BABA, is transforming its risk of loss to content providers.

* Youku is dismissing employees.

* We believe both of Youku’s decisions are positive for cost control and the operating margin will recover in FY2020.

* The P/E band suggests a price target HKD250, which is 38% upside above the market price.

3. “Deep Doubts, Deep Wisdom; Small Doubts, Little Wisdom”

Postal Savings Bank Of China (1658 HK) is outgrowing its peers on the top-line given exuberant pace of credit growth (especially in consumer lending such as credit cards but also in corporate and in agriculture). Expansion in Interest Income on earning assets is well in excess of an increase in Interest Expenses on interest-bearing Liabilities. This is not always the case in China today. Fee income is also growing by double-digits too. The bank has a huge deposit base and Liquidity is ample. In addition, “Jaws” stand out as being highly positive at 20pts given aforementioned top-line growth coupled with OPEX restraint.

However, capital remains tight and asset quality has deteriorated markedly. Despite the top-line growth and cost-control, an increasing amount of pre-impairment Income is being consumed by loan loss provisions and other asset writedowns. Substandard loans have exploded while loss loans have climbed forcefully. The bank shapes as if it is striving to grow itself out an asset quality bind. Given Balance Sheet risks, the bank has adjusted its provisioning accordingly.

The relatively meagre capital position (for example Equity/Assets or Basel 111 Leverage Ratio) while improving is surely the reason why Postal Savings cannot pay a higher dividend in comparison with say Agricultural Bank Of China (1288 HK) , Bank Of China (601988 CH), and China Construction Bank (601939 CH) which all command yields in excess of 5% and rate as income stocks. The Dividend Yield here though is not unattractive at 3.9%.

4. Bank of China: A Rich Dividend Yield Backed by the PRC.

In terms of fundamental momentum and trends (our core focus) Bank Of China (601988 CH) reported a mixed set of numbers at FY18.

While systemic asset quality issues weigh heavily on results, the bank has prudently improved its liquidity metrics, enhanced its provisioning, while cost-control remains exemplary in the face of stresses from loan quality and some systemic funding cost pressure. Underlying “jaws” are highly positive at 558bps. The improvement in Efficiency is a plus signal amidst the asset quality smoke.

All in all, it’s a stable rather than a gung-ho picture. Pre-tax Profit has barely budged since 2014.

5. What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?

Despite some signs of stabilization in China’s factory gauges the primary trend is still weakness and it might be rash for investors to read too much into the recent data given the apparent weakness in the Eurozone and the moderation form a high level of growth in the United States.  Quantitative tightening is on hold in the United States but a sharp “U-turn” to easing has not happened yet and is politically embarrassing. As inflation falls real rates are rising. Housing markets are showing signs of price weakness. Investors need to watch for signs of credit quality decay that could be an indicator of the next period of severe financial distress. 

In this briefing:

1. Quick Take on Tesla Q119 Deliveries: Yes, They Were Bad
2. StubWorld: Naspers’ Restructuring Update
3. Huya Placement: Best Performing Live Streaming Stock but Beware Douyu Is Catching Up
4. China – Soaring Real Estate Loans Makes One Wonder
5. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings

1. Quick Take on Tesla Q119 Deliveries: Yes, They Were Bad

Tesla Motors (TSLA US) finally reported first-quarter production and delivery numbers late Wednesday night and, sure enough, results came in closer to my below-market estimates and trailed management guidance and market consensus (see my report Tesla’s Weak QTD Deliveries Signal March Expectation Madness).

Tesla also admitted it delivered half of its total deliveries for the entire quarter in the last nine days of March, blaming “challenges encountered” for delays in getting cars to buyers in Europe and China. But even adding cars “in transit” doesn’t cover the shortfall versus guidance and market expectations.

It also doesn’t ease investors’ concerns about cooling demand for Model 3 in the US, or the alarming drop-off in sales for Models S and X, well, everywhere.

Read on for continued Bond Angle analysis.

2. StubWorld: Naspers’ Restructuring Update

This week in StubWorld …

• Naspers Ltd (NPN SJ)‘s discount to NAV narrows as it teases out more information on spinning-off and separately listing Tencent Holdings (700 HK).

Preceding my comments on Naspers are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.

3. Huya Placement: Best Performing Live Streaming Stock but Beware Douyu Is Catching Up

Huya, a leading live streaming player in China, announced share placement of USD 550 million after market close on April 3rd. In this insight, we will look at recent developments of Huya and score the deal in our ECM Framework.

4. China – Soaring Real Estate Loans Makes One Wonder

China Construction Bank H (939 HK) (CCB) added real estate loans at more than double the amount of total corporate loans during 2018. This is something we see with many of China’s banks in the period. What is also apparent is a sharp drop in real estate NPL ratios during the year – not simply due to a larger denominator. There is nothing anecdotally or otherwise that we have seen, that should suggest a dramatically more healthy China real estate sector, e.g. property development, commercial real estate during 2018 compared with 2017. The risk is that banks are extending substantially more credit here to support weak, frail debtors.  With a weakening economy, this is not likely to last without negative consequences.

5. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings

Ruhnn Holding Ltd (RUHN US) raised US$125m at US$12.50 per share, the mid-point of the price range. We have previously analyzed the IPO in:

• Ruhnn (如涵) IPO Review – Expensive Influence
• Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

In this briefing:

1. Nio (蔚来) Lock-Up Expiry – Scattered Pre-IPO Investors to Be the Sellers

1. Nio (蔚来) Lock-Up Expiry – Scattered Pre-IPO Investors to Be the Sellers

NIO Inc (NIO US)‘s lock-up will expire next week on the 11th of March. Shareholding breakdown suggests that there will be overhang upon lock-up expiry due to the large number of scattered pre-IPO shareholders. 

In this insight, we will look at the principal and pre-IPO investors and analyze who and how many shares would likely be sold upon lock-up expiry.

In this briefing:

1. China – Soaring Real Estate Loans Makes One Wonder
2. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings
3. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
4. Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside
5. “Deep Doubts, Deep Wisdom; Small Doubts, Little Wisdom”

1. China – Soaring Real Estate Loans Makes One Wonder

China Construction Bank H (939 HK) (CCB) added real estate loans at more than double the amount of total corporate loans during 2018. This is something we see with many of China’s banks in the period. What is also apparent is a sharp drop in real estate NPL ratios during the year – not simply due to a larger denominator. There is nothing anecdotally or otherwise that we have seen, that should suggest a dramatically more healthy China real estate sector, e.g. property development, commercial real estate during 2018 compared with 2017. The risk is that banks are extending substantially more credit here to support weak, frail debtors.  With a weakening economy, this is not likely to last without negative consequences.

2. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings

Ruhnn Holding Ltd (RUHN US) raised US$125m at US$12.50 per share, the mid-point of the price range. We have previously analyzed the IPO in:

• Ruhnn (如涵) IPO Review – Expensive Influence
• Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

3. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact

Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!

So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.

Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing. 

4. Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside

* Youku, the online TV subsidiary of BABA, is transforming its risk of loss to content providers.

* Youku is dismissing employees.

* We believe both of Youku’s decisions are positive for cost control and the operating margin will recover in FY2020.

* The P/E band suggests a price target HKD250, which is 38% upside above the market price.

5. “Deep Doubts, Deep Wisdom; Small Doubts, Little Wisdom”

Postal Savings Bank Of China (1658 HK) is outgrowing its peers on the top-line given exuberant pace of credit growth (especially in consumer lending such as credit cards but also in corporate and in agriculture). Expansion in Interest Income on earning assets is well in excess of an increase in Interest Expenses on interest-bearing Liabilities. This is not always the case in China today. Fee income is also growing by double-digits too. The bank has a huge deposit base and Liquidity is ample. In addition, “Jaws” stand out as being highly positive at 20pts given aforementioned top-line growth coupled with OPEX restraint.

However, capital remains tight and asset quality has deteriorated markedly. Despite the top-line growth and cost-control, an increasing amount of pre-impairment Income is being consumed by loan loss provisions and other asset writedowns. Substandard loans have exploded while loss loans have climbed forcefully. The bank shapes as if it is striving to grow itself out an asset quality bind. Given Balance Sheet risks, the bank has adjusted its provisioning accordingly.

The relatively meagre capital position (for example Equity/Assets or Basel 111 Leverage Ratio) while improving is surely the reason why Postal Savings cannot pay a higher dividend in comparison with say Agricultural Bank Of China (1288 HK) , Bank Of China (601988 CH), and China Construction Bank (601939 CH) which all command yields in excess of 5% and rate as income stocks. The Dividend Yield here though is not unattractive at 3.9%.

In this briefing:

1. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing

1. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing

Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports. 

Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.

In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.

In this briefing:

1. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing
2. Politics, Uncertainty and Bad Policy: The Third Wheels of Profits and the Investment Cycle

1. LYFT Pre-IPO – Drivers and Shared Rides Hold the Key But the Numbers Are Missing

Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports. 

Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.

In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.

2. Politics, Uncertainty and Bad Policy: The Third Wheels of Profits and the Investment Cycle

Our positive view of the Asian region in 2018 was not reflected in stock market performance. But now is not the time to discard fundamentals and fundamental analysis. Unlike the US, the Asian region is in the early stages of a profit upcycle. As we have argued on many occasions, that is the building block required to kick start the investment cycle. But theoretical explanations of the growth process aside, is there any empirical support for the argument that profits and investment, and therefore growth, are related? We would answer in the affirmative and, in the following report, we try to show how the process works and where Asia stands on two of our Austrian Stress Indicators (ASIs). Market volatility aside, the conditions for good growth gains are firmly in place in most of the region.

In this briefing:

1. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings
2. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
3. Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside
4. “Deep Doubts, Deep Wisdom; Small Doubts, Little Wisdom”
5. Bank of China: A Rich Dividend Yield Backed by the PRC.

1. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings

Ruhnn Holding Ltd (RUHN US) raised US$125m at US$12.50 per share, the mid-point of the price range. We have previously analyzed the IPO in:

• Ruhnn (如涵) IPO Review – Expensive Influence
• Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

2. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact

Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!

So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.

Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing. 

3. Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside

* Youku, the online TV subsidiary of BABA, is transforming its risk of loss to content providers.

* Youku is dismissing employees.

* We believe both of Youku’s decisions are positive for cost control and the operating margin will recover in FY2020.

* The P/E band suggests a price target HKD250, which is 38% upside above the market price.

4. “Deep Doubts, Deep Wisdom; Small Doubts, Little Wisdom”

Postal Savings Bank Of China (1658 HK) is outgrowing its peers on the top-line given exuberant pace of credit growth (especially in consumer lending such as credit cards but also in corporate and in agriculture). Expansion in Interest Income on earning assets is well in excess of an increase in Interest Expenses on interest-bearing Liabilities. This is not always the case in China today. Fee income is also growing by double-digits too. The bank has a huge deposit base and Liquidity is ample. In addition, “Jaws” stand out as being highly positive at 20pts given aforementioned top-line growth coupled with OPEX restraint.

However, capital remains tight and asset quality has deteriorated markedly. Despite the top-line growth and cost-control, an increasing amount of pre-impairment Income is being consumed by loan loss provisions and other asset writedowns. Substandard loans have exploded while loss loans have climbed forcefully. The bank shapes as if it is striving to grow itself out an asset quality bind. Given Balance Sheet risks, the bank has adjusted its provisioning accordingly.

The relatively meagre capital position (for example Equity/Assets or Basel 111 Leverage Ratio) while improving is surely the reason why Postal Savings cannot pay a higher dividend in comparison with say Agricultural Bank Of China (1288 HK) , Bank Of China (601988 CH), and China Construction Bank (601939 CH) which all command yields in excess of 5% and rate as income stocks. The Dividend Yield here though is not unattractive at 3.9%.

5. Bank of China: A Rich Dividend Yield Backed by the PRC.

In terms of fundamental momentum and trends (our core focus) Bank Of China (601988 CH) reported a mixed set of numbers at FY18.

While systemic asset quality issues weigh heavily on results, the bank has prudently improved its liquidity metrics, enhanced its provisioning, while cost-control remains exemplary in the face of stresses from loan quality and some systemic funding cost pressure. Underlying “jaws” are highly positive at 558bps. The improvement in Efficiency is a plus signal amidst the asset quality smoke.

All in all, it’s a stable rather than a gung-ho picture. Pre-tax Profit has barely budged since 2014.