Financials

• Bajaj Finance Ltd (BAF IN) , one of India’s largest NBFCs, aims to raise around US$1bn via a QIP.
• Bajaj Finance is an NBFC offering auto, consumer and home loans, along with other products as well.
• In this note, we run the deal through our ECM framework and talk about the deal dynamics.

• DBS is now guiding for no profit growth during FY24. This may end up missing with negative growth more statistically likely, in a worsening world.
• Credit metrics are not particularly positive in today’s release with SGD215m of credit costs compared with SGD72m in the preceding quarter.
• If rate rises are done or nearly done, than the main positive delta of DBS earnings are also done or nearly done. Management guidance suggests as much too.

• China Vanke (H) (2202 HK) saw a major drop in bond and stock prices recently, due to fear of default. 
• Yesterday, the company held a conference call, with representatives from Shenzhen SASAC and Shenzhen Metro (major shareholder of Vanke and owned by Shenzhen SASAC) participating in the call.
• The strong support shown by Shenzhen SASAC/Shenzhen Metro represents a good short-term buying opportunity, for both Vanke stock and bonds. 

• Mizuho Financial Group (8411 JP) can see higher profit guidance change than many in Japan, the region, given its first quarter was 40% of full-year guidance
• Riding JGB yields will support this, with less loans to total financial assets, and the bank has even seen its unrealized losses on JGBs decline. Good ALM.
• Credit metrics are better. Its credit costs are in reversal. This can continue or at least remain low. This is supported by granular, macro data.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Lippo Malls Indonesia Retail Trust’s ESG as “Adequate”, in line with its Environmental and Social scores. We deem Governance as “Weak”, despite the “Adequate” score in quantitative terms. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Pioneer Credit Limited (ASX:PNC) is one of the leading acquirers and managers of impaired credit in Australia and has gained its status by maintaining positive customer engagement, an unblemished compliance record with ASIC, and strong relationships with Australia’s largest bank and non-bank lenders.
• PNC purchases debt from 18 different Australian vendor partners with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
• The company’s AGM updates highlighted the strong position PNC occupies in the marketplace and the expected improvement in NPAT following debt refinancing currently in progress. 

With its focus on high-quality omnichannel supermarkets, Supermarket Income REIT (SUPR) is very well positioned to benefit from strong growth trends in the grocery sector, supportive of its income proposition and capital values. The company is confident that the targeted FY24 DPS of 6.06p (+1%) will be fully covered as adjusted earnings benefit from rental growth, cost efficiency and fixed debt costs.

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.

• Alam Sutera Realty
• China Vanke
• Vedanta Resources

• There seems to be no immediate requirement to close existing contracts. However, even the chairman of the Financial Services Commission was unable to offer a definitive answer.
• The comprehensive investigation and prohibition of the customary naked short selling could lead to a rapid decline in overall market liquidity.
• The first is the short-term view, focusing on futures backwardation, and the second is the medium to long-term perspective, examining how the overall market liquidity decline will affect market flows.

• Banning short-selling for stocks will provide some propulsion to the KOSPI 200 INDEX but inevitably there will be pullbacks when strong resistance areas are reached.
• The index is joining a wide global equities bounce, it is not recommended to go SHORT soon. There is a chance it may pullback briefly this week (buy the dip?)
• Our models say the index can rise from 2 to 4 weeks, before reversing: resistance will be met at 320, 328 and (hard to reach) 349.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU), JSR Corp (4185 JP), Orecorp Ltd (ORR AU), Lithium Power.
• Lowest spreads – Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Chindata Group (CD US), Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Allkem. 

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.

• China Vanke
• Hopson Development

• Daito Trust last week announced H1 earnings, its 50% dividend payout ratio, and a ¥50bn stock buyback which results in a shareholder payout ratio of ~120% over the next year.
• This should help to keep ROE high, and as it is a clear distribution of surplus, it should help keep the multiple up.
• It is worth looking at shareholder structure to see how this buyback will be taken.

• In this insight, we did a deep dive on Unibail, one of the biggest real estate companies in terms of developing and operating shopping malls in the world
• We think URW will continue to show superior operational performance than peers, we also think its leverage, which is one of market’s biggest concern, is manageable
• We see valuation upside for Unibail, we also recommend multiple trading strategies, subject to investors’ risk appetite, style and mandate

• The Nikkei closed the month of October down, 4 months down in a row (CC=-4), very OVERSOLD MONTHLY. The 30600 support indicated in our last MONTHLY insight did hold somehow.
• We think the Nikkei could continue to rally in November, but this explosive, fast rally, at one point will have to retrace back, before it can continue up.
• The index could rally for 2 months, into December. The target prices for the end of the rally are near 34000.

• There were a bunch of indices where the review period ended last week. The changes will be announced this month and implemented in December.
• Emerald Resources Nl (EMR AU) replaced Invocare Ltd (IVC AU) in the S&P/ASX 200 (AS51 INDEX) at the close on Friday.
• There were large outflows from mainland China listed ETFs during the week. Outflows from iShares Emerging Markets (EEM US) continued for another week.

• Unibail-Rodamco-Westfield (URW AU), Europe’s largest listed commercial property company, recently reported solid 3Q23 financials (through to September 2023). 
• Covid played havoc on shopping mall players/developers – URW is still down 62% from its Covid cliff versus an average of 24% for a basket of peers.
• Investor concerns over URW’s strategy and leverage have been a drag on the stock; however its long-term plan is finding the right path. 

• Web3 and NFTs is a green field opportunity for forward-thinking brands. It can create win-win opportunities for brands and consumers. Adidas, Nike, TIME, and Gucci capitalized early.
• The next generation of brands embracing NFTs can draw valuable insights from previous brand experiments, learning from their successes while avoiding their mistakes.
• We pinpoint four fundamental pillars that can propel brand engagement in the real world. And how NFTs are powerful tools that can enrich each pillar

• As highlighted in our prior notes, HDFC Bank (HDFCB IN) has been able to maintain its ROA and ROE despite NIM compression post merger.
• As the excess liquidity (related to the merger) recedes over the next 3-4 quarters, ROA and ROE should further normalize.
• HDFCB has been able to clock 5%ish QoQ growth across deposits and loans, allaying growth concerns on a larger base post merger.

• Cloudchain (CC CH) is looking to raise up to US$200m in its upcoming HK IPO. The deal will be run by China Securities International, ABC International, ICBC and Maxa Capital.
• Cloudchain is an independent industry digital finance platform in China, serving anchor enterprises, chain-related enterprises, and financial institutions. 
• According to F&S, it is the largest independent digitalized corporate credit confirming platform in China. Its user base had grown at a CAGR of 75.1% from 2020 to 2022. 

• In this insight, among the J-REIT universe, we explore the pair trade idea of LONG Japan Hotel REIT and SHORT Nippon Building Fund
• Among the real estate subsectors, we expect hotels continue to see superior performance on the back of tourism recovery, while office market will continue to be weak
• Both JHR and NBF are large caps with good trading liquidity.  In terms of valuation, we see more upside in JHR (20%) than NBF (0%)

• 40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.
• 92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.
• Big tables with data, reasons for guidance changes, and buyback history of each presented below.

• The latest BoJ adjustment to its yield curve control lifts the hard yield ceiling of 1% on 10 year JGBs, making it “a reference” and allowing yields to exceed it
• 10 year JGB yields are close to 1%, with Japanese bond yields steepening further which is positive for Japanese banks, especially those with a high share of floating-rate credit exposures
• We stick with our positive views on Resona, Mizuho, SMFG and Hachijuni; we add Concordia to our buy list for its high share of floating rate credit exposure

• Welcome to our short and sweet Fed preview.
• No one expects policy action from the Fed this week, but Powell could decide to reiterate that the dot plot remains intact given the most recent information received.
• We doubt that Powell will bring about a strong guidance for a December hike, but unless the wheels come off, it’s very likely that they will be tempted to deliver that hike come December.

• Our focus is not on the decimation of earnings at Standard Chartered (STAN LN) but rather the granular detail of stage 2 and stage 3 loans
• There is tremendous growth in stage 2 loans in the quarter, which means the bank enters the quarter with a far higher pool that can migrate to stage 3
• Stage 3 remains markedly higher provisions, and the bank’s rise in credit costs is still fairly low, it can rise another 50% before hitting average rates

• The MAS is not at all happy with the frequent digital banking services outages at DBS (DBS SP). There will be fines and higher required capital. 
• The outlook for the home market lending is already poor, with negative loan growth in recent months. Probes of money laundering will likely make lending even more sparse.
• UOB (UOB SP) , Standard Chartered (STAN LN) , HSBC Holdings (HSBA LN) results are all illustrative of risks facing DBS (DBS SP) before results come out, especially credit costs.

• NII decline has slowed but the overall profitability is lacklustre
• Asset quality stabilized for now, real estate exposure remains a concern
• We believe the turnaround of the bank is still pretty far off. 

• Hello everyone, and welcome to a shorter piece on where to find fundamental value in the current FX environment.
• We’ll take a trip back to the theory books and use some of the good old correlations and fundamental value metrics to give some insights on the best FX bets now that the tightening cycle is likely soon coming to an end.
• Read along, as we run through the most important pairs below.

• Bank Negara remains our top pick for its deep value attributes of low PE multiples and its very attractive PEG ratio, whilst improving post-provision returns and registering strong liquidity
• We also keep Bank Mandiri on a buy rating, for its premium returns and undemanding PE multiples; Bank Central Asia, albeit fully valued in our view, has impressive return
• Bank Rakyat again registered worsening pre-provision returns in 3Q23, along with cost of risk; its heavily MSME focused loan mix implies a high structural cost of risk going forward

• Marsh & McLennan Companies, Inc. managed to exceed the revenue and earnings expectations of Wall Street.
• The company achieved an unprecedented quarterly underlying revenue growth over two decades and reported substantial growth in adjusted EPS.
• Marsh McLennan Agency acquired Graham Company, a top-100 US insurance and benefits broker and risk management consultancy, bolstering the company’s Mid-Atlantic presence.

• On October 23, Bakkt announced that it was supporting the new Universal Money Address (UMA) open standard for money transmission.
• This is being done in collaboration with Lightspark, where Bakkt will be one of its initial partners.
• The initial launch of the UMA- capable Lightning service will support cross-border remittances, B2B settlement, instantaneous deposits and withdrawals for trading, or globally interoperable P2P.

• In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
• This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
• The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.

• For the month of October 2023, 7 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
• The average premium for the new deals announced (or first discussed) in October was 65%. The average YTD is 37% (85 deals).
• This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

• In our view, the key takeaway from the recent 3Q trading statement is how ABG is progressing strategically towards its “Future State 2” plan.
• In particular, we note specialist SME finance divisions generating the ambitious balance sheet growth in the plan, optimising the core relationship banking franchise, which, in this period, saw 7% deposit growth ‒ given the level of base rates, this is a profitable product for a relationship bank, and continued investment, which, at times, requires a step change in cost rather than a gentle evolution.
• To meet expected multi-year demand, ABG is increasing its central London HQ office space by 45% at an annual increase in cost of ca.£5m (with further dual running costs until October 2024 as it is refitted).

• M&T Bank Corporation delivered an all-around beat in the previous quarter.
• Revenues grew by 4% compared to the previous year, with net charge-offs decreasing and GAAP net income increasing by 7%.
• While economic uncertainty persists, M&T Bank’s historical outperformance during uncertain times underscores its resilience and potential for shareholder value creation.

• This is our first report on global financial behemoth S&P Global.
• The company reported a 7% revenue growth in the second quarter, excluding the impact of Engineering Solutions.
• In May, S&P Global introduced an AI assistant named ChatIQ for internal testing within Capital IQ Pro Labs.

• State Street Corporation delivered a mixed set of results for the quarter, with revenues below the analyst consensus.
• Initially, the quarter started with a positive note for equity markets in July, only to take a sharply negative turn as it progressed.
• State Street’s Alpha continued to gain traction, deepening existing mandates and securing two new Alpha mandate wins in the third quarter, including the company’s first Alpha for private markets mandate.

• American Express Company delivered a solid result and managed an all-around beat in the last quarter, continuing the impressive trajectory of its financial performance.
• The company reported its 7th consecutive quarter of tangible results, with significant revenues reaching $15.4 billion, showcasing a 13% year-over-year increase.
• The company further introduced product improvements and analytics advancements to its digital cash flow management hub, American Express Business Blueprint.

• Truist Financial Corporation delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
• In terms of digital and technology, the company reported positive digital engagement trends, accounting for 61% of total bank transactions.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• ICGT’s interim results to July 2023 confirmed the robust nature of its strategy and portfolio with LTM NAV per share total return of 4.1%.
• The 1HFY’24 portfolio return, on a constant currency basis, was 4.6% and the long-term, ongoing buyback programme enhanced NAV with an average discount on purchase of over 40%.
• Realisations were £94m, new investments £64m and new commitments £110m; activity that is slower than the recent past but still ongoing.

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.

• Lippo Karawaci

• Country Garden should not be a surprise. The bond price at 5 cents is based on much uncertainty.
• We list a few caveats why the bonds at 5 cents are not investible.
• The potential wind-up order by the Hong Kong court will be a big test of the rule of law in China.

• The merger between Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) is done. Newco starts trading this week as KDX.
• The trade was fine until I wrote 9 days ago there was still room to run. It fell the next day, bounced 3%, then got CRUSHED into the index upweight.
• NEWREIT is now as cheap relative to its Pro-Forma Peer Group as it was at announcement.

• Onewo (2602 HK) has announced the full conversion of 1.05bn Domestic Shares and Unlisted Foreign Shares to H-shares. The increased market cap will help in HSCI inclusion.
• Onewo (2602 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect soon after index inclusion.
• Onewo (2602 HK) has drastically underperformed its peers since listing and the HSCI inclusion could mark a turning point for the stock.

• Last week, the Nikkei closed down at 30991.69 (CC=-2). The index’s sell-off could end in November, marking a temporary bottom from which a rally could start.
• MRM models say that if the Nikkei bounces this week, it could rise for 3 weeks and reach a price area between 31624 (Q3/CC=+1) and 32892 (Q3/Gen.Pattern Boxplot).
• The upcoming rally comes as a reaction to quite OVERSOLD conditions, as previously discussed, but could be followed by another pullback. This insight points to where the rally may end.

• TPG will launch an agreed offer for turnaround-play Intervest Offices & Warehouses (INTO BB) at €21/share, 52% premium, with minimum acceptance condition of 50%+1 share. It has already secured 10.09% acceptances.
• At 6.7% discount to last reported EPRA NTA, 5.5% discount to pro forma EPRA NTA, and 14.3x P/FFO 2023e, the offer price seems good exit value for shareholders.
• Listed logistics European compas trade at c.11% premium EPRA NTA 2023e and 17x-18x P/FFO 2023e. Spread is 4.52%/16.04% (gross/annualised assuming settlement on 21 February). Risk/return looks interesting. Long.

• This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• Last week, China Mobile (941), SMIC (981) and CNOOC (883) all saw total SOUTHBOUND turnover top 75% of value traded on a gross basis, indicating huge participation. 
• Meituan was again the top SOUTHBOUND inflow, now net inflow every day for more than a month. Total Net Inflows at HK$6.9bn now 14 weeks straight in the positive column.

• We make two arguments in this note (A) Why you should invest in the Indian Life Insurance Sector right now; (B) Why you should start with SBILIFE  over HDFCLIFE
• Answers (A) The train has left-the-station on the long runway of double-digit growth in the sector; (B) The sector valuations are very reasonable due to short-term pressures, SBIL especially so.
• We compare SBILIFE and HDFCL’s valuations, and narrow the focus on to One Crucial Factor showcasing the fundamental strength of these businesses.

• Japan Post Bank (7182 JP) gets a dramatic upweight in TOPIX on Monday 30 October. There is a LOT of stock to buy. Call it US$2.2bn. 
• Shares have to come from someplace. Basically it will all come from retail or from those who pre-positioned themselves in the stock (buying from retail). Some could come from short-sellers.
• The stock WAS not cheap vs regional banks (what I see as their best set of comps) and the Q2 Unrealised Loss on Securities has ballooned. But care is needed.

• BFI Finance‘s 3Q2023 results reflected the lingering impact of May’s Malware incident which interrupted collections but this situation has now been remedied and the company can resume rebuilding its book.
• 4Q2023 will likely see further write-offs but an improvement in credit costs but the company will remain cautious on building its book with a full recovery expected in 2H2024. 
• BFI Finance remains the best-quality multi-finance company in Indonesia, with a low cost of funds and a differentiated target market of used 4W and 2W non-dealer loans. Valuations are attractive. 

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK) and Golden Solar New Energy Technology Holdings (1121 HK).

• US Banks’ office credit exposures represent a big part of the sector’s credit quality concerns, given the decline in office space occupancy and rising interest rates
• Industry data shows that bank funding costs are rising fast, and 3Q23 bank spread trends are mixed; banks with greater mortgage exposure are potentially at greater risk of narrowing spreads
• We stick with Capital One for its high lending spreads, negligible mortgage exposure and limited office credit exposure with high coverage; Capital One also has healthy overall NPL coverage

• So far in 4Q23, Japanese banks’ share prices have registered a mixed performance, in part due to the unsettled global market conditions; yet the Japanese bond yield curve keeps steepening
• We assess the top twelve Japanese commercial banks by market capitalisation, and we believe that Japanese banks remain good value with, a rare thing, improving fundamentals
• Ahead of the September results, we stick with our buys on Resona, Mizuho and SMFG; Resona has lagged deserving to re-rate further, and we add Hachijuni to our buy list

• Hindenburg Research published a short-selling report accusing the company and its Chairman & CEO of evading sanctions, fabricating revenue, market manipulations, etc.
• One area that could warrant more attention is the acquisitions Freedom carried out over the past 18 months, where numerous target companies were personally invested by its Chairman & CEO.
• In Kazakhstan, it’s difficult to have full visibility into these target companies’ shareholders and for whom exactly Freedom was providing liquidity.

• The MSCI ACWI index (ACWI-US) continues to test major support at $90.50-$91.50, though no decisive break yet; as long as this support area holds, we remain constructive on global equities.
• MSCI EM (EEM-US) continues to test $37 support, while MSCI ACWI ex-US (ACWX-US) and EAFE (EFA-US) are testing supports at $45 and $65-$66, respectively
• Remain overweight and add exposure to Japan; the TOPIX remains in a 1.5-year RS uptrend (vs. MSCI ACWI), and continues to hold above 5-month support at 2200-2215

• Traditional equities confer specific rights to their holders, such as voting power and dividends. Tokens offer distinct advantages, including implementation versatility, composability—especially within DeFi—and other functionalities unattainable with securities.
• The innovative designs of tokens play a pivotal role; they not only channel value back to the token holders but also exert a direct impact on the token’s market value.
• In this report, we explore four value accrual mechanisms implemented by tokens. These include: (i) Buyback and Burn; (ii) Real Yield; (iii) Tax-Tokens; and (iv) Book Value Tokens