Financials

• We add value play Bank of Baroda to the peer group, and to our buy list; we also add liquidity and funding screens and a PEG ratio valuation metric
• We keep HDFC Bank as our higher quality bank, with its strong balance sheet, especially on NPA coverage, and further positive momentum from the upcoming HDFC merger
• We remain negative on State Bank of India, and we are also cautious on ICICI Bank; Axis bank remains a name to watch, although valuations are far from compelling

• There continues to be little traction above $93 on MSCI ACWI (ACWI-US), which remains the top-end of our anticipated 2023 trading range. Important downside targets are $86, $84, and $75-77.
• Additionally, the EURO STOXX 50 remains below 2-year resistance at 4400-4415.
• We remain overweight Europe, Japan, and India, and we prefer to only add exposure on a pullback — especially in Japan where indexes are bullish yet extended.

S&U, the specialist motor and property finance lender, reported a good start to the financial year with profit before tax (PBT) up £0.3m in the period to 24 May despite group borrowing costs increasing by £3m versus the same period last year. A new £230m funding facility has increased total funding facilities to £280m, giving the group just under £100m to fund its growth plans over the next two years. Although rising interest rates are a headwind, credit quality remains strong, and S&U expects growth to continue in FY24. Our estimates remain unchanged.

• A double dose of StubWorld this week. Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific (293 HK) tackles alleged language bias by flight attendants.
• Preceding my comments on Japan Post are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Mapletree Industrial Trust (MINT SP) is looking to raise at least S$202m (US$150m) in its primary placement.
• The proceeds will be used to partially fund its acquisition of a data centre asset in downtown Osaka, Japan, while the remainder will be funded by debt.
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
• Many Asian Indices have Tight Ranges, Flat Returns YTD,  Options Expensive to the Range.
• HSBC Holdings (5 HK) and  Citic Ltd (267 HK)  are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options

• Futu reported 1Q23 revenue 12.7%/14.8% higher than our est./cons., non-GAAP NI 21.2%/19.5% higher than our est./cons., mainly due to strong margin financing and security lending activities during volatile market; 
• Futu’s operation and client trading behaviours remain steady in 1Q23 after the implement of rectification measures from regulators. 
• On the other side, overseas expansion in Japan and Malaysia may start to kick-off in 2H23; We maintain BUY rating on FUTU and maintain TP at US$51.  

• Asset Metrics is perhaps the most powerful product that Kaiko has ever released.
• With a single endpoint, users are able to fetch historical liquidity and volume data for any asset we cover, including all instruments and all exchanges – centralized or decentralized.
• Additionally, it includes historical holder data for a wide variety of ERC-20 tokens.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Sunac China’s ESG as “Weak”, in line with its Governance score. That said, the Environmental and Social pillars are “Adequate”. Controversies are “Immaterial” and Disclosure is “Adequate”.

• In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in June 2023.
• There are only few more days left for the base date and we believe there could be two ADDs/DELs for the SET 50 index.
• The LONG Thai Life Insurance (TLI TB) – SHORT Bangkok Life Assurance (BLA TB) trade had a good spell of performance but now it might be time to rethink.

• SBI Sumishin Net Bank (7163 JP) and Rakuten Bank (5838 JP) listed over the last couple of months and the stocks will be added to various indices over the year.
• First up, Rakuten Bank (5838 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 30 May.
• Then both stocks will be added to other global indices between August and December bringing in passive flows and helping support the stock.

• SPX has once again slipped from the 4,200 high zone. Bounce support lies at 4,120/100.
• Our preferred sequence touted a pullback from 4,200-20 which holds 4,100 and rockets back to 4,200+ on the back of a debt deal with overshoot risk to 4,250. 
• Any new June high will be unsustainable and fall prey to macro undercurrents. USD getting a bid on yield and risk aversion.

• Jenfi, a fintech company specialising in revenue-based financing, has raised US$6.6 million in pre-Series B funding.
• Headline Asia led the round, with participation from Monk’s Hill Ventures, ICU Ventures, Granite Oak, Korea Investment Partners & Golden Equator Capital, and Atlas Ventures. Existing early investors also participated.
• With the funding, the fintech firm plans to expand its presence in Singapore, Vietnam and Indonesia by broadening its customer base while expanding into new markets across Southeast Asia.

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.

• Lenovo
• Vedanta Resources
• Xiaomi Corp

Custodian Property Income REIT (CREI) has met its 5.5p DPS target for the year to 31 March 2023 and, with property yields stabilising, the Q423 NAV total return was an income-driven 0.9%. Average rental values have continued to increase and this, combined with asset management opportunities and a strong balance sheet, provides strong ongoing support for the company’s high-income strategy.

• Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
• The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason. 
• Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.

• Since January 2023 we have anticipated 4165-4200 would cap upside on the S&P 500 for 2023, but that a rally to 4300-4325 is also possible; this remains our view.
• So far there has not been much traction above 4200. Obvious problem is weak breadth, but this does not have to end badly if large-caps pause, and capital disperses elsewhere
• To that end, we’re watching the Russell 2000 (IWM) which is testing 2.5-month resistance at $180; a break above resistance would signal improving breadth and would be a positive development

• All conditions of the takeover offer have been fulfilled after the ECB approved the acquisition of a majority stake in Aareal. Settlement will take place by 7 June.
• The shares closed 3.33% higher vs. prior trading session, above the offer price(!). Aareal is trading at an undemanding 0.6x P/BV and 10.7x NTM Fwd P/E. No dividend is expected.
• The bidders specifically left open the possibility of a squeeze-out/delisting. If the 90% threshold is confirmed, I believe Atlantic will compulsorily acquire the remaining shares at €33/share.

• Japan’s largest logistics REIT Nippon Prologis Reit (3283 JP) (“NPR”) announced a US$183mn follow-on equity offering to fund their recent acquisition of a logistics facility.
• The primary offer quantity will be 86,851 units out of which 51,090 units and 35,761 units are expected to be allocated for domestic and international investors, respectively. 
• Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

• Nippon Prologis Reit (3283 JP) is looking to raise US$184m in its primary follow-on offering to acquire one property, namely Prologis Park Soka. 
• The deal is a somewhat large one to digest, at 14 days of three month ADV but only 3% dilution. 
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• In our latest South Korean banks screener; we stick with quality play Hana Financial and deep value Industrial Bank of Korea, despite rising credit quality headwinds
• We introduce delinquency ratio charts that show that NPLs and other poor quality credits are on a rising trend, yet most banks have healthy NPL provisions coverage
• Hana has a low PBV ratio relative to its premium ROE and an undemanding PEG; Industrial Bank of Korea has attractive multiples, PEG ratio and near top returns versus peers

• Deal remains subject to approvals from FCA, PRA, SRA and clearance by CMA. Curtis said the scheme will likely be delayed until Q3 2023. There’re potential antitrust and tech integration issues.
• Curtis trades at 15x Fwd P/E and the spread has widened to 7.7%. Some event-driven funds are cashing in partially while others are taking advantage of the blip.
• I think there’s still a reasonably good chance of a deal happening (implied c.68%), but considering issues in recent situations (Wood, EMIS, THG, even Caverion), investors’ concerns can be understood.

• The EUR/USD exchange rate has moved upwards with significant fluctuations over the course of March 2023.
• As it can be observed in the main graph (Graph 1), there was a period of fluctuations in the exchange rate but with a steady upward trend.
• The exchange rate fluctuated significantly over the course of the month reaching a high of 1.0901 on March 30th.

• Introduction Over the past few months, we have seen how ChatGPT has taken the world by storm.
• It is estimated that ChatGPT reached 100 million monthly active users in Jan 2023, just two months after launch, making it the fastest-growing consumer application in history.
• The popularity of ChatGPT has reignited conversations on the potential of artificial intelligence (AI).

• Ever since the March banking crisis, crypto trade volume and prices have been in the doldrums, with no strong movements in either direction.
• Over the weekend, daily volume dropped to multi-year lows.
• Yet, amid the lull, Tether’s market cap is quickly approaching a new all time high, with the total supply currently at $82.9 billion.

Supermarket Income REIT (SUPR) reported strong H123 results and expects to meet its full year dividend target on a fully covered basis. Earnings are fully protected from interest rate increases in the near term and we forecast rent growth to offset the eventual roll-off from hedging. The balance sheet is liquid and in this note we discuss the relative merits of debt repayment, reinvestment and share repurchases.

• USD breakout of the DXY bull wedge (Euro bear wedge) is gaining traction and will find additional fuel in June when the SPX faces a weaker cycle.
• Euro turn at macro resistance has legs. USD/JPY bull call from 130 has macro implications on follow through strength and will bleed into Asia FX. 
• USD vs SGD and IDR saw key macro turns. KRW and commodity currencies have led. USD/ZAR was out top pick in EM and is on fire.

• Meritz Financial confirmed the total number of treasury shares resulting from the mergers, amounting to 5.04% of SO. When combined with the largest shareholder’s stake, the float rate becomes 47.75%.
• We should focus on direct rebalancing flow through KS200 ETFs on T-1 effective rather than setting it up preemptively. The estimated total AUM of ETFs directly mirroring KS200 is ₩17T.
• Meritz Financial is expected to receive an inflow of around ₩43B, equivalent to 1.35x ADTV. This is a significant flow impact size as a single-day event.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Tata Technologies (TATATECH IN), Horizon Construction Development (1887128D HK), Growatt Technology (1833969D CH) IPOs; Yuexiu Property (123 HK) rights trading.
• Event-Driven developments – Invocare Ltd (IVC AU), Newcrest Mining (NCM AU), United Malt Group Ltd (UMG AU), Golden Energy & Resources (GER SP), Penguin International (PBS SP).  

• As technology continues to shape our lives and work environments, one significant innovation is ready to transform the financial landscape: smart contracts.
• These self-executing digital agreements, powered by blockchain technology, are set to redefine financial services by extending their availability, increasing their scope, and transforming the very foundation of how we manage our financial lives.
• While still in the early stages of development, smart contracts have already begun to showcase their potential through promising use cases and working products, offering a tantalizing glimpse into the future of finance.

• There are 40 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals were discussed on Smartkarma this past week: SBI Shinsei Bank (8303 JP) Tender Offer and TPG’s revised Offer for Invocare Ltd (IVC AU).
• Key updates took place for Newcrest Mining (NCM AU)/Newmont Mining (NEM US), Penguin International (PBS SP), Golden Energy & Resources (GER SP), and Sing Tao News Corp (1105 HK).

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• US 10yr Yield broke above its 4 decade downtrend at 2.70 in 2022, confirming a positive multi-year outlook and target towards 6.24 (38.2% retracement of the LT downtrend).
• Last week’s weekly close confirmed a renewal of the MT uptrend bias after a multi-month period of consolidation finally produced a definitive positive breakout above 3.57/3.64. Interim target at 3.90/3.95.

• Top longs have been India and Australia. Top shorts HSI and Korea. Korea’s bearish wedge is maturing and stands out as macro risk.
• Turned neutral the Nikkei above 29,200. 29,500 represents from buy support to threaten 31,000. Near term top at 31k for a pullback try.
• USD upside breakout is front running a softer equity bias in Asia for June. SPX 4,200/20 top zone throw over probable.

• US banks tightening standards for loans, as well as the downturn in loan demand, provides a silver lining for banks by reducing funding pressures as well as the increasing spreads
• Among the regional banks, Western Alliance is seeing deposit inflows in 2Q23; more generally, the usage of the Fed’s BTFP and issuance by the FHLB seem well controlled
• We stick with our picks M&T Bank and Western Alliance, adding First Horizon to the buy list, where valuations stand out along with solid capital ratios and above average returns

• Atour reported its 1Q23 revenue 2.8%/4.3% higher than our est./cons., and non-GAAP NI 22.7%/38.8% higher than our est./cons. The bottom-line beat is driven by strong sales growth from Occ. 
• We expect 2Q23/2023 rev. to grow 75%/65% YoY, implying 115%/112% of RevPAR recovery rate vs. 2019 and 85/291 net new hotels. 
• We maintain the BUY rating, and raise TP by US$1 to US$35 to factor in the higher gross margin expectation at 40% in 2023.

• BAF ended FY23 with a PAT of INR 11508cr in line with our estimate of INR 11500cr+. BAF has guided for 5.1%+ ROA and 25%+ growth for FY24.
• Despite heightened competitive intensity from banks, Bajaj Finance Ltd (BAF IN) has managed to grow well as per its targeted levels without comprising on profitability. 
• BAF’s growing omnipresence via its digital platforms, branch expansion and deepening of product suite across branches will be key drivers of its next phase of growth.

Secure Trust Bank (STB) announced a robust trading update with net lending exceeding £3bn, driven by a 17.7% sequential increase in new business lending. Deposits also significantly increased year-on-year by 16.2%. STB has expanded its capital position through the issuance of £90m tier 2 capital bonds, which is now complete. The augmented capital will provide the bank with growth opportunities in its lending activities. Management states that STB is trading in line with expectations and remains confident in delivering on FY23 and medium-term targets as well as improving its cost income ratio by the end of the year. We maintain our estimates for FY23 and FY24 and highlight that STB should be trading at c 0.45x price-to-book value (P/BV), based on our FY24 estimates, to be fairly valued compared to peers. STB currently trades at a P/BV of 0.31x.

• Suruga Bank Ltd (8358 JP) today signed an MOU (with board resolution) to form a business and capital alliance with Credit Saison (8253 JP). 
• Suruga will sell (post-dilution) 15+% of voting rights to Credit Saison, and buy 4.44% of CreditSaison. Then Suruga will try to buy back the shares it sold to Credit Saison.
• A look at the history is instructive, as is a look at the shareholder structure and the change in business model post-2019. Not as easy as it looks. 

• Nexus Select Trust (NST IN) raised around US$391m in its India IPO. The market value of its assets stood at INR234bn (US$2.9bn), of which INR211bn (US$2.6bn) was from its retail assets.
• NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
• We have looked at various aspects of the deal in our previous note, in this note, we talk about the demand and trading dynamics.

• After a multi-year drop in ownership, UK fund exposure in HSBC Holdings is on the rise. 
• Over the last 6-months, average fund weights have increased by +0.33% as new positions outnumbered closing positions by a factor of 2.
• With increasing active fund ownership and rising benchmark weights, UK Equity funds need higher conviction to omit HSBC from their portfolio.

• AUB Group Limited (AUB AU) is looking to raise up to AUD150m (US$100m) in its primary placement. The proceeds will be used to strengthen its balance sheet.
• The deal would be a large one to digest at 24 days of three month ADV and dilution of 6.2%.  
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• The stablecoin market has been upended in 2023.
• The start of the year saw BUSD given an expiry date of 2024, a banking crisis in March hit USDC and DAI hard, while Binance anointed TUSD as its stablecoin of choice by choosing it for one of the few zero-fee BTC pairs in crypto.
• All of these events had huge ramifications for stablecoin market structure.

BlackRock Latin American Investment Trust’s (BRLA’s) lead manager Sam Vecht and deputy manager Christoph Brinkmann have a high degree of confidence in the positive prospects for the trust’s portfolio. It has an overweight exposure to Brazil versus its benchmark, the MSCI Emerging Markets Latin America Index. Vecht highlights high real interest rates in the country, providing scope for a lower base rate. Brazil now has a more stable political situation, and the manager anticipates that the economy should turn around in H223, which he believes would be positive for equity performance. Vecht and Brinkmann consider that BRLA’s portfolio has real potential to deliver better absolute and relative performance.

AGBA is a Hong Kong-based financial services company offering a wide range of financial and healthcare products to the Guangdong-Hong Kong-Macao Greater Bay Area (GBA). With a population of 86 million, the GBA is a dynamic US$2tn economy, representing 13% of China’s GDP. Coupled with an ageing population, expansion into the GBA serves as a strategic move to meet the ever-increasing demand for health and wealth products. Through its extensive distribution network of 1,528 independent financial advisors (the largest in Hong Kong), AGBA is well placed to benefit from a recovery in sales following the recent removal of COVID-19 restrictions.

• Fund manager China Everbright (165 HK)‘s implied stub and simple ratio (CEL / Everbright Securities Co (A) (601788 CH))) are at multi-year lows.
• Preceding my comments on China Everbright are the weekly setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Futu announced to remove the Futubull app in Mainland China in order to fully compliance with the CSRC rectification measures, while the existing paying clients’ trading activities are unimpacted.
• We think the movement is consistent with CSRC’s previous statements, and thus maintain our 5% user churn rate in 2023 unchanged.
• We think the full implementation of penalty fine on Futu is unfair. We expect a symbolic fine to be imposed on Futu in the future.