Macro

• DingTalk /: Alibaba’s DingTalk hits 15 million paying users as it tries to climb out of the red
• Flights /: China drops Covid curbs on international flights
• Personnel /: China appoints new Taiwan Affairs Office head

• Hospitals /: Shanghai’s maternity hospitals struggle to isolate Covid patients
• Covid-19 /: China to drop outbound travel restrictions with end of ‘zero Covid’
• Banking /: China sets new risk rating system for foreign bank operations

• The surge of Covid-19 across China is preventing exporters from delivering orders on time because their workers are falling sick.
• The missed deadlines show how China’s Covid policy is again disrupting foreign trade, this time due to illnesses rather than lockdowns and other restrictions.
• Suppliers in the Guangdong province cities of Guangzhou, Dongguan and Foshan said they have had to push back deliveries until the middle of January

• The FSC recently made an amendment where when a listed company’s BOD decides on a split-off, the shareholders that oppose this physical division are granted the right to purchase shares.
• The new regulations on the split-offs will encourage new spin-offs where the shares of the subsidiary company of the spun-off entity are distributed as special dividends on a pro-rata basis.
• These capital market reforms in Korea will help the country to eventually reach Developed Country status by the MSCI, most likely in 2025-2027. 

• Global debt projected to test US$315 trillion (ex-financials) in 2023, or 312% of World GDP. Too much debt increases financial fragility
• Financial dominance driving a return to Central Bank QE. Global Liquidity will reverse its recent fall and rebound to US$174 trillion
• More liquidity is consistent with a future stabilization and moderate gains in World asset markets. Gold looks to be a winner

• China-Middle East /: Historic Middle East summits cap Xi’s year-end diplomatic push
• Covid-19 /: China ends quarantine requirement for inbound travelers despite surge in Covid-19 cases
• Fraud /: Fuyuan Beauty Salon’s chairman gets 16-year sentence for fundraising fraud

• Over three quarters of Global equity managers are underweight China.  Average weights sit at the bottom of the 10 year range, with 18% of funds holding no exposure at all.
• Continued rotation over the last 6-months. Within Asia, Japan has taken the lead as the key exposure, whilst Global funds prefer European countries as their main overweight positions.
• Tencent owned by 22% of funds, Alibaba by just 18%.  China re-opening/COVID relaxation places Global funds vulnerable to outperformance.

• The market value of short interest decreased by -6.0% ($-45.5) billion over the past 30 days. Net new active shorting decreased by $14.3 bn. 
• The strongest short activity was seen in Semis, Telecom Equipment and Home Improvement. The most short covering was seen in Packaged Software, Autos and Banks. 
• Consumer Durables, Non-Energy Minerals and Distribution Services have the highest short interest to shares outstanding.

• Covid-19 /: After China’s Covid U-turn, a ‘tsunami’ of infected strip bare pharmacy shelves
• Economy /: China’s economy won’t get back to normal until ‘wartime’ Covid controls end, expert says
• Hong Kong /: Hong Kong plans to reopen border with mainland in weeks

• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia. 
• The past week saw insights on Grab (GRAB US), Telekomunikasi Indonesia (TLKM IJ), GoTo (GOTO IJ), and Siam Makro Public (MAKRO TB).
• We also saw a number of insights looking at the SET50 index rebalance in Thailand, which will likely see CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out,

• Karl Marx famously said that Religion was the opiate of the masses, while legendary Liverpool Football managers Bill Shankly said Football “wasn’t just a matter of life and death, it was more important than that”.
• Certainly, in these troubled times it has been amazing how ‘real life’ has been suspended these last few weeks, thus we might ask, is Football, especially as represented by the World Cup, now a global Religion?
• Football is, of course, a consumer good with no physical aspect, its adherents pay large amounts of money but receive no ‘goods’ in return.

• The Conference Board Leading Economic Index (LEI) for the US decreased by 1% in November 2022 to 113.5, following a decline of 0,9% in October.
• Only stock prices contributed positively to the US LEI in November.
• The labor market, manufacturing, and housing indicators all weakened—reflecting serious headwinds to economic growth.

• It all went a bit potty in 2021-2022, and the market went from overextended lack of common sense to some mean reversion.
• The need for QE and negative yields for sustaining innovation and maintaining valuation VC investments, Marked to Myth investments, are finally being called out.   
• In short, Head Fakes are red herrings that divert attention from what is already happening.  

Social relief /: Why China’s social relief efforts have fallen short

Vaccines /: Germans will soon be able to access BioNTech shot on mainland, ambassador says

China-Australia /: China, Australia pledge to refresh soured relations

• Metaverse /: Strict rules at home push Chinese metaverse entrepreneurs, investors overseas
• Covid-19 /: Expert confirms not all Covid deaths will be included in official tally
• Economy /: World Bank cuts China growth forecasts on property slump, reopening complications

• The Korean financial regulators announced major changes to the mandatory M&A offers in Korea. These changes are among the most significant in Korea in the past three decades.
• We believe that these changes still remain woefully below global, advanced countries’ standards. However, they are better than the current M&A rules in Korea.
• Therefore, we believe these changes will have a positive impact on the Korea M&A market in the next several years, but there could be further improvements to the revised standards. 

• So far this year, the onshore spot yuan has depreciated by about 9% to around 7 per dollar, weakening to 7.3200 per dollar in early November — the lowest since December 2007.
• The weaker yuan has prompted more orders because some merchants cut their prices denominated in U.S. dollars.
• Due to waning global demand, Chinese goods exports in dollar terms contracted 8.7% year-on-year in November

• Outlook /: In Depth: What’s in store for China GDP, fiscal policy in 2023
• Covid-19 /: Hong Kong approval expands mainlanders’ access to mRNA Covid shots
• Trade /: Chinese exporters lose some of their edge from a weakening yuan

• Some state-owned drugmakers have moved to round-the-clock production and ramped up overseas procurement after the sudden reversal of China’s “zero-Covid” policy cleared pharmacy shelves of fever and cough medicines.
• After acute outbreaks in Beijing and Guangzhou overran Covid controls, demand has exploded across the country for so-called “anti-epidemic drugs,”
• According to data provided to Caixin by JD Health, the pharmacy platform saw an 18-fold spike in sales of anti-epidemic drugs in the week to Dec. 4, compared to the week to Nov. 4.

• Analyst sentiment continues to improve.  A net 26% of companies are seeing raised estimates up from net -6.5%. The average estimate revision across our universe is +1%, up from -6.5%.
• Analyst sentiment is overcrowded, to the bullish side, for Oilfield Services, Aerospace, Restaurants, Apparel Retail and Software.  They are bearish/crowded for Coal, Refiners, Engineering, Trucking, Semis, HR Services and REITs.
• More groups are seeing new raises than the opposite.  On the downside, we see Aluminum, Steel and Real Estate Development in accelerating downtrends.  Alcoholic Beverages estimates are in decelerating uptrends.

• We all woke up to a major macro surprise: the Bank of Japan (BoJ) widened the allowed trading band for the 10-year Japanese government bonds (JGBs) by 25 bps – 10y JGBs can now trade between -50 bps and +50 bps.
• While this doesn’t seem like a major change, it really is. To understand why, we need to take a small step back.
• For years, Japan implemented an aggressively dovish monetary policy stance.

Covid-19 /: Covid surge leaves blood banks begging for donations around China

Economy /: Key policy meeting highlights economic stability and restoring confidence

Property /: China real estate’s nagging woes are ‘top priority,’ state economist says

• On 18 December, the Korean financial regulators made important announcements regarding IPO policies in Korea.
• The major changes include the first day trading levels, longer book building period, and allow preliminary demand survey for institutional investors.  
• The higher IPO price range in the first day of trading could provide a speedier price discovery and greater opportunities for volatility trading in the first day of trading.

• China’s pivot away from its dynamic zero-COVID policy has generated much optimism, but the economy must endure a surge in infections that will strain the public health system. 
• The government has not laid the groundwork for an orderly transition away from dynamic zero-covid, and economic activity may be depressed by fearful consumer and business sentiment. 
• A pivot towards greater stimulus will help, but a shock this severe will be reversed neither easily nor smoothly. A sharp contraction is likely in the following 2 months. 

• China’s relationships with its neighbours will be a key determinant of Asia’s geopolitical risk environment moving into 2023. 
• Taiwan will remain a hot spot given China’s long-term ambitions of reunification, but Beijing may take a more tempered approach following developments in the region and elsewhere. 
• Sino-Indian border disputes are increasingly a flashpoint, with relationships between the two countries in a bad state and both sides taking hawkish stances against the other. 

• The main difference is that Draghi was unequivocally committed in being dovish and using all the ECB powers to save the Euro.
• Lagarde was relentlessly hawkish in an attempt to show unwavering commitment to slaying the European inflation dragon.
• Therefore, this was the most iconic ECB meeting since the Draghi era.

• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia. 
• The past week saw insights on Bukalapak (BUKA IJ), the performance of Asian IPOs from 2022, the ongoing Total Access Communication (DTAC TB) and True Corp Pcl (TRUE TB) merger.
• There was also a commentary on the upcoming Ohmyhome IPO in Singapore and an initiation on Thai Property firm Sansiri Public (SIRI TB). We also had credit research on Jababeka.

• Commodities will be the best-performing asset class once again in 2023, handing investors returns of more than 40%, according to Goldman Sachs.
• The Wall Street bank said that while the first quarter may be “bumpy” due to economic weakness in the US and China, scarcities of raw materials from oil to natural gas and metals will boost prices after that.
• The bank forecasts that Brent crude will climb to $105 a barrel in the final quarter of 2023, up from $82 today.