In this briefing:
- Monthly Geopolitical Comment: Markets Are Still Waiting for the Result of US-China Trade Talks
- TRADE IDEA – Melco (200 HK) Stub: Lose a Little Sleep in Macau
- RBA Hints at an Easing Bias
- China’s New Semiconductor Thrust – Part 1: Why and How?
- Last Week in GER Research: Lyft, Rakuten, Lynas, Yunji IPO, Xinyi IPO and Ruhnn IPO
1. Monthly Geopolitical Comment: Markets Are Still Waiting for the Result of US-China Trade Talks
The future of the US and China relationship remains the most significant geopolitical and economic issue watched by the markets. While the markets prefer to focus on the positives, the eventual outcome of the talks may yet prove disappointing. Meanwhile, a rift is emerging among EU members who have diverging attitudes to cooperation with China. Authorities in Turkey have again spooked investors with their ham-fisted approach to markets. In Ukraine, comedian Zelensky has won in the first round of the presidential poll. In India, sabre-rattling continues ahead of parliamentary elections despite the de-escalation of tensions with neighbouring Pakistan.
2. TRADE IDEA – Melco (200 HK) Stub: Lose a Little Sleep in Macau
Visitors to Macao will notice the gaudy designs of new properties like Studio City and the City of Dreams owned by Melco. Few will know that the Melco of today traces its roots back almost 100 years when it was named The Macau Electric Lighting Company. Melco was listed in Hong Kong in 1927 when it was still managing the electricity supply service for the island of Macau, which it had done since 1906. After the CEM was established in 1972 to supply power in Macau, Melco changed its name to Melco International Development Limited and became a subsidiary of Stanley Ho’s real estate holding company, Shun Tak Holdings (242 HK). With the burden of supplying electricity off its shoulders, the company did what any logical Hong Kong firm would do when its business disappears, it bought real estate.
To this day, Melco International Development (200 HK) still maintains ownership of one of these classic Hong Kong destinations which I will take a closer look at in my note. In the rest of this insight I will:
- finish the historical overview of Melco
- present my trade idea and rationale
- give a detailed overview of the business units of Melco International
- recap ALL of my stub trades on Smartkarma and the performance of each
3. RBA Hints at an Easing Bias
The final ‘policy guidance’ paragraph added that the RBA is now “monitoring developments” suggesting that it is less sure that its current policy setting will remain appropriate.
The RBA is typically relatively cautious in tipping its hand in the policy statement, and while subtle compared to the RBNZ statement last week, you might conclude that the change in this final RBA paragraph amounts to a shift from a neutral policy stance to an easing bias.
The final paragraph suggests that the RBA is now prepared to ease policy should various threats to their outlook build further.
4. China’s New Semiconductor Thrust – Part 1: Why and How?
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
5. Last Week in GER Research: Lyft, Rakuten, Lynas, Yunji IPO, Xinyi IPO and Ruhnn IPO
Below is a recap of the key analysis produced by the Global Equity Research team. This week, we update on Lyft Inc (LYFT US) now that it is below its IPO price and remind of the potentially muted impact for strategic holder Rakuten Inc (4755 JP). On the M&A front, Arun digs into the conditional deal for Lynas Corp Ltd (LYC AU) from Wesfarmers Ltd (WES AU). With regards to IPO research, we initiate on e-commerce player Yunji Inc. (YJ US) and solar company Xinyi Energy Holdings Ltd (1671746D HK) while we update on the IPO valuation of Ruhnn Holding Ltd (RUHN US).
In addition, we have provided an updated calendar of upcoming catalysts for EVENT driven names below.
Best of luck for the new week – Arun, Venkat and Rickin
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