In today’s briefing:
- HSI Index Rebalance Preview (March 2022): The Slow Crawl Continues
- Deep Dive: Xiaomi (XIACY, 1810 HKG)
- Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
HSI Index Rebalance Preview (March 2022): The Slow Crawl Continues
- The March rebalance should see the slow crawl toward 80 index members continue. We should get up to 68-70 members in March. Reaching 80 by June is unlikely.
- High probability inclusions are Kuaishou Technology (1024 HK), Smoore International (6969 HK), Nongfu Spring (9633 HK), JD Health (6618 HK) and JD Logistics (2618 HK).
- Currently, index turnover due to capping/float changes is low which will allow more stocks to be added to the index. Increase in the turnover will result in fewer changes.
Deep Dive: Xiaomi (XIACY, 1810 HKG)
- Xiaomi has an ambitious goal to surpass Samsung to become the #1 smartphone brand in the world (shipment basis) by 2024.
- We believe Xiaomi is less like the “Apple of China” and more like the “Costco of smartphones”. We explore the key aspects of this business model, including services monetization and an ecosystem strategy leveraging an “investment + incubation” model.
- Most investors seems to understand Xiaomi’s market share growth story, but may yet be underappreciating its monetization potential
Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
US equity markets rallied on Wednesday with the S&P and Nasdaq ending 0.9% and 0.5% higher. Sectoral gains were led by Communication Services up 3.1%, Real Estate and Utilities up 1.5-1.7%. US 10Y Treasury yields eased 2bp to 1.77%. European markets were broadly positive with the CAC and FTSE up 0.2% and 0.6% while DAX was flat. Brazil’s Bovespa closed 0.6% higher. In the Middle East, UAE’s ADX was up 0.2% while Saudi TASI closed 0.8% lower. Asian markets have opened mixed with STI up 2.1% while Nikkei was down 1.1%. Shanghai and HSI remain closed on account of the lunar new year holidays. US IG CDS spreads were 1.3bp wider and HY CDS spreads were 6.2bp wider. EU Main CDS spreads were 0.5bp tighter and Crossover CDS spreads were 0.3bp tighter. Asia ex-Japan CDS spreads were 0.4bp tighter.
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