In this briefing:
- HK Connect Discovery Weekly: Tencent, Kingsoft, and Yichang HEC (2019-01-18)
- The GER Weekly EVENTS Wrap: Softbank, Xiaomi, Capitaland and Navitas
- TRACKING TRAFFIC/Chinese Express & Logistics: Inter-City Pricing -9.1%
- Pinduoduo (PDD US): Lock-Up Expiry – Keep Calm, Keep Going
- Stimulus/Bond Index Products/China-US Tension/Huawei Denials/Military
1. HK Connect Discovery Weekly: Tencent, Kingsoft, and Yichang HEC (2019-01-18)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this week’s HK Connect Discovery, we highlight that Tencent topped the weekly inflow by quantum and its shares held by mainland investors via Stock Connect is at one year low. Stocks exposed to mobile game sector experienced inflow too. In addition, we continue to observe that the mainland investors holding on Yichang HEC continue to rise.
2. The GER Weekly EVENTS Wrap: Softbank, Xiaomi, Capitaland and Navitas
Have nascent bull cases developed for maligned Softbank Group (9984 JP) and Xiaomi Corp (1810 HK)? In this version of the GER weekly events wrap, we asses an interesting debt tender for Softbank Group (9984 JP) which could portend action for the equity. Secondly, we review our long-standing negative stance on Xiaomi Corp (1810 HK) after a very poor recent run. Finally, we are hesitant on the Capitaland Ltd (CAPL SP) acquisition and think a bump is possible for Navitas Ltd (NVT AU)
The rest of our event-driven research can be found below.
Best of luck for the new week – Rickin, Venkat and Arun
3. TRACKING TRAFFIC/Chinese Express & Logistics: Inter-City Pricing -9.1%
Tracking Traffic/Chinese Express & Logistics is the hub for our research on China’s express parcels and logistics sectors. Tracking Traffic/Chinese Express & Logistics features analysis of monthly Chinese express and logistics data, notes from our conversations with industry players, and links to company and thematic notes.
This month’s issue covers the following topics:
- December express parcel pricing fell by over 9% Y/Y. Average pricing per express parcel fell by 9.1% Y/Y, the worst decline since Q216 (excluding January/February figures distorted by the Lunar New Year holiday).
- Express parcel revenue growth remained well below 20% last month. Weak pricing dragged sector revenue growth down to 17% in December, the 4th consecutive month of sub-20% growth.
- Intra-city pricing (ie, local delivery) was strong in 2018. Relative to weak inter-city pricing (down 3.1% Y/Y in 2018), pricing for intra-city express shipments was firm, rising by 0.1% last year. In fact, average pricing for intra-city express shipments has risen in four of the last five years.
- Underlying domestic transport demand remained firm in December. Although demand for inter-city express shipments appears to be moderating (from high levels), underlying transportation activity in December remained firm. The three modes of freight transport we track (rail, highway, air) in aggregate rose 6.6% Y/Y in December, even as the growth of air freight slowed.
We retain a negative view of China’s express industry’s fundamentals: demand growth is slowing and pricing for inter-city shipments appears to be falling faster than costs can be cut, leading to margin compression.
4. Pinduoduo (PDD US): Lock-Up Expiry – Keep Calm, Keep Going
The recent collapse of Xiaomi Corp (1810 HK)’s shares after the end of its six-month lock-up period has focused minds on upcoming lockup expirations. Pinduoduo (PDD US) is the next major Chinese tech company with an upcoming lock-up expiration – its six-month lock-up period expires on 22 January.
We have been bulls on Pinduoduo with the shares up 32% since its IPO. While we are not privy to the shareholding plans of Pinduoduo’s shareholders, we believe that Pinduoduo will likely not mirror Xiaomi’s share price collapse after the end of its six-month lock-up period.
5. Stimulus/Bond Index Products/China-US Tension/Huawei Denials/Military
China News That Matters
- Pump it up, but don’t flood the place
- Roll up, roll up: China touts bonds
- Sino-US trade talks shift to Washington
- Trust me, I’m just a sesame seed
- No longer playing catch up? The “world-leading” PLA
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.
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