In this briefing:
- How the Bear Market Could End
- Discover HK Connect: Mainlanders Are Buying Shandong Gold, and Pharmaceuticals (2018-12-17)
- The GER Weekly EVENTS Wrap: Anta/Amer, Trade Me, Hengan and API/Sigma
- Last Week’s GER IPO Research: Tencent Music, IPO Trading Strategy Deep Dive, WuXi, Junshi & Xinyi
- Huawei/Trade Truce Progress/ Made in China 2025 /China Cyber Threat/Stimulus
1. How the Bear Market Could End
Last week’s report generated much discussion (see The S&P 500 Is In A Bear Market). Some of the questions related to the duration and downside target in a bear market. How far can stocks fall? How long will it last? What might be the trigger for a buy signal?
To reiterate our thesis from last week. Poor technical action and a recession forecast for late 2019 or early 2020 prompted the equity sell signal. The recession forecast stems from the combination of near-recession conditions based on conventional U.S. macro indicators, evidence of global weakness in both Europe and China, and the near certainty of a trade war which would further tank global growth.
What might turn this bear thesis around, or put a halt to the bear market? Here are a few possible fundamental triggers:
- An end to the trade war
- More stimulus underpinned by the ascendancy of MMT in fiscal policy circles
At this point, the jury is out as to whether these positive catalysts can actually happen, so we remain “data dependent”.
2. Discover HK Connect: Mainlanders Are Buying Shandong Gold, and Pharmaceuticals (2018-12-17)
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 mainlanders in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: those with a market capitalization of above USD 5 billion, those with a market capitalization between USD 1 billion and USD 5 billion, and those with a market capitalization between USD 500 million and USD 1 billion.
3. The GER Weekly EVENTS Wrap: Anta/Amer, Trade Me, Hengan and API/Sigma
Below is a recap of the key event-driven research produced by the Global Equity Research team. This week Arun develops a differentiated view on the deal between Anta Sports Products (2020 HK) and Amer Sports Oyj (AMEAS FH) which he thinks is worse for the former and better for the latter. In addition, we check the bump possibilities for Trade Me (TME AU) which we think is limited by valuation. Further, we find some validity in the short-seller case on Hengan Intl Group (1044 HK) and believe a bump is needed for Australian Pharma Industries (API AU) to close the deal on Sigma Healthcare (SIG AU)
The rest of our event-driven research can be found below
Best of luck for the new week – Arun, Venkat and Rickin
4. Last Week’s GER IPO Research: Tencent Music, IPO Trading Strategy Deep Dive, WuXi, Junshi & Xinyi
Another busy week for IPO research from the GER team. This week, we recap the Tencent Music Entertainment (TME US) IPO which we noted is more fairly valued post its day one rally. Secondly, we dig into Chinese domiciled IPOs that are listed in the States and find some interesting trends on maximizing the ‘pop’, knowing when to get out and an assessment of longer-term performance. Arun nails his DCF valuation on WuXi AppTec Co. Ltd. (2359 HK) which closed at his base-case valuation while he recommends getting involved at the low-end for Shanghai Junshi Bioscience Co. Ltd. (1387344D CH) . Finally, Xinyi Energy Holdings Ltd (1671746D HK) spares further wrath as it postpones its IPO – Venkat digs into the reasons why he is cautious on the company.
Quote of the week:
Please note the post-apocalyptical fiction section has been moved to current affairs
– Sign in front of a UK bookstore
Video of the week: Santas hit the slopes in Maine
This is our last wrap of 2018 – we wish you a safe and happy festive period – and we will back in 2019!
Best wishes – Rickin, Venkat and Arun
5. Huawei/Trade Truce Progress/ Made in China 2025 /China Cyber Threat/Stimulus
China News That Matters
- Canada caught in the crossfire
- Soybean sales and other good news
- Downgrading the master plan. Or not
- China: the greatest threat to US privacy?
- Real estate firms seek bond green light
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.
