Daily Brief China: Alibaba Group, Hong Kong Hang Seng Index, Pinduoduo, Kingston Financial, Jinke Smart Services, Tencent, SICC, Innovent Biologics Inc, Sunshine Insurance and more

• Chinese online game market size decreased by 19.1% YoY and 12.6% QoQ in 3Q22.
• Tmall, Alibaba’s direct sales app, started a mini-program in Tencent’s WeChat.
• State Post Bureau announced that it would revise the express delivery rules, especially for green packaging.

In 1992, a TV series aired in Hong Kong on TVB called The Greed of Man. The series told the three-plus-decade story of Ting Hai, an “uneducated and pathologically self-righteous brute” (played by Canto pop singer and actor Adam Cheng (born 1947)) and Fong Chun-sun, “an honest, cultured and refined leader of the Asian Stock Exchange” (played by Damian Lau) who were childhood friends, split, and saw Ting kill Fong over a girl.

Ting Hai fled to Taiwan, was brutish again, spent a decade-plus in prison there. One of Ting Hai’s sons pursues a Fong daughter, is rebuffed, the son turns violent. Eventually the three Fong daughters are killed, and Fong’s only son (played by Sean Lau) flees to Taiwan and makes it rich through indirect gambling on stocks. In Hong Kong, the Tings have made it rich by being short in the 1987 crash. Ting has come back to Hong Kong, is charged with murder, then buys himself out of a sentence. Fong comes back to Hong Kong, and they duke it out in the stock market in true good guys vs bad guys epic knock-down drag-out drama. Ting and his sons are backed by the triads. Fong is backed by a few HK tycoons. Eventually, Ting is wiped out.

He responds by throwing his four sons off the top of the stock exchange building and following himself. Only Ting survives, now billions in debt, and spends the rest of his life in prison. 

The first episode of the show actually started with that final scene of Ting hurling his sons off the building. TVB got so many calls from disturbed viewers they altered the show, and moved its time slot. Apparently, the re-issues and re-airings of the show all show edited versions. The edited version was re-released on TV in 2015 and was well-received in HK by a younger generation. 

Most importantly to this insight however, is that when the series started in 1992, the Hang Seng Index fell 1200 points in one month – that was almost 20% at the time. It started falling part way through the series, then the index fell 1,000 points (16+%) in four days after the gruesome ending.

There were so many complaints about the ending that TVB revised the video release and subsequent re-releases.

Two years later, another TVB drama series starring Adam Cheng called ‘Instinct‘ was aired starting in November 1994. The index started falling a day or two before, after what had been an ugly year-to-date, and fell 20% in 7 weeks while the series aired.

1996 saw two series starring Adam Cheng air on TVB.

Cold Blood Warm Heart – a romantic crime thriller series of 65 episodes aired its first episode on 5 February and ended its run on 3 May. The market fell 700+ points or 6% in the period. 

In early September 1996, Adam Cheng starred in another TVB series called Once Upon A Time In Shanghai (a remake of a 1980s series called The Bund), which ran from 2 September through 25 October 1996. The Hang Seng Index fell sharply the next day, and this was blamed on the Ting Hai Effect, but the market did pretty well in the 7-week-long series.

In late 1997 he starred in a historical drama called Legend of Yung Ching for a Taiwanese production company, covering a period in the mid 18th century of the Kangxi Emperor, the Yongzheng Emperor (Adam Cheng’s role), and the Qianlong Emperor in the Qing Dynasty. Apparently, the market dropped the day it aired. 

In June 1999, he starred in a four-part series called Lord of Imprisonment (may have been a Taiwanese series) which started apparently late in the month. That apparently started a fall of 6+% in the Hang Seng Index.

In 2000, a series called Divine Retribution aired on ATV. It was a sequel to Greed of Man, and was originally called Greed of Man 2000 and actually took place in the near future, not the recent past as had been the case for the original series. It ran from 11 September through 3 November 2000. The Hang Seng Index fell 10% in 6 weeks before rallying in the last two days of the series.

In March 2004 – from 8 March through 24 April 2004 – a historical drama of 37 episodes (more for the international version) starring Adam Cheng called Blade Heart aired on TVB. The opening theme song was performed by Adam Cheng.

You guessed it. The Hang Seng was down more than 10% in 7 weeks.

Later that year, he was in The Conqueror’s Story from 25 October through 4 December – also on TVB. The market fell nearly 200 points the day the series started. 

Adam Cheng also starred in a period costume drama called The Prince’s Shadow from 14 March through 18 April 2005. The market fell on the first day, regained most of its loss, but that was the high price of the series. The market fell over the period of the series.

In 2007, Adam Cheng played a real estate CEO in a TV drama set in contemporary China. The series, named Return Home ran for 33 episodes starting 15 July 2007.

In 2009 he did a TVB series on Hong Kong TV, titled The King of Snooker. It was 20 episodes airing on TVB from 30 March 2009 through 24 April 2009. On the first day, the market fell 600+ points or 4.7% on the day. He had also filmed a series in 2008 called The Book and The Sword – a 40-episode period drama aired in China starting 20 March 2009. The HK market fell 2.3% that day.

On 21 May 2012, a 30-episode psychological thriller titled Master of Play starred Adam Cheng. It ran on TVB for 30 episodes through 29 June 2012. The market fell 10% in the 10 days running up to the launch of the new series.

A year later, the period drama movie Saving General Yang was released in Beijing on 4 April 2013 and the next day, the Hang Seng was down 610 points (-2.7%).

In April 2015, the original 1992 drama The Greed of Man which made the Ting Hai Effect was rerun. The first day of the re-run (20 April) the market fell 2% or 558 points. 

He was interviewed in the South China Morning Post 9 days later and the next morning the article came out (30 April). He said he wasn’t to blame for the stock market’s falls when his shows aired. 

The market fell five days straight. 

In classic fashion, there was a new series out in 2018 called Ever Night. It saw advertising the two weeks before and the Hang Seng fell about 1,000 points in the two weeks before the release. People joked days before that the market fall was due to the new show.

The show was popular in China, so the 60-episode Season 1 started in October 2018 was followed by a 43-episode Season 2 staring 13 January 2020 and running for 3 months and a week. The market fell 25% from the start of Season 2 before rebounding. 

Which brings us to the present day…

Earlier this month, the sequel to The Greed Of Man was released for streaming on Disney+. The market, which had rebounded that day, fell for the next 6 days. 

And today, 25 October, TVB starts re-runs of the 1988 series Behind Silk Curtains starring Adam Cheng, where he plays the role of the chairman of a bank, and drives a businessman’s company to bankruptcy so he can take it over.

Notes:

• This is a fun thing. But it appears to be taken somewhat seriously. It ALWAYS comes up. 
• Not EVERY movie or tv series appearance causes bad results. Bar Bender aired starting on 3 April 2006 on TVB Jade, and the market was up that day, fell back a little in the following days, but not seriously, and then rose 8% by 26 April. 
• However, enough do that it retains its name decades later. 

Sources:

• CLSA put out a Hong Kong Market Outlook piece in April 2004 about The Adam Cheng Effect. That is probably the first I heard of it. 
• The Ting Hai Effect wikipedia page is a place to start. 
• There was an article in Chinese on www.chinanews.com (original source: http://big5.chinanews.com.cn:89/gate/big5/www.chinanews.com/yl/ypkb/news/2009/04-02/1629867.shtml) in April 2009 just after the King of Snooker series started which talked about the Tin Hai Effect. It is likely the source of some of the later articles in English because one of the dates is wrong and most later English sources copy that date.
• Wikipedia has a list of most of the TVB series by year of production. 
• IMDB has a list of most of his appearances. Wikipedia does too.

• With growth fading in the domestic market, the Chinese e-commerce company, Pinduoduo (PDD US) has made its first overseas push with the launch of Temu.com in the US.
• However, the launch was less than impressive, especially considering that the company created a lot of excitement about its US expansion in the previous earnings call.
• Selling $10.00 earbuds at $3.70, Temu could eat a significant chunk off of Pinduoduo’s profitability in the next couple of quarters.

• Kingston Financial (1031 HK) announced a privatisation offer from Mrs Chu, the controlling shareholder, at HK$0.30 per share, a 47.8% premium to the undisturbed price. The offer price is final.
• Key conditions include approval by at least 75% of disinterested shareholders (<10% of disinterested shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
• The offer is light and the offeror is betting that the grim market conditions will sway the headcount test in its favour. Scheme document despatched by 21 December. 

• Jinke Smart Services (9666 HK)’s VGO from Boyu Capital is now open at HK$12.00 per share. The first closing date is 14 November. The IFA says it’s fair and reasonable. 
• The offer is conditional on 7.71% valid acceptances and anti-trust approval. The conditions can be waived. The offeror has not received irrevocables.
• The offer is unattractive, but the low threshold and peer multiple derating suggest a high probability of success. At the current price, the spread to the offer is 3.4%. 

• Tencent (700 HK) shares dropped 11.43% during yesterday’s trade over concerns on the country’s political environment with Chinese president Xi Jinping securing an unprecedented third term.
• Gamma Data reported that mobile game sales in China dropped 25% YoY during third-quarter 2022 despite 3Q being a peak period for gaming due to 2-month long school holidays.
• Tencent’s shares dropped With renewed geopolitical challenges and further weakening of Tencent’s earnings, we expect share price to drop further.

• With the review period nearly complete, there could be 4 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
• The market cap of potential adds using a 6-month minimum listing history is higher and there is a higher probability of a 6-month minimum listing history being used.
• The potential adds have outperformed the potential deletes and the index. Similar to the last few rebalances, we could see the adds outperform post the end of the review period.

• Chu Yuet Wah is Offering to take Kingston Financial (1031 HK) private by way of a Scheme at HK$0.30/share.
• The Cancellation price is a 47.78% premium to last close. It will not be increased. 
• Disinterested shareholders  comprise 25.073% of shares out, therefore a blocking stake at the Scheme meeting is 2.5073%. The headcount test also applies. 

• Innovent Biologics Inc (1801 HK)’s share price had some rebounds last week, which could be related to some positive progress on business and the picking-up market sentiment in healthcare sector. 
• We increased overall sales forecast for Innovent by including the two new products from Sanofi. But it’s still far from the management’s target of RMB20 billion sales in 5 years.
• Innovent’s current commercialization capability is like a “semi-finished product”, and has long way to go. It lacks the second big product except PD-1 to “pave the way” for next-stage development.

• Sunshine Insurance Group (SIG), a life, health and P&C insurance company, aims to raise up to US$1bn in its HK IPO.
• SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China.
• In this note, we talk about the positive aspects of the deal.