In today’s briefing:
- HSCEI Dividend Futures: Shrinking OI; Fair Value Estimates Show Upside
- HSBC – Results on Thursday, Risk of BoCom Mark Down, Heavy UK, US Corporate Lending Not Positive
- Juniper Hotels IPO – Looks Somewhat Fairly Valued
- Indonesian Banks Screener; Mandiri Is Our Top Pick on Quality and Return Trends
- US Dollar: Trend Reversal or Start of Bull Run
- Morning Views Asia: Alam Sutera Realty, Citicore Renewable Energy
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HSCEI Dividend Futures: Shrinking OI; Fair Value Estimates Show Upside
- The open interest of the HSCEI 2024 dividend futures is less than half that of the HSCEI 2023 and HSCEI 2022 open interest at the same time of the year.
- Market volatility and the fallout of the losses faced by Korean investors (and the scrutiny of Korean ELS-issuing banks) are among the primary reasons for the low open interest.
- Our fair value for the HSCEI 2024 dividend futures is higher than the current market but there is a lot of sensitivity to bank dividends and special dividends.
HSBC – Results on Thursday, Risk of BoCom Mark Down, Heavy UK, US Corporate Lending Not Positive
- HSBC will release its results on Thursday and there remains risk of far worse credit metrics, not only related to CRE lending in HK and China
- Construction loan risks are tangentially related to CRE and are also considered fairly high risk, where HSBC can see sizable migration to stage 3 loans
- HSBC remains highly concentrated in UK and N America in its wholesale lending book, which we do not believe is well understood, and risky given economies
Juniper Hotels IPO – Looks Somewhat Fairly Valued
- Juniper Hotels is looking to raise up to US$217m in its upcoming India IPO.
- Juniper Hotels is the largest owner by no. of keys of Hyatt affiliated hotels in India as of 2Q23 (30th Jun 23), according to Horwath.
- We have looked at the company’s past performance in our previous note. In this note, we provide our thoughts on valuations.
Indonesian Banks Screener; Mandiri Is Our Top Pick on Quality and Return Trends
- Bank Mandiri is our top pick for its quality attributes, its premium and growing pre- and post-provision returns; Mandiri provides a better valuations to returns mix than Bank Central Asia
- Bank Negara is the value pick with its low PE multiples, its attractive PEG ratio, whilst also improving pre- and post-provision returns with cost of risk well controlled
- Bank Rakyat registered worsening pre- and post-provision returns in 4Q23, with cost of risk worsening; this reflects its heavily MSME focused loan mix which keeps structural cost of risk high
US Dollar: Trend Reversal or Start of Bull Run
- U.S. interest rates have been climbing since early January 2024 after reaching their lowest points between December 27th and January 11th.
- For example, the yield on 2-year Treasury bonds has increased by 52 basis points (bps), and the yield on 10-year bonds has risen by 49 bps since their respective lows.
- Similarly, the Dollar Index (DXY), which measures the value of the U.S. dollar against a basket of other currencies, experienced its weakest point on December 28th, 2023.
Morning Views Asia: Alam Sutera Realty, Citicore Renewable Energy
Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.