Daily Brief Financials: HKEX, S&P 500, Meritz Financial Group, Agile Property Holdings, Ethereum, Square Inc and more

• After getting ‘unprecedented access’ to inspect and investigate audit firms in the PRC, the PCAOB is vacating their 2021 determinations; there will be no ADR delistings in the near future.
• PCAOB inspectors have identified numerous potential deficiencies that are consistent with what the PCAOB has encountered in other first-time inspections around the world.
• The iShares MSCI China ETF (MCHI US), KraneShares CSI China Internet ETF (KWEB US) and NASDAQ Golden Dragon China Index (HXC INDEX) are trading lower in the U.S.

• SPX 4,150 turn target met. Our game plan focused on longs established near SPX 3,940 with an ideal sell zone at 4,150 on a brief spike above 4,100. 
• We established shorts at that SPX 4,150 (NDX, RTY, CAC, NKY, HSI). Ladder shorts on strength and use dips to reduce.
• Mid December cycle peak may need some top building work into January where we range before a more prominent down leg.

• The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.
• Meritz Financial’s buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.
• As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.

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.

• Kawasan Industri Jababeka

• Aave and Compound are two of DeFi’s stalwarts: the two largest lending and borrowing protocols on Ethereum, each with a TVL over ten times larger than the third largest protocol.
• Both protocols have functioned nearly flawlessly this year while a growing number of centralized entities have been failing in often spectacular fashion.
• Aave has accumulated just $2.17mn of bad debt (most of which was generated in a recent, likely unprofitable, exploit covered here) relative to its $3.2bn TVL, while Compound has just $65,000 to its $1.5bn TVL. 

• Block share price continued to underperform on a risk-adjusted basis, even it delivered double digit returns.
• Topline growth is slowing down as macroeconomic environment is no longer supportive and competition intensifies.
• Block’s business model seems ill-positioned to deliver, according to the company.