In today’s briefing:
- MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
- How Should We Play with Kakao Pay’s MSCI Inclusion Event?
- StubWorld: Swire And China’s Opening
- Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
- Fast Retailing: Another Beat Would Suggest That FR’s North America & Europe Expansion Is Viable
- H World (HTHT) Follow-On Offering – A More Genuine Need
- Bubble Warning: China Internet Investment (810 HK) Suspended
- Aequitas 2022 IPOs and Placements Performance Review – From the Busiest Year to the Slowest Year
- Alibaba (9988 HK): Still Significant Upside After Surging
- Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern
MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
- We expect a number of changes to the MSCI Standard indices for the Asia Pacific region at the first Quarterly Comprehensive Index Review to be implemented on 28 February.
- As usual, most changes are expected in China with a smattering of adds and deletes for the other markets.
- On average, the adds have outperformed the deletes over the last few weeks and months and pre-positioning should continue for the next couple of weeks.
How Should We Play with Kakao Pay’s MSCI Inclusion Event?
- Kakao Pay is the only possibility to be included in the February MSCI IR. It comfortably beats both the full market cap and float market cap hurdles.
- It can be assumed that the full-fledged emergence of local institutional flows targeting MSCI inclusion contributed to some extent to Kakao Pay’s outperformance early this year.
- More extreme reverse flow trading could emerge. In other words, there is a possibility that the share price will turn into a sell-off even before the MSCI announcement.
StubWorld: Swire And China’s Opening
- Retailers /hoteliers will welcome the return of Chinese travellers, with ~US$250bn in annual spending. That should bode well for mall operators like Swire Properties and, in turn, Swire Pacific.
- Preceding my comments on Swire are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
- KT’s foreign room has been rising since early September last year. If this trend continues, it will likely approach the inclusion borderline of 15% within a month or two.
- This trend is expected to continue for the time being as the tough relationship between the KT CEO and the government seems unlikely to be resolved in the short term.
- The February inclusion is pretty tight, but May seems like we could be looking out for it.
Fast Retailing: Another Beat Would Suggest That FR’s North America & Europe Expansion Is Viable
- Although it looks quite challenging, we think Fast Retailing (9983 JP) should beat consensus when it reports 1QFY23 results on 12th Jan 2023.
- We think shares could briefly touch 2021 highs on a relatively strong beat as it would suggest that the company’s aggressive expansion plans in North America and Europe are viable.
- Thus, we would look to buy Fast Retailing with a short investment horizon. We see considerable downside risks over a full-year period.
H World (HTHT) Follow-On Offering – A More Genuine Need
- H World Group (HTHT US) aims to raise around US$260m via a follow-on ADS offering.
- The company plans to use the proceeds mostly for investment. This will be the first deal by the company post its H-share listing in 2020.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Bubble Warning: China Internet Investment (810 HK) Suspended
- China Internet Investment Finance Holdings (810 HK) (CII), an investment manager, is currently suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
- CII has thrice responded to unusual price action in its share price in the past four months. Shares are up a staggering ~1,000% in the past six months.
- This insight provides some background information on CII. Trading at 64x book value, this is one avoidable company.
Aequitas 2022 IPOs and Placements Performance Review – From the Busiest Year to the Slowest Year
- 2022 marked our seventh year covering Equity Capital Markets (ECM) in Asia Pacific. 2022 was rather quiet ending with us covering one of the lowest number of IPOs and placements.
- We ended 2022 with an accuracy rate of 74.6% across 55 IPOs that we covered and 70.5% across 78 placements.
- For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.
Alibaba (9988 HK): Still Significant Upside After Surging
- A state-owned company invested in Ant Group which was also founded by Jack Ma.
- We believe both the revenue growth rate and the operating margin will rise in following quarters.
- We believe the stock price still has significant upside even after the surge in past four trading days.
Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern
- Company’s second largest shareholder General Atlantic sold out entire holdings at 5.9% to 6.4% discount to Monday close.
- The placement reflected mainly General Atlantic’s attempt to time market to recoup a 10-year investment instead of any negative read of company fundamentals, in our view.
- Recent newsflow continues pointing to steady recovery in all business lines of Xiabu group. Its valuation discount relative to peers has not captured strong turnaround prospects. Sector top pick.
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