China Specialist, Auto and Industrial Specialist

Victoria Li

Thematic (Sector/Industry)

We are bullish on PV sales in 2021E. We estimate China's PV sales will grow by 10% yoy to 22.2mn units. We also estimate China's EV (electric vehicle) sales double will in 2021E.SUV's market share would continue growing and might reach 50% soon in China due to customers' preference, while premium car market (above Rmb130k) would continue gain market shares with consumption upgrading. B/C segment EV SUVs, as long as there's qualified models available, would be the hottest segment in 2021E.Among EV brands, Tesla (TSLA.US) Shanghai might be the biggest winner next year, thanks to its coming Model Y (SUV). Xpeng(EPEV.US) is our favourite in local brand. It would  launch a new sedan EV (P5) in 2021E.  Xpeng's new SUV model might come in 2022E.  NIO's (NIO.US) sales would under pressure due to direct competition from Model Y.Among traditional OEMs, Geely (175.HK) remains our favourite due to high expected growth of earnings driven by ramping up Lynk&amp;Co, new models and coming brand new designed EV models.

We are bullish on PV sales in 2021E. We estimate China's PV sales will grow by 10% yoy to 22.2mn units. We also estimate China's EV (electric vehicle) sales double will in 2021E.SUV's market share would continue growing and might reach 50% soon in China due to customers' preference, while premium car market (above Rmb130k) would continue gain market shares with consumption upgrading. B/C segment EV SUVs, as long as there's qualified models available, would be the hottest segment in 2021E.Among EV brands, Tesla (TSLA.US) Shanghai might be the biggest winner next year, thanks to its coming Model Y (SUV). Xpeng(EPEV.US) is our favourite in local brand. It would  launch a new sedan EV (P5) in 2021E.  Xpeng's new SUV model might come in 2022E.  NIO's (NIO.US) sales would under pressure due to direct competition from Model Y.Among traditional OEMs, Geely (175.HK) remains our favourite due to high expected growth of earnings driven by ramping up Lynk&amp;Co, new models and coming brand new designed EV models.

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer comparison of the four companies under our coverage. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer comparison of the four companies under our coverage.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Macau Gaming Update - Lucror Analytics

Equity Bottom-Up

Geely might become the first traditional OEM who join smart EV boom in China.  We believe smart EV would be the key beneficiaries of China's EV market demand growth. Geely would start benefiting from it when it's Lynk&amp;Co Zero Concept, which would be manufactured on Geely's brand new EV  platform-SEA(which is designed for Full Autonomous Driving of future) launches in the market. In addition, full year contribution from its 6 new models launched this year and 3 new models coming next year would drive Geely's earnings grow by 66% yoy in 2021E. Valuation re-rating opportunity is expected with Geely's STAR boarding listing in the short term, and the company's transforming to smart EV maker in the long term.

Geely might become the first traditional OEM who join smart EV boom in China.  We believe smart EV would be the key beneficiaries of China's EV market demand growth. Geely would start benefiting from it when it's Lynk&amp;Co Zero Concept, which would be manufactured on Geely's brand new EV  platform-SEA(which is designed for Full Autonomous Driving of future) launches in the market. In addition, full year contribution from its 6 new models launched this year and 3 new models coming next year would drive Geely's earnings grow by 66% yoy in 2021E. Valuation re-rating opportunity is expected with Geely's STAR boarding listing in the short term, and the company's transforming to smart EV maker in the long term.

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - November 2020 - Lucror Analytics

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.The list is headed by <a href="https://www.smartkarma.com/entities/jiangsu-hengrui-medicine-co-ltd" target="_blank" data-smartkarma-citation="entities:14128:1" rel="noopener">Jiangsu Hengrui Medicine (600276 CH)</a>, one of the standout domestic holdings within the Health Care sector, followed by <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> and <a href="https://www.smartkarma.com/entities/luxshare-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:12310:1" rel="noopener">Luxshare Precision Industry (002475 CH)</a> .Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn

Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.The list is headed by Jiangsu Hengrui Medicine (600276 CH), one of the standout domestic holdings within the Health Care sector, followed by China Tourism Group Duty Free Corp Ltd (601888 CH) and Luxshare Precision Industry (002475 CH) .Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn

China's Next Generation:  Diversifying Away from Tencent and Alibaba.

Hong Kong

Geely Automobile Holdings Limited operates as a passenger vehicles manufacturing company. The Company provides passenger vehicles development, manufacturing, sales, and other services. Geely Automobile Holdings also exports passenger vehicles.

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Geely Auto (175 HK)

China Auto 2021E Outlook: Winter Is Over

We are bullish on PV sales in 2021E. We estimate China's PV sales will grow by 10% yoy to 22.2mn units. We also estimate China's EV (electric...

Victoria Li

Asia HY Monthly - Macau Gaming Update - Lucror Analytics

In this month’s “In-Focus” section, we provide an update on the Macau gaming sector, including our market outlook, concession renewals and a peer...

Lucror Analytics

Geely (175.HK)-Joining the EV Party

Geely might become the first traditional OEM who join smart EV boom in China. We believe smart EV would be the key beneficiaries of China's EV...

Victoria Li

Asia HY Trade Book - November 2020 - Lucror Analytics

The Asia HY Trade Book for the month of November includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

China's Next Generation: Diversifying Away from Tencent and Alibaba.

China exposure is becoming more concentrated in a small number of large cap stocks. We identify the next generation of China stocks by analyzing...

Steven Holden

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