Founder of Antler Capital

Stanley Tsai, CFA

Thematic (Sector/Industry)

<ul>
<li>The Jan. PMI readings corroborate what investors had already known over the break. But it is noteworthy that SMEs appear much less upbeat than large corporations.  </li>
<li>SMEs account for 60% of GDP and an even higher proportion of job creation. Policy support has been keeping many of them afloat throughout the pandemic. </li>
<li>As the deadline on the PBOC's SME support program is fast approaching, small regional banks may bear the brunt of the impact on the financial system.</li>
</ul>


The Jan. PMI readings corroborate what investors had already known over the break. But it is noteworthy that SMEs appear much less upbeat than large corporations.  
SMEs account for 60% of GDP and an even higher proportion of job creation. Policy support has been keeping many of them afloat throughout the pandemic. 
As the deadline on the PBOC's SME support program is fast approaching, small regional banks may bear the brunt of the impact on the financial system.


China's Micro Loan Market: Key Takeaways from the Jan PMI

<ul>
<li>We expect to see a strong start to the week for China financials names, with sentiments buoyed by upbeat consumer spending data over the new year holiday.</li>
<li>Early signs point to relatively loose conditions in the interbank market as trading resumes across the board on Monday. The central bank's easing bias will likely continue.</li>
<li>We see more momentum for the sector ahead of Q4 earnings (brokers &gt; insurers &gt; banks). Stock selection will become more important thereafter.</li>
</ul>


We expect to see a strong start to the week for China financials names, with sentiments buoyed by upbeat consumer spending data over the new year holiday.
Early signs point to relatively loose conditions in the interbank market as trading resumes across the board on Monday. The central bank's easing bias will likely continue.
We see more momentum for the sector ahead of Q4 earnings (brokers &gt; insurers &gt; banks). Stock selection will become more important thereafter.


China Financials Weekly: Jan 30 | A Bubbly Opening

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There are 5 changes for the SSE50 Index that will be implemented at the close on 9 December. Passive selling on a few deletions is pretty large.</li>
<li>We estimate a one-way turnover of 4.07% at the December rebalance leading to a one-way trade of CNY 3.36bn. Index arb activity could add to the impact on the stocks.</li>
<li>The adds have dropped over the last few months while the deletes have moved higher. There could be a reversion of that trend till implementation of the changes.</li>
</ul>


There are 5 changes for the SSE50 Index that will be implemented at the close on 9 December. Passive selling on a few deletions is pretty large.
We estimate a one-way turnover of 4.07% at the December rebalance leading to a one-way trade of CNY 3.36bn. Index arb activity could add to the impact on the stocks.
The adds have dropped over the last few months while the deletes have moved higher. There could be a reversion of that trend till implementation of the changes.


SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well

<ul>
<li>The review period nearly complete, we see 7 potential adds and 9 potential deletes at the December rebalance. However, there can be a maximum of 5 changes at a rebalance.</li>
<li>We estimate a one-way turnover of 4.28% at the December rebalance leading to a one-way trade of CNY 3.42bn. Index arb activity could add to the impact on the stocks.</li>
<li>The potential adds have dropped over the last month while the potential deletes have moved higher over the last couple of weeks.</li>
</ul>


The review period nearly complete, we see 7 potential adds and 9 potential deletes at the December rebalance. However, there can be a maximum of 5 changes at a rebalance.
We estimate a one-way turnover of 4.28% at the December rebalance leading to a one-way trade of CNY 3.42bn. Index arb activity could add to the impact on the stocks.
The potential adds have dropped over the last month while the potential deletes have moved higher over the last couple of weeks.


SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kingston-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:3566:1" rel="noopener">Kingston Financial (1031 HK)</a> 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.</li>
<li>Key conditions include approval by at least 75% of disinterested shareholders (&lt;10% of disinterested shareholders rejection) and the headcount test. No shareholder holds a blocking stake.</li>
<li>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. </li>
</ul>



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 (&lt;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. 


Kingston Financial’s HK$0.30 Privatisation Bid from Mrs Chu

China

Guotai Junan Securities Co.,Ltd. provides financial services. The Company offers corporate finance, fixed income securities, asset management, risk management, and other services. Guotai Junan Securities Company serves clients throughout China.

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Guotai Junan Securities (2611 HK)

China's Micro Loan Market: Key Takeaways from the Jan PMI

For the most part, the Jan PMI gauges were in line with investor expectations, although the more pessimistic SME sector may be a cause for concern...

Stanley Tsai, CFA

China Financials Weekly: Jan 30 | A Bubbly Opening

We expect a strong start to the week for the China financials space, after a new year holiday that confirms investors' hopes for a speedy recovery...

Stanley Tsai, CFA

SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well

There are 5 changes for the index in Dec - all in line with forecasts. There is a big sector skew. Trades have been performing well. Pre...

Brian Freitas

SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop

We forecast 5 changes in December as Energy, Industrials and Materials weights increase and IT and Financials drop. One-way turnover will be over...

Brian Freitas

Kingston Financial’s HK$0.30 Privatisation Bid from Mrs Chu

The key risk is the headcount test. Despite the large premium, the offer is underwhelming to peer multiples and historical share prices. A 60% deal...

Arun George

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