Equity Analyst

Ravi Kumar

Equity Bottom-Up

<ul>
<li>Revenue held up in 3Q25 as credit-driven services offset weakness in platform services, while regulatory and macro pressures continued to drive a strategic shift toward capital-heavy lending.</li>
<li>Provisions surged due to regulatory-driven business mix changes rather than asset-quality deterioration, pushing cost of risk sharply higher and weighing on profitability.</li>
<li>Despite lower FY25 guidance and reduced RoE, valuation remains attractive with meaningful upside supported by a higher target P/B and strong total return potential.</li>
</ul>


Revenue held up in 3Q25 as credit-driven services offset weakness in platform services, while regulatory and macro pressures continued to drive a strategic shift toward capital-heavy lending.
Provisions surged due to regulatory-driven business mix changes rather than asset-quality deterioration, pushing cost of risk sharply higher and weighing on profitability.
Despite lower FY25 guidance and reduced RoE, valuation remains attractive with meaningful upside supported by a higher target P/B and strong total return potential.


Qfin Holdings Inc.(QFIN): Rising Risk Costs Temper Otherwise Decent 3Q25 Result

<ul>
<li>QFIN shares are down ~19% MTD on regulatory concerns in China’s consumer finance sector, though the proposed credit-risk sharing rules may only modestly impact near-term RoE (1–3ppt).</li>
<li>While speculation over a lower NFRA loan yield cap persists, QFIN’s current yield profile suggests limited sensitivity; any tangible financial impact will depend on actual regulation rollout.</li>
<li>QFIN’s 0.9x P/B reflects overly bearish loss expectations. Even under a bear case with a 5ppt RoE reduction, the stock offers 56% upside, implying a fair value of $34.</li>
</ul>


QFIN shares are down ~19% MTD on regulatory concerns in China’s consumer finance sector, though the proposed credit-risk sharing rules may only modestly impact near-term RoE (1–3ppt).
While speculation over a lower NFRA loan yield cap persists, QFIN’s current yield profile suggests limited sensitivity; any tangible financial impact will depend on actual regulation rollout.
QFIN’s 0.9x P/B reflects overly bearish loss expectations. Even under a bear case with a 5ppt RoE reduction, the stock offers 56% upside, implying a fair value of $34.


Qfin Holdings Inc.(QFIN): Buying on Pullbacks Still Makes Sense Here

Equity Research Analyst - Long-Short

Raj S, CA, CFA

<ul>
<li>Regulation steady, not softer; policy silence reaffirms the 24% cap as industry standard, with industry participants electing to comply with immediate effect.</li>
<li>Asset stress rising; delinquencies peak as low-tier borrowers struggle, but QFIN’s disciplined underwriting and data scale set the stage for recovery in 2026e.</li>
<li>Leadership and capital strength, market-leading balance sheet and strong commitment to shareholder returns underpin confidence through the transition phase.</li>
</ul>


Regulation steady, not softer; policy silence reaffirms the 24% cap as industry standard, with industry participants electing to comply with immediate effect.
Asset stress rising; delinquencies peak as low-tier borrowers struggle, but QFIN’s disciplined underwriting and data scale set the stage for recovery in 2026e.
Leadership and capital strength, market-leading balance sheet and strong commitment to shareholder returns underpin confidence through the transition phase.


QFIN US - Follow-Up: Asset-Quality Pressure Undermines Early Bull Case; Recovery Shifts to 2026e

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

<ul>
<li>Small cap Emerging Market funds have outperformed their large-cap peers over the past 10 years.</li>
<li>Yet small and midcap exposure decreased to near record levels last year, in spite of managers maintaining an overweight position versus the benchmark.</li>
<li>We screen for well owned and small/midcap stocks that are showing strong momentum among managers.</li>
</ul>


Small cap Emerging Market funds have outperformed their large-cap peers over the past 10 years.
Yet small and midcap exposure decreased to near record levels last year, in spite of managers maintaining an overweight position versus the benchmark.
We screen for well owned and small/midcap stocks that are showing strong momentum among managers.


Alpha-Centric ESG Research

Kyle Rudden

Well, that sure escalated quickly.Early last week, in the Insight <a href="https://www.smartkarma.com/insights/pre-ipo-esg-analysis-didi-s-exemplary-esg-achievements-eclipsed-by-regulatory-risks-and-uncertainty" target="_blank" data-smartkarma-citation="insights:53687" rel="noopener">Pre-IPO ESG Analysis: DiDi's Exemplary ESG Achievements Eclipsed By Regulatory Risks and Uncertainty</a>, I juxtaposed <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi's (DIDI US)</a> relatively strong ESG results in areas under its control with serious concerns about regulatory risk outside of its direct control.Late last week, days after DiDi's successful US$4.4 billion initial public offering, Chinese regulators ordered the removal of DiDi's business-critical ride-hailing apps from online app markets, until the company rectifies "serious violations" pertaining to collection and use of customer data.DiDi is down 5.3% so far (delayed open today).Regulatory risk was central to my thesis in the first Insight. I hardly anticipated this, but I referred to regulatory risk as real, near-term, tangible investment risk; not just some fuzzy ESG risk. Given that, I felt obliged to follow up. At the same time, however, this news is covered ad nauseam.No sense in beating a dead horse with a broken record.So, I decided to do something different. That statement about regulatory risk being a real tangible investment risk is primarily based on anecdotal evidence – i.e., when regulators flex their muscle, stocks go down, not up. But "anecdotal" isn't good enough.Which is why I took this opportunity to quantify the impacts of adverse regulatory events in China. Specifically, with event studies measuring abnormal returns around major regulatory events across four broad categories. That's what most of this Insight is about. But back to DiDi for a moment.Regulatory risk and uncertainty for DiDi is much worse today than it was last week. Typically, the opposite would be true; a negative event out in the open is better than a possible event lurking in the shadows. But not this time. Barring an immediate change of heart by the PRC, this is bad.Therefore, downgrading to bearish.

Well, that sure escalated quickly.Early last week, in the Insight Pre-IPO ESG Analysis: DiDi's Exemplary ESG Achievements Eclipsed By Regulatory Risks and Uncertainty, I juxtaposed DiDi's (DIDI US) relatively strong ESG results in areas under its control with serious concerns about regulatory risk outside of its direct control.Late last week, days after DiDi's successful US$4.4 billion initial public offering, Chinese regulators ordered the removal of DiDi's business-critical ride-hailing apps from online app markets, until the company rectifies "serious violations" pertaining to collection and use of customer data.DiDi is down 5.3% so far (delayed open today).Regulatory risk was central to my thesis in the first Insight. I hardly anticipated this, but I referred to regulatory risk as real, near-term, tangible investment risk; not just some fuzzy ESG risk. Given that, I felt obliged to follow up. At the same time, however, this news is covered ad nauseam.No sense in beating a dead horse with a broken record.So, I decided to do something different. That statement about regulatory risk being a real tangible investment risk is primarily based on anecdotal evidence – i.e., when regulators flex their muscle, stocks go down, not up. But "anecdotal" isn't good enough.Which is why I took this opportunity to quantify the impacts of adverse regulatory events in China. Specifically, with event studies measuring abnormal returns around major regulatory events across four broad categories. That's what most of this Insight is about. But back to DiDi for a moment.Regulatory risk and uncertainty for DiDi is much worse today than it was last week. Typically, the opposite would be true; a negative event out in the open is better than a possible event lurking in the shadows. But not this time. Barring an immediate change of heart by the PRC, this is bad.Therefore, downgrading to bearish.

PRC Shows DiDi Who's Boss: An Analysis of Adverse Regulatory Events on Stock Prices

China

360 Finance, Inc. operates as a holding company. The Company, through its subsidiaries, provides a digital finance platform to render loans and capital contributions. 360 Finance serves clients in China.

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360 Finance, Inc. (QFIN US)

Qfin Holdings Inc.(QFIN): Rising Risk Costs Temper Otherwise Decent 3Q25 Result

Revenue held up in 3Q25 due to credit-driven services, but provisions surged, impacting profitability. Despite lower guidance, valuation remains...

Ravi Kumar

Qfin Holdings Inc.(QFIN): Buying on Pullbacks Still Makes Sense Here

QFIN shares fell 19% (MTD) on regulatory concerns in China, though RoE impact appears modest; stock offers 95% upside in the base case and 56% in...

Ravi Kumar

QFIN US - Follow-Up: Asset-Quality Pressure Undermines Early Bull Case; Recovery Shifts to 2026e

Newsflash on QFIN: Market chatter today points to further tightening in China’s consumer finance regulations beyond the 24% capping. If confirmed,...

Raj S, CA, CFA

Active GEM Funds: The Small Cap Effect

Small cap Emerging Market funds have outperformed their large-cap peers over the past 10 years, Yet small and midcap exposure decreased to near...

Steven Holden

PRC Shows DiDi Who's Boss: An Analysis of Adverse Regulatory Events on Stock Prices

Last week, I wrote about DiDi's regulatory risk. This week, it's worse. Hence the downgrade. But this is mostly an analysis of how regulatory...

Kyle Rudden

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Qfin Holdings Inc.(QFIN): Rising Risk Costs Temper Otherwise Decent 3Q25 Result

​Revenue held up in 3Q25 due to credit-driven services, but provisions surged, impacting profitability. Despite lower guidance, valuation remains...

Ravi Kumar

Qfin Holdings Inc.(QFIN): Buying on Pullbacks Still Makes Sense Here

​QFIN shares fell 19% (MTD) on regulatory concerns in China, though RoE impact appears modest; stock offers 95% upside in the base case and 56% in...

Ravi Kumar

QFIN US - Follow-Up: Asset-Quality Pressure Undermines Early Bull Case; Recovery Shifts to 2026e

Newsflash on QFIN: Market chatter today points to further tightening in China’s consumer finance regulations beyond the 24% capping. If confirmed,...

Raj S, CA, CFA

Active GEM Funds: The Small Cap Effect

Small cap Emerging Market funds have outperformed their large-cap peers over the past 10 years, Yet small and midcap exposure decreased to near...

Steven Holden

PRC Shows DiDi Who's Boss: An Analysis of Adverse Regulatory Events on Stock Prices

Last week, I wrote about DiDi's regulatory risk. This week, it's worse. Hence the downgrade. But this is mostly an analysis of how regulatory...

Kyle Rudden

Revenue held up in 3Q25 due to credit-driven services, but provisions surged, impacting profitability. Despite lower guidance, valuation remains...

QFIN shares fell 19% (MTD) on regulatory concerns in China, though RoE impact appears modest; stock offers 95% upside in the base case and 56% in...