Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Trying SPACs On For Size: On March 31, 2021, the Singapore Exchange (SGX.SP) [SGX] issued a Consultation Paper on the Proposed Listing Framework for Special Purpose Acquisition Companies (SPACs). The Consultation Paper is seeking comments on policy/rule proposals to allow SPAC listings on SGX;  *Blank Check Companies: Special Purpose Acquisition Companies (SPACs) are not new and have historically focused on the Over the Counter (OTC) pink sheet companies. SPACs are essentially known as blank check companies, essentially a shell company which raises a significant amount cash in an IPO; and*Not A Panacea: SPACs are not the panacea which will resolve SGX’s weakened revenue stream. Keep in mind that the majority of the US-listed SPACs remain below their USD 10 per share offering price and only seven have actually returned capital to investors. As the world heads toward a zero interest rate environment coupled with the giant vortex of skittish liquidity backstopped by central banks, the SPAC frenzy looks to be just the latest in a long line of unintended consequences of risk taking.

*Trying SPACs On For Size: On March 31, 2021, the Singapore Exchange (SGX.SP) [SGX] issued a Consultation Paper on the Proposed Listing Framework for Special Purpose Acquisition Companies (SPACs). The Consultation Paper is seeking comments on policy/rule proposals to allow SPAC listings on SGX;  *Blank Check Companies: Special Purpose Acquisition Companies (SPACs) are not new and have historically focused on the Over the Counter (OTC) pink sheet companies. SPACs are essentially known as blank check companies, essentially a shell company which raises a significant amount cash in an IPO; and*Not A Panacea: SPACs are not the panacea which will resolve SGX’s weakened revenue stream. Keep in mind that the majority of the US-listed SPACs remain below their USD 10 per share offering price and only seven have actually returned capital to investors. As the world heads toward a zero interest rate environment coupled with the giant vortex of skittish liquidity backstopped by central banks, the SPAC frenzy looks to be just the latest in a long line of unintended consequences of risk taking.

Singapore Exchange – Into Merlion’s Mouth

*Mainland Chinese Stock Exchange Powerhouse: According to Reuters, mainland China is contemplating the establishment of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center; and  *Here Comes The Pain Trade: If mainland China is successful this time around (and we think that they will be), it is probably pretty fair to say that the HKEX/mainland China growth story will have come to an abrupt end. In terms of where we are with valuation, HKEX’s P/E has exploded in the face of weaker volumes on the expectation of future US ADR listings. The increase in the stamp duty to cover Hong Kong’s tax shortfall only adds to the misery that HKEX may encounter.

*Mainland Chinese Stock Exchange Powerhouse: According to Reuters, mainland China is contemplating the establishment of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center; and  *Here Comes The Pain Trade: If mainland China is successful this time around (and we think that they will be), it is probably pretty fair to say that the HKEX/mainland China growth story will have come to an abrupt end. In terms of where we are with valuation, HKEX’s P/E has exploded in the face of weaker volumes on the expectation of future US ADR listings. The increase in the stamp duty to cover Hong Kong’s tax shortfall only adds to the misery that HKEX may encounter.

Hong Kong Exchanges & Clearing – Building The HKEX Coffin

*Poor Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 4Q20 earnings of HKD 2.9 bn, declining HKD 522 mn (15.6%) linked quarter. Results were challenged on many fronts, as evidenced by HKEX’ negative operating jaws during the period, whereby revenues declined HKD 210 mn (4.0%) whilst expenses jumped HKD 187 mn (13.2%)– pushing its C/I ratio higher by 480 bp to 31.4%; and*Stamp Dutied: Despite the poor showing during 4Q20, the real story for HKEX is the issue of the stamp duty which likely will impact earnings and market sentiment for the foreseeable future. Given the financial stress of the pandemic on the finances of the Hong Kong government,  on February 24, 2021 it was announced that there would be a 3 bp or 30% increase in the stamp duty to help offset the government budget deficit.

*Poor Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 4Q20 earnings of HKD 2.9 bn, declining HKD 522 mn (15.6%) linked quarter. Results were challenged on many fronts, as evidenced by HKEX’ negative operating jaws during the period, whereby revenues declined HKD 210 mn (4.0%) whilst expenses jumped HKD 187 mn (13.2%)– pushing its C/I ratio higher by 480 bp to 31.4%; and*Stamp Dutied: Despite the poor showing during 4Q20, the real story for HKEX is the issue of the stamp duty which likely will impact earnings and market sentiment for the foreseeable future. Given the financial stress of the pandemic on the finances of the Hong Kong government,  on February 24, 2021 it was announced that there would be a 3 bp or 30% increase in the stamp duty to help offset the government budget deficit.

Hong Kong Exchanges & Clearing – Hitting The Wall

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Quantitative Analysis

Since our Original on <a href="https://www.smartkarma.com/insights/asia-dividend-forecasting-the-rise-and-fall-of-dividends-across-asian-companies" target="_blank" data-smartkarma-citation="insights:43022" rel="noopener">Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies</a>, published on Sep 30 2020, this is our first quarterly update. Our models take into account latest reported fiscal year-end financials to provide updated results. We also discuss companies where there is notable change in our conviction level based on updated data.
At the webinar in October, there was also a request for conducting price movement analysis corresponding to forward dividend growth/cut for our back-test results. This analysis is now available. Our results show a high correlation between price movements and dividend growth/cut, suggesting that users of our models will benefit from guiding their investment decisions based on dividend growth/cut outlook.

Since our Original on Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies, published on Sep 30 2020, this is our first quarterly update. Our models take into account latest reported fiscal year-end financials to provide updated results. We also discuss companies where there is notable change in our conviction level based on updated data.
At the webinar in October, there was also a request for conducting price movement analysis corresponding to forward dividend growth/cut for our back-test results. This analysis is now available. Our results show a high correlation between price movements and dividend growth/cut, suggesting that users of our models will benefit from guiding their investment decisions based on dividend growth/cut outlook.

Asia Dividend Forecasting | Quarterly Update 1.0

Alpha-Centric ESG Research

Kyle Rudden

In <a href="https://www.smartkarma.com/insights/asia-exchanges-lead-in-esg-hkex-jpx-sgx" target="_blank" data-smartkarma-citation="insights:34447" rel="noopener">Asia Exchanges Lead in ESG: HKEX, JPX, SGX</a>, I assessed and benchmarked the world's financial exchanges on their contributions to sustainable/ESG investing and finance, and general Corporate Social Responsibility performance. Much has transpired, so it is time for an update... of sorts."Of sorts," because this version focuses exclusively on listed Asian exchange stocks, employs a more robust assessment/benchmarking model, and incorporates additional (previously-unavailable) data points. In short, it is more targeted, substantive, and actionable. Less breadth, more depth.The first analysis was based more on aspirations than on accomplishments because few exchanges had accomplished anything at that point. This version reflects real-world progress, and the results are significantly more insightful. The "downside," however, is information-overload.Therefore, this Insight addresses methodology and overall results (scores, rankings), and I will dive deeper into specific subjects (e.g., ESG derivatives) and exchanges separately. The Asian exchanges herein are: <a href="https://www.smartkarma.com/entities/asx-ltd" target="_blank" data-smartkarma-citation="entities:552:1" rel="noopener">ASX Limited (ASX AU)</a>, <a href="https://www.smartkarma.com/entities/bombay-stock-exchange" target="_blank" data-smartkarma-citation="entities:23694:1" rel="noopener">BSE Limited (BSE IN)</a>, <a href="https://www.smartkarma.com/entities/bursa-malaysia-bhd" target="_blank" data-smartkarma-citation="entities:17112:1" rel="noopener">Bursa Malaysia (BURSA MK)</a>, <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>, <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" data-smartkarma-citation="entities:11266:1" rel="noopener">Japan Exchange Group (8697 JP)</a>, <a href="https://www.smartkarma.com/entities/nzx-ltd" target="_blank" data-smartkarma-citation="entities:10696:1" rel="noopener">NZX Limited (NZX NZ)</a>, and <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a>.

In Asia Exchanges Lead in ESG: HKEX, JPX, SGX, I assessed and benchmarked the world's financial exchanges on their contributions to sustainable/ESG investing and finance, and general Corporate Social Responsibility performance. Much has transpired, so it is time for an update... of sorts."Of sorts," because this version focuses exclusively on listed Asian exchange stocks, employs a more robust assessment/benchmarking model, and incorporates additional (previously-unavailable) data points. In short, it is more targeted, substantive, and actionable. Less breadth, more depth.The first analysis was based more on aspirations than on accomplishments because few exchanges had accomplished anything at that point. This version reflects real-world progress, and the results are significantly more insightful. The "downside," however, is information-overload.Therefore, this Insight addresses methodology and overall results (scores, rankings), and I will dive deeper into specific subjects (e.g., ESG derivatives) and exchanges separately. The Asian exchanges herein are: ASX Limited (ASX AU), BSE Limited (BSE IN), Bursa Malaysia (BURSA MK), HKEX (388 HK), Japan Exchange Group (8697 JP), NZX Limited (NZX NZ), and Singapore Exchange (SGX SP).

Sustainable Stock Exchanges: SGX, HKEX Are Shaping the Future of Sustainable/ESG Investing in Asia

Australia

ASX Ltd is a demutualized company which operates Australia's primary national stock exchange and equity derivatives market. The ASX operates markets for equities, derivatives, fixed-interest securities and capital-raising for unlisted companies using advanced computer systems for both trading and settlement.

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ASX Ltd (ASX AU)

Singapore Exchange – Into Merlion’s Mouth

SINGAPORE EXCHANGE: SGX issued a Consultation Paper on SPACs seeking comments on policy proposals to allow SPAC IPOs. SPACs are not the panacea...

Thomas J. Monaco

Hong Kong Exchanges & Clearing – Building The HKEX Coffin

HONG KONG EXCHANGES & CLEARING: Mainland China is contemplating a new stock exchange to attract overseas firms. If mainland China is successful,...

Thomas J. Monaco

Hong Kong Exchanges & Clearing – Hitting The Wall

HONG KONG EXCHANGES & CLEARING: HKEX reported a 15.6% QOQ decline in 4Q20 earnings, given the period's negative operating jaws. The story is the...

Thomas J. Monaco

Asia Dividend Forecasting | Quarterly Update 1.0

We incorporate latest reported financial data to provide updated results for our Asia Dividend Forecasting models. We also ran an insightful price...

Ankit Agrawal, CFA

Sustainable Stock Exchanges: SGX, HKEX Are Shaping the Future of Sustainable/ESG Investing in Asia

Sustainability is imperative, capital is its cornerstone, and markets move capital. Exchanges, at that vital intersection, are agents of progress...

Kyle Rudden

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