Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Thematic (Sector/Industry)

<ul>
<li>A stealth bull market is underway in Chinese bank shares </li>
<li>Banks are well positioned to benefit as the economy grows and interest rates rise</li>
<li>Value remains in the sector despite the  move up in share prices</li>
</ul>


A stealth bull market is underway in Chinese bank shares 
Banks are well positioned to benefit as the economy grows and interest rates rise
Value remains in the sector despite the  move up in share prices


Who Is Crazy Enough to Buy a Chinese Bank?

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

<ul>
<li>There was a release from the State Council in China in late September about increasing Tier 1 capital of 6 of China's banks through a government capital injection</li>
<li>This week there was a Bloomberg story on this, but only them, talking about something similar and indicating at least RMB400bn of new capital for <a href="https://www.smartkarma.com/entities/agricultural-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1120:1" rel="noopener"></a>ABC and BoCom.</li>
<li>Interpolating from the numbers, there can be a 10% increase in total equity which may also be equivalent or nearly equivalent or slightly higher than total stated NPLs </li>
</ul>


There was a release from the State Council in China in late September about increasing Tier 1 capital of 6 of China's banks through a government capital injection
This week there was a Bloomberg story on this, but only them, talking about something similar and indicating at least RMB400bn of new capital for ABC and BoCom.
Interpolating from the numbers, there can be a 10% increase in total equity which may also be equivalent or nearly equivalent or slightly higher than total stated NPLs 


China Banks - If Largest 5 Banks Are Recapitalized with RMB1,415bn It Can Be Highly Positive

<ul>
<li>There is increased collateral risk for banks in Hong Kong and China considering ongoing stresses in real estate in both regions</li>
<li>China Vanke just issued a Profit Alert indicating a loss during FY24 compared with a profit in preceding year</li>
<li>Land mark downs are to blame and worsening profit margins and additional provisions for impairments</li>
</ul>


There is increased collateral risk for banks in Hong Kong and China considering ongoing stresses in real estate in both regions
China Vanke just issued a Profit Alert indicating a loss during FY24 compared with a profit in preceding year
Land mark downs are to blame and worsening profit margins and additional provisions for impairments


HK Banks - China Vanke FY24 EPS Profit Alert: Loss RMB3.79 Vs Profit RMB1.03, Bank Collateral Risk

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>Top holdings remain unchanged: TSMC, Samsung Electronics, and Tencent are almost universally owned. TSMC hits record weights but active funds sell into strength as benchmark weights surpass 10%</li>
<li>Hon Hai, Hyundai Motor, and Singtel lead recoveries from prolonged declines. Baidu Inc. and Kweichow Moutai see sharp ownership drops.</li>
<li>Momentum leaders include Accton Technology, CATL, and KE Holdings. By contrast, Axis Bank, PDD, and Reliance face stalling ownership.</li>
</ul>


Top holdings remain unchanged: TSMC, Samsung Electronics, and Tencent are almost universally owned. TSMC hits record weights but active funds sell into strength as benchmark weights surpass 10%
Hon Hai, Hyundai Motor, and Singtel lead recoveries from prolonged declines. Baidu Inc. and Kweichow Moutai see sharp ownership drops.
Momentum leaders include Accton Technology, CATL, and KE Holdings. By contrast, Axis Bank, PDD, and Reliance face stalling ownership.


Asia Ex-Japan Funds:  Stock Positioning Update

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>CSRC's Market Value Management Guidelines will indirectly benefit the H-share stocks with their A-share counterparts with a P/B of below 1x.  </li>
<li>Chinese banks dominated the list with below-book A-shares. <a href="https://www.smartkarma.com/entities/china-everbright-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:16221:1" rel="noopener">China Everbright Bank (6818 HK)</a>, <a href="https://www.smartkarma.com/entities/china-citic-bank-corp-ltd-ea6c25fd-4b20-45cb-a4a6-df7a60136f03" target="_blank" data-smartkarma-citation="entities:653:1" rel="noopener">China Citic Bank H (998 HK)</a>, and <a href="https://www.smartkarma.com/entities/industrial-and-commercial-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a> are the prime beneficiaries.</li>
<li>Infrastructure construction companies <a href="https://www.smartkarma.com/entities/china-railway-construction-corp-limited" target="_blank" data-smartkarma-citation="entities:263:1" rel="noopener">China Railway Cons Corp (1186 HK)</a>, <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group H (390 HK)</a>, and <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Comm Cons (1800 HK)</a> are also well-positioned to gain.</li>
</ul>


CSRC's Market Value Management Guidelines will indirectly benefit the H-share stocks with their A-share counterparts with a P/B of below 1x.  
Chinese banks dominated the list with below-book A-shares. China Everbright Bank (6818 HK), China Citic Bank H (998 HK), and ICBC (H) (1398 HK) are the prime beneficiaries.
Infrastructure construction companies China Railway Cons Corp (1186 HK), China Railway Group H (390 HK), and China Comm Cons (1800 HK) are also well-positioned to gain.


China & HK Strategy: Names to Watch for Market Value Management

China

China Construction Bank Corporation provides banking services. The Company offers deposits, loans, fund management, foreign exchange, and other services. China Construction Bank provides its services to individuals, enterprises, and other clients.

Price Gauge
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China Construction Bank (601939 CH)

Who Is Crazy Enough to Buy a Chinese Bank?

Chinese bank shares are experiencing a stealth bull market. Value and drivers still remain in the sector despite the negativity on the economy

Rikki Malik

China Banks - If Largest 5 Banks Are Recapitalized with RMB1,415bn It Can Be Highly Positive

BBG article about China recapitalizing its largest 5 banks, may be real news, coming after an official release in September. Recapping banks can be...

Daniel Tabbush

HK Banks - China Vanke FY24 EPS Profit Alert: Loss RMB3.79 Vs Profit RMB1.03, Bank Collateral Risk

The new profit alert from China Vanke highlights ongoing risks to banks, as land is their primary collateral. Real estate stresses are also evident...

Daniel Tabbush

Asia Ex-Japan Funds: Stock Positioning Update

Top holdings remain unchanged: TSMC, Samsung Electronics, and Tencent are almost universally owned. TSMC hits record weights but active funds sell...

Steven Holden

China & HK Strategy: Names to Watch for Market Value Management

SASAC issued "Several opinions on improving and strengthening the market value management of listed companies controlled by central enterprises"...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Who Is Crazy Enough to Buy a Chinese Bank?

​Chinese bank shares are experiencing a stealth bull market. Value and drivers still remain in the sector despite the negativity on the economy

Rikki Malik

China Banks - If Largest 5 Banks Are Recapitalized with RMB1,415bn It Can Be Highly Positive

BBG article about China recapitalizing its largest 5 banks, may be real news, coming after an official release in September. Recapping banks can be...

Daniel Tabbush

HK Banks - China Vanke FY24 EPS Profit Alert: Loss RMB3.79 Vs Profit RMB1.03, Bank Collateral Risk

The new profit alert from China Vanke highlights ongoing risks to banks, as land is their primary collateral. Real estate stresses are also evident...

Daniel Tabbush

Asia Ex-Japan Funds: Stock Positioning Update

Top holdings remain unchanged: TSMC, Samsung Electronics, and Tencent are almost universally owned. TSMC hits record weights but active funds sell...

Steven Holden

China & HK Strategy: Names to Watch for Market Value Management

SASAC issued "Several opinions on improving and strengthening the market value management of listed companies controlled by central enterprises"...

Osbert Tang, CFA

Chinese bank shares are experiencing a stealth bull market. Value and drivers still remain in the sector despite the negativity on the economy