Financial sector veteran, KT Capital Group

Fern Wang

Financial sector veteran

KT Capital Group

Principal investments and advisory firm that focuses on connecting the CIS countries with East Asia.

Principal investments and advisory firm

Equity Bottom-Up

<ul>
<li>Evergrande's filing in itself does not signify a deterioration in its financials; it was already insolvent as of end 2021.</li>
<li>The bankruptcy filing provides the benefits of automatic stay and is a necessary step to validate the Group's offshore restructuring plan. </li>
<li>Evergrande's long term viability still depends on recovery of the China property market. </li>
</ul>


Evergrande's filing in itself does not signify a deterioration in its financials; it was already insolvent as of end 2021.
The bankruptcy filing provides the benefits of automatic stay and is a necessary step to validate the Group's offshore restructuring plan. 
Evergrande's long term viability still depends on recovery of the China property market. 


Why Evergrande’s Bankruptcy Filing Is a Positive Development

APAC IPOs & Placements, Aequitas Research

Clarence Chu

APAC IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Event-Driven

<ul>
<li>Having first introduced the three red line guidance in late 2020, the government has begun shifting its stance, and relaxing some of its regulatory oversight.</li>
<li>In this note, we looked at recent news developments and how some larger developers fared against the three red lines criterion.</li>
<li>Of the large developers we looked at, there are a few names which stand out which could potentially do a capital raising given their financial standing. </li>
</ul>


Having first introduced the three red line guidance in late 2020, the government has begun shifting its stance, and relaxing some of its regulatory oversight.
In this note, we looked at recent news developments and how some larger developers fared against the three red lines criterion.
Of the large developers we looked at, there are a few names which stand out which could potentially do a capital raising given their financial standing. 


Chinese Developers’ Overview - Shift in Sentiment but a Few Still Needs Some Equity

Head of Asia, Lucror Analytics

Charles Macgregor

Head of Asia

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

<p>Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.</p><ul><li><a href='#lucror-entity-479'>Evergrande</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Evergrande

Asia Fixed Income Analyst

Derek Silva

<p>Since their introduction less than a decade ago, there has been much discussion and little evidence about the enforceability of the ‘keepwell’ deed in many Chinese USD corporate bonds. And, given that the biggest issuer of keepwell bonds in 2020 is Evergrande’s Hengda Real Estate, it remains as relevant as ever. Until recently, the structure had yet to be put to the test in any prominent distressed cases.  </p><p>A high-profile case in 2020 seemed to have changed that. In recent months, investors and analysts have closely followed the situation with PKFounder, a distressed issuer with a keepwell bond. And it didn’t look good for keepwell bondholders: The<a href="https://www.reuters.com/article/china-bond-keepwell/administrator-for-chinas-pufg-rejects-keepwell-deed-for-300-mln-bond-redd-idINL4N2FP01J" target="_blank" rel="noopener"> judgement rejected the bondholders' claims</a>, seemingly solidifying the argument for those who said the structure was little more than a gentleman’s agreement and provided a false sense of security.  </p><p>But now there’s been a new legal decision from a smaller case that contradicts the PKFounder decision. Which brings to mind something important to remember: the concept of <em>legal precedent</em> is not as powerful in China as it is elsewhere. In the other case, Mainland company CEFC had an offshore subsidiary which also issued keepwell bonds and, this month, the Shanghai Financial Court ordered the company to pay a bondholder on account of the keepwell deed. </p><p>In the following sections, we take a closer look at the specifics. And, while there is no firm conclusion about the enforceability of a keepwell deed, the latest news shows that the situation is not cut-and-dry and the keepwell feature in bonds might not be worthless after all.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/171/416/original/Screenshot%202020-11-14%20at%2011.21.07.png?1605330171" class="editor-image img-responsive" data-smartkarma-image-id="171416"></figure><div class="content-caption">Source: https://events.debtwire.com/apchart-of-the-week-keepwells-back-19-of-chinese-hy-bonds-ytd-while-pkfounder-cefc-bring-structure-on-focus</div></section><p></p></section>

Since their introduction less than a decade ago, there has been much discussion and little evidence about the enforceability of the ‘keepwell’ deed in many Chinese USD corporate bonds. And, given that the biggest issuer of keepwell bonds in 2020 is Evergrande’s Hengda Real Estate, it remains as relevant as ever. Until recently, the structure had yet to be put to the test in any prominent distressed cases.  A high-profile case in 2020 seemed to have changed that. In recent months, investors and analysts have closely followed the situation with PKFounder, a distressed issuer with a keepwell bond. And it didn’t look good for keepwell bondholders: The judgement rejected the bondholders' claims, seemingly solidifying the argument for those who said the structure was little more than a gentleman’s agreement and provided a false sense of security.  But now there’s been a new legal decision from a smaller case that contradicts the PKFounder decision. Which brings to mind something important to remember: the concept of legal precedent is not as powerful in China as it is elsewhere. In the other case, Mainland company CEFC had an offshore subsidiary which also issued keepwell bonds and, this month, the Shanghai Financial Court ordered the company to pay a bondholder on account of the keepwell deed. In the following sections, we take a closer look at the specifics. And, while there is no firm conclusion about the enforceability of a keepwell deed, the latest news shows that the situation is not cut-and-dry and the keepwell feature in bonds might not be worthless after all.Source: https://events.debtwire.com/apchart-of-the-week-keepwells-back-19-of-chinese-hy-bonds-ytd-while-pkfounder-cefc-bring-structure-on-focus

Keepwells: Not Dead Yet - There Might Be Some Protection After All?

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of September 29th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We have highlighted flows for Meituan, Tencent, ICBC and Xpeng.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of September 29th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We have highlighted flows for Meituan, Tencent, ICBC and Xpeng.


Hong Kong Connect Flows (Sep 29th): Meituan, Tencent, ICBC, Xpeng

China

China Evergrande Group is an integrated residential property developer. The Company, through its subsidiaries, operates in property development, investment, management, finance, internet, health, culture, and tourism markets.

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Evergrande (3333 HK)

Why Evergrande’s Bankruptcy Filing Is a Positive Development

Evergrande's bankruptcy petition is a positive development for its long negotiated restructuring plan, providing temporary protection against...

Fern Wang

Chinese Developers’ Overview - Shift in Sentiment but a Few Still Needs Some Equity

Country Garden Holdings just launched a primary placement to raise US$300m, at a fixed 17.7% discount to last close. Proceeds will be used to repay...

Clarence Chu

Morning Views Asia: Evergrande

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Keepwells: Not Dead Yet - There Might Be Some Protection After All?

Investors increasingly believe Keepwell deeds are worthless after the PKFounder legal decision this year. But a more recent case seems to...

Derek Silva

Hong Kong Connect Flows (Sep 29th): Meituan, Tencent, ICBC, Xpeng

We analyzed southbound Hong Kong connect flows in the past week and highlight flows for Meituan, Tencent, ICBC and Xpeng.

Ke Yan, CFA, FRM

52-week Range

Market Cap (USDm)

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Dividend (Yield)