Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On the 12th of November, newly lame duck US president Donald Trump signed an <a href="https://www.whitehouse.gov/presidential-actions/executive-order-addressing-threat-securities-investments-finance-communist-chinese-military-companies/" target="_blank" rel="noopener">Executive Order</a>(Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies) banning investment and capital provision by "US persons" to companies in lists established by the US Department of Defense pursuant to Public Law 105-261, Section 1237 (Fiscal Year 1999 National Defense Authorization Act).The various global index providers immediately commenced consultations with their myriad investors and with OFAC (the Office of Foreign Asset Control of the US Treasury Department) and decided in early December for the most part to delete certain securities from their indices. New guidance from OFAC in the form of FAQs (Frequently Asked Questions related to Executive Order (E.O.) 13959, "Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies":  <a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/857" target="_blank" rel="noopener">857</a>, <a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/858" target="_blank" rel="noopener">858</a>, <a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/859" target="_blank" rel="noopener">859</a>, <a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/860" target="_blank" rel="noopener">860</a>, <a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/861" target="_blank" rel="noopener">861</a>). This insight looks at the indirect holdings and subsidiaries.It is a BIG list (I have a list of 133 names, most of which appear to be 50+% controlled, which could be affected in portfolios).Investors would do well to understand how much of the float is for sale.

On the 12th of November, newly lame duck US president Donald Trump signed an Executive Order(Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies) banning investment and capital provision by "US persons" to companies in lists established by the US Department of Defense pursuant to Public Law 105-261, Section 1237 (Fiscal Year 1999 National Defense Authorization Act).The various global index providers immediately commenced consultations with their myriad investors and with OFAC (the Office of Foreign Asset Control of the US Treasury Department) and decided in early December for the most part to delete certain securities from their indices. New guidance from OFAC in the form of FAQs (Frequently Asked Questions related to Executive Order (E.O.) 13959, "Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies":  857, 858, 859, 860, 861). This insight looks at the indirect holdings and subsidiaries.It is a BIG list (I have a list of 133 names, most of which appear to be 50+% controlled, which could be affected in portfolios).Investors would do well to understand how much of the float is for sale.

OFAC Makes a Longer List of Trump Names of China Military Cos

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Equity Bottom-Up

The Premier Li Keqiang had just conducted an annual Government Work Report in the two session conference (两会) in Beijing this morning. In this insight, we will briefly walk through key points of his report and identify bulls and bears in the market.
While the theme of cost reduction benefits manufacturing companies, it will negative for some infrastructure service providers, such as telecom companies.
The full text in Chinese can be accessed <a href="http://www.xinhuanet.com/politics/2019lh/2019-03/05/c_1124194454.htm" target="_blank">here</a>.

The Premier Li Keqiang had just conducted an annual Government Work Report in the two session conference (两会) in Beijing this morning. In this insight, we will briefly walk through key points of his report and identify bulls and bears in the market.
While the theme of cost reduction benefits manufacturing companies, it will negative for some infrastructure service providers, such as telecom companies.
The full text in Chinese can be accessed here.

Quick Read of 2019 Government Work Report - Bulls and Bears

Quantitative Analysis

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: those with a market capitalization of above USD 5 billion, those with a market capitalization between USD 1 billion and USD 5 billion, and those with a market capitalization between USD 500 million and USD 1 billion.
We see the Financials sector led the outflow by mainland investors last week with 201 million USD of net selling. We also highlight a few companies this week: <a href="https://www.smartkarma.com/entities/27037" target="_blank" data-smartkarma-citation="entities:27037:1">China Tower (788 HK)</a>, <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/377" target="_blank" data-smartkarma-citation="entities:377:1">New China Life Insurance (1336 HK)</a>, and Ping An Good Doctor (1833 HK).

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: those with a market capitalization of above USD 5 billion, those with a market capitalization between USD 1 billion and USD 5 billion, and those with a market capitalization between USD 500 million and USD 1 billion.
We see the Financials sector led the outflow by mainland investors last week with 201 million USD of net selling. We also highlight a few companies this week: China Tower (788 HK), Tencent Holdings (700 HK), New China Life Insurance (1336 HK), and Ping An Good Doctor (1833 HK).

HK Connect Discovery Weekly: China Tower, Tencent, New China Life (2019-01-11)

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

Hebei Construction Group / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/26097" target="_blank" data-smartkarma-citation="entities:26097:1">Hebei Construction Group Co (1727 HK)</a> is raising approximately US$314m in its upcoming IPO to fund the construction of projects that are to be complete, equity investment in existing and future PPP projects, repay bank loans, and general corporate purposes.In this insight, we will look at the company's past performance, its exposure to the wildly anticipated Xiongan New Area, some corporate governance issues, and its valuation relative to other contract construction peers. We will also run the deal through our ECM framework.

Hebei Construction Group Co (1727 HK) is raising approximately US$314m in its upcoming IPO to fund the construction of projects that are to be complete, equity investment in existing and future PPP projects, repay bank loans, and general corporate purposes.In this insight, we will look at the company's past performance, its exposure to the wildly anticipated Xiongan New Area, some corporate governance issues, and its valuation relative to other contract construction peers. We will also run the deal through our ECM framework.

Hebei Construction IPO Review - Late to the Xiongan Game with Corporate Governance Issues

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

China State Construction International / Equity Bottom-Up

China State Construction International (3311 HK)

As one of the leading infrastructure firms in China, <a href="https://www.smartkarma.com/entities/10038" target="_blank" data-smartkarma-citation="entities:10038:1">China State Construction Int'l Holdings (3311 HK)</a> differentiates itself from its peers with its significant exposure to the Hong Kong and Macau market. CSCI is one of only a few mainland infrastructure firms that hold all of the five highest levels of regulatory approval needed to bid for the Hong Kong government’s public works projects, enabling it to compete in almost every public works project in Hong Kong; it also occasionally undertakes private-sector projects. Similarly, the company has managed to secure several high-profile projects that warrant years of stable new orders inflow in Macau. CSCI will play a crucial part in the city's ambitious land-reclamation project, and is likely to grab a sizable share of follow-up development projects due to its strong expertise and deep project management experience. As of 2016, two regions collectively contribute 30% and 57%, respectively, of the company's gross profit and revenue.<hr>CSCI delivered strong operating results for the first nine months. The 19% year-on-year revenue growth rate was in line with our expectations, while 34.5% year-on-year operating income growth ran ahead of our estimate, probably as a result of higher public-private-partnership, or PPP, project income. We raise our full-year net income estimate by roughly 5% to HKD 6.3 billion (from HKD 6 billion) to reflect the stronger-than-expected operating income, but reaffirm our fair value estimate of HKD 15 per share, given that our long-term operating assumptions remain intact.<div class="content-highlight">We consider shares undervalued at the current share price relative to the company’s robust long-term net earnings growth potential amid its deepening involvement in the PPP projects.</div>Analyst: John Hu

As one of the leading infrastructure firms in China, China State Construction Int'l Holdings (3311 HK) differentiates itself from its peers with its significant exposure to the Hong Kong and Macau market. CSCI is one of only a few mainland infrastructure firms that hold all of the five highest levels of regulatory approval needed to bid for the Hong Kong government’s public works projects, enabling it to compete in almost every public works project in Hong Kong; it also occasionally undertakes private-sector projects. Similarly, the company has managed to secure several high-profile projects that warrant years of stable new orders inflow in Macau. CSCI will play a crucial part in the city's ambitious land-reclamation project, and is likely to grab a sizable share of follow-up development projects due to its strong expertise and deep project management experience. As of 2016, two regions collectively contribute 30% and 57%, respectively, of the company's gross profit and revenue.CSCI delivered strong operating results for the first nine months. The 19% year-on-year revenue growth rate was in line with our expectations, while 34.5% year-on-year operating income growth ran ahead of our estimate, probably as a result of higher public-private-partnership, or PPP, project income. We raise our full-year net income estimate by roughly 5% to HKD 6.3 billion (from HKD 6 billion) to reflect the stronger-than-expected operating income, but reaffirm our fair value estimate of HKD 15 per share, given that our long-term operating assumptions remain intact.We consider shares undervalued at the current share price relative to the company’s robust long-term net earnings growth potential amid its deepening involvement in the PPP projects.Analyst: John Hu

CSCI's First 9 Months' Operating Profits Beat Expectation on PPP Business; FVE Maintained at HKD 15

Hong Kong

China State Construction International is a comprehensive construction and infrastructure investment enterprise. It specializes in building construction, civil engineering, foundation and marine works, prefabricated construction, and curtain wall engineering across Hong Kong, Mainland China, Macau, and internationally. The company was founded in 1979 and is headquartered in Wan Chai, Hong Kong.

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China State Construction International (3311 HK)

OFAC Makes a Longer List of Trump Names of China Military Cos

There are a LOT of names which could be affected by the Trump Executive Order on China Military Companies. It behooves investors to have a list....

Travis Lundy

Quick Read of 2019 Government Work Report - Bulls and Bears

The Premier Li Keqiang had just conducted an annual Government Work Report in the two session conference (两会) in Beijing this morning. In this...

Ke Yan, CFA, FRM

HK Connect Discovery Weekly: China Tower, Tencent, New China Life (2019-01-11)

In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by...

Ke Yan, CFA, FRM

Hebei Construction IPO Review - Late to the Xiongan Game with Corporate Governance Issues

Hebei Construction Group Co (1727 HK) is raising approximately US$314m in its upcoming IPO to fund the construction of projects that are to be...

Zhen Zhou, Toh

CSCI's First 9 Months' Operating Profits Beat Expectation on PPP Business; FVE Maintained at HKD 15

As one of the leading infrastructure firms in China, China State Construction Int'l Holdings (3311 HK) differentiates itself from its peers with...

Morningstar, Inc.

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