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

Thematic (Sector/Industry)

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the "COVID-19 pandemic and the government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover". The decision on th Business Interruption (BI) case against the insurance industry is mostly in favorable to policyholders; and *Asia-Pac To Follow: As many countries in Asia-Pacific are Common Law nations, High Court rulings such as this have a tendency to set precedent. It also wouldn’t be a surprise to see significant capital raises given the challenges to solvency.

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the "COVID-19 pandemic and the government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover". The decision on th Business Interruption (BI) case against the insurance industry is mostly in favorable to policyholders; and *Asia-Pac To Follow: As many countries in Asia-Pacific are Common Law nations, High Court rulings such as this have a tendency to set precedent. It also wouldn’t be a surprise to see significant capital raises given the challenges to solvency.  

Asian Insurers – High Court Ruling A Harbinger For Region

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Haidilao International Holding / Index Rebalance

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the 2020 Q3 review of the Hang Seng Family of Indexes on 6 November. The constituent changes will be effective after the close of trading on 4 December.With only 3 changes permitted in the September <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> review post the methodology change that included WVR securities and Secondary Listings in the eligible Universe, there could be as many as 9 changes in the December review.We see a high probability of <a href="https://www.smartkarma.com/entities/china-overseas-land-invest" target="_blank" data-smartkarma-citation="entities:419:1" rel="noopener">China Overseas Land &amp; Investment Ltd (688 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing (981 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-real-estate-group-limited" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a> being included in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>, and of <a href="https://www.smartkarma.com/entities/china-taiping-insurance-hldgs-co-ltd" target="_blank" data-smartkarma-citation="entities:489:1" rel="noopener">China Taiping Insurance Hldgs (966 HK)</a>, <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a>, <a href="https://www.smartkarma.com/entities/china-minsheng-banking-h" target="_blank" data-smartkarma-citation="entities:8983:1" rel="noopener">China Minsheng Banking H (1988 HK)</a>, <a href="https://www.smartkarma.com/entities/china-vanke-co-ltd-h" target="_blank" data-smartkarma-citation="entities:18368:1" rel="noopener">China Vanke Co Ltd (H) (2202 HK)</a>, <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 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 Corp Ltd H (998 HK)</a> and <a href="https://www.smartkarma.com/entities/china-shenhua-energy-co-h" target="_blank" data-smartkarma-citation="entities:382:1" rel="noopener">China Shenhua Energy Co H (1088 HK)</a> being deleted from the index.Depending on price movements between now and 30 September, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> and <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a> could be included in the index, which would see <a href="https://www.smartkarma.com/entities/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a> and <a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty H (2328 HK)</a> being deleted.Estimated one-way turnover for the rebalance is 9.63% which is lower than the turnover at the September rebalance, but significant nonetheless.The expected review changes will alter the sectoral composition of the index with an increase in the weight of the Consumer Discretionary, Information Technology and Health Care sectors at the expense of Financials and Energy. There will also be an impact on the HSCEI 2021 dividend futures, a large part of which has already been discounted by the market.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the 2020 Q3 review of the Hang Seng Family of Indexes on 6 November. The constituent changes will be effective after the close of trading on 4 December.With only 3 changes permitted in the September Hang Seng China Enterprises Index (HSCEI INDEX) review post the methodology change that included WVR securities and Secondary Listings in the eligible Universe, there could be as many as 9 changes in the December review.We see a high probability of China Overseas Land &amp; Investment Ltd (688 HK), JD.com (HK) (9618 HK), Alibaba Health Information Technology (241 HK), Haidilao (6862 HK), China Feihe (6186 HK), Semiconductor Manufacturing (981 HK) and Evergrande Real Estate Group (3333 HK) being included in the Hang Seng China Enterprises Index (HSCEI INDEX), and of China Taiping Insurance Hldgs (966 HK), China Telecom Corp Ltd (H) (728 HK), China Minsheng Banking H (1988 HK), China Vanke Co Ltd (H) (2202 HK), Fosun International (656 HK), China Citic Bank Corp Ltd H (998 HK) and China Shenhua Energy Co H (1088 HK) being deleted from the index.Depending on price movements between now and 30 September, NetEase (9999 HK) and Hansoh Pharmaceutical (3692 HK) could be included in the index, which would see Want Want (151 HK) and PICC Property &amp; Casualty H (2328 HK) being deleted.Estimated one-way turnover for the rebalance is 9.63% which is lower than the turnover at the September rebalance, but significant nonetheless.The expected review changes will alter the sectoral composition of the index with an increase in the weight of the Consumer Discretionary, Information Technology and Health Care sectors at the expense of Financials and Energy. There will also be an impact on the HSCEI 2021 dividend futures, a large part of which has already been discounted by the market.

HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected

Equity Bottom-Up

*PAL Leads Improvement: Ping An Insurance (2318.HK)[Ping An] reported a 1H20 operating profit of CNY 74.3 bn, increasing just 1% YOY and 5% below consensus. As a recovery appears underway with Ping An Life (PAL), Ping An results appeared to be well-supported by a HOH improvement of CNY 13.2 bn bn (40.4%) in net profits  - although its value of new business (VONB) declined CNY 3.9 bn (11.9%); and *P&amp;C Remains A Challenge: Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans. Auto combined ratio improved temporarily during the lockdown by 360 bp to 94.7%, and certainly warrants watching a driving returns to normal in mainland China.

*PAL Leads Improvement: Ping An Insurance (2318.HK)[Ping An] reported a 1H20 operating profit of CNY 74.3 bn, increasing just 1% YOY and 5% below consensus. As a recovery appears underway with Ping An Life (PAL), Ping An results appeared to be well-supported by a HOH improvement of CNY 13.2 bn bn (40.4%) in net profits  - although its value of new business (VONB) declined CNY 3.9 bn (11.9%); and *P&amp;C Remains A Challenge: Ping An P&amp;C operating profits declined CNY 2.6 bn (29.2%) HOH, as the overall combined ratio eroded 1.5% to 98.1% due primarily to continued weakness within the credit insurance unit where the combined ratio came in at 125.6% (up 32.4%). The credit insurance segment reported a CNY 3.5 bn underwriting loss, due to defaults on underlying loans. Auto combined ratio improved temporarily during the lockdown by 360 bp to 94.7%, and certainly warrants watching a driving returns to normal in mainland China.

Ping An Insurance – Life Showing Signs Of Life

*Weak Results Ahead: Ping An Insurance (2318.HK) [Ping An] is set to report 1H20 results on August 27, 2020. We anticipate COVID-19 to negatively impact Ping An’s multiple lines of business, which should aggregate to a YOY net income decline of 5% to CNY 69.8 bn, by our calculation; and*Struggles By Insurance Unit: The slowdown in new business volume is anticipated to weigh on Ping An Life’s bottom-line. As such, we anticipate a 35% decline in the value of new business during 1H20. Credit insurance exposure is likely to be a drag down performance again, and Ping An P&amp;C’s 1H20 combined ratio will be challenged and is due to increase to a tad under 100% - or barely profitable operationally.

*Weak Results Ahead: Ping An Insurance (2318.HK) [Ping An] is set to report 1H20 results on August 27, 2020. We anticipate COVID-19 to negatively impact Ping An’s multiple lines of business, which should aggregate to a YOY net income decline of 5% to CNY 69.8 bn, by our calculation; and*Struggles By Insurance Unit: The slowdown in new business volume is anticipated to weigh on Ping An Life’s bottom-line. As such, we anticipate a 35% decline in the value of new business during 1H20. Credit insurance exposure is likely to be a drag down performance again, and Ping An P&amp;C’s 1H20 combined ratio will be challenged and is due to increase to a tad under 100% - or barely profitable operationally.

Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

On 1st June 2020, Australian financial markets software company <a href="https://www.smartkarma.com/entities/iress-ltd" target="_blank" data-smartkarma-citation="entities:15342:1" rel="noopener">Iress Ltd (IRE AU)</a><a href="https://ausstocks.com.au/wp-content/uploads/austocks/ovh/2020_06_01_OVH_03913a5ad5601454cfa039860f349c80.pdf" target="_blank" rel="noopener">signed an scheme implementation agreement</a> to acquire 100% of <a href="https://www.smartkarma.com/entities/onevue-holdings-ltd" target="_blank" data-smartkarma-citation="entities:24327:1" rel="noopener">Onevue Holdings (OVH AU)</a> valuing the company at a market cap of A$107mn. The Acquirer <a href="https://ausstocks.com.au/wp-content/uploads/austocks/ovh/2020_06_01_OVH_ad478f7597d4bdfff9cec4e9f7adae99.pdf" target="_blank" rel="noopener">announced</a> they will also be simultaneously raising AS$170mn of equity but the OneVue Deal will not be conditional on financing. The Deal currently requires approvals from Target Shareholders and regulatory authorities. The Offer Price is A$0.40/share and the consideration will be in the form of cash. OneVue's shares last closed at A$0.37 translating to a gross spread of 8.1% with the transaction expected to complete by the end of September 2020. In this insight, we take a look at the potential risks associated with the Deal.

On 1st June 2020, Australian financial markets software company Iress Ltd (IRE AU)signed an scheme implementation agreement to acquire 100% of Onevue Holdings (OVH AU) valuing the company at a market cap of A$107mn. The Acquirer announced they will also be simultaneously raising AS$170mn of equity but the OneVue Deal will not be conditional on financing. The Deal currently requires approvals from Target Shareholders and regulatory authorities. The Offer Price is A$0.40/share and the consideration will be in the form of cash. OneVue's shares last closed at A$0.37 translating to a gross spread of 8.1% with the transaction expected to complete by the end of September 2020. In this insight, we take a look at the potential risks associated with the Deal. 

OneVue-Iress: Australian Deal Trading Wide

Hong Kong

China Taiping Insurance Holdings Company Ltd., through subsidiaries, underwrites life and property/casualty insurance and reinsurance.

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China Taiping Insurance Hldgs (966 HK)

Asian Insurers – High Court Ruling A Harbinger For Region

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the...

Thomas J. Monaco

HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q2 review of the Hang Seng Family of Indexes in mid August. The...

Brian Freitas

Ping An Insurance – Life Showing Signs Of Life

*PAL Leads Improvement: Ping An Insurance (2318.HK)[Ping An] reported a 1H20 operating profit of CNY 74.3 bn, increasing just 1% YOY and 5% below...

Thomas J. Monaco

Ping An Insurance – 1H20 Preview

*Weak Results Ahead: Ping An Insurance (2318.HK) [Ping An] is set to report 1H20 results on August 27, 2020. We anticipate COVID-19 to negatively...

Thomas J. Monaco

OneVue-Iress: Australian Deal Trading Wide

On 1st June 2020, Australian financial markets software company Iress Ltd (IRE AU)signed an scheme implementation agreement to acquire 100%...

Janaghan Jeyakumar, CFA

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