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Articles from Caixin Global

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News from Caixin

Cross Asset Strategy

<ul><li><p>Rebooting / Cover Story: Shanghai’s rocky road to rebooting.</p></li><li><p>Covid-19 / Beijing starts mass Covid testing as it imposes lockdowns.</p></li><li><p>Corruption / Graft probes ensnare college buddies who were top bankers.</p></li></ul>

Rebooting / Cover Story: Shanghai’s rocky road to rebooting.Covid-19 / Beijing starts mass Covid testing as it imposes lockdowns.Corruption / Graft probes ensnare college buddies who were top bankers.

CX Daily: Shanghai’s Rocky Road to Rebooting

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>VNET, formerly known as <a href="https://www.smartkarma.com/entities/21-vianet-group-inc-adr" target="_blank" data-smartkarma-citation="entities:8489:1" rel="noopener">21Vianet Group (VNET US)</a>, is a leading carrier and cloud-neutral data centre services provider in China. </li>
<li>It has received a non-binding privatisation proposal from <a href="https://www.hinagroup.com/" target="_blank" rel="noopener">The Hina Group</a> and <a href="https://www.smartkarma.com/entities/industrial-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:19515:1" rel="noopener">Industrial Bank Co Ltd A (601166 CH)</a> at $8.00 per ADS, a 48.1% premium to the undisturbed price. </li>
<li>The Board has not made any decisions on the offer. Despite the juicy premium, the offer is unattractive in the context of historical multiples and share prices.    </li>
</ul>


VNET, formerly known as 21Vianet Group (VNET US), is a leading carrier and cloud-neutral data centre services provider in China. 
It has received a non-binding privatisation proposal from The Hina Group and Industrial Bank Co Ltd A (601166 CH) at $8.00 per ADS, a 48.1% premium to the undisturbed price. 
The Board has not made any decisions on the offer. Despite the juicy premium, the offer is unattractive in the context of historical multiples and share prices.    


VNET’s Languishing Shares Draws an Opportunistic $8.00 Bid

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Commodities (ex. precious metals) and global yields are on the rise as the US dollar (DXY) deteriorates. Additionally, EM equities (EEM-US) display a bullish RS reversal relative to MSCI ACWI. </li>
<li>These are all important risk-on signals for global equities that continue to support our neutral yet constructive outlook. We expect more consolidation and mixed markets ahead.</li>
<li>Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a shift in favor of value.</li>
</ul>


Commodities (ex. precious metals) and global yields are on the rise as the US dollar (DXY) deteriorates. Additionally, EM equities (EEM-US) display a bullish RS reversal relative to MSCI ACWI. 
These are all important risk-on signals for global equities that continue to support our neutral yet constructive outlook. We expect more consolidation and mixed markets ahead.
Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a shift in favor of value.


Value Sectors Take The Lead On Rising Global Yields; Buying Energy and Financials

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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<p><em><strong>This week in StubWorld ...</strong></em></p>
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<div class="content-highlight">
<p><a href="https://www.smartkarma.com/entities/people-s-insurance-co-group-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:362:1" rel="noopener">People's Insurance Co. (PICC) (1339 HK)</a>'s ratio versus <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> is at an all-time low; and the implied stub is around its Covid-low. </p>
</div>
</div>
<div>
<p>Preceding my comments on PICC are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
</div>
<div>
<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
</div>


This week in StubWorld ...



People's Insurance Co. (PICC) (1339 HK)'s ratio versus PICC Property &amp; Casualty H (2328 HK) is at an all-time low; and the implied stub is around its Covid-low. 



Preceding my comments on PICC are the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.


StubWorld: PICC (1339 HK)'s All-Time Low Vs. PICC P&C (2328 HK)

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

Industrial Bank Co Ltd A / Equity Bottom-Up

<p><strong>EXECUTIVE SUMMARY</strong></p><p>According to our model <strong>PH Score™</strong>, <strong>Industrial Bank</strong> commands above average value-quality characteristics.  The valuation variable within the model (as elsewhere in China) helps the Score but other variables are broadly benign. Adding technical factors and the low valuation, <strong>Industrial Bank</strong> ranks in the top quartile globally of our <strong>VFM</strong> (Valuation, Fundamentals, Momentum) universe. </p><p>Elsewhere in China, recent bank data show subpar or mixed fundamental momentum and trends. This is not the case with <strong>Industrial Bank</strong>. However, it would be wrong to think that the bank was not affected by general systemic asset quality challenges.</p><p>On a LTM basis, the bank's <strong>PH Score™ of 8.5</strong> reflects progression in Profitability, in Efficiency, in Capital Adequacy, in NIM/Spread (impressive), in headline Asset Quality, as well as the valuation variable, though Liquidity, as measured by the rising LDR, eroded and the Provisioning metric utilised by the model softened somewhat.</p><p>A FV of 9% and a PBV of 0.72x are not unattractive. These are below thresholds of 10% and 1x, respectively. An Earnings Yield of 17.0% and a Dividend Yield of 4.2% underpin the valuation thesis though China and the world have cheaper banks. We are less enthusiastic about finding the cheapest banks per se but rather more interested in capturing the combination between fundamental progression -or quantamental trends- with valuation. </p><p><strong>Industrial Bank</strong> is focused on mainly corporate lending but also has a strong mortgage business. Given Leverage (Debt/Equity) and a more risky Funding Structure, revolving around wholesale markets and time deposits, though transaction accounts account for 41% of deposits, we see <strong>Industrial Bank</strong> as a more speculative opportunity in the Chinese Banking Space.</p>

EXECUTIVE SUMMARYAccording to our model PH Score™, Industrial Bank commands above average value-quality characteristics.  The valuation variable within the model (as elsewhere in China) helps the Score but other variables are broadly benign. Adding technical factors and the low valuation, Industrial Bank ranks in the top quartile globally of our VFM (Valuation, Fundamentals, Momentum) universe. Elsewhere in China, recent bank data show subpar or mixed fundamental momentum and trends. This is not the case with Industrial Bank. However, it would be wrong to think that the bank was not affected by general systemic asset quality challenges.On a LTM basis, the bank's PH Score™ of 8.5 reflects progression in Profitability, in Efficiency, in Capital Adequacy, in NIM/Spread (impressive), in headline Asset Quality, as well as the valuation variable, though Liquidity, as measured by the rising LDR, eroded and the Provisioning metric utilised by the model softened somewhat.A FV of 9% and a PBV of 0.72x are not unattractive. These are below thresholds of 10% and 1x, respectively. An Earnings Yield of 17.0% and a Dividend Yield of 4.2% underpin the valuation thesis though China and the world have cheaper banks. We are less enthusiastic about finding the cheapest banks per se but rather more interested in capturing the combination between fundamental progression -or quantamental trends- with valuation. Industrial Bank is focused on mainly corporate lending but also has a strong mortgage business. Given Leverage (Debt/Equity) and a more risky Funding Structure, revolving around wholesale markets and time deposits, though transaction accounts account for 41% of deposits, we see Industrial Bank as a more speculative opportunity in the Chinese Banking Space.

Industrial Bank: Trends Are Better than Peers

China

Industrial Bank Co.,Ltd. provides banking services. The Company offers deposits, loans, fund management, foreign currency management, and other services. Industrial Bank provides its services to individuals, enterprises, and other clients.

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Industrial Bank Co Ltd A (601166 CH)

CX Daily: Shanghai’s Rocky Road to Rebooting

Rebooting / Cover Story: Shanghai’s rocky road to rebooting. Covid-19 / Beijing starts mass Covid testing as it imposes lockdowns.

Caixin Global

VNET’s Languishing Shares Draws an Opportunistic $8.00 Bid

The Hina Group and Industrial Bank Co have offered $8.00 per ADS, a 48.1% premium to the undisturbed price. However, the offer is unattractive in...

Arun George

Value Sectors Take The Lead On Rising Global Yields; Buying Energy and Financials

Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a...

Vermilion Research

StubWorld: PICC (1339 HK)'s All-Time Low Vs. PICC P&C (2328 HK)

The current NAV discount and implied stub are around all-time low levels. The market is assigning HK$27.4bn less for the stub ops year to date, and...

David Blennerhassett

Industrial Bank: Trends Are Better than Peers

Industrial Bank is reporting positive fundamental momentum. Given value-quality merits, the shares can outperform peers in the Chinese Banking Space.

Paul Hollingworth

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