Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

<p>The Chinese internet search giant <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a>  has passed its listing hearing for a secondary listing on the Hong Kong Stock Exchange. Baidu’s secondary listing document didn’t provide the terms of the IPO, however, according to news media outlets, Baidu could raise as much as US$4-5bn through its HKEX offering.</p><p>Though Baidu has been known as a search engine for the past two decades, the company has finally been able to monetise its efforts in AI and related technologies. Baidu’s core online advertising business growth has slowed down (negative over the last two years), and at the same time, we remain concerned about the prospects of <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a> as well as recently acquired YY Live business from <a href="https://www.smartkarma.com/entities/joyy-inc" target="_blank" data-smartkarma-citation="entities:285:1" rel="noopener">JOYY (YY US)</a> . However, we believe Baidu’s next phase of growth will be driven by its AI Cloud business that includes self-driving and intelligent EVs. The top line from AI Cloud business has more than tripled over the past three years.</p><p>We believe the motive behind Baidu’s secondary listing close to its home is far from raising funds to fuel its business growth as the company is rich in cash. Baidu reported cash and cash equivalents of US$5.5bn and short-term investments of US$19.3bn as at the end of December 2020. Cash and short-term investments together accounted for nearly 50% of the company’s total assets as of that date. On the other hand, Baidu’s total debt of around US$11.6bn accounted for about 60% of the cash and short-term investment balance.</p>

The Chinese internet search giant Baidu (BIDU US)  has passed its listing hearing for a secondary listing on the Hong Kong Stock Exchange. Baidu’s secondary listing document didn’t provide the terms of the IPO, however, according to news media outlets, Baidu could raise as much as US$4-5bn through its HKEX offering.Though Baidu has been known as a search engine for the past two decades, the company has finally been able to monetise its efforts in AI and related technologies. Baidu’s core online advertising business growth has slowed down (negative over the last two years), and at the same time, we remain concerned about the prospects of iQIYI Inc (IQ US) as well as recently acquired YY Live business from JOYY (YY US) . However, we believe Baidu’s next phase of growth will be driven by its AI Cloud business that includes self-driving and intelligent EVs. The top line from AI Cloud business has more than tripled over the past three years.We believe the motive behind Baidu’s secondary listing close to its home is far from raising funds to fuel its business growth as the company is rich in cash. Baidu reported cash and cash equivalents of US$5.5bn and short-term investments of US$19.3bn as at the end of December 2020. Cash and short-term investments together accounted for nearly 50% of the company’s total assets as of that date. On the other hand, Baidu’s total debt of around US$11.6bn accounted for about 60% of the cash and short-term investment balance.

Baidu Secondary Listing: At the Crossroads

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.

Zhihu Technology / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/zhihu-technology-ltd" target="_blank" data-smartkarma-citation="entities:32185:1" rel="noopener">Zhihu Technology (ZH US)</a> is the largest Q&amp;A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC. Zhihu is acknowledged as the first choice among all online content communities in China where people look for information to make decisions or find answers, according to CIC.</p><p>Zhihu is backed by <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> (12.3% of outstanding shares, 7.1% of voting interest), <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> (8.3% of outstanding shares, 4.8% of voting interest) and <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> (5.0% of outstanding shares, 2.9% of voting interest). Zhihu has filed for an NYSE IPO to raise proceeds of $1 billion, according to press reports. </p><p>Online content communities have a high level of user engagement, which enables them to pursue a wide variety of monetisation opportunities, resulting in more sustainable business models. Q&amp;A content by nature encourages a high level of user interaction and stirs sharing of knowledge, experience and insights. Crucially, users are progressively demanding quality online content and have shown a growing willingness to pay for them. Over 80% of surveyed users are willing to pay more for high-quality online content in the future, according to CIC. Also, merchants and brands in China increasingly use online content communities for marketing services to help develop a brand narrative that can appeal to customers and drive conversion.</p><div class="content-highlight"><p>As the largest Q&amp;A-inspired online community, Zhihu is well-positioned to benefit from these favourable trends. Overall, we believe that Zhihu’s fundamentals are attractive.</p></div>

Zhihu Technology (ZH US) is the largest Q&amp;A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC. Zhihu is acknowledged as the first choice among all online content communities in China where people look for information to make decisions or find answers, according to CIC.Zhihu is backed by Tencent Holdings (700 HK) (12.3% of outstanding shares, 7.1% of voting interest), Kuaishou Technology (1024 HK) (8.3% of outstanding shares, 4.8% of voting interest) and Baidu (BIDU US) (5.0% of outstanding shares, 2.9% of voting interest). Zhihu has filed for an NYSE IPO to raise proceeds of $1 billion, according to press reports. Online content communities have a high level of user engagement, which enables them to pursue a wide variety of monetisation opportunities, resulting in more sustainable business models. Q&amp;A content by nature encourages a high level of user interaction and stirs sharing of knowledge, experience and insights. Crucially, users are progressively demanding quality online content and have shown a growing willingness to pay for them. Over 80% of surveyed users are willing to pay more for high-quality online content in the future, according to CIC. Also, merchants and brands in China increasingly use online content communities for marketing services to help develop a brand narrative that can appeal to customers and drive conversion.As the largest Q&amp;A-inspired online community, Zhihu is well-positioned to benefit from these favourable trends. Overall, we believe that Zhihu’s fundamentals are attractive.

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

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.

Equity Bottom-Up

<ul>
<li>BILI encourages users to upload videos different from game live broadcasting and anime.</li>
<li>BILI does not have strong ability in independent research and development of game.</li>
<li>Tencent aims to contain BILI’s game live broadcasting.</li>
<li>BILI will continue the financing and growing game.</li>
</ul>


BILI encourages users to upload videos different from game live broadcasting and anime.
BILI does not have strong ability in independent research and development of game.
Tencent aims to contain BILI’s game live broadcasting.
BILI will continue the financing and growing game.


Bilibili (BILI): Business Breakout, An Story of What BILI Was and Will Be

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a> and <a href="https://www.smartkarma.com/entities/sun-hung-kai-properties-ltd" target="_blank" data-smartkarma-citation="entities:111:1" rel="noopener">Sun Hung Kai Properties (16 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)</a>, <a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a> and <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a>. Shorts increased on Energy, while decreasing on Utilities, Health Care, Materials and Communication Services.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/nexon-co-ltd" target="_blank" data-smartkarma-citation="entities:16032:1" rel="noopener">Nexon (3659 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/brother-industries-ltd" target="_blank" data-smartkarma-citation="entities:6114:1" rel="noopener">Brother Industries (6448 JP)</a> and <a href="https://www.smartkarma.com/entities/shiseido-company-limited" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/toyo-tire-corporation" target="_blank" data-smartkarma-citation="entities:15064:1" rel="noopener">Toyo Tire Corporation (5105 JP)</a>, <a href="https://www.smartkarma.com/entities/h-i-s-co-ltd" target="_blank" data-smartkarma-citation="entities:19311:1" rel="noopener">H I S Co Ltd (9603 JP)</a>, <a href="https://www.smartkarma.com/entities/east-japan-railway-co" target="_blank" data-smartkarma-citation="entities:14271:1" rel="noopener">East Japan Railway Co (9020 JP)</a> and <a href="https://www.smartkarma.com/entities/gs-yuasa-corp" target="_blank" data-smartkarma-citation="entities:8298:1" rel="noopener">Gs Yuasa Corp (6674 JP)</a>. Shorts increased in all sectors led by Industrials, Information Technology, Communication Services, Consumer Discretionary and Consumer Staples.</p></div><div><p>In Korea, short increased on <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a> and <a href="https://www.smartkarma.com/entities/lg-uplus-corp" target="_blank" data-smartkarma-citation="entities:1113:1" rel="noopener">LG Uplus Corp (032640 KS)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> and <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a>, <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a> and <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">Au Optronics (2409 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/fitipower-integrated-tech" target="_blank" data-smartkarma-citation="entities:8712:1" rel="noopener">Fitipower Integrated Tech (4961 TT)</a>, <a href="https://www.smartkarma.com/entities/standard-foods-corp" target="_blank" data-smartkarma-citation="entities:19848:1" rel="noopener">Standard Foods (1227 TT)</a>, <a href="https://www.smartkarma.com/entities/nan-ya-printed-circuit-board-corporation" target="_blank" data-smartkarma-citation="entities:2699:1" rel="noopener">Nan Ya Printed Circuit Board (8046 TT)</a> and <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Kuaishou Technology (1024 HK), Alibaba Group (9988 HK), HKEX (388 HK), JD Health (6618 HK) and Sun Hung Kai Properties (16 HK) while there was short covering on Tencent Holdings (700 HK), Meituan (3690 HK), Ping An Healthcare and Technology Company Limited (1833 HK), Sunny Optical (2382 HK) and Anta Sports Products (2020 HK). Shorts increased on Energy, while decreasing on Utilities, Health Care, Materials and Communication Services.In Japan, stocks that saw the most shorts were Nexon (3659 JP), Toshiba Corp (6502 JP), Brother Industries (6448 JP) and Shiseido Company (4911 JP) while shorts decreased on Toyo Tire Corporation (5105 JP), H I S Co Ltd (9603 JP), East Japan Railway Co (9020 JP) and Gs Yuasa Corp (6674 JP). Shorts increased in all sectors led by Industrials, Information Technology, Communication Services, Consumer Discretionary and Consumer Staples.In Korea, short increased on SK Hynix (000660 KS) and LG Uplus Corp (032640 KS) while shorts decreased on Celltrion Inc (068270 KS), Samsung Electronics (005930 KS), Naver Corp (035420 KS) and LG Display (034220 KS). Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), United Microelectronics Corp (2303 TT), Pegatron Corp (4938 TT) and Au Optronics (2409 TT) while shorts were covered on Fitipower Integrated Tech (4961 TT), Standard Foods (1227 TT), Nan Ya Printed Circuit Board (8046 TT) and Largan Precision (3008 TT). 

Asia Short Interest: Kuaishou, HKEX, SHK, Anta, Nexon, Toshiba, Toyo Tire, HIS, Hynix, TSMC, UMC

Event-Driven

<p>Hang Seng Indexes have announced the conclusions of the market consultation on the "Proposal to enhance the Hang Seng Index as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market".</p><p>The main changes to the index are:</p><ul>
<li>Increase the number of constituents to 80 by mid-2022 and ultimately to have 100 stocks in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>. </li>
<li>To have a more balanced representation of the Hong Kong stock market, the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> constituents will be selected from seven Industry Groups. The target is to achieve a market cap coverage of not less than 50% for each Industry Group.</li>
<li>To provide flexibility for the timely addition of new listings, the listing history requirement will be lowered to 3 months.</li>
<li>There will be 20-25 'Hong Kong companies' in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> and this number will be evaluated at least every 2 years.</li>
<li>All index constituents, including Secondary Listings and WVR Securities, will be subject to a weighting cap of 8%. The 8% cap will be applied to 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> constituents as well.</li>
</ul><p>There is no mention of the tranched inclusion of stocks in the index. This leads us to believe that 5 stocks (net) could be included in the index at each review, starting in June 2021 and concluding in June 2022.</p><p>With a change in the Industry groups and a reduction in the target coverage (in terms of market cap) from 80% to 50% for each Industry group, we refresh our list of potential inclusions into and exclusions from the index.</p>

Hang Seng Indexes have announced the conclusions of the market consultation on the "Proposal to enhance the Hang Seng Index as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market".The main changes to the index are:
Increase the number of constituents to 80 by mid-2022 and ultimately to have 100 stocks in the Hong Kong Hang Seng Index (HSI INDEX). 
To have a more balanced representation of the Hong Kong stock market, the Hong Kong Hang Seng Index (HSI INDEX) constituents will be selected from seven Industry Groups. The target is to achieve a market cap coverage of not less than 50% for each Industry Group.
To provide flexibility for the timely addition of new listings, the listing history requirement will be lowered to 3 months.
There will be 20-25 'Hong Kong companies' in the Hong Kong Hang Seng Index (HSI INDEX) and this number will be evaluated at least every 2 years.
All index constituents, including Secondary Listings and WVR Securities, will be subject to a weighting cap of 8%. The 8% cap will be applied to the Hang Seng China Enterprises Index (HSCEI INDEX) constituents as well.
There is no mention of the tranched inclusion of stocks in the index. This leads us to believe that 5 stocks (net) could be included in the index at each review, starting in June 2021 and concluding in June 2022.With a change in the Industry groups and a reduction in the target coverage (in terms of market cap) from 80% to 50% for each Industry group, we refresh our list of potential inclusions into and exclusions from the index.

HSI Market Consultation: BIG Changes Coming

China

Kuaishou Technology operates as a content community and social platform. The Company helps users create, upload and watch short videos on mobile devices. Kuaishou Technology offers services worldwide.

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Kuaishou Technology (1024 HK)

Baidu Secondary Listing: At the Crossroads

Baidu’s core online advertising business growth has been slowing down, however, Baidu's efforts in AI and advanced technologies have begun to bear...

Shifara Samsudeen, FCMA, CGMA

Zhihu IPO Initiation: Question Time

Zhihu has filed for an NYSE IPO to raise proceeds of $1 billion, according to press reports. Overall, we believe that Zhihu’s fundamentals are...

Arun George

Bilibili (BILI): Business Breakout, An Story of What BILI Was and Will Be

BILI encourages users to upload videos different from game live broadcasting and anime. There are two reasons that BILI has to. The financing and...

Ming Lu

Asia Short Interest: Kuaishou, HKEX, SHK, Anta, Nexon, Toshiba, Toyo Tire, HIS, Hynix, TSMC, UMC

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

HSI Market Consultation: BIG Changes Coming

Hang Seng Indexes has announced the conclusions of the market consultation and the HSI is going to look different in a years time. Financials see a...

Brian Freitas

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