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

Equity Bottom-Up

*Glittering Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 1Q21 earnings of HKD 3.8 bn, improving HKD 915 mn (31.3%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 363 mn or 43.8% linked quarter) – increasing HKD 1.3 bn (61.0%) to HKD 3.4 bn. Results were highlighted by HKEX’ positive operating jaws, as recurring revenue increased HKD 1.2 bn (28.6%) while operating expenses declined HKD 194 mn (14.5%) over the period;  and*Risks Are Increasing: In addition to an extended valuation when ADT has begun to turn and having a new CEO with no exchange experiences, HKEX needs to contend with the government’s examination of a stamp duty increase and mainland China’s contemplation of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center.

*Glittering Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 1Q21 earnings of HKD 3.8 bn, improving HKD 915 mn (31.3%) linked quarter. Results were even more impressive when we exclude investment income (declined HKD 363 mn or 43.8% linked quarter) – increasing HKD 1.3 bn (61.0%) to HKD 3.4 bn. Results were highlighted by HKEX’ positive operating jaws, as recurring revenue increased HKD 1.2 bn (28.6%) while operating expenses declined HKD 194 mn (14.5%) over the period;  and*Risks Are Increasing: In addition to an extended valuation when ADT has begun to turn and having a new CEO with no exchange experiences, HKEX needs to contend with the government’s examination of a stamp duty increase and mainland China’s contemplation of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center.

Hong Kong Exchanges & Clearing – Golden Quarter, But Risks Are High

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Philippine Stock Exchange / Equity Bottom-Up

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Despite pressures on the Philippines from strict lockdowns and continuing issues with rising cases of COVID-19, <a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange Inc (PSE PM)</a> looks increasingly attractive with a powerful combination of rising volumes and a significant pipeline of IPOs in 2021. 
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The exchange has also been a direct beneficiary of COVID-19 as it has encouraged the influx of greater numbers of retail investors, which has boosted market volumes significantly. 
The <a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange Inc (PSE PM)</a> currently only has 272 listed companies, which looks quite a low number but is in the process of encouraging more smaller companies to list. 
The rapid increase in IPOs should be positive for margins given the high listing fees that the listing of new shares attracts. We have just seen the approval pass for the US$1bn <a href="https://www.smartkarma.com/entities/monde-nissin-corp" target="_blank" data-smartkarma-citation="entities:32188:1" rel="noopener">Monde Nissin Corp (0191881D PM)</a> IPO, which will focus attention on the overall market.
<a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange (PSE PM)</a> has outlined a number of new initiatives to increase liquidity and the number of new listings.
The company is also looking to increasingly digitize its business by upgrading its clearing and settlement system and shortening settlement to T+2. 
<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/philippine-stock-exchange-inc" target="_blank" data-smartkarma-citation="entities:23182:1" rel="noopener">Philippine Stock Exchange (PSE PM)</a> is trading at a discount to regional exchanges on 17.1x FY21E PER, which trades on an average forward PER of 29x. There are also a number of potential catalysts ahead, the most obvious being higher volumes, driven by increasing retail participation plus more IPOs in FY2021.
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Despite pressures on the Philippines from strict lockdowns and continuing issues with rising cases of COVID-19, Philippine Stock Exchange Inc (PSE PM) looks increasingly attractive with a powerful combination of rising volumes and a significant pipeline of IPOs in 2021. 

The exchange has also been a direct beneficiary of COVID-19 as it has encouraged the influx of greater numbers of retail investors, which has boosted market volumes significantly. 
The Philippine Stock Exchange Inc (PSE PM) currently only has 272 listed companies, which looks quite a low number but is in the process of encouraging more smaller companies to list. 
The rapid increase in IPOs should be positive for margins given the high listing fees that the listing of new shares attracts. We have just seen the approval pass for the US$1bn Monde Nissin Corp (0191881D PM) IPO, which will focus attention on the overall market.
Philippine Stock Exchange (PSE PM) has outlined a number of new initiatives to increase liquidity and the number of new listings.
The company is also looking to increasingly digitize its business by upgrading its clearing and settlement system and shortening settlement to T+2. 

Philippine Stock Exchange (PSE PM) is trading at a discount to regional exchanges on 17.1x FY21E PER, which trades on an average forward PER of 29x. There are also a number of potential catalysts ahead, the most obvious being higher volumes, driven by increasing retail participation plus more IPOs in FY2021.


Philippine Stock Exchange Inc (PSE PM) - Overlooked and On the Up

*Solid March Trading Result: Singapore Exchange (SGX.SP) [SGX] reported strong FY 3Q21 securities and derivatives volumes due to improving market caps and velocity. Securities value traded and average daily trading vale (ADTV) increased 50% and 24% MOM in March, respectively. Derivative volumes also improved 31% MOM to 23.2 mn contracts, reaching a new peak since July 2020; and *A Wrench Thrown Into SGX’s SPAC Plan:  The U.S. Securities and Exchange Commission (SEC) issued accounting guidance for SPACs, calling warrant issuance by SPACs liabilities rather than equity instruments. This could disrupt new SPAC filings, and certainly throw a wrench into SGX’s SPAC plans.

*Solid March Trading Result: Singapore Exchange (SGX.SP) [SGX] reported strong FY 3Q21 securities and derivatives volumes due to improving market caps and velocity. Securities value traded and average daily trading vale (ADTV) increased 50% and 24% MOM in March, respectively. Derivative volumes also improved 31% MOM to 23.2 mn contracts, reaching a new peak since July 2020; and *A Wrench Thrown Into SGX’s SPAC Plan:  The U.S. Securities and Exchange Commission (SEC) issued accounting guidance for SPACs, calling warrant issuance by SPACs liabilities rather than equity instruments. This could disrupt new SPAC filings, and certainly throw a wrench into SGX’s SPAC plans.

Singapore Exchange – Solid Quarter, But SPAC Setback

*Mainland Chinese Stock Exchange Powerhouse: According to Reuters, mainland China is contemplating the establishment of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center; and  *Here Comes The Pain Trade: If mainland China is successful this time around (and we think that they will be), it is probably pretty fair to say that the HKEX/mainland China growth story will have come to an abrupt end. In terms of where we are with valuation, HKEX’s P/E has exploded in the face of weaker volumes on the expectation of future US ADR listings. The increase in the stamp duty to cover Hong Kong’s tax shortfall only adds to the misery that HKEX may encounter.

*Mainland Chinese Stock Exchange Powerhouse: According to Reuters, mainland China is contemplating the establishment of a new stock exchange to attract overseas-listed firms (including Hong Kong) which will bolster Shanghai’s status as a global financial center; and  *Here Comes The Pain Trade: If mainland China is successful this time around (and we think that they will be), it is probably pretty fair to say that the HKEX/mainland China growth story will have come to an abrupt end. In terms of where we are with valuation, HKEX’s P/E has exploded in the face of weaker volumes on the expectation of future US ADR listings. The increase in the stamp duty to cover Hong Kong’s tax shortfall only adds to the misery that HKEX may encounter.

Hong Kong Exchanges & Clearing – Building The HKEX Coffin

*Poor Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 4Q20 earnings of HKD 2.9 bn, declining HKD 522 mn (15.6%) linked quarter. Results were challenged on many fronts, as evidenced by HKEX’ negative operating jaws during the period, whereby revenues declined HKD 210 mn (4.0%) whilst expenses jumped HKD 187 mn (13.2%)– pushing its C/I ratio higher by 480 bp to 31.4%; and*Stamp Dutied: Despite the poor showing during 4Q20, the real story for HKEX is the issue of the stamp duty which likely will impact earnings and market sentiment for the foreseeable future. Given the financial stress of the pandemic on the finances of the Hong Kong government,  on February 24, 2021 it was announced that there would be a 3 bp or 30% increase in the stamp duty to help offset the government budget deficit.

*Poor Quarter: Hong Kong Exchanges &amp; Clearing (388.HK) [HKEX] reported 4Q20 earnings of HKD 2.9 bn, declining HKD 522 mn (15.6%) linked quarter. Results were challenged on many fronts, as evidenced by HKEX’ negative operating jaws during the period, whereby revenues declined HKD 210 mn (4.0%) whilst expenses jumped HKD 187 mn (13.2%)– pushing its C/I ratio higher by 480 bp to 31.4%; and*Stamp Dutied: Despite the poor showing during 4Q20, the real story for HKEX is the issue of the stamp duty which likely will impact earnings and market sentiment for the foreseeable future. Given the financial stress of the pandemic on the finances of the Hong Kong government,  on February 24, 2021 it was announced that there would be a 3 bp or 30% increase in the stamp duty to help offset the government budget deficit.

Hong Kong Exchanges & Clearing – Hitting The Wall

Philippines

Philippine Stock Exchange Inc. is a self-regulatory organization that provides a fair, efficient, transparent and orderly market for the buying and selling of securities.

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Philippine Stock Exchange (PSE PM)

Hong Kong Exchanges & Clearing – Golden Quarter, But Risks Are High

HONG KONG EXCHANGES & CLEARING: HKEX 1Q21 operating earnings increased 61.0% QOQ, highlighted by positive operating jaws. HKEX needs to contend a...

Thomas J. Monaco

Philippine Stock Exchange Inc (PSE PM) - Overlooked and On the Up

The Philippine Stock Exchange (PSE PM) is probably the most overlooked listed stock exchange in Asia, with the catalyst of higher volumes driven by...

Angus Mackintosh

Singapore Exchange – Solid Quarter, But SPAC Setback

SINGAPORE EXCHANGE: SGX reported strong securities/derivatives volumes on improving market caps/velocity. The U.S. SEC, however, issued SPAC...

Thomas J. Monaco

Hong Kong Exchanges & Clearing – Building The HKEX Coffin

HONG KONG EXCHANGES & CLEARING: Mainland China is contemplating a new stock exchange to attract overseas firms. If mainland China is successful,...

Thomas J. Monaco

Hong Kong Exchanges & Clearing – Hitting The Wall

HONG KONG EXCHANGES & CLEARING: HKEX reported a 15.6% QOQ decline in 4Q20 earnings, given the period's negative operating jaws. The story is the...

Thomas J. Monaco

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