Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>Four weeks ago, I gave the warning that H/A spreads had moved tighter - too far too fast. The next week, spreads widened, they bounced back with a vengeance, then slightly wider in the short week at the start of Chinese New Year, and bouncing back in the post-CNY week.</p><p>In the two weeks from before to after Chinese New Year, the average sector spread moved about 70bp tighter, but the average spread moved only 42bp tighter.</p><table class="table table-striped"><tbody>
<tr>
<td><p>Sector</p></td>
<td style="text-align: right;"><p>Last<br>Week</p></td>
<td style="text-align: right;"><p>Previous<br>Week</p></td>
<td style="text-align: right;"><p>3wks<br>Ago</p></td>
<td style="text-align: right;"><p>4wks<br>Ago</p></td>
</tr>
<tr>
<td><p>Consumer</p></td>
<td style="text-align: right;"><p>-  1.20%</p></td>
<td style="text-align: right;"><p>+ 2.55%</p></td>
<td style="text-align: right;"><p>+ 2.32%</p></td>
<td style="text-align: right;"><p>-  2.62%</p></td>
</tr>
<tr>
<td><p>Energy</p></td>
<td style="text-align: right;"><p>+ 1.43%</p></td>
<td style="text-align: right;"><p>-  1.64%</p></td>
<td style="text-align: right;"><p>+ 1.98%</p></td>
<td style="text-align: right;"><p>-  0.59%</p></td>
</tr>
<tr>
<td><p>Financials &amp; Real Estate</p></td>
<td style="text-align: right;"><p>+ 0.10%</p></td>
<td style="text-align: right;"><p>+ 0.29%</p></td>
<td style="text-align: right;"><p>+ 0.62%</p></td>
<td style="text-align: right;"><p>-  1.73%</p></td>
</tr>
<tr>
<td><p>Health Care &amp; Info Tech</p></td>
<td style="text-align: right;"><p>+ 1.45%</p></td>
<td style="text-align: right;"><p>-  1.52%</p></td>
<td style="text-align: right;"><p>+ 2.29%</p></td>
<td style="text-align: right;"><p>-  0.27%</p></td>
</tr>
<tr>
<td><p>Industrials</p></td>
<td style="text-align: right;"><p>+ 0.26%</p></td>
<td style="text-align: right;"><p>-  0.62%</p></td>
<td style="text-align: right;"><p>+ 2.48%</p></td>
<td style="text-align: right;"><p>-  1.30%</p></td>
</tr>
<tr>
<td><p>Materials</p></td>
<td style="text-align: right;"><p>+ 3.08%</p></td>
<td style="text-align: right;"><p>-  0.57%</p></td>
<td style="text-align: right;"><p>+ 2.66%</p></td>
<td style="text-align: right;"><p>-  0.95%</p></td>
</tr>
<tr>
<td><p>Utilities</p></td>
<td style="text-align: right;"><p>+ 0.99%</p></td>
<td style="text-align: right;"><p>+ 0.25%</p></td>
<td style="text-align: right;"><p>+ 1.06%</p></td>
<td style="text-align: right;"><p>-  2.45%</p></td>
</tr>
<tr>
<td><p>Sector Average</p></td>
<td style="text-align: right;"><p>+ 0.87%</p></td>
<td style="text-align: right;"><p>-  0.18%</p></td>
<td style="text-align: right;"><p>+ 1.92%</p></td>
<td style="text-align: right;"><p>-  1.41%</p></td>
</tr>
</tbody></table><p>This week, the data is a bit cut short as the China Securities Depository and Clearing has not reported Southbound position data since the 10th as far as I can tell. </p><div class="content-highlight"><p>There were 75 recommendations last week.  The 32 short recommendations lost an average of 48bp, slightly underperforming the market as a whole. The 43 long recommendations averaged gains of 50bp over the two weeks, outperforming the market as a whole. The combined total package was up 0.084% over the two weeks. </p></div><div><div><h3>The H/A Spread Market</h3></div></div><div>
<p>The past two weeks straddling Chinese New Year saw mixed movement in H/A spreads, with 63 of 98 liquid spreads (64%) narrowing an average of 42bp. They are on average 92bp tighter over four weeks. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/832/original/Screenshot+2021-02-20+at+5.17.17+PM.png?1613812651" class="editor-image img-responsive" data-smartkarma-image-id="189832"></figure></section><hr>
</div><div><div><h3>Consumer Sector</h3></div></div><div>
<p>The first sector discussed is Consumer, where liquid H/A spreads narrowed on average 1.35% over the two weeks, but with some bumpiness. </p>
<p><a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> saw its spread move 3.1% wider over the two weeks and is now 7.1% wider over four weeks and it is no longer the narrowest liquid H/A spread in the sector, with <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> taking its place moving 2.4% in the two weeks and 10.7% in four.</p>
</div><div class="content-highlight">
<p>Two weeks ago, I recommended staying long the <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>, and short <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, <a href="https://www.smartkarma.com/entities/hisense-home-appliances-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20107:1" rel="noopener">Hisense Home Appliances Group Co., Ltd. H (921 HK)</a>, and <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> H vs A. </p>
<p>Those four trades gained an average of 1.67% in spread terms on the week.</p>
</div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/833/original/Screenshot+2021-02-20+at+5.28.45+PM.png?1613813350" class="editor-image img-responsive" data-smartkarma-image-id="189833"></figure></section><p>For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.</p>

Four weeks ago, I gave the warning that H/A spreads had moved tighter - too far too fast. The next week, spreads widened, they bounced back with a vengeance, then slightly wider in the short week at the start of Chinese New Year, and bouncing back in the post-CNY week.In the two weeks from before to after Chinese New Year, the average sector spread moved about 70bp tighter, but the average spread moved only 42bp tighter.

Sector
Last Week
Previous Week
3wks Ago
4wks Ago


Consumer
-  1.20%
+ 2.55%
+ 2.32%
-  2.62%


Energy
+ 1.43%
-  1.64%
+ 1.98%
-  0.59%


Financials &amp; Real Estate
+ 0.10%
+ 0.29%
+ 0.62%
-  1.73%


Health Care &amp; Info Tech
+ 1.45%
-  1.52%
+ 2.29%
-  0.27%


Industrials
+ 0.26%
-  0.62%
+ 2.48%
-  1.30%


Materials
+ 3.08%
-  0.57%
+ 2.66%
-  0.95%


Utilities
+ 0.99%
+ 0.25%
+ 1.06%
-  2.45%


Sector Average
+ 0.87%
-  0.18%
+ 1.92%
-  1.41%

This week, the data is a bit cut short as the China Securities Depository and Clearing has not reported Southbound position data since the 10th as far as I can tell. There were 75 recommendations last week.  The 32 short recommendations lost an average of 48bp, slightly underperforming the market as a whole. The 43 long recommendations averaged gains of 50bp over the two weeks, outperforming the market as a whole. The combined total package was up 0.084% over the two weeks. The H/A Spread Market
The past two weeks straddling Chinese New Year saw mixed movement in H/A spreads, with 63 of 98 liquid spreads (64%) narrowing an average of 42bp. They are on average 92bp tighter over four weeks. 

Consumer Sector
The first sector discussed is Consumer, where liquid H/A spreads narrowed on average 1.35% over the two weeks, but with some bumpiness. 
BYD (1211 HK) saw its spread move 3.1% wider over the two weeks and is now 7.1% wider over four weeks and it is no longer the narrowest liquid H/A spread in the sector, with Fuyao Glass Industry Group (3606 HK) taking its place moving 2.4% in the two weeks and 10.7% in four.

Two weeks ago, I recommended staying long the Great Wall Motor (2333 HK), and short BYD (1211 HK), Hisense Home Appliances Group Co., Ltd. H (921 HK), and Fuyao Glass Industry Group (3606 HK) H vs A. 
Those four trades gained an average of 1.67% in spread terms on the week.
For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.

Quiddity Weekly H/A: High Volatility in Materials and Industrials and Spreads Over Lunar New Year

David Blennerhassett

<p>A little under an hour after Nord Gold announced it had <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02326509-6A1014166?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">closed its Offer</a> - citing the indicative $1.075/share Offer from <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> was beyond what it could justify - Dongshan, an Emirati-Russian JV, <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02326574-6A1014186?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> its intention to make an off-market cash bid for <a href="https://www.smartkarma.com/entities/cardinal-resources-ltd" target="_blank" data-smartkarma-citation="entities:12256:1" rel="noopener">Cardinal Resources (CDV AU)</a> at A$1.20/share. a 12% premium to Shandong's current offer of A$1.075/share.  </p>
<p>Dongshan's Offer is subject to:</p>
<ul>
<li>Dongshan obtaining a relevant interest of 50.1%;</li>
<li>FIRB, Ghana approvals;</li>
<li>Dongshan securing committed financing'; and</li>
<li>Project due diligence.</li>
</ul>
<p>Cardinal advises shareholders to take no action at this time. This is as yet an indicative, highly conditional Offer, not a firm proposal.</p>
<p>More below the fold.</p>
<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/179/984/original/image_78183222561608782971156.png?1608782971" class="editor-image img-responsive" data-smartkarma-image-id="179984"></figure>
</div>
<hr>
<div>
<div>
<h3>Past insights on Cardinal:</h3>
</div>
</div>
<div>
<div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 218.75px;">
<h3>Date</h3>
</td>
<td style="width: 484.782px;">
<h3>Insight</h3>
</td>
</tr>
<tr>
<td style="width: 218.75px;">22-Jun-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/sVxVB" target="_blank" rel="noopener">Shandong's Competing Offer For Cardinal</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">15-Jul-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/E1Wgv" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Nordgold Reloads</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">23-Jul-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/tVkqj" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">2-Sep-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/eGXfx" target="_blank" rel="noopener">Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more:</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">7-Sep-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/4gYtj" target="_blank" rel="noopener">Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">22-Oct-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/3cYHs" target="_blank" rel="noopener">Cardinal Resources: Nordgold's "Competing Offer"</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">25-Nov-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/o176q" target="_blank" rel="noopener">Cardinal Resources: Three's A Crowd</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">23-Dec-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/DK1qv" target="_blank" rel="noopener">Cardinal Resources: Shandong's Indicative Bump</a></em></td>
</tr>
</tbody>
</table>
</div>
</div>
</div>

A little under an hour after Nord Gold announced it had closed its Offer - citing the indicative $1.075/share Offer from Shandong Gold Mining Co., Ltd. (1787 HK) was beyond what it could justify - Dongshan, an Emirati-Russian JV, announced its intention to make an off-market cash bid for Cardinal Resources (CDV AU) at A$1.20/share. a 12% premium to Shandong's current offer of A$1.075/share.  
Dongshan's Offer is subject to:

Dongshan obtaining a relevant interest of 50.1%;
FIRB, Ghana approvals;
Dongshan securing committed financing'; and
Project due diligence.

Cardinal advises shareholders to take no action at this time. This is as yet an indicative, highly conditional Offer, not a firm proposal.
More below the fold.






Past insights on Cardinal:









Date


Insight



22-Jun-20
Shandong's Competing Offer For Cardinal


15-Jul-20
Cardinal Resource (CDV AU): Nordgold Reloads


23-Jul-20
Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer


2-Sep-20
Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more:


7-Sep-20
Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer


22-Oct-20
Cardinal Resources: Nordgold's "Competing Offer"


25-Nov-20
Cardinal Resources: Three's A Crowd


23-Dec-20
Cardinal Resources: Shandong's Indicative Bump







Cardinal Resources (CDV AU). Exit Nord Gold, Enter Dongshan.

<p>The pointy end of this deal gets pointier.</p>
<p>On the 25 November,  Ghanaian firm Engineers &amp; Planners Company formally <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02312766-6A1008633?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">launched</a> a A$1.05/share all-cash offer. <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a> immediately <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02312766-6A1008633?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> its Offer to A$1.05/share. On the 11 December, Nordgold raised its Offer to <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02321283-6A1012105?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">A$1.05/share</a>.</p>
<h3>The Newest News</h3>
<p>Shandong has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02325410-6A1013747?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it will increase its Offer to A$1.075/share <em>provided</em> it holds at least 30% of Cardinal shares by the 31 December AND Nordgold's on-market Offer is not extended beyond the 23 December.</p>
<p>This transaction continues to drill down into the nuances and minutiae of the takeover rules under the Corporations Act.</p>
<div>
<p>More below the fold.</p>
</div>
<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/179/910/original/image_7949790241608693879122.png?1608693879" class="editor-image img-responsive" data-smartkarma-image-id="179910"></figure>
</div>
<hr>
<div>
<h3>Past insights on Cardinal:</h3>
</div>
<section>
<div id="ember7847">
<div>
<div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 218.75px;">
<h3>Date</h3>
</td>
<td style="width: 484.782px;">
<h3>Insight</h3>
</td>
</tr>
<tr>
<td style="width: 218.75px;">22-Jun-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/sVxVB" target="_blank" rel="noopener">Shandong's Competing Offer For Cardinal</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">15-Jul-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/E1Wgv" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Nordgold Reloads</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">23-Jul-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/tVkqj" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">2-Sep-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/eGXfx" target="_blank" rel="noopener">Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more:</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">7-Sep-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/4gYtj" target="_blank" rel="noopener">Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">22-Oct-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/3cYHs" target="_blank" rel="noopener">Cardinal Resources: Nordgold's "Competing Offer"</a></em></td>
</tr>
<tr>
<td style="width: 218.75px;">25-Nov-20</td>
<td style="width: 484.782px;"><em><a href="https://skr.ma/o176q" target="_blank" rel="noopener">Cardinal Resources: Three's A Crowd</a></em></td>
</tr>
</tbody>
</table>
</div>
</div>
</div>
</div>
</section>

The pointy end of this deal gets pointier.
On the 25 November,  Ghanaian firm Engineers &amp; Planners Company formally launched a A$1.05/share all-cash offer. Shandong Gold Mining Co., Ltd. (1787 HK) immediately bumped its Offer to A$1.05/share. On the 11 December, Nordgold raised its Offer to A$1.05/share.
The Newest News
Shandong has now announced it will increase its Offer to A$1.075/share provided it holds at least 30% of Cardinal shares by the 31 December AND Nordgold's on-market Offer is not extended beyond the 23 December.
This transaction continues to drill down into the nuances and minutiae of the takeover rules under the Corporations Act.

More below the fold.






Past insights on Cardinal:










Date


Insight



22-Jun-20
Shandong's Competing Offer For Cardinal


15-Jul-20
Cardinal Resource (CDV AU): Nordgold Reloads


23-Jul-20
Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer


2-Sep-20
Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more:


7-Sep-20
Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer


22-Oct-20
Cardinal Resources: Nordgold's "Competing Offer"


25-Nov-20
Cardinal Resources: Three's A Crowd









Cardinal Resources: Shandong's Indicative Bump

Quantitative Analysis

<div>
<p>The H-Share/A-Share monitor is published every weekend for the data ending the last trading day of the previous week. It includes all H-Share/A-Share pairs where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...</p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>H/A Discount,</li>
<li>movement in H/A Discount over 5 and 20 days,</li>
<li>a 52-week Z-score for the spread,</li>
<li>A chart showing evolution of the H/A spread over the last 20 days,</li>
<li>Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, </li>
<li>There is also a chart showing the average sector spread and the individual spreads within each sector over the last three years. </li>
</ul>
</div>
<div>
<p>A recent addition is the possible status of H/A-share companies in the monitor which are subject to the Trump Executive Order on Chinese Military Companies. They are separated into three types (Possible Direct Qualifying Entity, Possible Indirect Qualifying Entity, and 20+%-owned by Qualifying Entity). They are color-coded as below.</p>
</div>
<section>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/784/original/image?1606541170" class="editor-image img-responsive" data-smartkarma-image-id="174784"></figure>
</section>
<div>
<p>For more on the list of names, please see <a href="https://www.smartkarma.com/insights/trump-s-executive-order-on-chinese-military-companies" target="_blank" data-smartkarma-citation="insights:45259" rel="noopener">Trump's Executive Order on Chinese Military Companies</a>. </p>
</div>
<hr>
<div class="content-highlight">
<p>This past week saw mixed movement in H/A spreads but on average they were narrower.</p>
<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/829/original/Screenshot%202020-11-28%20at%206.25.16%20PM.png?1606559131" class="editor-image img-responsive" data-smartkarma-image-id="174829"></figure>
<p></p>
</section>
<p>Average performance of the 39 recommendations (long 27, short 12) from last week was for a profit of 0.67% per trade.</p>
<p>There are 43 recommendations for the upcoming week.</p>
</div>
<hr>
<div>
<p>The first sector discussed is <strong>Consumer</strong>, where liquid H/A spreads narrowed on average 0.6% this past week after narrowing 2.7% the week before. Spreads are now tighter by 2.1% on average over a four-week period. Four of six liquid Hs outperformed their As.</p>
<p>Southbound accounts were large-ish net buyers on the week. There were three net buys and three net sells but the net buying ended up being all <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, again. <a href="https://www.smartkarma.com/entities/guangzhou-automobile-group-co-ltd" target="_blank" data-smartkarma-citation="entities:11082:1" rel="noopener">Guangzhou Automobile Group (2238 HK)</a> saw significant net selling. </p>
</div>
<div>
<div>
<div class="content-highlight">
<p>Last week I recommended staying long the H vs A on <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a> and that spread gained 1.6% for the week (after gaining 4.7% the week before when it was also recommended). This past week I put out the Weekly late on Monday (after 2pm), when BYD in Hong Kong had gained 3.7% vs the As on the day, and so recommended implementing a short BYD (1211 HK) H vs A share trade and from that point or even from the end of the day or the next, the Hs actually underperformed the As by 0.4%. </p>
<p>See below the fold for this week's recommendations.</p>
</div>
</div>
</div>
<section class="figure">
<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/809/original/Screenshot%202020-11-28%20at%205.32.56%20PM.png?1606556000" class="editor-image img-responsive" data-smartkarma-image-id="174809"></figure>
</section>
<p></p>
</section>
<section class="figure"></section>
<section>
<section class="figure">For Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities, please read on.</section>
</section>


The H-Share/A-Share monitor is published every weekend for the data ending the last trading day of the previous week. It includes all H-Share/A-Share pairs where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...



H/A Discount,
movement in H/A Discount over 5 and 20 days,
a 52-week Z-score for the spread,
A chart showing evolution of the H/A spread over the last 20 days,
Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, 
There is also a chart showing the average sector spread and the individual spreads within each sector over the last three years. 



A recent addition is the possible status of H/A-share companies in the monitor which are subject to the Trump Executive Order on Chinese Military Companies. They are separated into three types (Possible Direct Qualifying Entity, Possible Indirect Qualifying Entity, and 20+%-owned by Qualifying Entity). They are color-coded as below.





For more on the list of names, please see Trump's Executive Order on Chinese Military Companies. 



This past week saw mixed movement in H/A spreads but on average they were narrower.




Average performance of the 39 recommendations (long 27, short 12) from last week was for a profit of 0.67% per trade.
There are 43 recommendations for the upcoming week.



The first sector discussed is Consumer, where liquid H/A spreads narrowed on average 0.6% this past week after narrowing 2.7% the week before. Spreads are now tighter by 2.1% on average over a four-week period. Four of six liquid Hs outperformed their As.
Southbound accounts were large-ish net buyers on the week. There were three net buys and three net sells but the net buying ended up being all BYD (1211 HK), again. Guangzhou Automobile Group (2238 HK) saw significant net selling. 




Last week I recommended staying long the H vs A on Great Wall Motor (2333 HK) and that spread gained 1.6% for the week (after gaining 4.7% the week before when it was also recommended). This past week I put out the Weekly late on Monday (after 2pm), when BYD in Hong Kong had gained 3.7% vs the As on the day, and so recommended implementing a short BYD (1211 HK) H vs A share trade and from that point or even from the end of the day or the next, the Hs actually underperformed the As by 0.4%. 
See below the fold for this week's recommendations.











For Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities, please read on.


Quiddity Weekly H/​​A: Share Spread Monitor as of 27 Nov 2020

<section>
<div id="ember3989">
<div>
<p>On the 21 October, Nordgold increased its Offer price to <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02296571-6A1002232?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">A$1.00/share</a>, matching <a href="https://www.smartkarma.com/entities/shandong-gold-mining-co-ltd-61153493-5437-47ee-a8d3-aec41fb7f1da" target="_blank" data-smartkarma-citation="entities:27455:1" rel="noopener">Shandong Gold Mining Co., Ltd. (1787 HK)</a>'s $1.00/share bid on the 7 September. But matters shortly turned sour: did Nordgold's improved Offer constitute a higher competing offer? Shandong says <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02297278-6A1002505?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">yes</a>. Nordgold says no. </p>
<p>The crux of the issues centred on Shandong's Second Supplementary Bidder's Statement on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02295721-6A1001904?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">19 October</a>, in which Shandong stated that its $1.00/share offer price is "<em>best and final in the absence of a higher competing offer</em>." </p>
<p>Cardinal added on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02296161-6A1002062?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">20 October</a> that "<em>unless there is a higher competing offer to the Shandong Gold Offer (whether from Nordgold or a third party), Shandong Gold cannot increase its offer price</em>". </p>
<p>After Nordgold's matching bid, Cardinal <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02296759-6A1002302?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> that "<em>Nordgold has made a higher competing offer by increasing the Offer Price of the Nordgold Takeover Bid to A$1.00 cash per share (previously A$0.90 can per share)"</em>. </p>
<p>In its submission to the Takeovers Panel (TP) on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02297975_PS-6A1002769?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">23 October</a>, Nordgold considered Cardinal's statement to be misleading and/or deceptive, and sought a correction. </p>
<p>A number of takeover applications ensued, so much so, Cardinal resorted to an <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02304400-6A1005622?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announcement</a> on the 4 November summarising these applications. There was no definitive conclusion at this juncture. And so it has dragged on, with at least another four TP updates from the summary announcement. </p>
<h3>The New News</h3>
<p>This morning Ghanaian firm Engineers &amp; Planners Company formally <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02312766-6A1008633?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">launched</a> a A$1.05/share all-cash offer.</p>
<p>At 4.24pm, Nordgold released a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02313088-6A1008768?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">statement</a> that E&amp;P's Offer is not an "offer" nor a "competing offer", therefore it does not free either Nordgold or Shandong from their Best and Final Statements. </p>
<p>Unfazed, Shandong <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02312766-6A1008633?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">bumped</a> its Offer to A$1.05/share 43 minutes later.</p>
<p>More below the fold.</p>
</div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/736/original/image_63795557821606227977871.png?1606227979" class="editor-image img-responsive" data-smartkarma-image-id="173736"></figure>
<div>
<div>
<hr>
<p>Past insights on Cardinal:</p>
</div>
<div>
<div>
<div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 218.75px;">
<h3>Date</h3>
</td>
<td style="width: 484.782px;">
<h3>Insight</h3>
</td>
</tr>
<tr>
<td style="width: 218.75px;">22-Jun-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/sVxVB" target="_blank" rel="noopener">Shandong's Competing Offer For Cardinal</a></td>
</tr>
<tr>
<td style="width: 218.75px;">15-Jul-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/E1Wgv" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Nordgold Reloads</a></td>
</tr>
<tr>
<td style="width: 218.75px;">23-Jul-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/tVkqj" target="_blank" rel="noopener">Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer</a></td>
</tr>
<tr>
<td style="width: 218.75px;">2-Sep-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/eGXfx" target="_blank" rel="noopener">Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more:</a></td>
</tr>
<tr>
<td style="width: 218.75px;">7-Sep-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/4gYtj" target="_blank" rel="noopener">Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer</a></td>
</tr>
<tr>
<td style="width: 218.75px;">22-Oct-20</td>
<td style="width: 484.782px;"><a href="https://skr.ma/3cYHs" target="_blank" rel="noopener">Cardinal Resources: Nordgold's "Competing Offer"</a></td>
</tr>
</tbody>
</table>
</div>
</div>
</div>
</div>
<div>
<div>
<div id="ember6226">
<div>
<div id="ember6246" data-smartkarma-discusison="79316">
<div data-ember-action="" data-ember-action-6247="6247">
<div>
<div></div>
</div>
</div>
</div>
</div>
</div>
</div>
<div>
<div id="ember6342">
<div id="ember6343" data-smartkarma-discusison="79042">
<div data-ember-action="" data-ember-action-6344="6344">
<div>
<div></div>
</div>
</div>
</div>
</div>
</div>
</div>
<div>
<div>
<div></div>
</div>
</div>
</div>
</section>




On the 21 October, Nordgold increased its Offer price to A$1.00/share, matching Shandong Gold Mining Co., Ltd. (1787 HK)'s $1.00/share bid on the 7 September. But matters shortly turned sour: did Nordgold's improved Offer constitute a higher competing offer? Shandong says yes. Nordgold says no. 
The crux of the issues centred on Shandong's Second Supplementary Bidder's Statement on the 19 October, in which Shandong stated that its $1.00/share offer price is "best and final in the absence of a higher competing offer." 
Cardinal added on the 20 October that "unless there is a higher competing offer to the Shandong Gold Offer (whether from Nordgold or a third party), Shandong Gold cannot increase its offer price". 
After Nordgold's matching bid, Cardinal announced that "Nordgold has made a higher competing offer by increasing the Offer Price of the Nordgold Takeover Bid to A$1.00 cash per share (previously A$0.90 can per share)". 
In its submission to the Takeovers Panel (TP) on the 23 October, Nordgold considered Cardinal's statement to be misleading and/or deceptive, and sought a correction. 
A number of takeover applications ensued, so much so, Cardinal resorted to an announcement on the 4 November summarising these applications. There was no definitive conclusion at this juncture. And so it has dragged on, with at least another four TP updates from the summary announcement. 
The New News
This morning Ghanaian firm Engineers &amp; Planners Company formally launched a A$1.05/share all-cash offer.
At 4.24pm, Nordgold released a statement that E&amp;P's Offer is not an "offer" nor a "competing offer", therefore it does not free either Nordgold or Shandong from their Best and Final Statements. 
Unfazed, Shandong bumped its Offer to A$1.05/share 43 minutes later.
More below the fold.





Past insights on Cardinal:








Date


Insight



22-Jun-20
Shandong's Competing Offer For Cardinal


15-Jul-20
Cardinal Resource (CDV AU): Nordgold Reloads


23-Jul-20
Cardinal Resource (CDV AU): Shandong Reloads, But Not A Knockout Offer


2-Sep-20
Cardinal Resources (CDV AU): Nordgold's Knockout Offer. Read more:


7-Sep-20
Cardinal Resources (CDV AU): Shandong Trumps Nordgold’s Knockout Offer


22-Oct-20
Cardinal Resources: Nordgold's "Competing Offer"









































China

Shandong Gold Mining is a Chinese company primarily engaged in the exploration, mining, processing, and sale of gold and gold products. It also deals with non-ferrous metals like silver, copper, lead, and zinc, and manufactures specialized equipment for gold mines. The company was incorporated in 2000 and is headquartered in Jinan, People's Republic of China.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Shandong Gold Mining (1787 HK)

Quiddity Weekly H/A: High Volatility in Materials and Industrials and Spreads Over Lunar New Year

H/A spreads have been reasonably volatile over the CNY period, but again they net narrowed over two weeks. There are still several sectors where...

Travis Lundy

Cardinal Resources (CDV AU). Exit Nord Gold, Enter Dongshan.

If you are already in, then continue to ride out the end game. Otherwise, buy around terms on the expectation one of the competing players...

David Blennerhassett

Cardinal Resources: Shandong's Indicative Bump

As before, if you are already in, then continue to ride out the end game. Otherwise, buy around terms on the expectation one of the competing...

David Blennerhassett

Cardinal Resources: Three's A Crowd

If you are already in, then continue to ride out the end game as this competitive bidding situation just became even more competitive.

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Weekly H/A: High Volatility in Materials and Industrials and Spreads Over Lunar New Year

H/A spreads have been reasonably volatile over the CNY period, but again they net narrowed over two weeks. There are still several sectors where...

Travis Lundy

Cardinal Resources (CDV AU). Exit Nord Gold, Enter Dongshan.

If you are already in, then continue to ride out the end game. Otherwise, buy around terms on the expectation one of the competing players...

David Blennerhassett

Cardinal Resources: Shandong's Indicative Bump

As before, if you are already in, then continue to ride out the end game. Otherwise, buy around terms on the expectation one of the competing...

David Blennerhassett

Quiddity Weekly H/​​A: Share Spread Monitor as of 27 Nov 2020

The weekly H/A Share Monitor and Trade Recommendations. Spreads narrower on the week. Last week's 39 trade recommendations gained 0.67% on average....

Travis Lundy

Cardinal Resources: Three's A Crowd

If you are already in, then continue to ride out the end game as this competitive bidding situation just became even more competitive.

David Blennerhassett

Quiddity Weekly H/A: Share Spread Monitor as of 27 Nov 2020