Transport Sector, China and Asia-focused Research

Charles De Trenck

Thematic (Sector/Industry)

<p>I recently had occasion to update my thinking on China, its massive waste generation in the last 10-15 years, and Chinese Communist Party members as major beneficiaries of this massive waste, and therefore also the continued need for Xi Jinping to keep cleaning up the more blatant instances of corruption and wealth transfer. The commodities boom of &lsquo;00s proved to be backed by a massive wave of over-production, waste and a social movement to self-enrichment by the privileged class of China. President Xi Jinping in many ways is now contributing to lower commodity prices as a byproduct of his crackdown. There is a twist, though. Not only does this piece make a link between Chinese Corruption and massive waste, but it also puts in its conclusions a couple of directional political Catch-22s President Xi may face.</p><p>&nbsp;</p>

I recently had occasion to update my thinking on China, its massive waste generation in the last 10-15 years, and Chinese Communist Party members as major beneficiaries of this massive waste, and therefore also the continued need for Xi Jinping to keep cleaning up the more blatant instances of corruption and wealth transfer. The commodities boom of &lsquo;00s proved to be backed by a massive wave of over-production, waste and a social movement to self-enrichment by the privileged class of China. President Xi Jinping in many ways is now contributing to lower commodity prices as a byproduct of his crackdown. There is a twist, though. Not only does this piece make a link between Chinese Corruption and massive waste, but it also puts in its conclusions a couple of directional political Catch-22s President Xi may face.&nbsp;

Implications and Fallout from Absolute Corruption of the Political Elite

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analysed the earning revision of component stocks of CSI 500 in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on Henan Shenhuo Coal &amp; Power, Guangxi Liugong Machinery, Inner Mongolia Dian Tou Energy, Suzhou Dongshan Precision Manufacturing, Shenergy, Maanshan Iron &amp; Steel, Yonghui Superstores.</li>
</ul>


We analysed the earning revision of component stocks of CSI 500 in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on Henan Shenhuo Coal &amp; Power, Guangxi Liugong Machinery, Inner Mongolia Dian Tou Energy, Suzhou Dongshan Precision Manufacturing, Shenergy, Maanshan Iron &amp; Steel, Yonghui Superstores.


CSI 500 Index Earning Revision (Jun): Henan Shenhuo Coal & Power, Guangxi Liugong Machinery

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>With 85% of the review period now complete, we forecast 50 changes (the maximum permitted) for the <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI Smallcap 500 Index</a> at the close on 13 June.</li>
<li>We estimate a one-way turnover of 10% at the rebalance resulting in a round-trip trade of CNY26.4bn (US$3.6bn). The Information Technology gains at the expense of Healthcare and Consumer Staples.</li>
<li>The forecast adds have outperformed the forecast deletes and the <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI Smallcap500 Index</a> over the last 6 months. The best part is that the volatility of the trade is very low.</li>
</ul>


With 85% of the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index at the close on 13 June.
We estimate a one-way turnover of 10% at the rebalance resulting in a round-trip trade of CNY26.4bn (US$3.6bn). The Information Technology gains at the expense of Healthcare and Consumer Staples.
The forecast adds have outperformed the forecast deletes and the CSI Smallcap500 Index over the last 6 months. The best part is that the volatility of the trade is very low.


CSI500 Index Rebalance Preview: 50 Changes; 10% Turnover; US$3.6bn Round-Trip Trade

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>The IFA opines that <a href="https://www.smartkarma.com/entities/china-hainan-rubber-industry-group" target="_blank" data-smartkarma-citation="entities:10551:1" rel="noopener">China Hainan Rubber Industry (601118 CH)</a>'s MGO at S$0.413 per share is fair and reasonable. The <a href="https://www.smartkarma.com/entities/halcyon-agri-corp-ltd" target="_blank" data-smartkarma-citation="entities:18191:1" rel="noopener">Halcyon Agri (HACL SP)</a> Board recommends accepting the offer.</li>
<li>Since the offer opened on 24 February, there have been no acceptances. Perhaps minorities held off until the full-year results and the IFA report. Board recommendation should drive acceptance.</li>
<li>The 50%+ minimum acceptance condition requires around 40% of minorities acceptance rate (47% excluding the Gondobintoro Family). This remains achievable. At the last close, the gross spread is 2.0%.</li>
</ul>


The IFA opines that China Hainan Rubber Industry (601118 CH)'s MGO at S$0.413 per share is fair and reasonable. The Halcyon Agri (HACL SP) Board recommends accepting the offer.
Since the offer opened on 24 February, there have been no acceptances. Perhaps minorities held off until the full-year results and the IFA report. Board recommendation should drive acceptance.
The 50%+ minimum acceptance condition requires around 40% of minorities acceptance rate (47% excluding the Gondobintoro Family). This remains achievable. At the last close, the gross spread is 2.0%.


Halcyon Agri (HACL SP): Board Recommends Conditional MGO

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-hainan-rubber-industry-group" target="_blank" data-smartkarma-citation="entities:10551:1" rel="noopener">China Hainan Rubber Industry (601118 CH)</a> has despatched the offer document relating to its <a href="https://www.smartkarma.com/entities/halcyon-agri-corp-ltd" target="_blank" data-smartkarma-citation="entities:18191:1" rel="noopener">Halcyon Agri (HACL SP)</a> MGO at US$0.315 or S$0.413 per share. The offer closes on 24 March.</li>
<li>The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities' acceptance rate (47% excluding the Gondobintoro Family).</li>
<li>We think that this is achievable as the offer is attractive. At the last close and for an early-April payment, the gross and annualised spread is 0.7% and 7.3%, respectively.</li>
</ul>



China Hainan Rubber Industry (601118 CH) has despatched the offer document relating to its Halcyon Agri (HACL SP) MGO at US$0.315 or S$0.413 per share. The offer closes on 24 March.
The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities' acceptance rate (47% excluding the Gondobintoro Family).
We think that this is achievable as the offer is attractive. At the last close and for an early-April payment, the gross and annualised spread is 0.7% and 7.3%, respectively.


Halcyon Agri (HACL SP): Offer Document Out, Offer Closes 24 March

China

Sinochem International Corporation imports and exports chemical products including plastics, rubber, coke, and other chemicals,  The Company also operates in domestic trading, freight transportation, and warehousing businesses.

Sinochem International Corporation A (600500 CH)

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Sinochem International Corporation A (600500 CH)

Implications and Fallout from Absolute Corruption of the Political Elite

I recently had occasion to update my thinking on China, its massive waste generation in the last 10-15 years, and Chinese Communist Party members...

Charles De Trenck

CSI 500 Index Earning Revision (Jun): Henan Shenhuo Coal & Power, Guangxi Liugong Machinery

We analyzed CSI 500's consensus for Jun 2025 and highlighted changes of EPS in Henan Shenhuo Coal & Power (000933 CH), Guangxi Liugong Machinery...

Ke Yan, CFA, FRM

CSI500 Index Rebalance Preview: 50 Changes; 10% Turnover; US$3.6bn Round-Trip Trade

There should be 50 changes in June. Estimated 1-way turnover is 10% and the round-trip trade is US$3.6bn. The forecast adds have outperformed the...

Brian Freitas

Halcyon Agri (HACL SP): Board Recommends Conditional MGO

The 50%+ minimum acceptance condition requires around 40% of minorities acceptance rate. This remains achievable. At the last close, the gross...

Arun George

Halcyon Agri (HACL SP): Offer Document Out, Offer Closes 24 March

The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities' acceptance rate. We think that this is achievable as the...

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)