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

*Why Do They Always Do This?: At a competitor conference, management ridiculously diminished government allegations. Tencent Holdings (700.HK) [Tencent] should simply answer “yes, we made mistakes and pushed the envelope but we are actively rectifying these issues. Its going to be painful for investors as we address the government's numerous over the near-term”;  
*Elephant In The Room: Mainland China's crackdown on capital markets activities has rapidly expanded under the broad narrative of "financial stability". There remains no doubt, in our view, that Tencent will follow Alibaba Group (BABA.US) [Alibaba] in the formation of a financial holding company. It’s pretty surprising that Tencent refuses to discuss this matter when financial services are the largest component of earnings and growth; and    
*Results Have Also Deteriorated As Distractions Mount: Tencent’s 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) linked quarter – and were of poor quality. Results were challenged by: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged.

*Why Do They Always Do This?: At a competitor conference, management ridiculously diminished government allegations. Tencent Holdings (700.HK) [Tencent] should simply answer “yes, we made mistakes and pushed the envelope but we are actively rectifying these issues. Its going to be painful for investors as we address the government's numerous over the near-term”;  
*Elephant In The Room: Mainland China's crackdown on capital markets activities has rapidly expanded under the broad narrative of "financial stability". There remains no doubt, in our view, that Tencent will follow Alibaba Group (BABA.US) [Alibaba] in the formation of a financial holding company. It’s pretty surprising that Tencent refuses to discuss this matter when financial services are the largest component of earnings and growth; and    
*Results Have Also Deteriorated As Distractions Mount: Tencent’s 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) linked quarter – and were of poor quality. Results were challenged by: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged.       

Tencent Holdings – Incredulous Management

*The Hits Just Keep On Coming: Various media outlets have reported that Alibaba Holdings (BABA.US) [BABA] is planning to spend CNY 100 bn (USD 15.4 bn or nearly 2/3 of 2020 earnings) through 2025 in order to support the government's "common prosperity" initiatives – implying another significant earnings hit; and
*FHC Challenges Ahead As Well: BABA’s Ant Group subsidiary is also reorganizing as a financial holding company, and will now be regulated more along the lines of a commercial bank by the China Bank and Insurance Regulatory Commission (CBIRC). As a result, Ant Financial needs to adhere to minimum CAR capital requirements, and follow other bank regulatory guidelines.

*The Hits Just Keep On Coming: Various media outlets have reported that Alibaba Holdings (BABA.US) [BABA] is planning to spend CNY 100 bn (USD 15.4 bn or nearly 2/3 of 2020 earnings) through 2025 in order to support the government's "common prosperity" initiatives – implying another significant earnings hit; and
*FHC Challenges Ahead As Well: BABA’s Ant Group subsidiary is also reorganizing as a financial holding company, and will now be regulated more along the lines of a commercial bank by the China Bank and Insurance Regulatory Commission (CBIRC). As a result, Ant Financial needs to adhere to minimum CAR capital requirements, and follow other bank regulatory guidelines.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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 Capital Markets

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.KP began operation in Sep 2014 as a fintech division of Kakao to facilitate online payments. Ant Financial invested US$200m in the company in Feb 2017 and the division was spun out of Kakao in Apr 2017. Since spinning out, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.

Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao held a 55% stake prior to listing, with Ant Financial holding the balance 45% stake.As of 1H21, KP had a total of 36m users and around 20m monthly active users (MAU). It processed a total GMV of KRW66.9tn in 2020 and it had already generated KRW47.9tn GMV in 1H21 itself. As of the end of 1H21, it had dealings with more than 610,000 affiliated stores and 100 financial institutions.KP began operation in Sep 2014 as a fintech division of Kakao to facilitate online payments. Ant Financial invested US$200m in the company in Feb 2017 and the division was spun out of Kakao in Apr 2017. Since spinning out, the number of MAUs have grown 14x from 2Q17 to 2Q21, while the quarterly transaction amount grew 61x from KRW0.4tn in 2Q17 to KRW24.5tn in 2Q21. Over the past few years the company has been expanding its offering beyond payment processing to include other financial products. On the back of this, its revenue has been growing faster than its GMV.

Kakao Pay IPO - Guided by Ant Financial to Be a Mini Ant

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <a href="https://www.smartkarma.com/entities/yandex-nv-a" target="_blank" data-smartkarma-citation="entities:414:1" rel="noopener">Yandex (YNDX US)</a>, <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a>, Ant Financial, <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a>, <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Global (DIDI US)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 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/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing International Corp (SMIC) (981 HK)</a>

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity indices. Companies mentioned this week:Tencent (700 HK), NetEase (9999 HK), Yandex (YNDX US), Prosus (PRX NA), Naspers (NPN SJ), Ant Financial, NIO Inc (NIO US), DiDi Global (DIDI US), JD.com Inc. (9618 HK), Alibaba Group (9988 HK), Semiconductor Manufacturing International Corp (SMIC) (981 HK) 

Global Emerging Markets Weekly: 3 September 2021

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<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.</div><div>Hong Kong saw shorts rise on <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/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> and <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> 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 (700 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> and <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>. Shorts increased in the Information Technology, Consumer Discretionary, Health Care and Real Estate sectors while decreasing in the Communication Services and Materials sectors.</div><div>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-osk-lines-ltd" target="_blank" data-smartkarma-citation="entities:20717:1" rel="noopener">Mitsui Osk Lines (9104 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/invesco-office-j-reit-inc" target="_blank" data-smartkarma-citation="entities:7414:1" rel="noopener">Invesco Office J Reit (3298 JP)</a>, <a href="https://www.smartkarma.com/entities/odakyu-electric-railway-co-ltd" target="_blank" data-smartkarma-citation="entities:5405:1" rel="noopener">Odakyu Electric Railway (9007 JP)</a>, <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec Corp (6920 JP)</a>, <a href="https://www.smartkarma.com/entities/jsr-corp" target="_blank" data-smartkarma-citation="entities:17620:1" rel="noopener">JSR Corp (4185 JP)</a>, <a href="https://www.smartkarma.com/entities/keio-corp" target="_blank" data-smartkarma-citation="entities:1223:1" rel="noopener">Keio Corp (9008 JP)</a>. Shorts increased in most sectors led by the Industrials, Consumer Discretionary, Information Technology, Consumer Staples and Materials stocks.</div><div>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a>, <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>, <a href="https://www.smartkarma.com/entities/kumho-petro-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:2014:1" rel="noopener">Kumho Petro Chemical (011780 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Inc (034730 KS)</a> and <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> while shorts were covered on <a href="https://www.smartkarma.com/entities/sk-telecom-co-ltd-bbccd86c-474d-4a4d-946d-10e911a225a2" target="_blank" data-smartkarma-citation="entities:395:1" rel="noopener">SK Telecom (017670 KS)</a>, <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/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics Co., (207940 KS)</a> and <a href="https://www.smartkarma.com/entities/korea-shipbuilding-offshore-engineering-co-ltd" target="_blank" data-smartkarma-citation="entities:10155:1" rel="noopener">Korea Shipbuilding &amp; Offshore Engineering (009540 KS)</a>. </div><div>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/ase-technology-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:27270:1" rel="noopener">ASE Technology Holding Co Ltd (3711 TT)</a>, <a href="https://www.smartkarma.com/entities/taishin-financial-holding" target="_blank" data-smartkarma-citation="entities:715:1" rel="noopener">Taishin Financial Holding (2887 TT)</a> and <a href="https://www.smartkarma.com/entities/momo-com-inc" target="_blank" data-smartkarma-citation="entities:8403:1" rel="noopener">Momo.Com Inc (8454 TT)</a> while shorts covered on <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/china-steel-corp" target="_blank" data-smartkarma-citation="entities:962:1" rel="noopener">China Steel (2002 TT)</a>, <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 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> and <a href="https://www.smartkarma.com/entities/taiwan-business-bank" target="_blank" data-smartkarma-citation="entities:18958:1" rel="noopener">Taiwan Business Bank (2834 TT)</a>. </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 Alibaba Group (9988 HK), China Merchants Bank H (3968 HK), JD.com Inc. (9618 HK), Xiaomi Corp (1810 HK) and Kuaishou Technology (1024 HK) while there was short covering on Tencent (700 HK), Ping An Insurance (H) (2318 HK), Anta Sports Products (2020 HK), Shenzhou Intl Group Holdings (2313 HK) and HKEX (388 HK). Shorts increased in the Information Technology, Consumer Discretionary, Health Care and Real Estate sectors while decreasing in the Communication Services and Materials sectors.In Japan, stocks increased on Shiseido Company (4911 JP), Fast Retailing (9983 JP), Yaskawa Electric (6506 JP), Canon Inc (7751 JP) and Mitsui Osk Lines (9104 JP) while there was short covering on Invesco Office J Reit (3298 JP), Odakyu Electric Railway (9007 JP), Lasertec Corp (6920 JP), JSR Corp (4185 JP), Keio Corp (9008 JP). Shorts increased in most sectors led by the Industrials, Consumer Discretionary, Information Technology, Consumer Staples and Materials stocks.In Korea, shorts increased on NCSOFT Corp (036570 KS), LG Display (034220 KS), Kumho Petro Chemical (011780 KS), SK Inc (034730 KS) and Samsung Electronics (005930 KS) while shorts were covered on SK Telecom (017670 KS), Celltrion Inc (068270 KS), Oci Co Ltd (010060 KS), Samsung Biologics Co., (207940 KS) and Korea Shipbuilding &amp; Offshore Engineering (009540 KS). In Taiwan, shorts increased on Evergreen Marine Corp (2603 TT), Mediatek Inc (2454 TT), ASE Technology Holding Co Ltd (3711 TT), Taishin Financial Holding (2887 TT) and Momo.Com Inc (8454 TT) while shorts covered on TSMC (2330 TT), China Steel (2002 TT), Wan Hai Lines (2615 TT), United Microelectronics Corp (2303 TT) and Taiwan Business Bank (2834 TT). 

Asia Shorts: Alibaba, CMB, Tencent, Anta, Shiseido, Odakyu, Keio, NC Soft, LGD, SK Tel, Evergreen

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

Tencent Holdings – Incredulous Management

TENCENT: At a competitor virtual conference, Tencent discussed the impact of regulatory changes but didn’t discuss its targeted financial services...

Thomas J. Monaco

Alibaba Group Holdings - Penance

ALIBABA: BABA is apparently launching a plan to spend CNY 100 bn (nearly 2/3 of 2020 earnings) by 2025 to the "common prosperity" – implying a...

Thomas J. Monaco

Kakao Pay IPO - Guided by Ant Financial to Be a Mini Ant

Kakao Pay, one of South Korea’s largest payment and financial services apps, aims to raise up to US$1.3bn in its South Korean IPO. Kakao holds a...

Sumeet Singh

Global Emerging Markets Weekly: 3 September 2021

This insight provides a summary of the key news developments impacting the largest countries and constituents of the Global Emerging Markets equity...

Wium Malan, CFA

Asia Shorts: Alibaba, CMB, Tencent, Anta, Shiseido, Odakyu, Keio, NC Soft, LGD, SK Tel, Evergreen

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

Brian Freitas

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