Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

<p><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> listed associates have continued their exceptional share price performance over the past 6 months, led by <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/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a>  and <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>. I estimate that Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at only 23.1x rolling 12-month forward earnings.</p><p><em>Please also refer to <a href="https://www.smartkarma.com/insights/tencent-a-closer-look-at-investees-reveals-a-discount-rating-and-future-value-unlock-potential" target="_blank" data-smartkarma-citation="insights:42361" rel="noopener">Tencent: A Closer Look at Investees Reveals a Discount Rating and Future Value Unlock Potential</a> for more detail on this analysis.</em></p>

Tencent Holdings (700 HK) listed associates have continued their exceptional share price performance over the past 6 months, led by Meituan (3690 HK), Pinduoduo (PDD US)  and JD.com (HK) (9618 HK). I estimate that Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at only 23.1x rolling 12-month forward earnings.Please also refer to Tencent: A Closer Look at Investees Reveals a Discount Rating and Future Value Unlock Potential for more detail on this analysis.

Tencent: Listed Associates Continue to Outperform

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

<div><p><a href="https://www.smartkarma.com/entities/ke-holdings-inc" target="_blank" data-smartkarma-citation="entities:29213:1" rel="noopener">KE Holdings Inc (BEKE US)</a> (BEKE), a company 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>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and Hillhouse, raised around US$2.1bn in its US listing in Aug 2020. It's now back to raise a similar amount. </p></div><div><p>We have covered the stock since its listing, links to our previous notes are below. In this insight, I'll run the deal through our ECM framework and talk about deal dynamics.</p></div><div><p>In my previous insight, I have looked at various aspects of the deal:</p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-the-positives-fast-growth-high-market-share" target="_blank" rel="noopener">KE Holdings/​Beike Pre-IPO - The Positives - Fast Growth, High Market Share</a>, </li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-the-negatives-questions-margins-p2p" target="_blank" rel="noopener">KE Holdings/​​Beike Pre-IPO - The Negatives - Questions, Margins, P2P</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-recent-updates-peer-comparison" target="_blank" rel="noopener">KE Holdings/​​Beike Pre-IPO - Recent Updates, Peer Comparison</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-pre-ipo-thoughts-on-valuation-rumoured-valuation-might-be-a-stretch" target="_blank" rel="noopener">KE Holdings/​​​Beike Pre-IPO - Thoughts on Valuation, Rumoured Valuation Might Be a Stretch</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-ipo-can-t-see-much-upside" target="_blank" rel="noopener">KE Holdings/​​​​Beike IPO - Can’t See Much Upside</a></li>
<li><a href="https://www.smartkarma.com/insights/ke-holdings-beike-ipo-trading-we-would-be-sellers-if-it-pops" target="_blank" rel="noopener">KE Holdings/​​​​​Beike IPO Trading - We Would Be Sellers if It Pops</a></li>
</ul></div>

KE Holdings Inc (BEKE US) (BEKE), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, raised around US$2.1bn in its US listing in Aug 2020. It's now back to raise a similar amount. We have covered the stock since its listing, links to our previous notes are below. In this insight, I'll run the deal through our ECM framework and talk about deal dynamics.In my previous insight, I have looked at various aspects of the deal:

KE Holdings/​Beike Pre-IPO - The Positives - Fast Growth, High Market Share, 
KE Holdings/​​Beike Pre-IPO - The Negatives - Questions, Margins, P2P
KE Holdings/​​Beike Pre-IPO - Recent Updates, Peer Comparison
KE Holdings/​​​Beike Pre-IPO - Thoughts on Valuation, Rumoured Valuation Might Be a Stretch
KE Holdings/​​​​Beike IPO - Can’t See Much Upside
KE Holdings/​​​​​Beike IPO Trading - We Would Be Sellers if It Pops


KE Holdings/​​​​​Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry

<p><a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> plans to raise around US$5bn via a mix of issuing shares and convertible bonds.</p><p>The stock has been a one-way street since listing and has risen by 27% since it announced its 3Q20 results on 12th Nov 2020. </p><p>In this insight, we will run the deal through our ECM framework and talk about valuations. </p>

Pinduoduo (PDD US) plans to raise around US$5bn via a mix of issuing shares and convertible bonds.The stock has been a one-way street since listing and has risen by 27% since it announced its 3Q20 results on 12th Nov 2020. In this insight, we will run the deal through our ECM framework and talk about valuations. 

Pinduoduo Placement - Should Do Well If, It Corrects Beforehand

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<ul>
<li>The effect of the COVID pandemic saw an unprecedented level of sector rotation among EM active portfolios in 2020.</li>
<li>Banking stocks were hit the hardest, with Semiconductor, Internet Retail and Interactive Media industry groups the beneficiaries.</li>
<li>Banking exposure is at its lowest levels in over a decade, EM active investors at highest ever weights in Tech related Consumer Discretionary and Communication Services stocks.</li>
<li>Improving outlook for banking stocks, vaccine hopes, plus potential regulation in the Tech sector point to a potential unwind.  </li>
<li>'Beaten Up' banking stocks include <a href="https://www.smartkarma.com/entities/itau-unibanco-holding-sa-9d47d196-e503-471b-a84e-ca4401033062" target="_blank" data-smartkarma-citation="entities:24550:1" rel="noopener">Itau Unibanco Holding Sa (ITUB4 BZ)</a> , <a href="https://www.smartkarma.com/entities/kasikornbank-pcl" target="_blank" data-smartkarma-citation="entities:293:1" rel="noopener">Kasikornbank PCL (KBANK TB)</a> and <a href="https://www.smartkarma.com/entities/standard-bank-group-ltd" target="_blank" data-smartkarma-citation="entities:24988:1" rel="noopener">Standard Bank (SBK SJ)</a> </li>
<li>Fully owned Tech related stocks include <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/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> and <a href="https://www.smartkarma.com/entities/mercadolibre-inc" target="_blank" data-smartkarma-citation="entities:27954:1" rel="noopener">MercadoLibre Inc (MELI US)</a> </li>
</ul>


The effect of the COVID pandemic saw an unprecedented level of sector rotation among EM active portfolios in 2020.
Banking stocks were hit the hardest, with Semiconductor, Internet Retail and Interactive Media industry groups the beneficiaries.
Banking exposure is at its lowest levels in over a decade, EM active investors at highest ever weights in Tech related Consumer Discretionary and Communication Services stocks.
Improving outlook for banking stocks, vaccine hopes, plus potential regulation in the Tech sector point to a potential unwind.  
'Beaten Up' banking stocks include Itau Unibanco Holding Sa (ITUB4 BZ) , Kasikornbank PCL (KBANK TB) and Standard Bank (SBK SJ) 
Fully owned Tech related stocks include Meituan (3690 HK) , JD.com Inc (ADR) (JD US) and MercadoLibre Inc (MELI US) 


GEM Fund Positioning Update:  The COVID Unwind.

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

<p><strong><em>*Another Positive Update Ahead of AGM: </em></strong>The Australia Securities &amp; Investments Commission (ASIC) recently released its second report on the Buy Now Pay Later (BNPL) space, and the findings appear to be similar to its first report. This is quite positive for the shares of Afterpay Touch (APT.AU) [Afterpay], where Tencent Holdings (700.HK) [Tencent] holds what is likely to be a growing 5% stake. The AGM for Afterpay is on November 17<sup>th</sup>; and  </p><p><strong><em>*More Magic Fairy Dust:</em></strong> Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology BNPL company is paying dividends to Tencent in numerous other ways. </p>

*Another Positive Update Ahead of AGM: The Australia Securities &amp; Investments Commission (ASIC) recently released its second report on the Buy Now Pay Later (BNPL) space, and the findings appear to be similar to its first report. This is quite positive for the shares of Afterpay Touch (APT.AU) [Afterpay], where Tencent Holdings (700.HK) [Tencent] holds what is likely to be a growing 5% stake. The AGM for Afterpay is on November 17th; and  *More Magic Fairy Dust: Tencent continues to hit it out of the park with its Afterpay stake. In addition to a superb return on investment of 394% over the past five plus months since the stake announcement, this alliance with Australia’s premier financial technology BNPL company is paying dividends to Tencent in numerous other ways. 

Tencent – This Deal Keeps Rolling Along

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: Listed Associates Continue to Outperform

Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at...

Wium Malan, CFA

KE Holdings/Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry

KE Holdings Inc (BEKE US), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, raised US$2.1bn in its US listing...

Sumeet Singh

Pinduoduo Placement - Should Do Well If, It Corrects Beforehand

Pinduoduo (PDD US) plans to raise around US$5bn via a mix of issuing shares and convertible bonds. The stock has been a one-way street since listing.

Sumeet Singh

GEM Fund Positioning Update: The COVID Unwind.

How did Emerging Market managers react to the COVID-19 pandemic? Unprecedented rotation out of Bank stocks and in to Tech. How are managers now...

Steven Holden

Tencent – This Deal Keeps Rolling Along

TENCENT HOLDINGS: ASICs Second Report On The Buy Now Pay Later Space Is Yet Another Positive For Tencent's Afterpay Investment.

Thomas J. Monaco

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52-week Range

Market Cap (USDm)

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Tencent: Listed Associates Continue to Outperform

Tencent’s associates currently contribute c.23% to its market cap, which would imply that their consolidated operations are currently trading at...

Wium Malan, CFA

KE Holdings/​​​​​Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry

KE Holdings Inc (BEKE US), a company backed by Tencent Holdings (700 HK), Softbank Group (9984 JP) and Hillhouse, raised US$2.1bn in its US listing...

Sumeet Singh

Pinduoduo Placement - Should Do Well If, It Corrects Beforehand

Pinduoduo (PDD US) plans to raise around US$5bn via a mix of issuing shares and convertible bonds. The stock has been a one-way street since listing.

Sumeet Singh

GEM Fund Positioning Update: The COVID Unwind.

How did Emerging Market managers react to the COVID-19 pandemic? Unprecedented rotation out of Bank stocks and in to Tech. How are managers now...

Steven Holden

Tencent – This Deal Keeps Rolling Along

TENCENT HOLDINGS: ASICs Second Report On The Buy Now Pay Later Space Is Yet Another Positive For Tencent's Afterpay Investment.

Thomas J. Monaco

KE Holdings/Beike Placement - Too Much, Too Soon. Front Running the Lock-Up Expiry