Smartkarma Daily Briefs

• Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
• Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
• Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.

• June/July/August saw 1,673/825/202 new Corporate Governance Reports filed and 8/5/9 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed, respectively. The TSE’s very simple tool comes in 15 days.
• Our tools show every report, links to every document, and now a new diff file tool. input a name, see the difference between the Old/New Reports. We hope it helps.
• This tool is designed to be a shelf reference. We update it once a month, and every CorpGovReport and new “Management Conscious” report updated since a CGR update is here.

• On 22 August, the Psc Insurance (PSI AU) IE considered Ardonagh’s A$6.19 offer fair and reasonable as it is within the A$5.69 to A$6.65 valuation range. 
• The offer is conditional on shareholder approval of the scheme. No disinterested shareholder holds the 25% blocking stake. The scheme meeting is on 26 September.
• The offer is attractive and represents an all-time high. At the last close and for the 11 October payment, the gross/annualised spread is 1.3%/12.1%.

• Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.
• The introduction of some stocks in the F&O segment could lead to their inclusion in the NIFTY, SENSEX, Nifty Bank and CNXIT indices and weight changes in the Nifty Next50.
• The inclusion of stocks in indices with a fixed number of constituents will result in deletion of some stocks from these indices. There should be methodology changes too.

• Back on the 8th May, PSC Insurance (PSI AU), a diversified insurance service provider, entered into a Scheme with Ardonagh Group, at A$6.19/share, in cash.
• That’s a 27.6% premium to undisturbed, and a lifetime high. Directors and key executives holding ~39.6% of shares out, are supportive. 
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 26th September. Expected implementation on the 11 October. The IE says fair & reasonable.

• In last week’s Crypto Moves #40, we highlighted that we are on the verge of a significant surge in interest toward decentralized finance, or DeFi. We believe that only a select few DeFi-focused cryptocurrencies truly have the potential to benefit from this anticipated increase in DeFi interest, as this interest is likely to translate into greater monetary rewards for their token holders.
• As we have consistently emphasized, apart from Bitcoin, we only invest in productive cryptocurrencies – those that offer monetary rewards to their token holders, much like dividends from equities.
• In some cases, we may consider investing if we are confident that the cryptocurrency in question will soon become productive.

• In a previous insight we have postulated that a pullback may be behind the corner for the Hang Seng Index (HSI INDEX).
• We said the pullback could come the week after the insight was published, or the following week (i.e. this week). Last week closed up, the index could retrace this week.
• In this insight we want to update the levels to buy LONG for this week, to benefit from a highly probable continuation of the rally in September.

China Vanke’s H1/24 results were weak in our view. Revenue from the core property development business fell meaningfully amid fewer project deliveries. In addition, the 5% gross margin from property development was weaker than that reported by peers, as Vanke likely carried out aggressive discounting to boost sales. Cash flows were weaker than expected, leading to higher net debt and leverage deterioration. Moreover, liquidity was inadequate.

We note negatively that management did not mention its debt reduction plans. Still, we view positively that the company has reiterated its strong commitment to timely repayment of public debts and ensuring no defaults occur. In addition, Vanke’s proportion of offshore debt has decreased, which could enhance the recovery value against offshore assets in the event of a restructuring. We estimate that the company’s offshore assets may cover offshore debt by 0.7x.

We do not expect Vanke to default in FY 2024, as the company is able to obtain onshore loans for refinancing. Going forward, we believe Vanke’s ability to stave off default in FY 2025 may depend on the progress of its asset sales and asset monetisation initiatives.