In today’s briefing:
- HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
- Fujitsu (6702) Subsidiary Selldowns To Come
- Melco Trading “Cheap” As Macau Opens Up
- Global Liquidity Has Bottomed …
- Bank of Kyoto (8369) – Not a Normal Regional Bank
- Last Week In SPACE: Cosmo, Olam, Yamada Denki, Jardine Cycle/Astra, Tianneng Power/Battery, Fujitsu
- ECM Weekly (15th Jan 2023) – 2022 Performance, 2023 Pipeline, Bilibili, HTHT, China Edu, CDP, Allied
- Hong Kong CEO & Director Dealings (15 Jan): WWPKG, Tianyun International, Yeahka, Flat Glass
- DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea
- Good Morning Japan |Fed 1 Inflation 0, Fed Wins; Equity Bid Continues; Telsa Cuts Px; BOJ in Focus
HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
- We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
- We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
Fujitsu (6702) Subsidiary Selldowns To Come
- Three years ago I wrote Fujitsu Subsidiary Selldowns or Buy-Ins? My choice then was Fujitsu Frontech which was bought out 8 months later.
- A Bloomberg article today with quotes from an interview with the CEO of Fujitsu fuelled some movement today.
- The “obvious” trade is Shinko Electric Industries (6967 JP) but you have to buy the new dream.
Melco Trading “Cheap” As Macau Opens Up
- After Macau’s government renewed the concession periods for the city’s six incumbent gambling concessionaires for another 10 years, the key players are up 86% on average
- Both Melco International Development (200 HK) and Melco Resorts & Entertainment (MLCO US) have gained a little over 100%.
- Melco’s NAV discount is back out to 36%. The simple ratio – Melco/MCLO – is around the lowest level since Melco began consolidating MCLO in early 2017.
Global Liquidity Has Bottomed …
- Global Liquidity Index (GLI) moves higher to 17.5 (normal range 0-100). Most national liquidity indexes bottomed around October 2022
- Global Liquidity will reverse its recent fall and rebound to US$174 trillion. Rising Central Bank Liquidity is a common theme. Financial dominance driving a return to Central Bank QE.
- More liquidity is consistent with future stabilisation and moderate gains in World asset markets. Rebound investment phase. Emerging Markets and Cyclicals favoured. Gold, commodities and crypto also could be winners
Bank of Kyoto (8369) – Not a Normal Regional Bank
- Bank of Kyoto (8369 JP) is a classic “deep value” trade. It has a low PBR, and… “Dude, it’s equity portfolio alone is worth more than the whole bank.”
- It has a larger market cap than most super-low PBR Japanese regional banks, is more liquid, and the narrative is quite easy to tell.
- Japanese Banks are the hottest new thing but unless you think This Particular Leopard is going to change its spots, it is still best thought of as a range trade.
Last Week In SPACE: Cosmo, Olam, Yamada Denki, Jardine Cycle/Astra, Tianneng Power/Battery, Fujitsu
- Given the likelihood of more buybacks and pressure on capital allocation and structuring of the renewable energy business, Cosmo Energy (5021 JP) is more of a buy than a sell.
- Olam Group (OLG SP) is a tricky beast to analyze. A key issue for investors is valuing Olam, ex- Olam Agri, ex- OFI.
- Unloved as it is, Yamada Denki (9831 JP) is still cheap.
ECM Weekly (15th Jan 2023) – 2022 Performance, 2023 Pipeline, Bilibili, HTHT, China Edu, CDP, Allied
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
- Things remain quiet on the IPO front and are likely to remain that way till CNY. Korea was once again the one that set the IPO ball rolling.
- Placements were a different matter with deal flow pickup up where it left off last week.
Hong Kong CEO & Director Dealings (15 Jan): WWPKG, Tianyun International, Yeahka, Flat Glass
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
- Stocks mentioned include WWPKG Holdings Co Ltd (8069 HK), Tianyun International Holdings (6836 HK), Yeahka Limited (9923 HK), GHKGBA (1396 HK), and Flat Glass (6865 HK).
DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea
- DearU’s acquisition of NCSoft’s Universe K-Pop fandom platform will expand DearU Bubble’s number one position in the K-Pop fandom platform in Korea.
- The sale of Universe by NCSoft is a win-win situation for both DearU and NCsoft.
- Applying a 25x P/E to an estimated net profit of 50 billion won in 2024 would suggest an market cap of 1.25 trillion won for DearU, representing a 52% upside.
Good Morning Japan |Fed 1 Inflation 0, Fed Wins; Equity Bid Continues; Telsa Cuts Px; BOJ in Focus
- OVERSEAS: SPX +0.4%DoD +2.7%WoW; Semi run continues with SOX +0.4%DoD +6.2%WoW; Beta and Growth the big WoW winners; Fed’s Bostic leans to 25bp hike; Tesla cuts prices
- JAPAN: NKY Futs -1.3% vs Cash; JGB 10Yr Yld hits 0.512% despite BOJ 10trn yen buying; USDJPY up to127.87; DECARBONIZATION: Resonac (Showa Denko) expansion; Toray expansion; METI CCS roadmap
- DAILY NUGGET: Slowing EV sales in China ? Maybe, but its still the largest EV market in the world. We see Nidec as the best way to play.
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