Smartkarma Daily Briefs

• WuXi XDC Cayman (1877628D HK) is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).
• WuXi XDC Cayman (1877628D HK) will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.
• Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.

• We retain Bank of Baroda as the deep value Indian bank from our peer group, for its modest valuations, healthy ROE and further improvements in pre- and post-provision returns
• The market seems unconvinced by HDFC Bank but we retain it as our quality bank pick, with its potential for savings from the HDFC merger and its strong balance sheet
• Axis bank stays on our watchlist, but its premium valuations are the challenge; we remain negative on State Bank of India for its delinquency risks and limited progress on returns

• Life Insurance of India (LICI IN) reported its 1H24 earnings which are a continuation of the poor performance of the largest life insurer in India.
• Total sales were down -10% (individual sales – flat y-o-y); VNB margins falling; outlook not positive. Not positive shifts in product mix or distribution trends.
• We value LIC at 0.5x FY25e P/EV, implying a -15% downside from the current price, reflecting poor sales growth, loss of market-share and its failure to turn-around the business model.

BlackRock Latin American Investment Trust (BRLA) has two managers, Sam Vecht (lead) and Christoph Brinkmann (deputy). They highlight that Latin America has been overlooked by investors and the trust is now the only fund in the AIC Latin America sector. The managers are finding interesting opportunities in the region in their search for companies offering a niche product or service, which have long-term growth potential and are reasonably priced. BRLA offers a broad exposure to Latin America, with around 60% of the fund invested in Brazil, the largest country in the region. The Brazilian central bank was proactive in raising interest rates to combat higher inflation, real interest rates remain relatively high and the economy should benefit now that interest rates are coming down.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Jinmao Holdings

Molten Ventures released its H124 trading update (to end-September 2023), with management expecting its NAV per share at c 735p, a c 5.7% decline from the end-March 2023 level as a result of a 3.6% negative fair value movement (excluding fx) across its portfolio. That said, management highlighted that the valuation environment is stabilising and that Molten’s portfolio performance remains resilient, with a good balance between growth (even if at a slower pace) and capital efficiency (with very limited exceptions). Molten’s shares currently trade at a 66% discount to NAV.

• Japan Post Insurance might seem undervalued based on a regression analysis, but its relatively strong RoE was due to extraordinary gains.
• The company has a much larger portion of its investment securities being carried at cost on the balance sheet vs. its peer, Dai-ichi Life.  
• Against the backdrop of Japan’s “higher for longer” theme, its embedded value growth could be under more pressure due to ANW’s m-t-m adjustments and very weak new business value.

• During the period under consideration, i.e. September 27th – October 27th, 2023, the EUR/USD exchange rate fluctuated between 1.049 and 1.061 until October 22nd, 2023, but thereafter it followed an instantaneous daily uptrend on October 23 to finally secure the price of 1.0668.
• However, at the finish of October, the Euro notched a slight drop, but it was still trading higher than the levels at the end of September.
• According to Graph 1, during the first 18 trading days of the period under consideration, the pair showed a consolidation pattern mainly along the range of 1.05-1.0593 (except 2 sessions).