Smartkarma Daily Briefs

Korean car rental play SK Rent A Car (068400 KS) has announced a Tender Offer from SK Networks (001740 KS), its largest shareholder with ~76%.
SK Rent shareholders have the option of receiving cash or SK Networks scrip. Appraisal rights are also afforded.
The shareholder vote is a lock. The current trade is the cash offer, which is trading tight to terms.

Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well

By Sumeet Singh

Ventia Services Group Pty (VNT AU)’s two largest shareholders, Apollo Global Management and CIMIC Group, will come off their placement linked lockup soon.
The two largest shareholders together owned nearly 30% of the company and have pared their stake twice this year.
In this note, we will talk about the likely placement and past deal performance.

Quiddity Leaderboard T50/100 Sep 23: Final Expectations; AI Frenzy Fades; Wisdom Marine TDIV DEL

Today is the base date for the T50 and T100 Indices for the September 2023 Rebalance.
In this insight, we take a look at the final expectations for ADDs/DELs for the T50 and T100 Indices.
Previously, I expected five and three changes for the T50 and T100 indices, respectively, but now I see four changes for both indices.

Quiddity Leaderboard TDIV Sep 23: Wisdom Marine Could Underperform the Index

In this insight, we take a look at Quiddity’s final flow expectations for the September 2023 index rebalance.
In my previous insight, I revised my AUM assumption upwards but now I have revised it downwards based on the latest available data.
Based on the latest available data, I see 47 names with positive index flow expectations and 3 names with negative index flow expectations (including the DEL Wisdom Marine).

Hanwha Ocean’s Massive Issuance: Clearly, This Is Test-The-Water and How to Approach It

Multiple local news outlets reported Hanwha Ocean is undergoing a 2.5 trillion won equity increase. The official disclosure regarding this matter is expected to be released within this month.
We have repeatedly observed a pattern of testing the waters through leaks to the local media. The case of Hanwha Ocean can also be seen in this light.
It’s challenging to envision this magnitude being absorbed seamlessly by the market. There is a considerable likelihood that both issuers and bankers will aggressively attract inflows of arbitrage-seeking hot money.

Privatization of HMM: Hapag-Lloyd, Harim, Dongwon, and LX Groups [Short-Listed Bidding Candidates]

After the market close on 21 August, it was reported that Harim Group, Dongwon Group, LX Group, and Hapag-Lloyd have been short-listed as preliminary bidders for HMM.
KDB and KOBC are selling 38.9% stake in HMM on a fully diluted basis. The local media have mentioned that the potential sales price could be about 5-6 trillion won.
We continue to have a Negative view of HMM. e expect additional 20-30%+ downside risk over the next 6-12 months.

Monthly Chinese Express Tracker | July Growth Slows | Pricing Hits Record Low | (August 2023)

By Daniel Hellberg

Chinese express parcel volume growth was 11.7% in July, far slower than in Feb-May
July ASP for all segments fell to 8.84 Yuan per piece, the lowest in at least ten years
Industry leader SF Holding partly insulated from margin pressure by air, international

Emerson Electric Co.: A Story Of Digital Transformation To Empower Process Manufacturers – Key Drivers

Emerson Electric’s results were a major disappointment as the company failed to meet the revenue as well as the earnings expectations of Wall Street.
The company’s focus on key growth areas, including energy transition, nearshoring, and its leading software portfolio, positions it to capture growth opportunities and drive value for its customers and stakeholders in the foreseeable future.
The company’s pricing strategies, and solid operational performance are key factors that contributed to the exceptional results in the third quarter.

C.H. Robinson Worldwide Inc.: 3 Catalysts Responsible For Its Growth! – Financial Forecasts

C.H.
Robinson Worldwide delivered disappointing results as the company could not meet the revenue and earnings expectations of Wall Street.
The company’s truckload and LTL businesses faced varying market conditions, with truckload volumes declining and LTL shipments remaining flat but declining AGP per order.

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Aug 22

Daily Brief Health Care: Olympus Corp, Jiangsu Hengrui Medicine, Coeptis Therapeutics Holdings, Mckesson Corp, Waters Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Olympus Corp (7733 JP): Slow Start of FY24; Unfavorable Macro Backdrop Continues to Hurt Business
Jiangsu Hengrui Medicine (600276.CH) 23H1 – Has the Turning Point of Performance Really Arrived?
Coeptistx (COEP) Deverra Deal Flash Note 21082023
McKesson Corporation: Decoding the Success Behind Their Broad-Based Momentum! – Major Drivers
Waters Corporation: New Line of SEC Columns & Other Major Developments

Olympus Corp (7733 JP): Slow Start of FY24; Unfavorable Macro Backdrop Continues to Hurt Business

By Tina Banerjee

Olympus Corp (7733 JP) announced muted Q1FY24 result. Revenue increased 8% YoY to ¥208B, while operating profit declined 50% YoY to ¥22B. A one-time gain has inflated the net profit.
Revenue missed about 3% compared to the plan. Product shipment hold and parts supply shortages represented about 1.5% points out of the total miss of 3%.
Olympus has reiterated FY24 guidance and expects FY24 revenue of ¥914B (+4% YoY) and operating profit of ¥163B (-13% YoY). In FY23, the company missed operating profit guidance.

Jiangsu Hengrui Medicine (600276.CH) 23H1 – Has the Turning Point of Performance Really Arrived?

By Xinyao (Criss) Wang

Hengrui’s performance recovery in 23H1 (especially 23Q2) was due to the low base last year caused by pandemic/lockdown. Increasing innovative drugs revenue proportion also reduced the negative impact of VBP.
People think the turning point of Hengrui’s performance has arrived, but we hold different opinions.Some big varieties haven’t entered VBP. It would take some time to achieve breakthrough in internationalization.
The negative impact of 23H2 anti-corruption hasn’t been reflected in interim report.Even if Hengrui’s performance growth could be back to 20-25% YoY in 2025/2026, over 60 PE/TTM is already expensive.

Coeptistx (COEP) Deverra Deal Flash Note 21082023

By ACF Equity Research

Deverra deal adds two patented assets to COEP product pipeline;
Reduces COEP risk profile and so contributes to our valuation range;
DVX201 – Unmodified NKC therapy from pooled donor CD34+ cells.

McKesson Corporation: Decoding the Success Behind Their Broad-Based Momentum! – Major Drivers

McKesson Corporation managed to exceed analyst expectations in terms of revenue as well as earnings.
McKesson’s core distribution businesses, particularly pharmaceutical distribution, exhibited broad-based momentum with solid growth across customer channels.
We give McKesson Corporation a ‘Hold’ rating with a revised target price.

Waters Corporation: New Line of SEC Columns & Other Major Developments

Waters Corporation delivered an all-around beat in its most recent quarterly result, with organic constant currency growth of 3%.
Their organic performance in constant currency was driven by excellent growth in the Industrial segment and the academic and governmental sectors.
We give Waters Corporation a ‘Hold’ rating with a revised target price.

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Aug 22

Daily Brief Event-Driven: E-Guardian (6050) Partial Offer Update and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

E-Guardian (6050) Partial Offer Update
Market Information About Samsung Electronics’ Shareholder Return
Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover
Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?
SK Rent A Car: SK Networks’ Tender Offer
SK Networks Launches a Tender Offer for SK Rent-A-Car
Quiddity Leaderboard T50/100 Sep 23: Final Expectations; AI Frenzy Fades; Wisdom Marine TDIV DEL
Offshore China ETFs Rebalance Preview: Two Changes Expected in September
Quiddity Leaderboard TDIV Sep 23: Wisdom Marine Could Underperform the Index
Hanwha Ocean’s Massive Issuance: Clearly, This Is Test-The-Water and How to Approach It

E-Guardian (6050) Partial Offer Update

When this was launched, it traded more volume than expected on the first day, then again on the second day. Since then it has traded cheap vs initial estimates.
A week after the launch, two separate Large Shareholder Filings came out. Those bear scrutiny.
The back end trade is still an interesting one in my opinion.

Market Information About Samsung Electronics’ Shareholder Return

The local market is increasingly convinced that Samsung Electronics’ quarterly dividends for the latter half of this year will experience a reduction.
Samsung Electronics plans to apply the updated regulations from the 2024 1st quarter dividends, following the conclusion of the capital market law revision at the end of this year.
It might be prudent to refrain from trading that bets on a reduction in the 1P discount in the first half of this year.

Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover

There should be 4 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 1 deletion for the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
The potential adds are driven by the AI-frenzy that has swept the market for the last few months. Most potential deletions are shipping stocks that are way off their highs.
Short interest on the potential deletions is high in terms of days of ADV and free float. The rise in shorts on the potential adds is being rapidly covered.

Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?

The premium of Ping An Insurance Group of (601318 CH) to Ping An Insurance (H) (2318 HK) has jumped from 4% to 14% in the space of a week.
There has also been a jump in the Hang Seng Stock Connect China AH Premium Index and big inflows to mainland China ETF raising the possibility of National Team buying.
A stabilisation in onshore China markets could lead to the AH premium dropping back towards parity and we would gradually scale out of long A/ short H positions.

SK Rent A Car: SK Networks’ Tender Offer

Korean car rental play SK Rent A Car (068400 KS) has announced a Tender Offer from SK Networks (001740 KS), its largest shareholder with ~76%.
SK Rent shareholders have the option of receiving cash or SK Networks scrip. Appraisal rights are also afforded.
The shareholder vote is a lock. The current trade is the cash offer, which is trading tight to terms.

SK Networks Launches a Tender Offer for SK Rent-A-Car

We have a positive view of SK Networks’ tender offer of SK Rent-A-Car.
SK Networks is trying to buy the entire SK Rent-A-Car which is enjoying solid growth in sales and profits. SK Networks plans to eventually delist SK Rent-A-Car.
The shareholders of SK Rent-A-Car have a choice of tendering their shares receiving cash (at the tender offer price of 13,500 won) or receiving shares in SK Networks.

Quiddity Leaderboard T50/100 Sep 23: Final Expectations; AI Frenzy Fades; Wisdom Marine TDIV DEL

Today is the base date for the T50 and T100 Indices for the September 2023 Rebalance.
In this insight, we take a look at the final expectations for ADDs/DELs for the T50 and T100 Indices.
Previously, I expected five and three changes for the T50 and T100 indices, respectively, but now I see four changes for both indices.

Offshore China ETFs Rebalance Preview: Two Changes Expected in September

Based on the close of 21 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (HKD) (2822 HK) in September.
NARI Technology Co Ltd A (600406 CH) and CSC Financial (601066 CH) should replace Tongwei Co Ltd A (600438 CH) and Shaanxi Coal Industry (601225 CH) in the ETFs.
There are couple of stocks with over 1x ADV to trade from the ETFs. Plus there are cash and carry positions that will need to be rebalanced, adding to flow.

Quiddity Leaderboard TDIV Sep 23: Wisdom Marine Could Underperform the Index

In this insight, we take a look at Quiddity’s final flow expectations for the September 2023 index rebalance.
In my previous insight, I revised my AUM assumption upwards but now I have revised it downwards based on the latest available data.
Based on the latest available data, I see 47 names with positive index flow expectations and 3 names with negative index flow expectations (including the DEL Wisdom Marine).

Hanwha Ocean’s Massive Issuance: Clearly, This Is Test-The-Water and How to Approach It

Multiple local news outlets reported Hanwha Ocean is undergoing a 2.5 trillion won equity increase. The official disclosure regarding this matter is expected to be released within this month.
We have repeatedly observed a pattern of testing the waters through leaks to the local media. The case of Hanwha Ocean can also be seen in this light.
It’s challenging to envision this magnitude being absorbed seamlessly by the market. There is a considerable likelihood that both issuers and bankers will aggressively attract inflows of arbitrage-seeking hot money.

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Aug 22

Daily Brief Consumer: SK Networks, Tongwei Co Ltd A, Premier Investments, Zhongsheng Group, Clorox Company, Mondelez International, Sichuan Baicha Baidao Industrial, Porsche Automobil Holding , Yerbae Brands , MGM Resorts International and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

SK Networks Launches a Tender Offer for SK Rent-A-Car
Offshore China ETFs Rebalance Preview: Two Changes Expected in September
Premier’s (PMV AU) Four-Way Split
Zhongsheng Group (881 HK): Could Be A Winner In The Long Run, But No Short-Term Visibility
The Clorox Company: Unmasking Their Strategy to Restore Pre-Pandemic Margins! – Major Drivers
Mondelez: Ignore The Noise And Invest In Strong And Well-Managed Brands
Sichuan Baicha Baidao Industrial Pre-IPO Tearsheet
Porsche Automobile Holding: H1 SOTP and Discount to NAV
YERB.U: Recent Announcements Reaffirm Investment Thesis
MGM Resorts International: An International Strategy That’s Raising Eyebrows? – Major Drivers

SK Networks Launches a Tender Offer for SK Rent-A-Car

We have a positive view of SK Networks’ tender offer of SK Rent-A-Car.
SK Networks is trying to buy the entire SK Rent-A-Car which is enjoying solid growth in sales and profits. SK Networks plans to eventually delist SK Rent-A-Car.
The shareholders of SK Rent-A-Car have a choice of tendering their shares receiving cash (at the tender offer price of 13,500 won) or receiving shares in SK Networks.

Offshore China ETFs Rebalance Preview: Two Changes Expected in September

Based on the close of 21 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (HKD) (2822 HK) in September.
NARI Technology Co Ltd A (600406 CH) and CSC Financial (601066 CH) should replace Tongwei Co Ltd A (600438 CH) and Shaanxi Coal Industry (601225 CH) in the ETFs.
There are couple of stocks with over 1x ADV to trade from the ETFs. Plus there are cash and carry positions that will need to be rebalanced, adding to flow.

Premier’s (PMV AU) Four-Way Split

In tandem with a trading update this morning, Aussie retailer Premier Investments (PMV AU) announced a break-up of the empire. And the departure of the CEO.
Premier said it is exploring the demerger and creation of (at least) three new separate companies, encompassing Peter Alexander, Smiggle, and Apparel Brands (Just Jeans, Dotti and Portmans, etc.).
Separately, Richard Murray, who joined Premier from JB Hi-Fi Ltd (JBH AU) two years ago, will exit the company on September 15.

Zhongsheng Group (881 HK): Could Be A Winner In The Long Run, But No Short-Term Visibility

By Steve Zhou, CFA

China MeiDong Auto (1268 HK) announced a profit warning this morning, expecting a 90% decline in net profit for 1H23.
Luxury auto dealer in China is facing major uncertainties in its business model, with no visibility in the near term.
However, Zhongsheng Group (881 HK) currently employs the best long-term strategy amidst industry transformation. Suggest to keep a close eye on the name.

The Clorox Company: Unmasking Their Strategy to Restore Pre-Pandemic Margins! – Major Drivers

The Clorox Company managed to exceed analyst expectations in terms of revenue and earnings.
Strong results at the quarter’s end highlight the tremendous progress the company has made with its strategic priorities.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Mondelez: Ignore The Noise And Invest In Strong And Well-Managed Brands

By Vladimir Dimitrov, CFA

Mondelez has outperformed the market both on an absolute and risk-adjusted basis.
The company is in a very good position to improve margins to higher levels than currently expected.
The stock remains as one of my favourite picks in the sector. The stock is one of the company’s favourite picks.

Sichuan Baicha Baidao Industrial Pre-IPO Tearsheet

By Ethan Aw

Sichuan Baicha Baidao Industrial (SCBCBDID CH) is looking to raise up to US$300m in its upcoming HK IPO. The deal will be run by CICC.
Sichuan Baicha Baidao Industrial (SBBI) sells new-style tea drinks through its ChaPanda stores, most of which are franchised.
As of the Latest Practicable Date (8th Aug 2023), ChaPanda’s store network comprised 7,117 stores, spanning across 31 provinces and municipalities in mainland China.

Porsche Automobile Holding: H1 SOTP and Discount to NAV

By Jesus Rodriguez Aguilar

My updated SOTP shows that the shares of Porsche SE are trading at a still massive 44.9% discount to NAV. The discount has come down from 50.8% on 28 February.
The shares of Porsche SE suffer from a double discount, the holding structure (with a new layer since the listing of Porsche AG) plus a non-voting discount.
My SOTP valuation indicates that the shares are significantly undervalued, but it is challenging to pinpoint a short-term catalyst that could realise this upside potential.

YERB.U: Recent Announcements Reaffirm Investment Thesis

By Atrium Research

Yerbaé announced the closing of the first tranche of its celebrity investment round, including various prominent athletes and entertainers.
The announcements include closing the first tranche of its celebrity investment round, an expansion into Costco, and record sales on Amazon Prime Day.
Celebrity Investment Round This morning, YERB.U announced that it has closed the first tranche of its celebrity investment round, raising ~$4M.

MGM Resorts International: An International Strategy That’s Raising Eyebrows? – Major Drivers

MGM Resorts International delivered an all-around beat in the most recent quarterly result, demonstrating robust growth, highlighted by a record for consolidated net revenues.
The company showcased strength across its diverse portfolio, with solid earnings from domestic operations, particularly notable in MGM China and BetMGM.
Regional operations also displayed year-over-year growth on a same-store basis, reflecting the company’s commitment to maximizing profitability while delivering exceptional customer service.

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Aug 22

Daily Brief Equity Bottom-Up: AIA – Results 24 Aug and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

AIA – Results 24 Aug, Cratering Mkt Cap Suggests Malaise, Earnings Base May Be Structurally Lower
Westpac – Non-Performing Exposures in Australia Mortgages Surge in June & NZ Non-Performing Loans
Wilmar’s Kuok Khoon Hong acquires 9 million shares
[Alibaba (BABA US, BUY, TP US$127) TP Change]: The New Wanxiangtai Will Enhance the Take Rate
REIT Watch – iEdge S-Reit Index vies for portfolio positioning
Olympus Corp (7733 JP): Slow Start of FY24; Unfavorable Macro Backdrop Continues to Hurt Business
Zhongsheng Group (881 HK): Could Be A Winner In The Long Run, But No Short-Term Visibility
Earnings: MCHP and IFX, SIMO Rumors, SMCI, POWI, GFS, COHR, WOLF, AMAT, CSCO
Monthly Chinese Express Tracker | July Growth Slows | Pricing Hits Record Low | (August 2023)
SDRL: Attractive Value, PT to $62

AIA – Results 24 Aug, Cratering Mkt Cap Suggests Malaise, Earnings Base May Be Structurally Lower

By Daniel Tabbush

1Q23 shows strong Value Of New Business (VONB), not sure of profit flow through
Comparative to 1H22 is easy vs loss of USD556m in the period, but risk to downside
Despite, stock buybacks, increased dividends market cap down 34% since peak this year

Westpac – Non-Performing Exposures in Australia Mortgages Surge in June & NZ Non-Performing Loans

By Daniel Tabbush

New release shows surge in Australia residential mortgage non-performing exposures QoQ
From March 2023 to June 2023 these NPLs rose by 10.5% and this is not an annualized rate
Its total NZ non-performing loans rose from AUD671m to AUD741m or 10.4% QoQ

Wilmar’s Kuok Khoon Hong acquires 9 million shares

By Geoff Howie

Share buybacks by primary listed companies 11 – 17 Aug 2023 Institutions were net buyers of Singapore stocks over the five trading sessions through to Aug 17, with S$256 million of net institutional inflow, while 21 primary-listed companies conducting buybacks with a total consideration of S$36 million.
On Aug 15, QAF joint group managing director and executive director Lin Kejian acquired 450,000 shares at an average price of S$0.79 per share.

[Alibaba (BABA US, BUY, TP US$127) TP Change]: The New Wanxiangtai Will Enhance the Take Rate

By Shawn Yang

Taobao and Tmall have implemented two major reforms: 1) The launch of the Wanxiangtai Platform Unlimited Edition; 2) Changing the rules for displaying merchant sales volume from monthly to annual.
Although the new Wanxiangtai differs from PDD’s “Fangxintui” and “Quanzhantui” , the idea is to simplify and automate merchant promotion. We anticipate that this change will boost the take rate.
We increased our core e-commerce take rate estimate for BABA in FY24/FY25 to 3.85%/4.0%, respectively, and raised our TP to US$ 127.

REIT Watch – iEdge S-Reit Index vies for portfolio positioning

By Geoff Howie

10 largest weights of the iEdge S-Reit Index THE FTSE EPRA Nareit Developed Index is designed to track the performance of listed real estate companies and real estate investment trusts (Reits) worldwide.
The 10 largest weights of the iEdge S-Reit Index make up close to 70 per cent of the index weights.

Olympus Corp (7733 JP): Slow Start of FY24; Unfavorable Macro Backdrop Continues to Hurt Business

By Tina Banerjee

Olympus Corp (7733 JP) announced muted Q1FY24 result. Revenue increased 8% YoY to ¥208B, while operating profit declined 50% YoY to ¥22B. A one-time gain has inflated the net profit.
Revenue missed about 3% compared to the plan. Product shipment hold and parts supply shortages represented about 1.5% points out of the total miss of 3%.
Olympus has reiterated FY24 guidance and expects FY24 revenue of ¥914B (+4% YoY) and operating profit of ¥163B (-13% YoY). In FY23, the company missed operating profit guidance.

Zhongsheng Group (881 HK): Could Be A Winner In The Long Run, But No Short-Term Visibility

By Steve Zhou, CFA

China MeiDong Auto (1268 HK) announced a profit warning this morning, expecting a 90% decline in net profit for 1H23.
Luxury auto dealer in China is facing major uncertainties in its business model, with no visibility in the near term.
However, Zhongsheng Group (881 HK) currently employs the best long-term strategy amidst industry transformation. Suggest to keep a close eye on the name.

Earnings: MCHP and IFX, SIMO Rumors, SMCI, POWI, GFS, COHR, WOLF, AMAT, CSCO

By Douglas O’Laughlin

Infineon’s big news is that they, too, will be building one of the largest Silicon Carbide fabs in the world. This makes Wolfspeed’s Siler City look puny in comparison.
Infineon is now looking to be number three in the Silicon Carbide device game, targeting ~500 million in 2023.
So given the impressive growth, Infineon is a bit late but plans to spend 5 billion dollars over five years for the factory in Kulim.

Monthly Chinese Express Tracker | July Growth Slows | Pricing Hits Record Low | (August 2023)

By Daniel Hellberg

Chinese express parcel volume growth was 11.7% in July, far slower than in Feb-May
July ASP for all segments fell to 8.84 Yuan per piece, the lowest in at least ten years
Industry leader SF Holding partly insulated from margin pressure by air, international

SDRL: Attractive Value, PT to $62

By Hamed Khorsand

SDRL reporting second quarter results provided greater insight on the contribution of Aquadrill to SDRL’s financials and sets the course for how the business could benefit from current day rates
SDRL has two drill ships set for contract expiration at year end and another two more vessels expected off contract by end of 2024, not including those with contract options
Our new price target of $62 from $50 values SDRL in line with its peers even though SDRL is not levered

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Aug 22

Daily Brief Crypto: Top Trends of The Summer and more

By Smartkarma Daily Briefs | Crypto, Daily Briefs

In today’s briefing:

Top Trends of The Summer

Top Trends of The Summer

By Kaiko

Exceptionally low liquidity, macro factors, and a flurry of bad news were among the drivers of last week’s flash crash, pushing BTC to its lowest level in months and spurring a wave of liquidations across derivative markets.
While BTC 2% market depth has stabilized over the past few months at around 5k BTC, it remains more than 50% below its pre-FTX highs.
As BTC prices began falling towards $25k around 8pm UTC on August 17, market depth dropped 50% to just 2k BTC.

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Aug 22

Daily Brief Macro: Steno Signals #61 – The End of China as We Know It? and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Steno Signals #61 – The End of China as We Know It?
Positioning Watch: Is Anyone Even Invested in China at This Stage?
Portfolio Watch: Catching a Chinese Cold?
Back with a Bang! – Macro and Sentiment Call for an Underweight in Equities
EM By EM #17 China: Real Estate Complex and The “Phony” Stimulus
Macro Strategy Nugget: Why USDCNH > or < 7.30 is everything you need to watch
Rates & FX nugget: The PBoC doom-loop
The Week That Was in ASEAN@Smartkarma – Sea Ltd’s Rout, GoTo’s Budget Focus, and Indosat’s Surge
Malaysia: State Elections Bolster Anwar Near-Term; Long-Term PAS Shadow Grows
Traders Remain Neutral Commodities // Copper Loses as China Falls Apart

Steno Signals #61 – The End of China as We Know It?

Happy Sunday and welcome to our flagship editorial! Everyone seems to have been occupied with Chinese doom-mongering over the past week as the malaise in the Real Estate sector is now out in the open once again.
It is obvious to everyone that China is stuck in a mess but how grave are the issues really?
Another couple of trading days as we have had last week and we will be back at the abysmal October lows in traded property stocks, which prompted or even forced the CCP to initiate a surprise reopening of the economy in November last year.

Positioning Watch: Is Anyone Even Invested in China at This Stage?

We hope you have enjoyed our China Week coverage with extensive analysis on the ongoing malaise in Chinese Real Estate.
Positioning in CNY markets is an underreported angle in the discussion on China as it may help guide asset performance from here, now that everyone and their mother agrees that China is stuck in a mess.
Are international investors even involved in China anymore?

Portfolio Watch: Catching a Chinese Cold?

By Emil Moller

Hello everybody and welcome back to our weekly Portfolio Watch! This week we have witnessed considerable turmoil in the markets, and it would be an exaggeration to claim that we’ve emerged from it unscathed.
A few positions have been stopped-out but it is some source of consolation that our strongest conviction trades remain performers in an otherwise red massacre in financial markets. We have been rather vocal about our major conviction of a steepening of the yield curve was if not inevitable then at least very favourable on a r/r basis.
I too have clearly declared my aversion against the momentum of risk assets.

Back with a Bang! – Macro and Sentiment Call for an Underweight in Equities

By Jeroen Blokland

China could become a ‘Credit Event.’ Despite a slew of new stimulus measures by the Chinese government, they are not comprehensive enough to rule out one or more credit events.
200-Day moving averages hit. Several equity market indices have dipped below their 200-day moving average, including the MSCI Emerging Markets Index.
Response to the latest US inflation figure. In contrast to previous favorable inflation figures, American stocks closed lower on the day following the publication.

EM By EM #17 China: Real Estate Complex and The “Phony” Stimulus

By Emil Moller

In the past month, the focus of the markets revolved around the Bank of Japan and now August appears to have shifted its attention towards China.
Surprisingly, Japan’s current economic performance seems to be outpacing that of China- a sentence that would have merited a straightjacket and a padded room not long ago.
In my last PBoC piece on the “The People’s Bank Pickle” I outlined the conflicting monetary policy objectives within China, and how that circumstance would impose on them to commit to one at the expense of the other- in short defending the Remnibi would prevent the PBoC to address the domestic trend of deflation.

Macro Strategy Nugget: Why USDCNH > or < 7.30 is everything you need to watch

In our “Nugget series” we aim at visualizing the most important themes in global macro with a few timely charts and very few words.
This nugget will show why USDCNH is the by far most important global bellwether at this stage and why 7.20 (or 7.30) will serve as the most important level to watch in global macro.
Let’s look at 3 charts why USDCNH is a very binary predictor of risk assetsUSDCNY has served as a risk asset barometer around key intervention levels.

Rates & FX nugget: The PBoC doom-loop

In our “Nugget series” we aim at visualizing the most important themes in global macro with a few timely charts and very few words.
Today we will explain the market moves of the day with our “PBoC doom loop”.
Today’s market in short: A rebound in CNY after intervention above 7.30 against the USD, a sharp move higher in USDJPY and higher USD rates.

The Week That Was in ASEAN@Smartkarma – Sea Ltd’s Rout, GoTo’s Budget Focus, and Indosat’s Surge

By Angus Mackintosh

The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.
The past week saw insights on Sea (SE US), GoTo (GOTO IJ), Indosat (ISAT IJ), Bumrungrad Hospital (BH TB), Home Product Center (HMPRO TB), and Vinfast (VFS US).
There was also an insight on Bank CIMB Niaga (BNGA IJ) plus insight looking at Chinese involvement in the South-East Asia data centre market.

Malaysia: State Elections Bolster Anwar Near-Term; Long-Term PAS Shadow Grows

By Prasenjit K. Basu

PM Anwar was strengthened in the near-term by PH comfortably winning the 3 states where it was the incumbent, although the alliance helped UMNO gain leverage in Negri Sembilan.
PAS won landslide victories in Kelantan, Terengganu and Kedah (three states that were part of Thailand until 1909, with smaller non-Malay populations). Bersatu is a token junior partner everywhere.
As the prospect of PAS gaining national power grows, non-Malay emigration and capital flight will increase, reversing the positive gain from the PKR-DAP vision of renewed strength for multi-racialism.

Traders Remain Neutral Commodities // Copper Loses as China Falls Apart

By The Commodity Report

Orange juice futures hit an all-time high last week as citrus crops all across the US have been hammered by a series of hurricanes and the spread of citrus greening, an incurable disease spread by insects.
The vast majority of oranges produced in the US come from Florida, which has been hobbled by hurricanes and a cold snap, massively hampering supply.
Such headwinds are responsible for the supply shortage in oranges, which has driven up prices that will eventually filter through to consumers.

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Aug 22

Most Read: Tokyo Stock Exchange Tokyo Price Index Topix, East Buy Holding , E Guardian Inc, AAC Technologies Holdings, Accton Technology, Samsung Electronics Pref Shares, Trip.com Group , Ping An Insurance (H), SK Rent A Car, Ventia Services Group Pty and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Share Buybacks In Japan – A 2023 Primer
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
E-Guardian (6050) Partial Offer Update
Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%
Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover
Market Information About Samsung Electronics’ Shareholder Return
HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way
Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?
SK Rent A Car: SK Networks’ Tender Offer
Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well

Share Buybacks In Japan – A 2023 Primer

The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to >1.0x. The easiest way to do that is raise ROE.
Raising R requires customers “agree” (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That’s easier for a company.
So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.

HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks

As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

E-Guardian (6050) Partial Offer Update

When this was launched, it traded more volume than expected on the first day, then again on the second day. Since then it has traded cheap vs initial estimates.
A week after the launch, two separate Large Shareholder Filings came out. Those bear scrutiny.
The back end trade is still an interesting one in my opinion.

Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%

The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE.
AAC is a significant flow event, and worth looking at. There are a few odds and ends too.

Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover

There should be 4 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 1 deletion for the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
The potential adds are driven by the AI-frenzy that has swept the market for the last few months. Most potential deletions are shipping stocks that are way off their highs.
Short interest on the potential deletions is high in terms of days of ADV and free float. The rise in shorts on the potential adds is being rapidly covered.

Market Information About Samsung Electronics’ Shareholder Return

The local market is increasingly convinced that Samsung Electronics’ quarterly dividends for the latter half of this year will experience a reduction.
Samsung Electronics plans to apply the updated regulations from the 2024 1st quarter dividends, following the conclusion of the capital market law revision at the end of this year.
It might be prudent to refrain from trading that bets on a reduction in the 1P discount in the first half of this year.

HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way

The HSCEI Review for Sep 2023 was announced on Friday 18 August. There is one ADD Trip.com Group (9961 HK) and one DELETE Country Garden Services (6098 HK).
Neither of these two are a surprise. Neither are hugely impactful.
There is about 2.5% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?

The premium of Ping An Insurance Group of (601318 CH) to Ping An Insurance (H) (2318 HK) has jumped from 4% to 14% in the space of a week.
There has also been a jump in the Hang Seng Stock Connect China AH Premium Index and big inflows to mainland China ETF raising the possibility of National Team buying.
A stabilisation in onshore China markets could lead to the AH premium dropping back towards parity and we would gradually scale out of long A/ short H positions.

SK Rent A Car: SK Networks’ Tender Offer

Korean car rental play SK Rent A Car (068400 KS) has announced a Tender Offer from SK Networks (001740 KS), its largest shareholder with ~76%.
SK Rent shareholders have the option of receiving cash or SK Networks scrip. Appraisal rights are also afforded.
The shareholder vote is a lock. The current trade is the cash offer, which is trading tight to terms.

Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well

By Sumeet Singh

Ventia Services Group Pty (VNT AU)’s two largest shareholders, Apollo Global Management and CIMIC Group, will come off their placement linked lockup soon.
The two largest shareholders together owned nearly 30% of the company and have pared their stake twice this year.
In this note, we will talk about the likely placement and past deal performance.

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Aug 21

Daily Brief Australia: Costa Group Holdings and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Merger Arb Mondays (21 Aug) – Costa, OreCorp, Sanei, T&K Toka, Celltrion, Eoflow, Golden Eagle

Merger Arb Mondays (21 Aug) – Costa, OreCorp, Sanei, T&K Toka, Celltrion, Eoflow, Golden Eagle

By Arun George

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Symbio Holdings (SYM AU), ENM Holdings (128 HK), Eoflow (294090 KS), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), Costa Group.
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Celltrion Healthcare (091990 KS), Yaizu Suisankagaku Industry (2812 JP), Kenedix Retail REIT (3453 JP), Penguin International (PBS SP).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Aug 21

Daily Brief South Korea: Eoflow , Celltrion Healthcare and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material
Weekly Deals Digest (20 Aug) – Celltrion, Sanei, T&K Toka, Costa, DDH1, Tesserent, VinFast

Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material