Smartkarma Daily Briefs

We analyzed the latest HK SFC report for aggregate short position as of Mar 17th.
Top short increases and decreases were tabulated for one week and four week period.
We highlight short changes in Meituan, Gcl Tech, Link Reit, Sensetime, Trip.Com, Hsbc, Baba, Wuxi Apptec.

A-H Premium Weekly (Mar 24th): Dongfang Electric, CEEC, Great Wall Motor

We analyse the changes of A-H premium on 143 stocks over the last week. The average A-H premium was 114.1% as of Mar 24th.
The average A-H premium changed by 0.6ppt week on week, led by information technology, industrials, utilities and offset by communication services, consumer discretionary, energy.
We highlight weekly changes in A-H premium for Dongfang Electric, CEEC, Great Wall Motor.

Hong Kong Connect Flows (Mar 24th): Meituan, Tencent, Bilibili

We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of March 24th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We estimate that the total inflows were USD3.3bn last week and highlight flows for Meituan, Tencent, Bilibili.

Northbound Flows (Mar 24th): Boe, CATL, Moutai, Shenzhen Inovance, Luxshare

We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of March 24th.
We estimate the weekly inflows to be US$1,685.1 million, led by industrials, information technology, health care sectors, and offset by energy, financials.
We highlight flows for Boe Technology, Contemporary Amperex Technology, Kweichow Moutai, Shenzhen Inovance Technology, Luxshare Precision Industry, Hithink Royalflush Information Network, China Shenhua Energy, Foxconn Industrial Internet, Ping An Insurance.

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Mar 27

Daily Brief Technical Analysis: Credit Becoming Due and more

By Smartkarma Daily Briefs | Daily Briefs, Technical Analysis

In today’s briefing:

Credit Becoming Due

Credit Becoming Due

By Untying The Gordian Knot

The troubles of Silicon Valley Bank, Silvergate Capital, Credit Suisse, an ongoing lack of confidence in European banks, and First Republic Bank have resulted in extreme volatility in Short dated Interest rates, Banks, and Financials.
The sharp rise in fixed-income volatility has not happened to FX, Commodity, and Equity volatility.
We saw record one-day moves in 3-month SOFR futures, and 2-Year Treasury yields dropped the most since 2008.

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Mar 27

Most Read: Toshiba Corp, Meituan, Japan Airlines, DGB Financial Group, Kunlun Tech, Toyo Construction, Cellivery Therapeutics, Rakuten Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Toshiba – Thoughts On The Tender Opinion
Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!
Nikkei 225 Index Rebalance: Passives Trade on Friday
KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)
Last Week in Event SPACE: Toshiba, Toyota Industries, Meituan, Kingsoft, Rakuten Bank
Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout
KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)
Rakuten Bank Vs SBI Sumishin Net Bank
Good Morning Japan |SPX Rallies but Uncertainties Remain; NUGGET: 7&I-ValueAct Goes Full John Wick

Toshiba – Thoughts On The Tender Opinion

By Mio Kato

Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published.
They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent.
In addition, the information regarding other bids and alternatives was a little surprising to us.

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!

By Sumeet Singh

On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

Nikkei 225 Index Rebalance: Passives Trade on Friday

Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.
DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.

Last Week in Event SPACE: Toshiba, Toyota Industries, Meituan, Kingsoft, Rakuten Bank

By David Blennerhassett

Toshiba Corp (6502 JP)‘s Board is clearly giving this to shareholders and saying “We did our job. Now it’s up to you.”
Toyota Industries (6201 JP) admits to falsifying some engine emission tests. But the market dinging the company ~20% is excessive.
US$16bn of Meituan (3690 HK) shares from Tencent (700 HK) got delivered on 24 March 2023. That’s a lot.

Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank

There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout

By Travis Lundy

YFO continues its fight on Board governance. Toyo Construction has shifted so the Board and a Special Committee will now examine the input Toyo says YFO has not provided.
Toyo also objected because it said YFO’s bid could not be sustained based on Toyo’s economics. Toyo’s fight should have been offence. With a new Medium-Term Management Plan, it is.
Toyo now promises strong revenue and double digit OP growth, and a ¥50/share (5.3%) dividend. Toyo is trying to pay off shareholders to support it against YFO. That’s fair/good.

KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)

Following Cellivery Therapeutics (268600 KS) designation as an Administrative Issue and an Investment Attention Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Humasis (205470 KS).
The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 17 April.
Humasis (205470 KS) was limit up on Friday following the ex-date of a 1:3 scrip issue. The stock could continue to move higher over the next week.

Rakuten Bank Vs SBI Sumishin Net Bank

Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise about $870 million. The pricing is on 5 April and the listing is on 21 April.
In Rakuten Bank IPO: The Investment Case, we highlighted the key elements of the investment case.
SBI Sumishin Net Bank (7163 JP), the key peer, will list on 29 March. In this note, we compare Rakuten Bank and SBI Sumishin across several key metrics.

Good Morning Japan |SPX Rallies but Uncertainties Remain; NUGGET: 7&I-ValueAct Goes Full John Wick

By Mark Chadwick

OVERSEAS. SPX +0.6% on intraday bounce; Defensives led w/Utilities; Financials lag as Banking fears persist; Rates down on recession view WHILE Fed signals more hikes; MSFT-ATVI deal closer to approval
JAPAN. NKY Futs -0.9% vs Cash; Weaker USDJPY 130.7 ; Kishida Approval Rating Rises; Feb Inflation 3.1%; ValueAct takes off gloves with 7&i; Shippers in focus with ex-div this week.
NUGGET. 7&i: Activist ValueAct goes Full John Wick calling for removal of 4 Directors, including Chairman/CEO Isaka. 2023 could be the year of accelerated reforms. Stock looks attractive post sell-off.

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Mar 27

Daily Brief Event-Driven: Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!
Nikkei 225 Index Rebalance: Passives Trade on Friday
Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout
Weekly Deals Digest (26 Mar) – Toshiba, Toyo, Healius, Mincor, Rakuten Bank, SBI Sumishin, Harita
Merger Arb Mondays (27 Mar) – AAG Energy, Jiangnan, Toshiba, Toyo, Estia, Mincor, Golden Energy

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!

By Sumeet Singh

On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

Nikkei 225 Index Rebalance: Passives Trade on Friday

Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout

By Travis Lundy

YFO continues its fight on Board governance. Toyo Construction has shifted so the Board and a Special Committee will now examine the input Toyo says YFO has not provided.
Toyo also objected because it said YFO’s bid could not be sustained based on Toyo’s economics. Toyo’s fight should have been offence. With a new Medium-Term Management Plan, it is.
Toyo now promises strong revenue and double digit OP growth, and a ¥50/share (5.3%) dividend. Toyo is trying to pay off shareholders to support it against YFO. That’s fair/good.

Weekly Deals Digest (26 Mar) – Toshiba, Toyo, Healius, Mincor, Rakuten Bank, SBI Sumishin, Harita

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Rakuten Bank (5838 JP), SBI Sumishin Net Bank (7163 JP), Trial Holdings (5882 JP) and PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) IPOs.
Event-Driven developments – Toshiba Corp (6502 JP), Toyo Construction (1890 JP), Golden Energy & Resources (GER SP), Estia Health (EHE AU), Healius (HLS AU), Mincor Resources NL (MCR AU).

Merger Arb Mondays (27 Mar) – AAG Energy, Jiangnan, Toshiba, Toyo, Estia, Mincor, Golden Energy

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Alliance Aviation Services (AQZ AU), 111 Inc (YI US), Genesis Minerals (GMD AU), Aag Energy Holdings (2686 HK), Tyro Payments (TYR AU), Estia Health (EHE AU).
Lowest spreads – Mincor Resources NL (MCR AU), Healius (HLS AU), Golden Energy & Resources (GER SP), Boustead Projects (BOCJ SP), GK Goh Holdings (GKG SP), Nippon Steel.

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Mar 27

Daily Brief Thematic (Sector/Industry): Good Morning Japan |SPX Rallies but Uncertainties Remain; NUGGET: 7&I-ValueAct Goes Full John Wick and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

Good Morning Japan |SPX Rallies but Uncertainties Remain; NUGGET: 7&I-ValueAct Goes Full John Wick
Investors Return to Tobacco Stocks After Multi-Year Decline
China TMT Update (Mar.27) – BABA/JD/ PDD/VIPS/LI/700HK/NTES/BILI/ – Tmall Outlines Upcoming Changes

Good Morning Japan |SPX Rallies but Uncertainties Remain; NUGGET: 7&I-ValueAct Goes Full John Wick

By Mark Chadwick

OVERSEAS. SPX +0.6% on intraday bounce; Defensives led w/Utilities; Financials lag as Banking fears persist; Rates down on recession view WHILE Fed signals more hikes; MSFT-ATVI deal closer to approval
JAPAN. NKY Futs -0.9% vs Cash; Weaker USDJPY 130.7 ; Kishida Approval Rating Rises; Feb Inflation 3.1%; ValueAct takes off gloves with 7&i; Shippers in focus with ex-div this week.
NUGGET. 7&i: Activist ValueAct goes Full John Wick calling for removal of 4 Directors, including Chairman/CEO Isaka. 2023 could be the year of accelerated reforms. Stock looks attractive post sell-off.

Investors Return to Tobacco Stocks After Multi-Year Decline

By Steven Holden

After a multi-year drop in ownership, Global EM fund exposure in the Tobacco sector is on the rise.
Tobacco remains heavily under-owned, but key EM funds are raising allocations, led by GQG Partners, Virtus, BNY Mellon and Allianz.
ITC Limited has been a key beneficiary of inflows and stands as the most widely owned stock in the sector, followed by KT&G Corp.

China TMT Update (Mar.27) – BABA/JD/ PDD/VIPS/LI/700HK/NTES/BILI/ – Tmall Outlines Upcoming Changes

By Shawn Yang

BABA/ JD/ PDD/ VIPS: Tmall outlines upcoming changes to its platform (-/-/-/-)
LI: Li Auto CEO reveals six pure EVs in pipeline(+)
700HK/NTES/BILI/: Game industry in general: Domestic game codes published by NPPA（+）

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Mar 27

Daily Brief ECM: Rakuten Bank Vs SBI Sumishin Net Bank and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Rakuten Bank Vs SBI Sumishin Net Bank
Pre-IPO Kelun Biotech – Debut Is the Peak, and Then It Wanes?

Rakuten Bank Vs SBI Sumishin Net Bank

By Shifara Samsudeen, ACMA, CGMA

Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise about $870 million. The pricing is on 5 April and the listing is on 21 April.
In Rakuten Bank IPO: The Investment Case, we highlighted the key elements of the investment case.
SBI Sumishin Net Bank (7163 JP), the key peer, will list on 29 March. In this note, we compare Rakuten Bank and SBI Sumishin across several key metrics.

Pre-IPO Kelun Biotech – Debut Is the Peak, and Then It Wanes?

By Xinyao (Criss) Wang

Kelun-Biotech did not get widespread attention until it reached three license and collaboration agreements with Merck, with upfront and milestone payments totaling up to US$11.8 billion.
The remaining products have limited investment value. After Kelun-Biotech out-licensed all of its valuable core assets in pipeline, it could mainly remain at the stage of biotech in the future.
The original core R&D team members have left, which means the “root of Kelun-Biotech is broken”. The lack of sustainable follow-up R&D capability would have negative impact on valuation performance.

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Mar 27

Daily Brief Equity Bottom-Up: Samsung FN REIT: Book Building Results and more

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

In today’s briefing:

Samsung FN REIT: Book Building Results
Meituan (3690 HK): 4Q22, High Growth, Better Margin, and 45% Upside
CIMC Enric (3899 HK): Growth Outlook Secured by Encouraging Orderbook
Meituan: Pandemic Driven Top Line Growth Is Only Temporary
China Internet Weekly (27Mar2023): Douyin, Bilibili, Tencent, NetEase, JD Health, Zhihu
China Power International (2380 HK): This Will Be a Rewarding Year
Hanmi Pharm (128940 KS): Strong Base Business; Innovative Biologic Drug Commercialized in US
How To Play Nike On Changing Fashion Trends
Beyond the Blackboard

Samsung FN REIT: Book Building Results

By Douglas Kim

Samsung FN REIT announced its IPO book building results. The IPO price was determined at 5,000 won per share. The demand ratio was 24.88 to 1.
The core investment thesis of Samsung FN REIT is that it is the only publicly listed Samsung affiliate that provides REIT services.
It is a stable business with excellent locations for its existing properties and the company is expected to provide 5.6% annual dividend yield in the next three years.

Meituan (3690 HK): 4Q22, High Growth, Better Margin, and 45% Upside

By Ming Lu

In 4Q22, the growth rates of total revenue and most business lines are better than our expectation.
The operating margins have stayed at a low level for the third quarter.
We believe the stock has an upside of 45% and a price target of HK$204 for year end 2023.

CIMC Enric (3899 HK): Growth Outlook Secured by Encouraging Orderbook

By Osbert Tang, CFA

After posting a decent FY22 result, earnings momentum for CIMC Enric Holdings (3899 HK) should sustain, underpinned by clean energy recovery and chemical and environmental equipment demand.
2M23 new orders growth stayed healthy at 10.7%, evidencing positive demand outlook. Hydrogen Energy is a growing driver as revenue will reach Rmb700m in FY23 and Rmb3bn in FY25.
The stock’s PERs of 11.7x and 9.5x for FY23 and FY24, respectively, appear inexpensive in view of 19% earnings CAGR. Net cash position also adds an appeal to us.

Meituan: Pandemic Driven Top Line Growth Is Only Temporary

Meituan (3690 HK) reported 4Q2022 results. Revenue increased 21.4% YoY to RMB60.1bn (vs consensus RMB57.7bn) while reported operating losses dropped to RMB732m (vs consensus RMB1.4bn) from RMB5.0bn in 4Q2021.
Covid outbreak in China in 4Q2022 led to strong growth in food delivery service revenues, however, losses have widened compared to 3Q2022 due to increased rider costs and others.
We expect Meituan’s top line growth to slow down and margins to remain under pressure with Douyin’s entry into food delivery and the company’s expansion into Hong Kong.

China Internet Weekly (27Mar2023): Douyin, Bilibili, Tencent, NetEase, JD Health, Zhihu

By Ming Lu

Chinese Apps’ time on site decreased to 26.7 hours in 2022 from 28.5 hours in 2021.
The Press and Publication Administration approved 27 imported games in March.
Douyin launched a medium-duration video app, which can be Bilibili’s competitor.

China Power International (2380 HK): This Will Be a Rewarding Year

By Osbert Tang, CFA

China Power International (2380 HK) will enjoy another year of strong earnings improvement in FY23, as coal-fired segment returns to profit and new energy capacity drives growth.
Solar and wind capacity will increase 66.5% and 23.1%, respectively, raising new energy’s proportion to over 70%. Profitability for hydropower also looks to recover in this year.
There is huge room for asset injection from SPIC given the parent’s new energy capacity of 139GW, with only 20GW in CPI. Its FY23 PER of 8.4x PER is attractive.

Hanmi Pharm (128940 KS): Strong Base Business; Innovative Biologic Drug Commercialized in US

By Tina Banerjee

Hanmi Pharm (128940 KS) posted revenue of KRW1.33T in 2022, the largest ever in the company’s history. Strong product competitiveness driven by high R&D investment strengthened Hanmi’s dominant industry positioning.
In October 2022, Hanmi’s US partner Spectrum Pharmaceuticals launched Rolvedon in the U.S. market. During 4Q22, Rolvedon generated revenue of $10.1M. Rolvedon is expected to report $100M revenue this year.
By leveraging on its biopharmaceutical development and manufacturing capabilities, Hanmi plans to launch a large-scale CMO and CDMO, which can be the new growth engines of the company.

How To Play Nike On Changing Fashion Trends

By Kevin George

RBC analysts noted that luxury fashion buying is dwindling.
Luxury fashion buying has been down to sportswear, according to RBC analysts. RBC: “Squeezed consumers are turning to sportsswear.
NIKE (NYSE:NKE) recently released its Q3 earnings report which beat analyst estimates.

Beyond the Blackboard

By subSPAC

The pandemic has been a catalyst for change, propelling the edtech sector to unprecedented heights as traditional educational institutions scrambled to adapt.
However, as we enter 2023, the landscape has shifted significantly from the edtech boom of 2021.
Companies now face the challenges of customer retention, unit economics, and the looming shadow of inflation and recession concerns.

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Mar 27

Daily Brief Macro: Bank Watch – Deutsche and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Bank Watch – Deutsche, Deustche Alles Ist Vorbei
A Fed Put of a Different Kind
An Event Study of the Fed’s Reaction Function

Bank Watch – Deutsche, Deustche Alles Ist Vorbei

By Andreas Steno

Why is Deutsche Bank suddenly selling off violently again without a trigger?
Could the FIMA-repo usage be a hint that a European entity needs USDs?
We look at alternative explanations of the contagion in European banking stocks

A Fed Put of a Different Kind

By Cam Hui

We interpret current conditions as Powell Fed has conveyed that there is a limited Fed Put in the market.
The Fed will act to support the banking system, or a Bank Put, but it will do nothing to support the overall stock market, or a Market Put.
As long as the market concerns over the banking system are in place, expect a range-bound choppy stock market.

An Event Study of the Fed’s Reaction Function

By Cam Hui

The latest “dot plot” is stale by the time it’s published and there’s a high degree of uncertainty around its projections. Instead…
What matters more is the Fed’s reaction function to financial crises. We have conducted an event study of how the Fed has reacted to shocks and crises in the past.
In all cases, the Fed took action to stabilize the system. Once stability returned, the Fed withdrew stimulus measures 2–3 months after the event.

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Mar 26

Daily Brief China: Beijing Kunlun Tech, Hong Kong Hang Seng Index, Li Auto, Meituan and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Li Auto: First Quarterly Profit, Route to Sustained Annual Profits Will Be Harder
ECM Weekly (26th Mar 2023) – Meituan, Rakuten Bank, SBI, Harita, Trial, DPC, Onewo, Leap, Growatt

Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank