In this briefing:
- HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
- Dongzheng Auto Finance (东正汽车金融) IPO Review – Relaunched at Lower Price
- Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call
- Is There Still a Bright Future for FutureBright?
1. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this insight, we highlight the WH Group, which led the inflows last week.
2. Dongzheng Auto Finance (东正汽车金融) IPO Review – Relaunched at Lower Price
Dongzheng Automotive Finance (2718 HK) (DAF) re-launched its IPO at a lower fixed price of HK$3.06 per share, expecting to raise about US$208m. We have covered the fundamentals and valuation of the company in:
- Dongzheng Auto Finance (东正汽车金融) Pre-IPO Review – Dependent on Dealership Network for Growth
- Dongzheng Auto Finance (东正汽车金融) IPO Review – Better off Buying the Parent
In this insight, we will only look at the company’s updated valuation and re-run the deal through IPO framework.
3. Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
- The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
- Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
- US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
- Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
- Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
- Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
- Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.
4. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call
- US: Fed Sees Tailwinds from Global Growth Shifting to Headwinds from China and Europe.
- Greece: Growth supported by ‘Golden Visa’ (5-year visa for investing 250,000 Euro) and strong tourism arrivals. 2.3% GDP in 2020.
- Thailand: Sunday election between Shinawatra-linked Pheu Thai Party and military backed Palang Pracharat Party. Too close to call.
- Brazil: Former Brazilian President Michel Temer has been arrested in São Paulo as part of the Car Wash corruption investigation. Brazil stocks fell on the news.
5. Is There Still a Bright Future for FutureBright?
Almost 12 months after posting our initial thesis on Future Bright Holdings (703 HK)Gambling on a Bright Future, we review FutureBright’s most recent results, raising questions on whether stalling improvement in the core restaurant business performance warrants taking chips off the table while waiting for key catalysts to materialise.
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