In this briefing:
- Shanghai/Shenzhen Connect – $8.4 Bn Inflows in February (Kweichow Moutai, Aier Eye, Luxshare)
- China – Eurozone Negative Feedback Loop.
- Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business
- HK Connect Discovery – February Snapshot (Tencent, COFCO Meat)
- Hopewell Holdings (54 HK): A Reasonable but Not Great Exit for Shareholders
1. Shanghai/Shenzhen Connect – $8.4 Bn Inflows in February (Kweichow Moutai, Aier Eye, Luxshare)
In our Discover SZ/SH Connect series, we aim to help our investors understand the flow of northbound trades via the Shanghai Connect and Shenzhen Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by offshore investors in the past seven days.
We split the stocks eligible for the northbound trade into three groups: those with a market capitalization of above USD 5 billion, and those with a market capitalization between USD 1 billion and USD 5 billion.
We note that offshore investors were buying all GICS sectors, and had a strong preference for Industrials, Consumer Staples, Consumer Discretionary, and Financials names. We estimate that total inflow into the A-share market via northbound trade amounted to USD 8.4 bn in February.
2. China – Eurozone Negative Feedback Loop.
Historically, Germany and China have depended on exports to lead growth. With the US unwilling to play the role of consumer of last resort and being determined to limit its current account deficit, this avenue is not available anymore. In the absence of a rethink by German policy makers as to how to make German growth more self -sustaining a deflationary feedback loop is developing between the EU and China.
3. Shenwan Hongyuan (申万宏源) A+H: A Commoditized Broker Business
Shenwan Hongyuan filed in November to list in Hong Kong. It is a leading brokerage house in China. With an A-share market capitalization of USD 18 billion, the company plans to issue up to 20% of its shares for an A+H listing. In this insight, we will discuss:
- Company’s history.
- Comparison with leading Chinese brokers.
- Our thoughts on valuation.
4. HK Connect Discovery – February Snapshot (Tencent, COFCO Meat)
This is a monthly version of our HK Connect Weekly note, in which I highlight Hong Kong-listed companies leading the southbound flow weekly. Over the past month, we have seen the outflow continue from January. In February, we have seen Chinese investors were selling Tencent in February after buying Tencent in January. Chinese investors were also buying domestic automotive manufacturers and Macau gaming sectors.
Our February Coverage of Hong Kong Connect southbound flow
- HK Connect Discovery Weekly: China Tower, Geely, COFCO Meat (2019-02-15)
- HK Connect Discovery Weekly: Geely, Great Wall Motor and Sands China (2019-02-22)
5. Hopewell Holdings (54 HK): A Reasonable but Not Great Exit for Shareholders
Hopewell Holdings (54 HK), an infrastructure and property developer, is subject to a privatisation proposal from its Chairman, Sir Gordon Wu. The privatisation price of HK$38.80 cash per share is a 46.7% premium over the closing price on 30 November 2018, the day before the announcement of the privatisation proposal.
While predicting the success of Hong Kong privatisations is a challenge due to the high threshold of shareholder approval, we believe that the Hopewell privatisation proposal has a good chance of success as it offers a reasonable (but not great) exit for shareholders.
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