Daily BriefsMost Read

Most Read: China Telecom Corp Ltd (H), Xpeng Motors, China Mobile, BeiGene Ltd and more

In today’s briefing:

  • MSCI and FTSE Give Investors One Day To Sell The China Telcos
  • Xpeng: The Next Xiaomi?
  • US Inflation Risks in 2021: Supply Chain Pressures Dampened by Winter Lockdowns
  • Smartkarma North Asia Weekly: MSCI China Telcos Deletions, RLX IPO, Yidu Tech, & China SaaS Leaders
  • BeiGene: Cancer Treatment in China–The Underestimated Opportunity

MSCI and FTSE Give Investors One Day To Sell The China Telcos

By Travis Lundy

As noted in yesterday’s OFAC Clarifies The Clarifications of Its Clarifications, MSCI and FTSE were almost certain to imminently announce the deletion of China Mobile (941 HK), China Telecom Corp Ltd (H) (728 HK), and China Unicom Hong Kong (762 HK) after OFAC clarified in FAQ864 that these companies had names similar to names which were on the list despite not being listed themselves so they would be considered to be Communist Chinese military companies. 

The rule is that US Persons cannot transact after 9:30am 11 January, which would mean selling on Monday 11 January Hong Kong time would be within the rules, but it appears MSCI and FTSE have decided to play it safe and delete them at Friday’s close. 

The “problem”, of course, as with the other names on the lists MSCI and FTSE have created before for the index deletions on 5 January 2021 and 18 December 2020, respectively, is that a lot of people who would normally buy the dip are themselves US Persons or adjacent to them in some way which would make them ineligible to transact. Those who do may find themselves less able to find counterparts to buy from them later after they have bought the dip. 

More detail below the fold. 


Xpeng: The Next Xiaomi?

By Victoria Li

If Tesla (TSLA US) is the Apple(AAPL US) of EV sector, Xpeng might be the Xiaomi(XIACY US), in our view. In the short term (before the launch of P5 ), lower prices of new Made in China Tesla Model 3 might have negative impact on P7 sales; but increasing client interest on Tesla would benefit Xpeng P7. On a 10 year view, Xpeng would be the winner among existing Top three Chinese emerging EV brands, by being a follower of Tesla (focusing on making EVs ‘smart’)

Xpeng might turn profitable in 2022 with increasing awareness and acceptance by the customers, launch of P5 and first B-segment SUV.

Reiterate BUY with 12M target price of US$71.


US Inflation Risks in 2021: Supply Chain Pressures Dampened by Winter Lockdowns

By Said Desaque

Since March, US financial markets have been slaves to news about COVID-19 and, consequently, have become susceptible to negative news stemming from other sources. Priced for perfection entering 2021, investors are largely ignoring adverse outcomes, such as higher inflation, stemming from non-pandemic sources.

The Federal Open Market Committee (FOMC) will probably tolerate a 50 basis points inflation overshoot of the long-term target, even though members are not expecting this outcome before 2023 Q4. Aggregate demand exceeding supply is the most plausible route to higher inflation, but the economy remains in a sizeable negative output gap at present.

Higher prices due to supply chain disruptions in Q1 will probably be overlooked by the FOMC. Meanwhile, narrow money supply (M1) has surged since March, suggesting significant pent-up spending firepower, that could impact inflation, particularly in services.

Winter lockdowns will depress economic activity in Q1, thereby reducing global inflationary pressures, notably in Europe. 

While the FOMC is powerless to prevent economic weakness in Q1, leaving the responsibility to fiscal policy, the real issue facing investors is how long full economic recovery from the pandemic will ultimately require. According to their latest Summary of Economic Projections, FOMC members believe it will take three years for the economy to properly heal and, consequently, any future changes in policy will be signalled by alterations in asset purchases that could produce another taper tantrum.      


Smartkarma North Asia Weekly: MSCI China Telcos Deletions, RLX IPO, Yidu Tech, & China SaaS Leaders

By Douglas Kim

In this edition of the Smartkarma North Asia Weekly, it summarizes some of the top insights on Smartkarma in the past week covering Japan, HK/China, and the Korean stock markets. The top topics are below:

1) MSCI & FTSE Deletes Chinese Telcos

2) China Mobile (941 HK): Probably Too Cheap

3) LG Corp: Updated SoTP Valuation Analysis

4) Xpeng: The Next Xiaomi?

5) Yidu Tech IPO Valuation

6) Short Kose & Long Fancl and Kao

7) NCsoft: Key Catalysts

8) Oriental Land: Downside Risks Mount

9) China Tech: Emerging Enterprise SaaS Companies

10) Car Inc (699 HK): Are We Missing Anything?

11) Toshiba – The Drama Never Ends

12) RLX Technology Pre-IPO

13) TOPIX Inclusion: Welbe, Inc.

14) Asian Container Carriers

15) Wuxi Biologics Placement 

16) Japan Post Insurance Update – Three Reasons To Buy


BeiGene: Cancer Treatment in China–The Underestimated Opportunity

By Kemp Dolliver, CFA

We spend a substantial portion of our time thinking about oncology in China: one of the largest unmet needs in healthcare globally. The World Health Organization estimates that there are 4.3 million new cases and 2.9 million deaths annually. Historically, treatment options have been limited compared to the US, EU, and many of China’s neighbors. Fortunately, the government has implemented several reforms in recent years to accelerate development and importation of innovative treatments and to provide reimbursement for them. 

This Insight includes names to consider for two approaches to invest in this opportunity:

1) Invest in the leading multi-asset oncology companies.

2) Invest in a basket of companies with narrower oncology offerings.


Before it’s here, it’s on Smartkarma