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Most Read: Tencent Holdings, NTT Docomo Inc, Sea Ltd, Alibaba Group, Jardine Cycle & Carriage and more

In today’s briefing:

  • Party Poopers: Reining In China’s Internet
  • NTT/Docomo – The KDDI Quibble
  • MSCI Singapore: SEA Change Coming in May 2021
  • BABA Ugly Bear Gap Toward Support
  • Jardine Cycle & Carriage: “Buy The Fact” On MSCI Deletion

Party Poopers: Reining In China’s Internet

By David Blennerhassett

And the rest, as they say, is history.
At the 11th hour, leading to what would the world’s largest IPO, with an implied valuation of US$316bn – nearly 20% larger than the world’s largest bank, ICBC (H) (1398 HK) – the Shanghai Stock Exchange cancelled the A-Share listing saying that the interviews that authorities had conducted with Jack Ma and regulation changes were not adequately explained in the documents, and the listing could not go ahead. Shortly after, Ant Group pulled its H-Share offering too.
Source: FT
It’s easy to point the finger at Jack Ma’s bellicose speech in Shanghai on the 24 October, in which he suggested traditional Chinese banks should change their “pawnshop” operating model. Arguably, this didn’t help.
But the scuppering of the IPO is not some juicy vendetta – simply the reality of China’s state-controlled banking system.
The runaway success of Alibaba Group (9988 HK)Ant Group (6688 HK) – and other massive tech companies such as Tencent Holdings (700 HK) – pivots off a less regulated entity pitched against more heavily regulated rivals.
The reining in of “disruptors” reach of these tech companies came in for even greater oversight yesterday with proposed new government measures to stomp on monopolistic practices, as a means to curtail their influence.
What does all this mean for big Chinese tech companies? Yesterday’s downward move in BABA and Tencent could be just a sign of things to come.
More below the fold.

NTT/Docomo – The KDDI Quibble

By Travis Lundy

Today during the lunch session, there were reports across the newswires of KDDI Corp (9433 JP) and other companies (including both Softbank Corp (9434 JP) and Rakuten Mobile) sending a letter to the Telecommunications Ministry (It was, in fact, addressed to the Ministry of Internal Affairs and Communications). 

The headlines were…


This caused NTT Docomo shares to fall sharply on the PM session open, briefly falling as much as 75bp to ¥3861 (vs the ¥3900 Tender Offer Price) before the shares settled around ¥10 down on the day near ¥3876-3884/share for most of the rest of the day.

The media said that the letter called on Japan’s Telecommunications Ministry “to ensure a fair market environment amid NTT’s planned takeover of Docomo, arguing the deal could inhibit fair competition and development of the telecom market.” (Bloomberg). 

The letter, it turns out, is on KDDI’s home page in Japanese (link).

There are interesting comments within the letter but I am surprised it took this long to produce. This really looks like it is KDDI and others setting the stage to be able to pursue a campaign of harassment against NTT if necessary going forward. Complain about it in general terms before the deal goes through, in order to give yourself room to complain about specifics later. 

It is what I would do if I were in their shoes. 

What was surprising to me was the reaction on NTT Docomo shares. Given the nature of the document, the nature of JFTC and MIC purview on the transaction, and what must have been reasonably explicit “approval” to get the NTT deal for Docomo done in the first place, if this letter means something about the future competitiveness of the NTT/Docomo/East/West/Com grouping, the stock which should have been negatively impacted was NTT (Nippon Telegraph & Telephone) (9432 JP). Indeed, NTT shares ended up “only” 1.4% on the day after starting the day higher, but this was stronger than KDDI on the day.

More commentary about NTT Docomo, NTT, and KDDI below the fold.  

MSCI Singapore: SEA Change Coming in May 2021

By Brian Freitas

MSCI announced the results of the November 2021 Semi Annual Index Review (SAIR) earlier today. While there were no surprises, there was also another announcement that flew under the radar.

MSCI announced that foreign listings would become eligible for the MSCI Singapore indices starting from the May 2021 SAIR since the market met the Foreign Listing Materiality Requirements at the November 2020 SAIR.

This means that Sea Ltd (SE US) will be eligible for inclusion in the MSCI Singapore indices at the May 2021 SAIR. We estimate passive buying of US$2.46bn at the close of trading on 27 May 2021.

BABA Ugly Bear Gap Toward Support

By Thomas Schroeder

Alibaba Group (BABA US) is on track to reach for support outlined in our BABA Sell Resistance and Fresh Long Zone after kissing the 300-305 sell zone and gap resistance. This is a follow up given the bearish gap lower and hard close as sell volumes spike. This now brings into question whether our initial support target holds are we overshoot to macro support near 230. Let’s look as some of the key chart points that have evolved.

Jardine Cycle & Carriage: “Buy The Fact” On MSCI Deletion

By David Blennerhassett

Yesterday, MSCI announced its November 2020 Semi-Annual Index Review.  As widely anticipated, Jardine Cycle & Carriage (JCNC SP) and Yangzijiang Shipbuilding (YZJSGD SP) are shown the exit, reducing the number of index constituents to 19. The changes will be effective after the close of trading on 30 November.

In MSCI Singapore Index Rebalance Nov20: Shrinking Number of Constituents, Brian Freitas reckons 8.9 days of ADV to sell of JCNC from passive funds. JCNC is down ~3% today as I type, against +3% for ASII.

I see JCNC’s discount to NAV at ~36% against a 12-month average of ~17%, having recently moved off its all-time low of ~38%.

As JCNC is all-but a proxy into Astra, this appears a straight-forward mean reversion play. 

More below the fold.

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