Daily BriefsTMT/Internet

TMT: Chinasoft International, Intel Corp, Tencent, iFAST and more

In today’s briefing:

  • MSCI Aug 2021 Index Rebalance Preview: Potential Changes After Week 1; Positioning at Work
  • Intel 2Q21: Where Do Margins Go?
  • Tencent (700 HK): Juvenile Internet Usage Will Not Decrease
  • IFast 2Q: Strong Earnings; Winning Malaysian Digital Banking License Could Be a Near-Term Catalyst

MSCI Aug 2021 Index Rebalance Preview: Potential Changes After Week 1; Positioning at Work

By Brian Freitas

MSCI is scheduled to announce the results of the August 2021 Quarterly Index Review (QIR) on 11 August (early morning of 12 August Asia time) with the changes implemented after the close of trading on 31 August.

The review period for price cut-off began on 19 July and will run through to 30 July. After the end of week 1 of the review period, most of the changes are expected in China with a few changes for Hong Kong, Taiwan, Korea and Thailand.

Most of the names appear on the add/delete list every day during the review period, while a few names appear/drop out of the list of potential changes. The final list will depend on the day that MSCI chooses. Based on historical data, there is over a 90% probability that MSCI chooses a day from week 1 to compute the market cap for the stocks that will determine the list of inclusions and exclusions.

Post week1 of the review period, potential inclusions to the MSCI Standard Index are SITC International (1308 HK)Huabao International Holdings (336 HK)Momo.Com Inc (8454 TT)Chinasoft International (354 HK)China United Network A (600050 CH)Ecopro BM Co Ltd (247540 KS), SK IE Technology (361610 KS), CRRC Corp Ltd A (601766 CH)Beijing Wantai Biological-A (603392 CH)Beijing Kingsoft Office Software-A (688111 CH)Beijing Roborock Technology-A (688169 CH)Imeik Technology Development (300896 CH)StarPower Semiconductor Ltd (603290 CH)Advanced Micro-Fabrication Equipment-A (688012 CH), Ginlong Technologies Co Ltd (300763 CH) and China Baoan (000009 CH).

Potential exclusions are Bangkok Bank PCL (BBL/F TB), Bank of East Asia (23 HK), Taiwan Business Bank (2834 TT), KMW Co Ltd (032500 KS), Perennial Energy Holdings Ltd (2798 HK), Douyu International Holdings (DOYU US) and Gaotu Techedu (GOTU US).

The August QIR will also implement tranche 2 of Sea Ltd (SE US)‘s inclusion in the MSCI indices and will result in the index inclusion factor increasing from 0.05 to 0.25.

There is also a very high probability of a 75% reduction in the  SK Telecom (017670 KS)‘s Foreign Inclusion Factor (FIF) due to a drop in the availability of foreign room on the stock.

Intel 2Q21: Where Do Margins Go?

By Aaron Gabin

We remain short Intel. The growth and margin picture is still deteriorating. We don’t think Pat Gelsinger is capable of turning this ship around…and we think the proposed acquisition of Global Foundries may accelerate Intel’s demise.

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

Tencent (700 HK): Juvenile Internet Usage Will Not Decrease

By Ming Lu

  • We do not believe the juveniles will reduce internet usage in the future.
  • The authorities forbid tutoring schools so that juveniles have more time to spend on internet.
  • Parents went back to their office so they cannot stop their children from using internet.

IFast 2Q: Strong Earnings; Winning Malaysian Digital Banking License Could Be a Near-Term Catalyst

By Shifara Samsudeen, ACMA, CGMA

iFAST (IFAST SP)  reported its 2Q2021 results on Friday (23rd July) which saw revenues increasing 31.7% YoY while reported operating profit grew 46.0% YoY during the quarter. The net revenue from B2B segment increased 32.9% YoY while net revenue from B2C segment grew 30.5% YoY during 2Q2021 driven by increased investment subscription from customers in exchange-listed securities, service fee from currency conversion administration services and net inflows from clients in unit trusts (UTs). iFast’s assets under administration (AUA) grew 57.3% YoY to SG$17.54bn as at the end of June 2021 from SG$16.11bn as at the end of March 2021.

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