Daily Dim-sum Set 2015-01-06

Market Appetizer:

  1.  Foreign institutional investors losing patience on Chinese stocks (http://www.bloomberg.com/news/articles/2016-01-06/as-china-revives-stock-intervention-foreign-funds-lose-patience)

Commentary: Another questionable piece by Bloomberg. Foreign investors account for so little of the current pool, and the exit will be a ripple in the pond at its best. If you don’t want to invest, just throw in your towel and leave, why are they sending these ambiguous signals to seemingly make sense of themselves? Or are they just fabricating a fake big title (搞个大新闻)?

2. History suggests short selling ban might not work in favor of stocks (http://www.businessinsider.com/ban-on-selling-wont-help-china-pick-up-its-stock-market-2015-8)


Commentary:  A far more rational piece here. This exactly echoes the question I raised yesterday: when do you expect majority shareholder to sell? During a bull market? I do have another question for the regulatory bodies today: how are we going to have a registration system of stock listing under the backdrop of such volatility? I don’t know the answer as of now.

3. CNH breaks 6.7 as onshore-offshore gap continues to widen (http://www.ft.com/intl/cms/s/0/91647e04-b43c-11e5-b147-e5e5bba42e51.html#axzz3wMuRIdfp)

Commentary: The fixing used to be at 6.1x level last year, and the CNH is trading around 6.4x. How is that different from the current fixing at 6.5 and the CNH trading above 6.7? I guess it’s more about policy intentions that really contributes to CNH weakness now. I believe PBoC will not intervene before 6.8-7 range.

Policy Bun:

  1. NDRC and CSRC jointly leads the effort of aligning 22 departments in the State Council to sign a MOU on “collective punishment on listed companies that have misconducts or lost credibility”(http://www.gov.cn/xinwen/2016-01/06/content_5030927.htm)

Commentary: Some of the punishments include restrict companies from issuing bonds, or participating in government’s bidding process. Are SOEs eligible to be subject to this MOU as well? If so, how are going to enforce it?

2. Xi pays his first official visit in 2016 to Chongqing (http://english.cri.cn/12394/2016/01/05/4202s911524.htm)

Corporate Dessert:

  1. iKang(NasdaqGS:KANG), one of China’s largest health checkup chains, joined forces with Alibaba and China Life, in its privatization warfare with Health 100 consortium, by which initiated a hostile takeover plan earlier last year.Health 100 is backed by Sequoia, Pingan and several other private equity firms (http://tech.sina.com.cn/i/2016-01-06/doc-ifxneept3785115.shtml, Chinese only) Health 100, on the other hand, announced its plans to raise the privatization price to 25 USD/share, or 40% premium over the market price (http://companies.caixin.com/2016-01-07/100896890.html, Chinese only)


Commentary: iKang threatened to use a poison pill in order to prevent a hostile takeover. But after a back-door listing, Health 100 is trading at 140x P/E in the domestic market, a huge size advantage over its US-listed counterpart.


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