Dim Sum Set Jan.18th-20th

Market Appetizer:

1. Chinese stock in HK fell to new low, HKD under pressure – (http://www.bloomberg.com/news/articles/2016-01-20/china-stocks-fall-as-commodity-shares-slump-on-economic-concerns)


Commentary: HSCEI index is trading below 1.0x book, lower than what it used to get in 2008. While market has its reason to focus on the depeg, the economic logic behind dumping SOME of the Chinese H-shares is quite puzzling – if HKD depreciates, it’s CNY-denominated asset should be more valuable in HKD terms. But as the likes of short traders might be thinking of a simultaneous depreciation of CNY and HKD.

2. HKMA chief vows to protect the peg, Chinese banks also voiced support (http://app.scmp.com/scmp/mobile/index.html#/article/1902284/desktop)

Commentary: While it’s futile to think short term of a depeg, it is necessary for Hong Kong and China to think about the longer term future of HKD, particularly in the backdrop of rapid RMB internationalisation, if that is what regulatory is hoping for. “Be careful of what you wish for”- as the former HKMA chief has stated in his paper (http://www.igef.cuhk.edu.hk/igef_media/working-paper/IGEF/igef_working_paper_no_9_eng.pdf)

3. China sets RRR ratio for overseas RMB deposit institutions (http://www.reuters.com/article/us-china-yuan-offshore-changes-idUSKCN0UV07D)

Commentary: It is merely a move to set up a “danger” signal for RMB shorters, who are now shorting HKD instead for a better risk/return profile.

Policy Bun:

1. AIIB President Jin Liqun says AIIB is ready for business (https://www.project-syndicate.org/commentary/asian-infrastructure-investment-bank-aiib-opens-by-liqun-jin-2016-01)


Commentary: For a brand new multinational institution, some steep learning curve is needed. Everything will be under spotlight and there is very little margin for error.

2. Inclusion finance policy white paper issued by the Chinese government, calling for more opportunities for rural and new startups (http://www.gov.cn/zhengce/content/2016-01/15/content_10602.htm- Chinese only)

Commentary: We see huge opportunity in this SME credit business in China, and it is beneficial for the government to accumulate credit statistics from rural areas.

Corporate Dessert:

1. Meituan-Dianping raised 3 billion after merger, but profitability remains a distant goal (http://www.wsj.com/articles/chinas-meituan-dianping-raises-3-3-billion-in-biggest-startup-round-ever-1453211614)


Commentary: How would an investor exit from such a business? Let’s pray for a return in the global IPO market.

2. Baidu’s Robin Li apologises for selling healthcare-related content ownership to private sector without moral guidance (http://finance.people.com.cn/n1/2016/0118/c1004-28062240.html-Chinese only)

Commentary: Do be evil is the way to survive in China, unfortunately.

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