Dim Sum Weekly – February 22nd-26th

Market Appetizer:

  1. A-share market fell 3.3% for the full week after rumors of more ChiNext IPOs denied by CSRC. H-shares closed higher due to valuation play, seen more buying power (http://www.scmp.com/business/markets/article/1917098/risk-sentiment-dominates-share-markets-after-thursdays-plunge)

Commentary: The selloff on Thursday shows weak sentiment among investors, particularly no consensus that the market’s undervalued. The market is plagued by weak-side rumors, and is unlikely to reverse until the NPC sessions.

2. Fake information, prices and overcharges among rampant tricks by real estate agencies: watchdog (http://www.shanghaidaily.com/metro/Fake-information-prices-and-overcharges-among-rampant-tricks-by-real-estate-agencies-watchdog/shdaily.shtml)


Commentary: Shanghai’s real estate prices have been up for a while and has got rampant since CNY. A huge part of it was due to tricks by agencies, such as Lianjia, it is a necessary move for the regulatory to step in, though it won’t help much to cool down the property prices.

3. GS – RMB’s stop-start devaluation still got legs to run (http://www.fxstreet.com/news/forex-news/article.aspx?storyid=c7bc0241-03e6-4722-af6e-f034f2d8c1c3)

Commentary: “For now, we are likely to remain in the zone of interior solutions – where some degree of currency depreciation, some further reserve burn and some tightening of capital controls are all part of the policy mix”  I tend to agree some cosmetic depreciation will happen, but there will be a point where the US FED just stops rate hikes and the repercussions of which are uncertain.

Policy Bun:

  1. Zhou pledged not to use competitive devaluation, but monetary policy will slightly tighten from the January credit binge (http://blogs.barrons.com/asiastocks/2016/02/25/g20-pboc-governor-zhou-on-yuan-capital-outflow-chinas-credit-risk/)

Commentary: Excessive credit growth is detrimental to the long-term health, but beware the shrink of PBoC balance sheet, which could lead to even worse deflationary bias of the economy.

2. Deputy Finance Minister Zhu Guangyao said China has room for more budget deficit (http://www.yicai.com/news/2016/02/4753896.html, Chinese only )

Commentary: “2015 budget deficit is 2.3%, 2016 budget deficit still has room, but it’s for Premier Li to disclose during the NPC convention” We believe budget deficit in 2016 could be as high as 3% (or even 3.5% if the government thinks it couldn’t make the growth target this year). The fiscal multiplier has been largely muted in the past, but will be re-used here as monetary expansion seems to be a lethal tool to use during period of  depreciation bias.

3. China’s key economic official: more relaxation on entry barriers of monopolistic sectors, such as oil & gas, electricity, telecom, finance, etc, conducive to long-term growth and supply-side reform (http://economy.caixin.com/2016-02-26/100913229.html, Chinese only)

Commentary: Expect more M&A within China in the coming years, these deals will have an impact on the future efficiency of the SOEs, as well as competition with private enterprises.

Corporate Dessert:

  1. Wanda offers piece of Legendary, eyes on Europa City (http://www.wsj.com/articles/chinas-wanda-group-sets-its-sights-on-frances-europa-city-1456401575, http://www.hollywoodreporter.com/news/chinas-wanda-offers-piece-legendary-869488)


Commentary:Wondering who will join the “extra” madness with Wanda on the film producer, but the Europa deal seems like a natural fit for Wanda’s corporate strength and status. But Wang Jianlin said “stay tuned” for a major deal, I guess this might not be just it.

2. Didi-Kuaidi raising another round of $1 billion, marking up 33% in valuation (http://www.autoblog.com/2016/02/26/chinas-didi-kuaidi-is-raising-1-billion-more-to-battle-uber/)


Commentary: I think this is it. If successful, this will be a final fatal blow on Uber, and the war will be over. Now it’s time for profitability? You must be joking, right?

3. Zhongan, China’s largest online insurer, raising $2 billion for IPO (http://www.businessinsider.com/r-chinese-online-insurer-zhong-an-plans-2-billion-mainland-ipo-in-2016-ifr-2016-2)

Commentary: No boundary for primary market valuation will lead to eventual supply outrage in the secondary market…stay tuned….



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