ROC Investment Management

22/07/2020

万亿独角兽即将上市，谁是最大赢家？

蚂蚁金服（已更名为蚂蚁集团）在七月二十日宣布启动上市计划的消息占据了全球头条新闻。市场普遍认为，蚂蚁集团上市之后，其估值将达到2000亿美元，相比它在2018年的C轮融资时1500亿美元的估值溢价33%。蚂蚁也将借此成为全球最大的金融科技公司之一 （Paypal市值2100亿美元，比蚂蚁略大一些)，以及近年上市的最贵独角兽公司之一。毫无疑问的是，拥有可以与国有四大行相比肩的市值会让蚂蚁集团在上市后很快被纳入相关指数，2000亿美元的市值将仅仅是开始。

蚂蚁金服主要以其拥有全中国最大的两个支付平台之一的支付宝著称，但其实它为C端用户和B端商家提供的服务远远不止电子支付解决方案。蚂蚁在全球已拥有约13亿的用户，其构建的综合金融生态系统已经布局了保险，信用，理财，小微贷款等多种业务，触达到用户多方面的需求。

一个最直接的“蚂蚁概念股”就是阿里巴巴。阿里巴巴拥有33% 的蚂蚁集团股权 （创始人马云持有8.8%,阿里系和蚂蚁系员工持有50%的股权)， 这些股权价值660亿美元，等于阿里巴巴9.3%的市值。在蚂蚁集团上市，以及即将推出的恒生科技指数的双重利好消息下，阿里巴巴的股价当天上扬7.3%。对阿里巴巴来说，除了蚂蚁金服上市这一提振股价的利好，更令人期待的催化剂是即将到来的八月十四号恒生指数季检。如果阿里能成功染蓝，将为中国内地投资者提供通过港股通购买阿里股票的机会。美团和小米也有希望加入恒生指数，但是这两家公司已经在港股通名单里，季检对它们带来的影响不如阿里巴巴大。

另一个不太直接但是有潜力的“蚂蚁概念股”是腾讯。根据一些卖方分析师的估计，支付宝最大的竞争对手--腾讯旗下的全资子公司，微信支付的估值已经达到1600亿美元，相当于现在腾讯23%的市值。我们看到，把占阿里市值9%的蚂蚁集团分拆上市可以让阿里巴巴的股价在一天之内上涨了7%；那么想象一下，把占腾讯市值23%的微信支付分拆出来时，对腾讯的股价影响会有多大！

陳華德
鹏盛资产董事总经理

免责声明： 鹏盛资产持有阿里巴巴，腾讯，小米及美团的财务权益

22/07/2020

More than a unicorn

Ant Financial’s decision to file for listing makes global headlines today. At an estimated valuation of US$200 billion, it represents a cool 33% premium over its series C fundraising round valuation of US$150 billion back in 2018. Not only will it be one of the largest global fintech companies when it lists (PayPal is slightly larger at US$210 billion), it will also be one of the most valuable companies to come to market in years. As its sheer size is comparable to China’s big four state owned banks, there is little doubt that it will be included in most of the relevant stock indices shortly after its IPO. It probably won’t stay at US$200 billion for too long.

Ant Financial is known primarily for Alipay, one of the two main payment platforms in China, but it is actually much more than just a digital payment solutions provider to Chinese consumers and businesses. Counting a user base of 1.3bn, Ant’s pervasive financial ecosystem spans across different sectors such as insurance, credit, money market, small business loans, touching the lives of all Chinese citizens.

The knee jerk trade for Ant Financial’s listing is Alibaba. It owns 33% of Ant Financial (founder Jack Ma has 8.8% while employees own 50%), worth US$66bn or 9.3% of its market cap. The news of Ant’s impending listing, along with the imminent launch of the Hang Seng Technology index, sent parent Alibaba Group’s share price up 7.3% today. While the crystallization of Ant’s valuation is a positive development, for Alibaba, the more mouth-watering catalyst is in the form of the upcoming Hang Seng Index’s review on 14 August. Should it be included, Alibaba’s Hong Kong shares would become eligible for buying via Hong Kong Stock Connect to mainland investors for the first time. Meituan and Xiaomi could also be included, but the impact would be less than that of Alibaba since both are already on the southbound list.

A less intuitive but lucrative trade could be Tencent. Various sell side analysts have estimated Tencent’s Wechat Pay, the main competitor to Alipay in China, to be worth US$160 billion. This valuation would make this wholly owned subsidiary 23% of Tencent’s total market cap. If crystallization of 9% of its value by way of Ant Financial’s listing can send Alibaba up 7% plus in a day, imagine what the spinoff of an 23% market cap equivalent subsidiary like a WeChat Pay can do for Tencent’s shares?

Walter Chang
Managing Director, ROC Investment Management

Disclaimer: ROCIM Limited is a shareholder of Alibaba, Tencent, Xiaomi and Meituan

01/08/2019

美國減息香港樓價會否上升？

昨天8號風球換來難得的寧靜。最近差不多所有傳媒和朋友圈都在談論社會紛爭，難得有半日的休閒，終於有時間可以想想我經常被問到的問題：美國聯儲局減息會否帶來香港房地產價格的升浪？這是一個很好的問題，因為絕大多數香港人的財產都是在房地產上。而這個市場因為種種的原因，包括超低利息和資金泛濫，已升了很多年。

在答之前，我想我們要探討一下美國為什麼要減息。究竟是為了防範或是聯儲局己見到衰退的來臨？昨天晚上聯儲局主席鮑威爾說這只是一個中期的調整，即是說是「防範」，但他的言詞中好像不是太確定！事實上從最近美國強勁的經濟數據來看，防範的機會還是高一點，即是說不會減很多。

香港房地產價格是不會因今次減息而上升的。美國從2016年起總共加了2.25%，而香港最優惠利率只是加了0.125%，所以除非聯儲局今後減很多，香港是不會跟隨的。反而，如果社會運動持續一段長時間而令到香港的評級降低，到時HIBOR走高，按揭利率上升，樓價不跌才怪！從現在的情況來看，決定房地產價格最重要的因素是本地和中國經濟狀況，美國減息是没有太大影响力的。

其實美國利息變動最直接影响的是美國的股市。如果減息是為了防範經濟衰退，歷史上標準普爾指數在第一次減息後一年內會上升20%以上。反過來說，如果減息一年之内真的是有經濟衰退，那麽指数會有大幅的調整。

香港現在踏入風暴季節，或許未來會有多一點寧靜時間來思考。

陳華德
鵬盛資產管理投資董事

01/08/2019

The hoisting of typhoon 8 yesterday afternoon has brought a rare peace and quiet time. While the city's social unrests have hijacked the local media and dominated most discussions, the rare off-day has provided a good opportunity for me to find time to answer a very popular question that I've been regularly asked: will the cut in US rates send HK property prices soaring again? The local real estate market is the most important source of wealth and has enjoyed the best and longest uptrend ever, fuelled partly by ample liquidity and low interest rate.

To answer the question, one must understand why US Fed is cutting rates, and what are the likely consequences.
Is the Fed's rate cut a precautionary measure or is it part of a series of cuts to head off a recession? Fed chairman Powell said it's a mid-term adjustment, in other words, precautionary. This is not what the market had hoped, and worse off, his delivery was uncertain! However, given how strong US economic data has been so far, the chance of this being a precautionary cut is high. In other words, we probably won't a more than expected rate reduction to drive further yield compression.

So, the answer is most likely a no. Property prices here won't rise on this cut, and further cuts will be limited. Note that low interest rate is just part of the formula behind strong property prices. Economic growth and supply are just as important. Since HK prime rate only moved up a quarter percent when US rates moved up a staggering 2.25% since 2016, the reversal in direction is therefore insignificant. However, if the rating agencies decided to downgrade HK sovereign rating on prolonged social unrests, HIBOR will move up, so will mortgage rate, then it would be a big surprise if prices can still hold up! For now, the most important driver for local property market is definitely economic growth. China is softening without much incentive for stimulus, and Hong Kong's GDP growth is being revised downward rather quickly at the moment.

Separately, the impact of interest rate cut to the US stock market is more direct. History shows that if the cut is precautionary, S&P 500 would rise more than 20% a year after the first cut. But if a recession indeed comes, the index would end up falling in a double digit rate for the same period.

Hong Kong is now in typhoon season, maybe we will get more peaceful time to think.

Walter Chang
ROC Investment Management

12/05/2019

左侧右侧

11 May 2019

前一段日子时，投资界有一段花边消息。当时川普并未重启贸易战，股市牛气冲天，一位国内的资深私募基金经理，在全年回报达到30%时，对他所有的分析员说，今天清仓，明天开始放假，直到年底，事关今年赚够了，对投资者已有交代。朋友圈收到这消息时当堂炸开，有说此君相当聪明，赚够就走是对的，亦又说经济复苏，中美关系开始缓和，美联储更可能加息，股市会再往上夹，年底时这位老兄一定会被笑到脸黄。事后孔明看来，这位基金经理，当时的决定，可谓明智至极。

其实笔者对此不敢苟同，若这位基金经理，到了暑假之后忍不住再大举入市，摸顶后没多久就崩盘，到时哭都无谓，这种先行者的悲惨，在2015年熔断一役，六月清仓，七月买回，八月人民币汇改复跌，真害惨了很多人。

我相信的是钟摆理论，股价有如钟摆，在平衡点时的时间最短，非理性的时候可能很长。升市时在左侧早走，熄机不看，不问世事，谈何容易。反而股价或
股市合理位置过了之后再涨，回吐时方走，事后最起码你知道自己接近高位离场，赚钱不容易，好投资标的不容易找到，别再赌桌上留太多的钱。

高位跌下，什么时候走？笔者有大致上有三个方法。本来打算是长线的，应问自己买的原因变了没有，假如有变，分析后觉得不值，当然要走。股价跌太多，表示你之前看法有误，亦要走些，这是风险管理。若是短炒，催化剂过了之后，赢输都走，切忌短炒变长揸。

包子敬
鹏盛资产管理研究部总监

23/10/2018

Forget November

My neighbor Peter owns an electronics factory in Guangdong. While business has not been easy in recent years, Peter has done okay. This morning, with his brows furled, he asked me what I think of the current trade war between US and China. His factory has been running flat out recently because his customers have placed a lot more orders than normal. He reckons it is because his products are not subject to US tariffs yet, but they will most certainly be on the list in the next round of escalation. Peter is worried that business will fall off the cliff next year.

As a SME exporter/industrialist in China, Peter didn’t have to care as much about geopolitics until recently. Should US President Donald Trump enact his tariffs against all goods from China, he will have to face the unsavory outcome of having to subsidize some of the price increase to keep some of his customers happy, with the possibility that some of his business may be lost anyway. His hope is for a Democrat win in November, which might reverse the trade war and bring some sense back to the current disagreement. His thick brows furled even more when I told him that I think he should still prepare for tough times to continue if Democrat were to win. He couldn’t understand why Americans would vote for Trump in the first place, and he cannot fathom why a Democrat win wouldn’t help him.

I gave Peter a relatively long explanation of my thoughts on Trump and the basis of his popularity. Trump is not a typical Republican. He appears to care little about Ronald Reagan’s “Shining City on the Hill” type of idealistic description of the US. Reagan’s “American Exceptionalism” comes at a cost which Trump thinks is worth paying for. Trump openly repudiates Clinton’s “Assertive Multilateralism”, inherited from George HW Bush, which involved US’s allies in coordinated actions based on consensus. He has pulled back from TPP and Paris Accord, and attacks the WTO constantly. He thinks US shouldn’t be tied down by opinions of its allies. Obama’s dealing with other nations involving negotiations and cooperation is something Trump mocks as weak.

Trump’s unilateralism, in a way, is akin to the Bush Doctrine. George W Bush justified his invasion of Afghanistan and Iraq because he reckoned these countries posed threats to the US. Though Bush attracted much sympathy in his attack on Afghanistan immediately after 911, his unilateral war on Iraq was carried out even though many American allies opposed the decision. Like Bush, Trump justifies his economic stance by accusing everyone, friends and foes alike, of taking advantage of the US, over protests by other countries. His preference for bilateral agreements has a strong economic point. By doing so, he can use America’s scale to his advantage and can force smaller countries to make economic concessions to the US in return for reciprocal preference in market entry. Ironically this is one tactic that Trump accuses China of doing, although it is with individual corporations instead of countries. In a way, Trump the President is little different than Trump the New York real estate baron. The Trump Organization is known to squeeze its suppliers and service providers who do not have the financial resources for a protracted legal fight. America’s size is an inherent competitive edge that Trump takes advantage of.

Many international observers could not understand why Trump is so well liked. Trump’s core constituency consists of rust belt blue collar workers who feel left behind by the globalism championed by Trump’s predecessors. Many outside US were surprised by how George HW Bush lost to Bill Clinton even though he won the first Iraq War cleanly. “It’s the economy, stupid” was a catchy slogan which explained it all then. Hope for economic improvement is again probably the main reason why many conservatives still embrace Trump, despite his obvious character flaws.

Anyone who’s been following US politics lately would have noted that polls are predicting a split result, with the Democrats expected to win Congress and Republicans likely to win the Senate. While polls have been proven to be quite unreliable, especially given the shocking result of Trump’s presidential win and UK’s Brexit vote, this is all we have to go by at the moment. Democrats appear to have more of a motivated base of voters this time around. The reason for a split vote is quite technical. Suffice to say that during any two years, one out of three Senate seats, and all of Congress seats are contested. This year, it just so happens that the Senate seats that are contested are Democrats’ seats.

I suspect US market may not react too kindly to the base case of a split US Congress. Markets never like discontinuity as it means unpredictability. A Democrat takeover of the US House in Congress would mean more political infighting in the US. Democrats will have the legislative power if they control Congress to initiate further investigations into Donald Trump’s personal affairs. Trump’s alleged tax evasion as reported by New York Times, Russian campaign meddling investigation being investigated by special prosecutor Robert Mueller, plus a host of other hidden skeletons in Trump’s closet, will all be welcome to the forefront. We will see American politics at its worst, and this will irritate President Trump further. For political distraction in the medium term, enter stage right, China. Trump will use China’s trade threat as a boogieman to unite his support. We will be dealing with US China trade war for a while.

Emerging markets, however, may react differently than American markets this time around. But along with Peter, hopes will be dashed when reality sets in. Ironically, Republicans have been the free-traders and globalists in US politics. The recent anti-globalism views proclaimed by a Republican President and enacted in terms of tariff threats have literally outdone even some of the more radical protectionists among the Democratic Party. Charles Schumer, leader of the Democrats in the US Senate, a long-term trade hawk, had stated that he is standing in line with Trump when it comes to trade fight with China. With their leader in the White House eager for a trade fight, the more pragmatic globalist Republicans have gone quiet. There would be little incentive for the US government to change tacks even if control of Congress flips. If Republicans were to maintain control of both Congress and Senate this year, the identity of the party will be stamped with Trump’s image going forward. There is also little chance of a change in political stance as a result.

A Republican sweep of both houses of Congress, however, might be beneficial for trade in the medium term. While Vice President Pence’s proclamation that China is considered a larger threat to the US than Russia should not be overlooked. China is viewing the current election as a test of Trump’s holding power. Rumors have it that China is in no mood to negotiate because they want to see whom they’d be negotiating with in the end. While both sides would have to be able to claim victory and save face, Peter’s respite might come from betting that Trump is a realist. Deep down, he is a New York real estate guy who is looking for a good deal. With enough concessions, he might take one if China offers something more substantial. We’ll get a better feel when the two leaders meet at Buenos Aires at the end of November.

We think that it is illogical for both sides to continue escalating, the chance of US and China engaging in a prolonged trade spat/war cannot be overlooked. I told Peter that he ought to diversify from relying on just his US customers as well, it was like preaching to the choir.

12/08/2017

02/09/2016

Emerging markets continue to receive inflows from developed markets since Brexit. During the last several weeks, central banks in UK, Australia and New Zealand have all embarked in easing programs through bond buying and interest rate cuts. There are already a handful of countries with sovereign debts that are in negative rates territory, and it looks like more will join this ignominious club. Asset allocators have little choice but to take on more risks and in their search for more return, and emerging markets fit the bill. The political instability of Europe versus that of emerging markets, especially Asia, makes such shift even more credible. While most of the inflows to emerging markets have been into fixed income, some went into the equity markets as well.

From an equity investor point of view, it is very clear that the rise in index value or share prices have little to do with the improvement in growth of the underlying companies. The price appreciation has more to do with the acceptance of lower returns and the chase of yield. Stocks that give predictable and steady dividends with bond like nature have run up the most amidst the current yield compression trend. Riskier bets go to dividend paying companies that have less predictable business model. If the trend continues, it is possible that it could extent into the more inferior companies.

Is this the beginning of a bull market in Asia Equity? No! A bull market is formed by a general pickup in growth of corporate earnings, and it is usually accompanied by a “theme”. Currently we have neither. It is however very clear that there is a super bull market for global fixed income. Equities should continue to do well as long as the bond markets are prosperous, but equities won’t outperform fixed income. If the fixed income markets start to come off for whatever reasons, absent a pickup in economic growth, equities will surely fall just as much, if not more. Investors are advised to remember that the root of the current inflow that buoy equity market levels come from the bond market.

We suggest that equity investors should take the following approaches. They should continue to add yield stocks in their portfolio as they are acting like bonds and their high yields will compress. They should also increase their exposure to long term winners as these would only get more expensive as winners are hard to come by. At the margin, they should work harder to look for turnaround stories. Although without faster growth in the economy, turnarounds are not easy to be found. A twist to this approach is to look for credible but downtrodden companies that are becoming less bad. This should work as risk appetite increases.

29/03/2016

Don’t believe we are out of the woods!

As of last week, global risky assets, including equities, have risen for the fifth consecutive week. Some people asked if we are out of the woods of market doldrums and on a new upward leg. We think the chance for this is slim. The investment world today is faced with a new normal where low growth, low interest rate, low inflation (in some places, deflation) prevail. This new normal is driven primarily by past years' excesses, ageing demographics and technological displacement of existing industries. We have seen economies of developed countries stuck in structurally decelerating, if not recessionary, trends that are hard to shake. The massive quantitative easing programs global central banks have collectively rolled out during the last few years may have helped tide things over. Outsized monetary expansion has merely kicked the proverbial can down the road. The main driver of global growth in previous years, China, is also experiencing a nontrivial adjustment as it embarks upon a structural shift of its economy that will lead to lower growth for years.

How should the investor position his portfolio in this environment? We think he should accept that his returns will be lower in the near future. Equities return will be lower, as people often pay for growth in this asset class where valuation is often determined by earnings growth trajectory. This trajectory is slowing down. Sovereign and high grade bonds, like savings accounts, will continue to pay very little in interest. Certain segments of higher yielding corporate bonds are more attractive, especially USD based ones issued by listed Chinese property companies in the next one or two years. These, however, will probably only work for one or two years. They are subject to redemption and reinvestment risks, as issuers find it more economical to call and refinance them using cheaper RMB debt. Property remains an interesting asset class, although additional taxes and regulatory curbs imposed by various governments have been making transactions costlier. Property also requires localized knowledge, as Guangzhou can stay flat while Shenzhen can see strong returns. For many people, throwing in the towel and staying in cash does not seem as outlandish a choice as before, especially in a deflationary environment. But in our opinion, one need not be as negative in one's portfolio positioning.

Within the equities space, there are still industries and situations that can do well, and they include the following:

(1) Innovative technology companies. These are usually counter cyclical because they create things or services that alter the way we live or take market share from older, existing players.
(2) Pharmaceuticals, biotech and medical services companies. Population in developed markets are ageing as baby boomers enter retirement. They will spend more on healthcare.
(3) Educational services, as this is probably the last item families will cut. It is fast growing and also very counter-cyclical.
(4) Companies with high dividend yield and earnings visibility, as investors seek for yield, these previously slower growing but high cash paying companies are becoming more attractive.

Having said that, investors should be aware that overall equity market has become very volatile and will remain so in the foreseeable future. Globalization and easy credit have seen excess capital chase after a dearth of investment opportunities in the last few years, and this kind of fast moving money can pull out just as fast as they come in. One needs strict risk management to navigate through the gyrations of the market. Unless you can time or find ways to lower the volatility of your positions, you are probably better off leaving your investments to the professionals!

10/08/2015

Game over for Asia? What's next?

Asia and the rest of emerging markets felt like the end of the world recently. Falling commodity prices and subdued external demand have cast a pall on any budding optimism. China's slowdown has affected nearly all its neighbors, from Korea and Taiwan to the rest of ASEAN, in the form of lowered exports and demand for commodities. The constrained financial spendings in countries such as Indonesia and Thailand have added to the burden these economies are already facing amidst an export slowdown. Their woes are further exasperated as a strengthening USD drains liquidity away from these markets. Recent capital market history also has not been kind. ASEAN's response to the taper tantrum in 2013, as well as the recent wild gyrations of the Chinese equity market only act to remind investors of the "emerging" nature of GEM once again. According to a report by Credit Suisse, all Asian countries are witnessing earnings downgrades to different degrees. The only country that is seeing earnings upgrade in Asia is Japan, and Japan is decidedly not part of GEM.

One global fund manager asked me earlier this week, "from a macro perspective, can you give me one good reason to buy non Japan right now?" I was stumped for a moment. Most global institutional investors treat Asia ex japan only as a high beta trade. Growth of Asia ex is used to spice up returns of their portfolios. Given the lack of growth in most "investable countries" in the region, there does not appear to be any reason to be here.

Should one forget about investing in Asia and move everything to the developed markets in Japan, U.S. and Europe? Of course not! One just needs to look deeper to see that there are still plenty of long term growth stories. The major underpinning of such growth is the rising middle class in Asia, especially China. The rise of the middle class drives increase in consumption across various segments. Demand for services and products such as IT, education, medical services, tourism and properties, to name a few, should continue to be robust as a whole generation of Asians earn enough to begin consuming.

Take China's consumption as an example. According to government published statistics, retail sales is still growing at a 10% plus clip as of June. If you don't trust government statistics, try the following anecdotal evidence reported by individual corporations. China's sporting good manufacturer and brand, Anta, has just reported first half revenue increase of 24% to RMB 5.1bn, while earnings grew 20% to RMB 965m. Its local rivals, many of whom have not yet reported interim numbers, are all expecting to deliver double digit or high single digit growth. The market leaders, Nike and Adidas, are also doing well in China. Kering, the company that owns Gucci, said its sales in Europe to Chinese has grown a lot for the first half. LVMH expressed the same view. Japan Airport Terminal saw good growth of Chinese tourists. Department stores, drug stores and duty free stores in Tokyo and Osaka have all mentioned that they are benefiting from a similar trend. Major property projects across the globe, from down under in Sydney and Melbourne to London, New York and Tokyo would not launch without marketing to Chinese investors.

The Chinese middle class are consuming, but they are consuming wisely. They are buying and spending money on goods and services that provide value. Not everyone can make money from them, but those who can satisfy their needs can make a lot! One question that reverberates among investment circles is whether the slowdown in China's economy, and especially the recent stock market turmoil would affect consumption. We believe the answer is a qualified yes, but the slowdown would be temporary and not across the board. The numbers have not reflected any slowdown yet, but this, we'll find out in a couple of months.