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The Week that Was in Greater China @Smartkarma: BABA Is Everywhere, Chinese Tourism, Fertility Fears

This issue of 'The Week that Was in Greater [email protected]' covers the week of August 13 - 18 and features a selection of the week's insights on China, Macau, Hong Kong and Taiwan. This is a collaborative report compiled by Scott Laprise/ 乐天虎, Valerie Law, CFA, Ke Yan, CFA, FRM, and Daniel Hellberg on a rotating basis. Please let us know if you would like to be included in this collaborative effort.

Companies, Sectors & Themes

It really does seem like Chinese e-commerce giant Alibaba Group Holding Ltd (BABA US) is EVERYwhere these days: Vincent Fernando, CFA offered a good summary of BABA's strong June quarter results in Alibaba 1Q18 Earnings: All-Around Beat; Core Commerce Surging, while others wrote about BABA's investments in Logistics (BABA-Backed CaiNiao Network’s Loss Rose 8% Y/Y, On Track for 2bn+ RMB Loss in 2017, Pressure Grows) and in SE Asia's Lazada.com (Alibaba June Q Results Suggest Dramatic Improvement in Lazada Revenue, Up as Much as 291% Y/Y). Valerie Law, CFA also gave a quick update to her previous (negative) piece on BABA's chief rival, JD.com Inc (ADR) (JD US), which reported its own June quarter results earlier in the week. In line with her expectations from JD.com: Rich Valuations on Razor-Thin Margins & Negative ROIC, JD.com's June results did not match their seemingly strong performance from the March quarter, and progress to date on creating a large, independent Logistics subsidiary has been unimpressive.

Several Insight Providers contributed their latest views on Chinese gaming and tourism: Howard J Klein described a Macau dynasty in Galaxy’s Mass Focus Worthy of Stronger Valuations Even if Macau Recovery Slows Against 2016 Comps. In it Howard details how Galaxy's controlling family has built up strong relationships with authorities in Beijing over time, even over two generations of management. JL Warren Capital provided a quick update on Macau gaming activity in Macau Gaming August Update: MTD ADR Up 25+% YoY Driven by Robust VIP Demand. And finally Christopher Balding offered and excellent analysis of recent Chinese domestic and international travel activity in Behind the Divergent Trends in Chinese Travel and Transport. 

Elsewhere, we argued investors should revisit Chinese warehouse 'pure play' CLPH in ‘GLP Wannabe?’ Revisiting China Logistics Property Holdings After Sale of Global Logistic Properties. The company should report H1 results later in August, and we will be examining the numbers closely to see if CLPH made progress in resolving some earlier concerns.

We also told subscribers about the dramatic H1 turnaround at Taiwan's largest container carriers in Evergreen, Yang Ming Q217 Results Show Sharp Recovery Since Hanjin Bankruptcy in Q316; Now What?. Since then, Drewry Maritime Financial Research has also covered the cyclical recovery at Yang Ming Marine Transport (2609 TT) and Danish giant AP Moeller - Maersk A/S (MAERSKB DC). With Evergreen's shares up over 30% since Q2 results came out last week, we were clearly way too early in stating that the sector's recovery had already been fully discounted.

Valerie Law late in the week noted that several HK-listed Chinese education companies will soon be included in certain Hang Seng indices; see her piece here: Inclusion in Hang Seng Family of Indexes Boosts Newly-Listed Education Stocks – Top Pick 2001 HK. This step may generate moderate index-related buying but, more importantly, the stocks will become 'HK-Connect' eligible, which should stimulate buying interest from Chinese investors. Her top pick in the group is China New Higher Education Group (2001 HK). 

Smartkarma's own Ke Yan, CFA, FRM gave an overview of China Feihe (FEIHE HK), a leading Chinese infant formula company that's adding production facilities in Canada in China Feihe IPO Preview: Goat Bless Infant Formula Milk? The company is attempting to raise funds (again) soon after a failed attempt at an IPO in 2016.

Elsewhere, Thomas Monaco wrote about weak profitability at global banking giant HSBC's North American operation in HSBC North America  - Such a Drag. Meanwhile, Daniel Tabbush looked at rapidly deteriorating margins at some unlisted Chinese banks in Unknown, Fringe China Bank Reveals Telling Margin Erosion and wonders what the implications are for some larger, publicly traded Chinese banks.

In technology, Andrew Lu covered the re-emergence of private Chinese communications chip designer Spreadtrum in Spreadtrum Is Back to the Game by Leveraging Intel IPs and Production; Negative to MediaTek?. Andrew concluded that while Spreadtrum's new chips may pose a minor near-term challenge to some of Qualcomm Inc (QCOM US)'s and Mediatek Inc (2454 TT)'s established products, in the long-run Spreadtrum will struggle to be cost competitive if it relies on Intel Corp (INTC US) for foundry. Finally, Dr. Andrew Stotz, CFA published a comprehensive overview of a Taiwanese memory chip specialist in Macronix: Devices Depend on Company’s Memory.

Macro & Politics

Dr. Jim Walker wrote convincingly about a coming economic 'war' between generations in World War Three: Part 1 – Falling Fertility, which stimulated a lively discussion on the platform. His next piece on the subject will propose some solutions to this growing problem -- watch for it! 

In China: Soaring Credit Keeps the Economy Afloat, Precariously, Prasenjit K. Basu argued that the current pace of credit growth and FAI expansion in China cannot continue for very long. Christopher Balding's Just How Important Is FAI to the Chinese Economy? serves as an excellent companion to Prasenjit's piece.

Finally, Manu Bhaskaran wrote about China's assertiveness in its discussions with SE Asian nations regarding security in the South China Seas. Please find his piece here: China Shows ASEAN Who’s Boss. 

This insight is part of Smartkarma. For more follow this link.



This post first appeared on Smartkarma | Intelligent Investing, please read the originial post: here

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The Week that Was in Greater China @Smartkarma: BABA Is Everywhere, Chinese Tourism, Fertility Fears

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