Cachet's Insight 27/01/2020

Updated: Feb 19


Hot Topic

Moody’s Investors Service lowered Hong Kong’s rating as a long-term issuer of debt by one notch on Monday, just months after Fitch Ratings took a similar action amid political protests.


Moody’s cited a degree of “inertia” characterizing the legislative and executive branches of government in the statement, as it lowered the rating to Aa3 from Aa2. The ratings agency also changed the outlook to “stable” from “negative. The absence of tangible plans to address either the political or economic and social concerns of the Hong Kong population that have come to the fore in the past nine months may reflect weaker inherent institutional capacity than Moody’s had previously assessed.


Market Outlook

Due to the down grading to Hong Kong’s rating from Muddy’s and spreading of Wuhan pneumonia infection, Hang Seng Index dropped 3.81% weekly, the eighth straight week for the index was gone. Regarding the outbreak of coronavirus in China, the toughest time seems yet to come. as the number of new cases is still on the rise, the market will get a clearer picture of the widespread degree, speed and breath of transmission after Lunar New Year. Hang Seng Index is expected to defend 28,000 in the next week, and may have at least thousands of points downsides if the virus becomes uncontrollable after Lunar New Year.


Chart of the week

In the US-China 'phase one' trade deal, China has pledged a series of measures to open its financial services sector to US competition, in areas ranging from banking services to credit ratings, electronic payment services, asset management and insurance. The American business could benefit from such market open. The stocks show’s below will be happy when there's a trade deal.


Electronic Payment:

  • Visa (V.US)

  • Master (MA.US)

Fund Management:

  • BlackRock (BLK.US)

  • Blackstone (BX.US)

Credit Rating Agencies:

  • S&P Global (SPGI.US)

Index Inclusion for Chinese Securities:

  • BlackRock (BLK.US)

  • S&P Global (SPGI.US)

  • HKEX (0388.HK)

These above-mentioned businesses could benefit from the opening of Chinese financial sector, and even more so when there are further developments in the trade deal. Companies such as Visa and Mastercard will gain Access to China's RMB 190 trillion electronic payments market S&P has Large opportunity in China with access to RMB 95 trillion bond market.

Global Indices

  • SSE Composite Index was down 3.22% last week.

  • Hang Seng Index was down 3.81% last week.

  • Dow Jones Industrial Average index was down 1.22% last week.

  • NASDAQ Composite Index was down 0.79% last week.

  • S&P 500 Index was down 1.03% last week.

Investment Idea

HOLIDAY CASH PARKING OFFERS


Asset Allocation

Analyst Recommendation

Goldman Sachs gave its price target on Alibaba Group Holding Ltd (9988.HK) to $277 a share and gave the buy rating.


Nomura gave its price target on China Mobile Ltd (0941.HK) to $91 a share and gave the buy rating.


Huatai Research gave its price target on Zhangzhou Pientzehuang Pharmaceutical Co Ltd (600436.CH) to $137.64 a share and gave the buy rating.


Goldman Sachs gave its price target on Lockheed Martin Corp (LMT.US) to $469 a share and gave the buy rating.

Mizuho Securities gave its price target on Chevron Corp (CVX.US) to $140 a share, gave the buy rating.


Global Indices

  • SSE Composite Index was down 3.22% last week.

  • Hang Seng Index was down 3.81% last week.

  • Dow Jones Industrial Average index was down 1.22% last week.

  • NASDAQ Composite Index was down 0.79% last week.

  • S&P 500 Index was down 1.03% last week.


Newly Listed

  • ONEM.US 1Life Healthcare INC (2020/1/30)

  • ARQT.US Arcutis Biotherapeutics INC (2020/1/30)

  • AHI.US Avadim Health INC (2020/1/30)

  • BDTX.US Black Diamond Therapeutics INC (2020/1/30)

  • REYN.US Reynolds Consumer Products INC (2020/1/30)


Result Announcement

2020/01/27

  • Quarter: JNPR.US Juniper Networks Inc

  • Quarter: WHR.US Whirlpool Corp

  • Quarter: ELS.US Equity LifeStyle Properties Inc

  • Quarter: BYND.US Beyond Meat Inc

  • Quarter: GGG.US Graco Inc


2020/01/28

  • Quarter: AAPL.US Apple Inc

  • Quarter: LMT.US Lockheed Martin Corp

  • Quarter: MMM.US 3M Co

  • Quarter: PFE.US Pfizer Inc

  • Quarter: XLNX.US Xilinx Inc


2020/01/29

  • Quarter: WYNN.US Wynn Resorts Ltd

  • Quarter: MCD.US McDonald's Corp

  • Quarter: FB.US Facebook Inc

  • Quarter: BA.US Boeing Co/The

  • Quarter: TSLA.US Tesla Inc


2020/01/30

  • Quarter: EA.US Electronic Arts Inc

  • Quarter: UPS.US United Parcel Service Inc

  • Quarter: DB.US Deutsche Bank AG

  • Quarter: MO.US Altria Group Inc

  • Quarter: V.US Visa Inc


2020/01/31

  • Quarter: CAT.US Caterpillar Inc

  • Quarter: CL.US Colgate-Palmolive Co

  • Quarter: AMZN.US Amazon.com Inc

  • Quarter: ITW.US Illinois Tool Works Inc

  • Quarter: LYB.US LyondellBasell Industries NV


Hot Topic of the Bond Market

Tianqi Lithium Corp., the world’s second-biggest producer of the mineral, canceled a bondholder meeting slated for Tuesday amid concern over its ability to repay a 300-million-yuan bond ($44 million), according to a REDD report.


Sinolink Securities, the underwriter of the company’s 300m yuan 6.3% bond due February 2023 puttable Feb. 1, canceled the meeting as Tianqi was concerned that any leaked information presented would pose a negative risk to its business.


The Chinese producer of the mineral key to electric-vehicle batteries needs to repay 318 million yuan in principal and interest after almost all holders exercised the put, according to a Jan. 4 filing. The company promised to do its best to raise funds to refinance the bond, REDD reported late Monday.


Tianqi’s $300 million bond sank the most on record earlier this week, according to Bloomberg-compiled prices. REDD had reported earlier on Monday that Tianqi planned the bondholder meeting and is considering asking for a short-term extension.


Tianqi Lithium’s investor relations department declined to comment when reached by Bloomberg by phone, while its media office didn’t immediately reply to an email request.

Lithium producers worldwide have struggled after a rush of investment in mines left the market facing a premature wave of new supply. Prices have more than halved since their peak in April 2018, according to consultancy Benchmark Mineral Intelligence, triggering the failure of some planned new projects.


Tianqi’s rating was cut to B1 from Ba3 in December by Moody’s Investors Service, which said the smaller-than-expected proceeds from the company’s rights issue would result in slower deleveraging and tighter liquidity.

Asia Bond Market

Fund managers were glued to their desks Tuesday as new Asia bond deals continued thick and fast from borrowers taking advantage of a window to sell notes ahead of the Lunar New Year. The deals being marketed were geographically diverse, including Evergrande. The market was busy even as Asian shares dropped on a risk-off move stemming from growing worries about China’s coronavirus. Orderbooks have been robust and investors are keen to put money to work at the start of the year. However, Investors also took a breather to assess the fallout from a new respiratory virus following the record deluge of sales this month. HNA faces $500m debt deadline before Lunar New Year.


Evergrande

  • 2.75Y/3.75Y USD Bond IPT 11.5%/12.5% Area

  • Expected Issue Ratings: B2 (Moody’s) / B (S&P)

  • Reg S

  • Joint Global Coordinators, Joint Lead Managers and Joint Bookrunners: Credit Suisse (B&D), BofA Securities, UBS


Dalian Wanda Commercial

  • $400m 3.5Y bond, 6.875% vs IPT 7.25% area

  • Expected issue ratings: Ba3/BB+ (Moody’s/Fitch)

  • Reg S

  • GC: Credit Suisse


Dexin China

  • $200m 2.25Y bond, 13% vs IPT 13.5% area

  • Expected issue rating: B3 (Moody’s)

  • Reg S

  • JGCs/JBRs/JLMs: Guotai Junan International (B&D), Credit Suisse, UBS


Dafa Properties

  • $200m 364-day bond at 12.75%, vs IPT 13.125% area

  • Unrated

  • Reg S

  • JGCs/JBRs/JLMs: HSBC (B&D), Credit Suisse, CMB International, Barclays, Deutsche Bank, HeungKong Financial


Sunshine 100

  • $105m tap of 2021 USD bond at 12.5%, IPT 12.5%

  • Unrated

  • Reg S

  • JGCs/JLMs/JBRs: CCB International, China Industrial Securities International, Haitong International


Risesun Real Estate

  • $300m 364-day bond, 8.875% vs IPT 9.375% area

  • Unrated

  • Reg S

  • JGCs/JLMs/JBRs: Guotai Junan International, UBS, Haitong International, Morgan Stanley, China Investment Securities International



CACHET GROUP

28/F YF Life Tower,
33 Lockhart Road, Wanchai,

Hong Kong

T(HK): (852) 3579 2090

T(CN): (86) 150 1251 8130

F: (852) 3579 2089

Wechat ID: CACHETGROUP 

linkedin (1).png