Category: personal_noteS

US-China direct flights recovery

Recovery Tracker

after China reopened in 2023, flights were set to increase from 16 per week to 24 per week, announced in March 2023.

In Aug 2023, two sides agreed to double capacity of 48 per week, ramping up to 36 per week on Sep 1, and 48 per week on Oct 29.

Flights would further increase to 70 per week starting Nov. 9.

Technical difficulties

US need to avoid Russian airspace, which requires longer distance and thus refueling.

Impact on tourism

e.g. SF: visitors from Mainland would be only ~20% of 2019 level.

“In 2019, 518,000 of San Francisco’s 4.3 million international visitors were from China, according to data provided by SF Travel. Though visitors from Mexico outnumbered them by about 100,000, visitors from China spent the most of any group, accounting for $1.2 billion of the $7.7 billion international tourists spent in the city that year.

This year, visitors from China are expected to number only one-fifth of their 2019 total, and expected to spend just under $450 million. That brings the city’s total international visitor spending down from 2019’s $7.7 billion to an expected $5.9 billion in 2023.”

— SF Chronicle (https://www.sfchronicle.com/sf/article/international-tourism-china-recovery-18188305.php)

 

Other sources:

https://www.regulations.gov/document/DOT-OST-2020-0052-0165

 

US new home sales resilient

Looks like the monthly sales is still health. Month to clear inventory is steady and up a bit to ~7.8 months in Oct 2023.

Currently monthly sales pace is better than 2018 and 2022, despite record high interest rate in recent years.

New homes for sales has gone up more. So the number month to clear new home inventory has gone up to 7-8 months recently vs. an average of 6.2 months in 2018. And is much better than the 2020-21 average of 5.1 months.

Better availability should be good for inflation and soft-landing scenario.

New residential sales Oct 2023

See the other post for China new home sales – the inventory stood at over 20 months the last time I checked.

Commercial real estate problems summary

A good summary from Rob Stuckey, head of Carlyle’s U.S. real estate funds, on US office building weakness, from Insights and Indicators podcast by Carlyle:

  1. Already weak before pandemic
    • oversupplied
    • low operating margin
    • high correction to GDP / exposure to macro cyclicality
  2. Secular trend of work-from-home / technology trend

Factors to value real estate

  • demand drivers (macro/GDP, demographics)
  • technology
  • operating margin (high maintenance/recurring capital expenditure)
  • tenant stickiness (demand ever increasing)

 

Meituan’s changing financial reporting

Back to 2021-2022, Meituan’s quarterly results experienced various changes in reported metrics, which looks a bit dubious and problematic – whether it’s due to conflicts when measuring performance internally and to investors, or gov’s implicit requirement, or regulation changes.

Here are the 4 changes:

1/ Food delivery revenue split (2021q4): “Commission” split into “Commission” and “Food delivery services”, not segment changes.

2021q3

2021q4

2/ no more “GTV of food delivery” and “number of domestic hotel room nights” (2022q1)

2021q4

2022q1

3/ big change in 2022q2: new segment reporting of “Core local
commerce”, which combines previous “Food delivery”, “In-store, hotel & travel” & some business previously in “New initiatives and others”, e.g. Meituan Instashopping (美團閃購)

2022q1

2022q2

This segment reporting is used as of today.

Plus, in operating metrics, “Number of food delivery transactions” is now “Number of On-demand Delivery transactions”.

2022q1

2022q2

This is interesting – according to the footnote, “Number of On-demand Delivery transactions” includes number of transactions from food delivery and Meituan Instashopping businesses. While it’s consistent with “Core local commerce” definition, it’s hard to argue why business like Meituan Grocery (美團買
菜), which is under “New initiatives and others”, is not on-demand delivery transaction.

Plus, since “Core local commerce” now includes in-store, hotels etc., which has nothing to do with “delivery”, it’s hard to know the unit economics for delivery.

4/ No more reporting of “Number of Transacting Users”, “Number of Active Merchants” and transaction per user (2023q1)

2022q4

Gone in 2023q1

US-China recent deals round-up

Biotech

Nov – Modern Shanghai plant break ground; the $1bn deal was signed in July

Oct – Junshi’s PD-1 drug, with US & Canada right purchased by partner Coherus was approved by FDA

Agricultural purchases

Oct – signed 11 purchasing agreements/contracts, worth multiple billions in value

Nov – 600k ton soybeans; and then 3mn+ tons; a good summary here

Industrial / Areospace

Nov –  GE Aerospace’s 25 GEnx-1B engines order from China Eastern Airlines to power its Boeing 787 fleet.

Nov – Xiamen Airlines purchases.

Market is speculating more Boeing orders.

Consumer internet / tech

Nov – Meta’s Oculus is coming to China in late 2024 (w/ a lower-end version of Quest 3), with Tencent as partner; WSJ reported the talk between Meta and Tencent back in Feb 2023.

Nov – Nvidia to release 3 new chips for China market (H20, L20 and L2), available as soon as the end of this year.

China new home sales 2023 Sep vs. 2020 Sep

Facts for China new home sales

2020 2023
Sep Sep
‘0000 sqm 万，平方米
Supply 供应面积           7,529           2,990
Demand 成交面积           5,228           2,262
Inventory 库存         50,739         51,221
Sales pace (month)             9.71           22.64

Inventory actually didn’t increase much, flat after 3 three years.

But the willingness to purchase (new homes) has decreased, area sold in Sep 2023 is less than half (43%) of 2020 Sep level.

Therefore, the resulting month-to-clear-for-sale-homes is more than doubled from ~10 month to almost 23 month – it will need almost 2 years to clear new house inventory at current sales pace.

The above figure is for 100 cities in China.

To look at the bottom 10 cities: back in Sep 2020, the worst 10 cities needed 21.5 – 35.3 month to clear inventory whereas in Sep 2023, the worst 10 cities will need 57.6 – 93.9 month to clear inventory.

Source:

http://m.fangchan.com/news/320/2023-10-25/7122778841134993672.html

http://news.dichan.sina.com.cn/2020/10/27/1274844.html

 

 

 

Why books (& reading) are one of the best investments?

You can get 20% return on stocks per year if you are as good as Buffet.

But books and reading have a much higher return!

The cost of a book is basically cost-plus, including those paid to the author. It’s relatively small sum of money – likely less than a meal.

The price is similar for every one. It’s up to each reader to capture all the upside to him/herself. No price discrimination.

The paper and the printing are basically similar across books – different words on a single page don’t mean they cost differently. Therefore, an amazing book costs the same as any other books (well, royalties, length, quality of paper may differ, but you know what I mean).

Put it another way, a good reader can get higher value from reading books, without increasing costs, if he/she can pick “high value” books (for him/herself).

It’s like Nvidia pays similar prices as others for the same wafer to TSMC, but gets higher value/return from it.

Besides money, readers are also investing their time. So, the return of reading a book could be even higher if he/she can read more efficiently, reducing time spent while still get most of the stuff.

It’s like fitting a few more chips onto one wafer.

What’s more impressive? TSMC has a high market share and some bargain power, but printing books seem to be very fragmented and has very good availability.

Enjoy reading great books! That’s likely a higher return investment than Nvidia selling chips.

 

 

Wanda Commercial refinancing YTD

Sources

  • 年初融美元债$700mn，12+% yield
    • 2025 $400mn @11%
    • 2026 $300mn @11%
  • 境内中期票据 15 亿 rmb，6.8%
  • 卖万达电影股权，两笔共40多亿rmb，
    • 一笔中国儒意（背后腾讯出钱）
    • 一笔是东方财富的老婆
  • 卖5座万达广场股权；price? to 大家保险 etc
  • 发行ABS; didn’t work
  • Net income ~$1bn in 23H1

Uses

  • 还40亿 rmb 票据
  • 还$400mn Jul 2023美元债@6.875%
  • Sep 回购 5.58% 38亿puttable境内债 20万达01

Upcoming: Jan 2024 $600mn 7.25% note

Potential: didn’t IPO -> to repurchase 30bn rmb

Is China’s mobile gaming market growing?

Yes.

In 2023 summer (July and Aug), China’s mobile gaming market grew 57% yoy (!).  China’s overall gaming market grew 46.1% yoy in August.

That’s an amazing number, considering it’s quite mature and developed already.

The base effect is obvious though. China’s most recent crackdown on video gaming back to Aug 2021 lasted around a year (or15-month if consider Tencent’ new commercial license as an end).

New game license issuance resumed in Apr 2022, stopped once again in May 2022, and resumed in June 2022. However, big companies like NetEase didn’t get new commercial game licenses until September 2022, and Tencent waited until November 2022 (no new game license issued in Oct 2022).

The crackdown led to yoy decline of ~24% in summer 2022 (July and Aug) for mobile gaming, which is ~70% of the market.

However China mobile gaming is reaching a new high now. It’s 20% higher than 2021 summer.

Comparing with 2020 summer, 3-yr CAGR would be 8.9% for mobile gaming.