Chindata Goes Private

Key News

Asian equities were mixed but mostly lower overnight on decent volumes.

Data center operator Chindata will be going private. The company is reported to have reached a deal with Bain Capital, which values the company +7.5% higher than the initial proposal. Holders of the company’s American Depositary Receipts (ADRs) will receive $8.60 in cash. The company is an important and promising player in developing the enormous amount of cloud data centers that China will need for its cloud transition. Hat tip to Bain for recognizing the value of this company that public markets could not. Hopefully, it will be back when public market sentiment improves.

Back in the summer of 2015, go-private deals marked the market’s bottom following a challenging period for A shares with the popping of many bubbles. Could this indicate another bottom for China Internet? We shall see.

This will be a busy week for economic releases and central bank decisions in China. Tomorrow, the PBOC will release the new loan prime rates, which are expected to remain unchanged at around 2.7% though we may see a surprise cut given the needs of the economy. Tomorrow will also see the release of industrial production, retail sales, property investment, and unemployment. Retail sales are expected to indicate the most significant improvement from last month.

The State Council released 24 measures to shore up the attractiveness of China’s markets to foreign investors. More policy support is expected before the end of the year, but perhaps not right away. The loan prime rates provide an opportunity, but the government is likely to focus on purely fiscal and structural measures for the time being.

Country Garden Holdings is headed for restructuring, facing a similar fate as China’s Evergrande Group. The company announced the suspension of 6 onshore bonds last night and established a plan to eventually meet repayments. Country Garden is one of the largest non-state-owned property developers in China, focusing on lower tier cities. Presales have been underperforming in recent months as most demand for new houses was mainly deriving from tier 1 cities. The developer began to face significant liquidity stress in the second half of this year as an outsized portion of its debts came due at the same time amid slowing sales.

The Hang Seng and Hang Seng TECH
ECH
indexes closed lower by -1.58% and -1.52%, respectively, overnight on volume that increased +8% from Friday. Short sale turnover also increased +31% from Friday. Meanwhile, Mainland investors continued to buy weakness in Hong Kong, with a net purchase of $1.1 billion worth of Hong Kong shares overnight via Southbound Stock Connect. Internet stocks were clipped though most sectors were lower overnight.

Shanghai, Shenzhen, and the STAR Board all closed lower by -0.34%, -0.13%, and -0.88% overnight, respectively, on volume that decreased -3% from Friday. Foreign investors sold a net $595 million worth of Mainland stocks overnight. Most sectors were lower overnight.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.26 versus 7.24 yesterday
• CNY per EUR 7.91 versus 7.93 yesterday
• Yield on 1-Day Government Bond 1.37% versus 1.37% yesterday
• Yield on 10-Year Government Bond 2.62% versus 2.64% yesterday
• Yield on 10-Year China Development Bank Bond 2.73% versus 2.74% yesterday
• Copper Price +0.12% overnight
• Steel Price -0.05% overnight