The Sohn Hong Kong Investment Leaders Conference will take place in person on Wednesday for the first time since 2019, after the city exited three years of stringent Covid restrictions.
(Bloomberg) — The Sohn Hong Kong Investment Leaders Conference will take place in person on Wednesday for the first time since 2019, after the city exited three years of stringent Covid restrictions.
Much has changed in that time. China stocks that had been staples at the annual event before 2019 were nowhere to be seen last year, following a domestic crackdown on freewheeling technology and consumer companies, mounting geopolitical tensions and rising interest rates that made investors less willing to put money into highly valued, cash-burning growth companies.
Instead, Vietnam took the spotlight in 2022, as a beneficiary of manufacturers moving production away from China to escape its pandemic curbs and US scrutiny over a growing rank of Chinese companies. Oasis Management’s Seth Fischer pitched buying a pair of exchangeable bonds issued by companies under Vingroup JSC. Flowering Tree Investment Management Pte’s Rajesh Sachdeva revisited Vietnam Prosperity JSC Bank as a way to tap into consumer finance demand in a high-growth economy.
In the end, Converium Capital Inc.’s Aaron Stern won out with his idea of buying 2025 and 2032 El Salvador sovereign bonds. Gabriel Grego of Quintessential Capital Management made more gains from his 1.5-year-long bearish wager on Cassava Sciences Inc.
Here are the winners and losers among last year’s ideas.
El Salvador Bonds
The call: Stern, chief investment officer of Montreal-based Converium, touted El Salvador sovereign bonds as an investment opportunity. The country’s sound fundamentals had been overshadowed by concerns about it being the first nation to adopt Bitcoin as legal tender. Its sovereign debt was trading like those of Ukraine and Sri Lanka, implying market expectations of a default and low recovery rate.
The outcome: The country fully repaid the principal and interest of dollar bonds due January 2023 and bought back the bulk of those maturing in January 2025, the next major principal repayment date. That sent the 2025 bonds on a 70% rally between the 2022 Sohn conference and Monday. The April 2032 notes gained 58%.
Truecaller AB
The call: Nishchay Goel of Duro Capital Singapore Advisors was bullish on the Stockholm-based company that identifies unknown phone numbers and filters out spam calls in markets including India. Goel said it could be worth $7.5 billion, implying a 4.2-times upside, and become an acquisition target for a global telecommunications operator.
The outcome: Truecaller shares tumbled in September after it became the subject of a report by Viceroy Research, which shorted the stock. The shares extended declines in February when the company’s earnings missed estimates. While it has since pared losses, as of Monday’s close the stock was still down 37% since last year’s conference.
Vietnam Prosperity JSC Bank
The call: Sachdeva of Flowering Tree revisited his 2018 bullish pitch of the Vietnamese lender, which runs the nation’s dominant consumer-finance franchise. Sachdeva said the bank had one of the highest return ratios and lowest cost-to-income ratios in the country. He bet that manufacturers shifting production from China to Vietnam would boost consumer income there.
The outcome: Within a month of making his call, the bank lost almost a quarter of its value — a plummet that Sachdeva linked to government interventions in the property sector and rules around bond issuances that impacted several lenders. But by March, the stock had all but recovered after Japan’s Sumitomo Mitsui Financial Group Inc. bought a 15% stake for about $1.5 billion. Sachdeva said he added to his position this year and it’s up 2% on a 12-month basis. He expects the banking system risks to be largely over by the third quarter, making it one of his top three positions.
Vingroup
The call: Fischer, Oasis’s chief investment officer, spoke of Vingroup, the largest Vietnamese conglomerate whose businesses range from industrial to technology, healthcare and education. Bonds of Vinpearl — the hotel, resort and amusement park operator — that can be exchanged into shares of Vingroup, and of Vingroup into shares of its real estate arm Vinhomes offered attractive yields.
The outcome: Buying the two exchangeable bonds and hedging them with shorting the stocks would have made a decent return as the Vietnamese central bank cut rates amid an export slump and property market turmoil. Even without the stock hedges, the Vinpearl-to-Vingroup bond earned a net 2% from accrued interest since last year’s conference, and the Vingroup-to-Vinhomes bond returned 6.4% from both price gains and accrued interest, Fischer said.
Crypto Revival
The call: IDEG Asset Management Managing Director Kevin Loo touted beaten-up crypto assets as the market went through its third winter. He argued that the growing ecosystems of DeFi and web3 apps attracted more users, validating the industry’s importance.
The outcome: Crypto markets have partially rebounded this year, with Bitcoin still more than $40,000 below its November 2021 peak. Regulatory uncertainty has increased with US clampdowns after the unraveling of FTX in November. One bright spot was the successful upgrade of the Ethereum blockchain.
Cassava Sciences
The call: Grego, the New York-based chief investment officer of Quintessential, had the lone bearish idea during last year’s conference. Having started a campaign against Cassava Sciences in November 2021, backed with a short position, he predicted the stock was “heading for zero.”
The outcome: Cassava filed a defamation suit against Quintessential and others in November, alleging a smear campaign centering on trials for its proposed Alzheimer’s treatment. This month, a federal judge ruled that investors could move forward with a suit in which they alleged Austin-based Cassava had misled them about the prospects of the drug. The stock, which soared to $135.30 in July 2021, has fallen about 10% since last year’s conference to $26.51 as of Monday.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.