HK/China Equity Long-Short

Osbert Tang, CFA

Quantitative Analysis

<ul>
<li>2023 is the worst year for our "Buy the Worst" strategy as it returned -34.5% YTD, underperforming the HSI by 20.7pp. The two property names are the key drags.</li>
<li>Despite a poor 2023, the strategy has still outperformed the HSI by 17.9pp for 2018-2023. It remains significantly better than buying the winners in the current year.</li>
<li>For 2024, our strategy is to switch to <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning (2331 HK)</a>, <a href="https://www.smartkarma.com/entities/country-garden-services-holdin" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services (6098 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a>, and <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a>. </li>
</ul>


2023 is the worst year for our "Buy the Worst" strategy as it returned -34.5% YTD, underperforming the HSI by 20.7pp. The two property names are the key drags.
Despite a poor 2023, the strategy has still outperformed the HSI by 17.9pp for 2018-2023. It remains significantly better than buying the winners in the current year.
For 2024, our strategy is to switch to Li Ning (2331 HK), Country Garden Services (6098 HK), Meituan (3690 HK), Wuxi Biologics (2269 HK), and Zhongsheng Group (881 HK). 


"Buy the Worst" HSI Strategy: A Tragic 2023 and What About 2024?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The capping for the Hang Seng family of indices will use closing prices from 28 November while implementation will take place at the close on 1 December.</li>
<li>The changes for the next <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> rebalance will be announced after the close of trading on 1 December.</li>
<li>It was another week of inflows for the <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets-223f5da3-7054-4e4f-bc55-b7f0852c2581" target="_blank" data-smartkarma-citation="entities:31998:1" rel="noopener">iShares Emerging Markets (EMXC US)</a> to take units outstanding to a new high.</li>
</ul>


The capping for the Hang Seng family of indices will use closing prices from 28 November while implementation will take place at the close on 1 December.
The changes for the next S&amp;P/ASX 200 (AS51 INDEX) rebalance will be announced after the close of trading on 1 December.
It was another week of inflows for the iShares Emerging Markets (EMXC US) to take units outstanding to a new high.


Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, Div+, Top50, ASX, FXI, Xiaomi, Tata Tech

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>The Dec 23 review results for the Hang Seng Tech Index were announced on Friday 17 November after the close.</li>
<li>There were no ADDs to or DELETEs from the index, in something of a surprise. </li>
<li>The "big flow" on HS TECH is the downweight on <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> due to sharp capping after significant outperformance since the August review.</li>
</ul>


The Dec 23 review results for the Hang Seng Tech Index were announced on Friday 17 November after the close.
There were no ADDs to or DELETEs from the index, in something of a surprise. 
The "big flow" on HS TECH is the downweight on Xiaomi Corp (1810 HK) due to sharp capping after significant outperformance since the August review.


Hang Seng Tech Dec23 Index Review/Flows - No Name Changes, Some Big Capping Flows

<ul>
<li>The HSCEI Review for December 2023 was announced on Friday 17 November. </li>
<li>There were no ADDs and no DELETEs, which was a bit of a surprise.</li>
<li>There is about 2.8% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.</li>
</ul>


The HSCEI Review for December 2023 was announced on Friday 17 November. 
There were no ADDs and no DELETEs, which was a bit of a surprise.
There is about 2.8% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.


HSCEI Dec23 Index Review/​Flows - NO ADDs, No DELETEs; ~2.5% One Way

<ul>
<li>For a second review running, <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> has avoided being deleted from the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>.</li>
<li>That means <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> misses out on index inclusion, but there is still hope for the next one.</li>
<li>There does not appear to be any significant positioning on either stock and any large moves early in the coming week could be short lived.</li>
</ul>


For a second review running, Zhongsheng Group (881 HK) has avoided being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX).
That means China Unicom Hong Kong (762 HK) misses out on index inclusion, but there is still hope for the next one.
There does not appear to be any significant positioning on either stock and any large moves early in the coming week could be short lived.


HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life

Hong Kong

China Unicom (Hong Kong) Limited, through its subsidiaries, provides telecommunications services in the People's Republic of China.  The Company's services include cellular, paging, long distance, data, and Internet services.

Price Gauge
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China Unicom Hong Kong (762 HK)

"Buy the Worst" HSI Strategy: A Tragic 2023 and What About 2024?

2023 was bad for the "Buy the Worst" strategy, but it still outperformed the HSI for 2018-2023. In 2024, we will switch to Li Ning, Country Garden...

Osbert Tang, CFA

Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, Div+, Top50, ASX, FXI, Xiaomi, Tata Tech

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

Hang Seng Tech Dec23 Index Review/Flows - No Name Changes, Some Big Capping Flows

Hang Seng Index team announced the December 2023 review for the Hang Seng Tech index on 17 Nov after the close. No name changes. But several...

Travis Lundy

HSCEI Dec23 Index Review/Flows - NO ADDs, No DELETEs; ~2.5% One Way

Hang Seng Indices announced the Dec 2023 review for the HSCEI on Friday 17 November after the close. No name changes, which is a surprise....

Travis Lundy

HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life

In a surprise, there are no constituent changes for the HSCEI in Dec. Estimated one-way turnover is 2.8% leading to a one-way trade of HK$1.85bn...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

"Buy the Worst" HSI Strategy: A Tragic 2023 and What About 2024?

​2023 was bad for the "Buy the Worst" strategy, but it still outperformed the HSI for 2018-2023. In 2024, we will switch to Li Ning, Country Garden...

Osbert Tang, CFA

Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, Div+, Top50, ASX, FXI, Xiaomi, Tata Tech

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

Hang Seng Tech Dec23 Index Review/Flows - No Name Changes, Some Big Capping Flows

Hang Seng Index team announced the December 2023 review for the Hang Seng Tech index on 17 Nov after the close. No name changes. But several...

Travis Lundy

HSCEI Dec23 Index Review/​Flows - NO ADDs, No DELETEs; ~2.5% One Way

Hang Seng Indices announced the Dec 2023 review for the HSCEI on Friday 17 November after the close. No name changes, which is a surprise....

Travis Lundy

HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life

In a surprise, there are no constituent changes for the HSCEI in Dec. Estimated one-way turnover is 2.8% leading to a one-way trade of HK$1.85bn...

Brian Freitas

2023 was bad for the "Buy the Worst" strategy, but it still outperformed the HSI for 2018-2023. In 2024, we will switch to Li Ning, Country Garden...

HSCEI Dec23 Index Review/Flows - NO ADDs, No DELETEs; ~2.5% One Way