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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Hang Seng Indexes will announce the results of the December 2021 review of the Hang Seng Family of Indexes on 19 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ended on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>.With Hang Seng Indexes looking to get up to 80 <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.As of the close on 3 November, index turnover is 1.3% from capping and other changes to the current index constituents. That gives the index committee a lot of room to add some big stocks to the index without increasing the turnover to levels seen at the last two rebalances in June and September.We identify 12 stocks that could be added to the index based on market coverage and the impact of recent regulatory changes. Of the 12 stocks, 8 are higher probability changes and 4 are lower probability.All 12 inclusions will result in a one-way turnover of 6.37% while the inclusion of the 8 high probability changes will result in a one-way turnover of 4.98%.There is large short interest on most of the stocks and index inclusion could set off a round of short covering and could drive the stocks higher.

Hang Seng Indexes will announce the results of the December 2021 review of the Hang Seng Family of Indexes on 19 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ended on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).With Hang Seng Indexes looking to get up to 80 Hong Kong Hang Seng Index (HSI INDEX) members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.As of the close on 3 November, index turnover is 1.3% from capping and other changes to the current index constituents. That gives the index committee a lot of room to add some big stocks to the index without increasing the turnover to levels seen at the last two rebalances in June and September.We identify 12 stocks that could be added to the index based on market coverage and the impact of recent regulatory changes. Of the 12 stocks, 8 are higher probability changes and 4 are lower probability.All 12 inclusions will result in a one-way turnover of 6.37% while the inclusion of the 8 high probability changes will result in a one-way turnover of 4.98%.There is large short interest on most of the stocks and index inclusion could set off a round of short covering and could drive the stocks higher.

Hang Seng Index Rebalance Preview: The Road to 80 Constituents

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Market dynamics remain healthy which suggests a new broad-based bull market is not far off. With that said, we are still waiting for confirmation in the form of breakouts or bullish price inflections on the broad global indexes (ACWI-US, ACWX-US, EFA-US, and EEM-US) in order to turn bullish.<ul type="disc">
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Actionable Theme: Major Autos/Auto Parts. Global automobile stocks display bullish price and RS inflections with many breaking out to new highs -- add exposure... see pages 3 and 5-6.</li>
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Actionable Theme: Financials. There continues to be a plethora of attractive Financial stocks globally, ranging from banks and insurance to financial services -- add exposure... see pages 4 and 6-14.</li>
</ul>

Market dynamics remain healthy which suggests a new broad-based bull market is not far off. With that said, we are still waiting for confirmation in the form of breakouts or bullish price inflections on the broad global indexes (ACWI-US, ACWX-US, EFA-US, and EEM-US) in order to turn bullish.

Actionable Theme: Major Autos/Auto Parts. Global automobile stocks display bullish price and RS inflections with many breaking out to new highs -- add exposure... see pages 3 and 5-6.

Actionable Theme: Financials. There continues to be a plethora of attractive Financial stocks globally, ranging from banks and insurance to financial services -- add exposure... see pages 4 and 6-14.


Buying Global Financials & Autos/Auto Parts

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> is looking to raise up to US$1.8bn in its H-share placement.In this note, we will look at deal dynamics, recent Q3 results, and run the deal through our ECM framework.We covered the January placement in:<ul><li dir="ltr" aria-level="1"><a href="https://www.smartkarma.com/insights/byd-placement-a-well-anticipated-placement-with-strong-momentum" target="_blank" data-smartkarma-citation="insights:47230" rel="noopener">BYD (比亚迪汽车) Placement - A Well Anticipated Placement with Strong Momentum</a> </li></ul>

BYD (1211 HK) is looking to raise up to US$1.8bn in its H-share placement.In this note, we will look at deal dynamics, recent Q3 results, and run the deal through our ECM framework.We covered the January placement in:BYD (比亚迪汽车) Placement - A Well Anticipated Placement with Strong Momentum 

BYD (比亚迪汽车) Placement - Should Cruise Through Smoothly

China Specialist, Auto and Industrial Specialist

Victoria Li

Equity Bottom-Up

BYD's share price hit a new high and has fully priced in the foreseeable positive effect from increasing car sales, rising market share of blade battery and to-be-launched 'Ocean' series cars.Looking forward, we see more downside risks on BYD's share performance. 1) ASP are trending down with increasing sales of DM-i models and A0-class EV Dolphin, margins might be under pressure. 2) Brand upgrading strategy didn't work so far. Monthly sales of Han EV did not go above 10,000 units and have slid down to 6,000-7,000 per month lately,  which indicates that car market hasn't accept Han's market proposition as BYD had expected. 3) First new model in 'Ocean' series, Dolphin, might not gain enough popularity among its target customers. 4) Chips shortage issue, which benefits BYD as it has self-supply chips, would be solved by the end of 2022, in our view.

BYD's share price hit a new high and has fully priced in the foreseeable positive effect from increasing car sales, rising market share of blade battery and to-be-launched 'Ocean' series cars.Looking forward, we see more downside risks on BYD's share performance. 1) ASP are trending down with increasing sales of DM-i models and A0-class EV Dolphin, margins might be under pressure. 2) Brand upgrading strategy didn't work so far. Monthly sales of Han EV did not go above 10,000 units and have slid down to 6,000-7,000 per month lately,  which indicates that car market hasn't accept Han's market proposition as BYD had expected. 3) First new model in 'Ocean' series, Dolphin, might not gain enough popularity among its target customers. 4) Chips shortage issue, which benefits BYD as it has self-supply chips, would be solved by the end of 2022, in our view.

BYD(1211.hk): Upside from Models and Battery in the Price, Unique Strength in Chips to Fade

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Mazda is continuing to implement its take on the Subaru revival playbook that once took Subaru’s stock from a GFC low around ¥250 all the way above ¥5,000 while it briefly led the automotive world in OPM.

Mazda is continuing to implement its take on the Subaru revival playbook that once took Subaru’s stock from a GFC low around ¥250 all the way above ¥5,000 while it briefly led the automotive world in OPM.

Mazda – Moving Upmarket With a RWD Is a Straight Six

China

BYD Company Limited, through its subsidiaries, manufactures and sells automobiles. The Company also researches, develops, manufactures and sells batteries, which are applied on mobile phones, cordless phones, power tools and other kinds of portable electronic devices.

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BYD (1211 HK)

Hang Seng Index Rebalance Preview: The Road to 80 Constituents

The HSI has 60 members and the target is to reach 80 constituents over the next 3 rebalances. There could be a lot of stocks added at the Dec rebal...

Brian Freitas

Buying Global Financials & Autos/Auto Parts

Global automobile stocks display bullish price and RS inflections with many breaking out to new highs. Financials are attractive globally, ranging...

Vermilion Research

BYD (比亚迪汽车) Placement - Should Cruise Through Smoothly

BYD (1211 HK) is looking to raise up to US$1.8bn in its H-share placement. In this note, we will look at deal dynamics, recent Q3 results, and run...

Sumeet Singh

BYD(1211.hk): Upside from Models and Battery in the Price, Unique Strength in Chips to Fade

BYD's share price hit a new high and has fully priced in the foreseeable positive effect from increasing car sales, rising market share of blade...

Victoria Li

Mazda – Moving Upmarket With a RWD Is a Straight Six

Mazda is continuing to implement its take on the Subaru revival playbook that took Subaru’s stock from a GFC low around ¥250 all the way above...

Mio Kato

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