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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Haidilao International Holding / Index Rebalance

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the 2020 Q3 review of the Hang Seng Family of Indexes on 6 November. The constituent changes will be effective after the close of trading on 4 December.With only 3 changes permitted in the September <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> review post the methodology change that included WVR securities and Secondary Listings in the eligible Universe, there could be as many as 9 changes in the December review.We see a high probability of <a href="https://www.smartkarma.com/entities/china-overseas-land-invest" target="_blank" data-smartkarma-citation="entities:419:1" rel="noopener">China Overseas Land &amp; Investment Ltd (688 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing (981 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-real-estate-group-limited" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a> being included in 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>, and of <a href="https://www.smartkarma.com/entities/china-taiping-insurance-hldgs-co-ltd" target="_blank" data-smartkarma-citation="entities:489:1" rel="noopener">China Taiping Insurance Hldgs (966 HK)</a>, <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a>, <a href="https://www.smartkarma.com/entities/china-minsheng-banking-h" target="_blank" data-smartkarma-citation="entities:8983:1" rel="noopener">China Minsheng Banking H (1988 HK)</a>, <a href="https://www.smartkarma.com/entities/china-vanke-co-ltd-h" target="_blank" data-smartkarma-citation="entities:18368:1" rel="noopener">China Vanke Co Ltd (H) (2202 HK)</a>, <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a>, <a href="https://www.smartkarma.com/entities/china-citic-bank-corp-ltd-ea6c25fd-4b20-45cb-a4a6-df7a60136f03" target="_blank" data-smartkarma-citation="entities:653:1" rel="noopener">China Citic Bank Corp Ltd H (998 HK)</a> and <a href="https://www.smartkarma.com/entities/china-shenhua-energy-co-h" target="_blank" data-smartkarma-citation="entities:382:1" rel="noopener">China Shenhua Energy Co H (1088 HK)</a> being deleted from the index.Depending on price movements between now and 30 September, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> and <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a> could be included in the index, which would see <a href="https://www.smartkarma.com/entities/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a> and <a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty H (2328 HK)</a> being deleted.Estimated one-way turnover for the rebalance is 9.63% which is lower than the turnover at the September rebalance, but significant nonetheless.The expected review changes will alter the sectoral composition of the index with an increase in the weight of the Consumer Discretionary, Information Technology and Health Care sectors at the expense of Financials and Energy. There will also be an impact on the HSCEI 2021 dividend futures, a large part of which has already been discounted by the market.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the 2020 Q3 review of the Hang Seng Family of Indexes on 6 November. The constituent changes will be effective after the close of trading on 4 December.With only 3 changes permitted in the September Hang Seng China Enterprises Index (HSCEI INDEX) review post the methodology change that included WVR securities and Secondary Listings in the eligible Universe, there could be as many as 9 changes in the December review.We see a high probability of China Overseas Land &amp; Investment Ltd (688 HK), JD.com (HK) (9618 HK), Alibaba Health Information Technology (241 HK), Haidilao (6862 HK), China Feihe (6186 HK), Semiconductor Manufacturing (981 HK) and Evergrande Real Estate Group (3333 HK) being included in the Hang Seng China Enterprises Index (HSCEI INDEX), and of China Taiping Insurance Hldgs (966 HK), China Telecom Corp Ltd (H) (728 HK), China Minsheng Banking H (1988 HK), China Vanke Co Ltd (H) (2202 HK), Fosun International (656 HK), China Citic Bank Corp Ltd H (998 HK) and China Shenhua Energy Co H (1088 HK) being deleted from the index.Depending on price movements between now and 30 September, NetEase (9999 HK) and Hansoh Pharmaceutical (3692 HK) could be included in the index, which would see Want Want (151 HK) and PICC Property &amp; Casualty H (2328 HK) being deleted.Estimated one-way turnover for the rebalance is 9.63% which is lower than the turnover at the September rebalance, but significant nonetheless.The expected review changes will alter the sectoral composition of the index with an increase in the weight of the Consumer Discretionary, Information Technology and Health Care sectors at the expense of Financials and Energy. There will also be an impact on the HSCEI 2021 dividend futures, a large part of which has already been discounted by the market.

HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 14 August. The constituent changes will be effective from 7 September 2020 and the rebalancing trades will need to be done at the closing auction on 4 September 2020.For 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>, there are 3 additions: <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan Dianping (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, and 3 deletions: <a href="https://www.smartkarma.com/entities/sinopharm-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:32:1" rel="noopener">Sinopharm Group Co Ltd H (1099 HK)</a>, <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> and <a href="https://www.smartkarma.com/entities/citic-securities-h" target="_blank" data-smartkarma-citation="entities:463:1" rel="noopener">Citic Securities (H) (6030 HK)</a>.We had expected all changes, so there are no surprises here. However, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> should react positively to its 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> while <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan Dianping (3690 HK)</a> could react negatively on its non-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>.Turnover is estimated at 14.79% and there is no stock that has more than 2 days of ADV to buy or sell. There are quite a few names that will have more than 1 day of ADV to sell as part of the funding trade.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 14 August. The constituent changes will be effective from 7 September 2020 and the rebalancing trades will need to be done at the closing auction on 4 September 2020.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 3 additions: Xiaomi Corp (1810 HK), Meituan Dianping (3690 HK) and Alibaba Group (9988 HK), and 3 deletions: Sinopharm Group Co Ltd H (1099 HK), BYD (1211 HK) and Citic Securities (H) (6030 HK).We had expected all changes, so there are no surprises here. However, Xiaomi Corp (1810 HK) should react positively to its inclusion in the Hong Kong Hang Seng Index (HSI INDEX) while Meituan Dianping (3690 HK) could react negatively on its non-inclusion in the Hong Kong Hang Seng Index (HSI INDEX).Turnover is estimated at 14.79% and there is no stock that has more than 2 days of ADV to buy or sell. There are quite a few names that will have more than 1 day of ADV to sell as part of the funding trade.

HSCEI Index Rebalance - Huge Turnover as WVRs & Secondary Listings Make Their Index Debut

Event-Driven

On 13 January, Hang Seng Indexes Limited (HSIL) had released a <a href="https://www.hsi.com.hk/static/uploads/contents/en/news/consultations/20200113T121200.pdf" target="_blank" rel="noopener">consultation paper</a> on proposed changes to the Hang Seng Index (HSI) and the Hang Seng China Enterprises Index (HSCEI).There were three proposals for the HSCEI: 1. Eligibility of Weighted Voting Rights (WVR) securities in the HSCEI 2. Eligibility of secondary-listing companies in the HSCEI 3. Rationalization of eligibility criteria for Red-chips and P-chips to bring them in line with the criteria for H-sharesToday, HSIL has <a href="https://www.hsi.com.hk/static/uploads/contents/en/news/pressRelease/20200518T150000.pdf" target="_blank" rel="noopener">published</a> the conclusions of the public consultation. For the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" rel="noopener" data-smartkarma-citation="entities:22900:1">Hang Seng China Enterprises Index (HSCEI INDEX)</a>, WVRs and secondary listed companies from the Greater China region will be eligible for inclusion in the index. Individual constituent weighting of these securities will be subject to a 5% weighting cap.The additional eligibility criteria (listing history, price volatility and financial performance) for Red chips and P-chips have been removed.The changes will be implemented starting with the August 2020 review. To manage the index turnover at a manageable level, the number of constituent changes will be capped at three in the August 2020 review.At the current time, we see <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" rel="noopener" data-smartkarma-citation="entities:28434:1">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" rel="noopener" data-smartkarma-citation="entities:26970:1">Meituan Dianping (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:24409:1">Xiaomi Corp (1810 HK)</a> being included in the August 2020 review, while we see <a href="https://www.smartkarma.com/entities/citic-securities-h" target="_blank" rel="noopener" data-smartkarma-citation="entities:463:1">Citic Securities (H) (6030 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" rel="noopener" data-smartkarma-citation="entities:20962:1">BYD (1211 HK)</a> and <a href="https://www.smartkarma.com/entities/china-minsheng-banking-h" target="_blank" rel="noopener" data-smartkarma-citation="entities:8983:1">China Minsheng Banking H (1988 HK)</a> as deletion candidates. One way turnover is estimated at around 12.9%.

On 13 January, Hang Seng Indexes Limited (HSIL) had released a consultation paper on proposed changes to the Hang Seng Index (HSI) and the Hang Seng China Enterprises Index (HSCEI).There were three proposals for the HSCEI: 1. Eligibility of Weighted Voting Rights (WVR) securities in the HSCEI 2. Eligibility of secondary-listing companies in the HSCEI 3. Rationalization of eligibility criteria for Red-chips and P-chips to bring them in line with the criteria for H-sharesToday, HSIL has published the conclusions of the public consultation. For the Hang Seng China Enterprises Index (HSCEI INDEX), WVRs and secondary listed companies from the Greater China region will be eligible for inclusion in the index. Individual constituent weighting of these securities will be subject to a 5% weighting cap.The additional eligibility criteria (listing history, price volatility and financial performance) for Red chips and P-chips have been removed.The changes will be implemented starting with the August 2020 review. To manage the index turnover at a manageable level, the number of constituent changes will be capped at three in the August 2020 review.At the current time, we see Alibaba Group (9988 HK), Meituan Dianping (3690 HK) and Xiaomi Corp (1810 HK) being included in the August 2020 review, while we see Citic Securities (H) (6030 HK), BYD (1211 HK) and China Minsheng Banking H (1988 HK) as deletion candidates. One way turnover is estimated at around 12.9%.

HSCEI Consultation on WVRs & Secondary Listings - All Proposals Get the Green Light

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Quantitative Analysis

With increased focus on the Health Care sector in light of the COVID-19 pandemic, Health Care allocations reached record levels last month. We analyse the sector in detail, breaking down exposure by industry group and highlighting the stocks that are capturing investment from active China managers.<ul>
<li>Health Care allocation stands at a record 7.98% in China active portfolios. </li>
<li>Health Care Equipment &amp; Supplies, Biotechnology and Life Sciences allocations surged to all-time highs last month.</li>
<li>Key stocks are <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (Cayman) Inc (2269 HK),</a><a href="https://www.smartkarma.com/entities/jinyu-bio-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:4579:1" rel="noopener">Jinyu Bio-Technology Co., Ltd. (600201 CH)</a> and <a href="https://www.smartkarma.com/entities/hangzhou-tigermed-consulting-co-ltd" target="_blank" data-smartkarma-citation="entities:397:1" rel="noopener">Hangzhou Tigermed Consulting (300347 CH)</a> - all are well positioned and seeing strong ownership momentum among active China managers.</li>
</ul>Analysis taken from our China active manager research, consisting of 122 dedicated long-only China active funds.

With increased focus on the Health Care sector in light of the COVID-19 pandemic, Health Care allocations reached record levels last month. We analyse the sector in detail, breaking down exposure by industry group and highlighting the stocks that are capturing investment from active China managers.
Health Care allocation stands at a record 7.98% in China active portfolios. 
Health Care Equipment &amp; Supplies, Biotechnology and Life Sciences allocations surged to all-time highs last month.
Key stocks are Wuxi Biologics (Cayman) Inc (2269 HK),Jinyu Bio-Technology Co., Ltd. (600201 CH) and Hangzhou Tigermed Consulting (300347 CH) - all are well positioned and seeing strong ownership momentum among active China managers.
Analysis taken from our China active manager research, consisting of 122 dedicated long-only China active funds.

China Health Care - Allocation Boom: Wuxi Biologics/Jinyu Bio-Tech/Hangzhou Tigermed Top Picks

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Hong Kong SFC reported today for aggregate short position on Apr 29. The aggregate short value for equities increased by $1,489m (+2.7%) WoW and increased by $4,944m (+9.7%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($10,086m, +3.4% WoW), Tencent Holdings Limited/700 HK($2,954m, -6.1% WoW), Baba-Sw/9988 HK($1,653m, +3.7% WoW), Xiaomi Corporation/1810 HK($1,219m, -2.5% WoW), Aia Group Limited/1299 HK($997m, +0.6% WoW).<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/722/original/Hong_Kong_Market_Short_Position_Value_%28line%29_and_1W_Changes_%28bar%29_%28%24m%292020-05-11%2013_16_13.png?1589174424" class="editor-image img-responsive" data-smartkarma-image-id="132722"></figure>

Hong Kong SFC reported today for aggregate short position on Apr 29. The aggregate short value for equities increased by $1,489m (+2.7%) WoW and increased by $4,944m (+9.7%) over the preceding four weeks.Most shorted stocks by aggregate short value of positions are Ping An Insurance (Group) Company Of China, Ltd./2318 HK($10,086m, +3.4% WoW), Tencent Holdings Limited/700 HK($2,954m, -6.1% WoW), Baba-Sw/9988 HK($1,653m, +3.7% WoW), Xiaomi Corporation/1810 HK($1,219m, -2.5% WoW), Aia Group Limited/1299 HK($997m, +0.6% WoW).

Short Interest Spiked for China Gas, Country Garden Svc, Big Covers for Innovent

China

Hansoh Pharmaceutical Group Company Limited operates as a pharmaceutical company. The Company manufactures and sells anti-infectives, anti-neoplastic agents, diabetes drugs, and other products. Hansoh Pharmaceutical Group markets its products throughout China.

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Hansoh Pharmaceutical Group (3692 HK)

HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q2 review of the Hang Seng Family of Indexes in mid August. The...

Brian Freitas

HSCEI Index Rebalance - Huge Turnover as WVRs & Secondary Listings Make Their Index Debut

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 14 August....

Brian Freitas

HSCEI Consultation on WVRs & Secondary Listings - All Proposals Get the Green Light

On 13 January, Hang Seng Indexes Limited (HSIL) had released a consultation paper on proposed changes to the Hang Seng Index (HSI) and the Hang...

Brian Freitas

China Health Care - Allocation Boom: Wuxi Biologics/Jinyu Bio-Tech/Hangzhou Tigermed Top Picks

With increased focus on the Health Care sector in light of the COVID-19 pandemic, Health Care allocations reached record levels last month. We...

Steven Holden

Short Interest Spiked for China Gas, Country Garden Svc, Big Covers for Innovent

Hong Kong SFC reported today for aggregate short position on Apr 29. The aggregate short value for equities increased by $1,489m (+2.7%) WoW and...

Ke Yan, CFA, FRM

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