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

Event-Driven

<ul>
<li>The U.S. Department of Defense has designated <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> as a Chinese Military Company. <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd-69366efb-cf6b-404d-a0e4-c6b9b2e128dc" target="_blank" data-smartkarma-citation="entities:17:1" rel="noopener">Tencent Holdings (ADR) (TCEHY US)</a> shares were down nearly 8% overnight.</li>
<li>There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.</li>
<li>If added to the NS-CMIC list, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> will be deleted from global indexes and there will be HUGE passive selling from these trackers.</li>
</ul>


The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.


Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

Equity Derivatives

Industrial and Commercial Bank of China / Equity Derivatives

Industrial and Commercial Bank of China (1398 HK)

<ul>
<li>Call volumes dominate tradng across single stocks with the Put/Call ratio hitting its 3rd lowest level since the beginning of November. Volumes continue trend lower in place since early November.</li>
<li>Auto companies seeing big increases in option volumes with Li Auto and Great Wall Motor moving in opposite directions since the middle of the month.  </li>
<li>We add 2 new tables showing the largest volume increases across Puts and Calls – a conveient way to view unusual changes in trading activity.</li>
</ul>


Call volumes dominate tradng across single stocks with the Put/Call ratio hitting its 3rd lowest level since the beginning of November. Volumes continue trend lower in place since early November.
Auto companies seeing big increases in option volumes with Li Auto and Great Wall Motor moving in opposite directions since the middle of the month.  
We add 2 new tables showing the largest volume increases across Puts and Calls – a conveient way to view unusual changes in trading activity.


EQD | Hong Kong Single Stock Options Weekly December 23 – 27

<ul>
<li>The US election is the ultimate of known unknowns. The markets have endured both Trump and Biden/Harris so impactful policy surprises should be limited. </li>
<li>Hedging cost are running high for Asian equities post August unwind and September stimulus combined with election. </li>
<li>Markets have some momentum and in some cases mean reversion to the price move on the day after the election. </li>
</ul>


The US election is the ultimate of known unknowns. The markets have endured both Trump and Biden/Harris so impactful policy surprises should be limited. 
Hedging cost are running high for Asian equities post August unwind and September stimulus combined with election. 
Markets have some momentum and in some cases mean reversion to the price move on the day after the election. 


EQD | US Election -  Hedge Considerations

<ul>
<li>Major markets are in a waiting game with vols not monetizing yet implied holding up with US FOMC and the election this week. </li>
<li>Hang Seng Index (HSI INDEX) , Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY) and Nikkei 225 (NKY INDEX) have elevated implied vols vs average historical observations for November.</li>
<li>November typically sees strong price performance, particularly in the 3rd week, leading to softer historic vols in that time frame. </li>
</ul>


Major markets are in a waiting game with vols not monetizing yet implied holding up with US FOMC and the election this week. 
Hang Seng Index (HSI INDEX) , Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY) and Nikkei 225 (NKY INDEX) have elevated implied vols vs average historical observations for November.
November typically sees strong price performance, particularly in the 3rd week, leading to softer historic vols in that time frame. 


EQD | Asia November Vol Roadmap - The Waiting Game

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Capital Markets

To match service levels offered by <a href="https://www.smartkarma.com/entities/446" target="_blank" data-smartkarma-citation="entities:446:1">JD.com Inc (ADR) (JD US)</a> and leading express carrier <a href="https://www.smartkarma.com/entities/4128" target="_blank" data-smartkarma-citation="entities:4128:1">S.F. Holding Co Ltd (002352 CH)</a>, <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding Ltd (BABA US)</a> and its logistics partners are making a belated push to invest in first- and last-mile parcel delivery capacity. BABA and its partners have so far avoided making the large investments needed to control 100% of their parcel delivery networks. Instead of direct ownership of first- and last-mile assets, BABA has tried to rely upon the 'transparency' provided by its technologically sophisticated logistics subsidiary, CaiNiao Network (CN). But five years after BABA set up CN, JD.com's continued lead in logistics quality and logistics speed -- confirmed in private surveys of Chinese consumers -- seems to have convinced BABA and its partners that they must finally take the plunge.Battle lines in this coming logistics war have been drawn over the past year or so. JD.com established JD Logistics in April 2017, and the private company recently raised US$2.5 bn at a valuation of US$13.4 bn. SF Express -- China's largest express carrier by revenue -- already offers first- and last-mile delivery, and has shown a willingness to butt heads with BABA. The five smaller express companies aligned with BABA have recently announced moves that will bring them even closer to the e-commerce giant; there are also indications these express companies are stepping up their own first- and last-mile investments at the behest of BABA.For the five carriers aligned with BABA, a belated push into ownership of first- and last-mile service will require an enormous increase in capital expenditures. The five carriers had combined capex of about 8.3 bn RMB in 2017; we estimate the push to acquire control of first- and last-mile capacity could require additional annual capex of 25 bn RMB or more over the next few years (BABA itself had CapEx of 29.8 bn RMB in its latest fiscal year). Such a dramatic increase in capital spending -- assuming it is mainly shouldered by the express companies -- will require significant, dilutive fundraising by these five express carriers over the next few years; we also anticipate initial returns on these investments will be very low.Alternatively, if it is BABA's private logistics subsidiary CN that does the heavy lifting, this would likely bring forward the timing of that company's IPO (it was valued at US$20 bn in a September 2017 funding round). We do not believe the expansion of first- and last-mile capacity is part of CN's projected total CapEx of 100 bn RMB between 2017-2021. The ultimate beneficiary of this costly expansion of express networks? Alibaba, of course. As a result of the expected push into first- and last-mile delivery, the e-commerce giant will likely end up with deeper reach and faster, more reliable delivery service. These improvements should allow it to retain its position as China's pre-eminent e-commerce company. The apparent asymmetry of expected capex and expected benefits from first- and last-mile investments -- express companies invest, BABA reaps the benefits -- suggests a pair trade: Long BABA against Short positions in China's express companies.

To match service levels offered by JD.com Inc (ADR) (JD US) and leading express carrier S.F. Holding Co Ltd (002352 CH), Alibaba Group Holding Ltd (BABA US) and its logistics partners are making a belated push to invest in first- and last-mile parcel delivery capacity. BABA and its partners have so far avoided making the large investments needed to control 100% of their parcel delivery networks. Instead of direct ownership of first- and last-mile assets, BABA has tried to rely upon the 'transparency' provided by its technologically sophisticated logistics subsidiary, CaiNiao Network (CN). But five years after BABA set up CN, JD.com's continued lead in logistics quality and logistics speed -- confirmed in private surveys of Chinese consumers -- seems to have convinced BABA and its partners that they must finally take the plunge.Battle lines in this coming logistics war have been drawn over the past year or so. JD.com established JD Logistics in April 2017, and the private company recently raised US$2.5 bn at a valuation of US$13.4 bn. SF Express -- China's largest express carrier by revenue -- already offers first- and last-mile delivery, and has shown a willingness to butt heads with BABA. The five smaller express companies aligned with BABA have recently announced moves that will bring them even closer to the e-commerce giant; there are also indications these express companies are stepping up their own first- and last-mile investments at the behest of BABA.For the five carriers aligned with BABA, a belated push into ownership of first- and last-mile service will require an enormous increase in capital expenditures. The five carriers had combined capex of about 8.3 bn RMB in 2017; we estimate the push to acquire control of first- and last-mile capacity could require additional annual capex of 25 bn RMB or more over the next few years (BABA itself had CapEx of 29.8 bn RMB in its latest fiscal year). Such a dramatic increase in capital spending -- assuming it is mainly shouldered by the express companies -- will require significant, dilutive fundraising by these five express carriers over the next few years; we also anticipate initial returns on these investments will be very low.Alternatively, if it is BABA's private logistics subsidiary CN that does the heavy lifting, this would likely bring forward the timing of that company's IPO (it was valued at US$20 bn in a September 2017 funding round). We do not believe the expansion of first- and last-mile capacity is part of CN's projected total CapEx of 100 bn RMB between 2017-2021. The ultimate beneficiary of this costly expansion of express networks? Alibaba, of course. As a result of the expected push into first- and last-mile delivery, the e-commerce giant will likely end up with deeper reach and faster, more reliable delivery service. These improvements should allow it to retain its position as China's pre-eminent e-commerce company. The apparent asymmetry of expected capex and expected benefits from first- and last-mile investments -- express companies invest, BABA reaps the benefits -- suggests a pair trade: Long BABA against Short positions in China's express companies.

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

China

Tencent Holdings Ltd. is a Chinese multinational technology and entertainment conglomerate. It provides a wide range of internet-related services and products, including social communication platforms like Weixin/WeChat and QQ, online games, digital content, and fintech services. The company was founded in 1998 and is headquartered in Shenzhen, China.

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Tencent (700 HK)

Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

The U.S. DoD has designated Tencent as a Chinese Military Company. The stock is not on the NS-CMIC list yet and could be added later. Addition to...

Brian Freitas

EQD | Hong Kong Single Stock Options Weekly December 23 – 27

Trading volumes in single stocks were dominated by call volumes, with the Put/Call ratio at its 3rd lowest level since early November. We...

John Ley

EQD | US Election - Hedge Considerations

The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...

John Ley

EQD | Asia November Vol Roadmap - The Waiting Game

Major markets are not monetizing, with US FOMC and election impacting implied vols. Hang Seng, Shanghai Shenzhen, and Nikkei 225 have elevated...

John Ley

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

As China's largest smart locker company Hive Box prepares for a potential IPO in Hong Kong, we are resurfacing this old insight to help readers...

Daniel Hellberg

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

The U.S. DoD has designated Tencent as a Chinese Military Company. The stock is not on the NS-CMIC list yet and could be added later. Addition to...

Brian Freitas

EQD | Hong Kong Single Stock Options Weekly December 23 – 27

​Trading volumes in single stocks were dominated by call volumes, with the Put/Call ratio at its 3rd lowest level since early November. We...

John Ley

EQD | US Election - Hedge Considerations

​The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...

John Ley

EQD | Asia November Vol Roadmap - The Waiting Game

​Major markets are not monetizing, with US FOMC and election impacting implied vols. Hang Seng, Shanghai Shenzhen, and Nikkei 225 have elevated...

John Ley

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

As China's largest smart locker company Hive Box prepares for a potential IPO in Hong Kong, we are resurfacing this old insight to help readers...

Daniel Hellberg

Trading volumes in single stocks were dominated by call volumes, with the Put/Call ratio at its 3rd lowest level since early November. We...

The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...

Major markets are not monetizing, with US FOMC and election impacting implied vols. Hang Seng, Shanghai Shenzhen, and Nikkei 225 have elevated...