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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.Read on for more details and stocks affected by the changes.

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.Read on for more details and stocks affected by the changes.

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

Event-Driven

Hong Kong Exchanges and Clearing / Event-Driven

Hong Kong Exchanges and Clearing (388 HK)

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>, <a href="https://www.hkex.com.hk/News/Regulatory-Announcements/2020/201030news?sc_lang=en" target="_blank" rel="noopener">published</a> the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:<ul>
<li>a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.</li>
<li>be an 'innovative company' as part of the suitability for listing</li>
<li>demonstrate that the laws, rules and regulations provide certain shareholder protection standards</li>
</ul>The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a> and <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a>, among others, to pursue a secondary listing on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>.

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of HKEX (388 HK), published the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:
a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.
be an 'innovative company' as part of the suitability for listing
demonstrate that the laws, rules and regulations provide certain shareholder protection standards
The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for Tencent Music (TME US) and iQIYI Inc (IQ US), among others, to pursue a secondary listing on the HKEX (388 HK). 

Conclusions of the Corporate WVR Consultation: Small Changes for Now

China

Baozun is a leading brand e-commerce solutions provider and digital commerce enabler in China. The company offers end-to-end e-commerce solutions, including IT solutions, online store operations, digital marketing, customer services, warehousing, and fulfillment, alongside brand management services. Founded in 2007, Baozun is headquartered in Shanghai, People's Republic of China.

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Baozun (9991 HK)

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

While the HSCI does not have assets benchmarked to it, the index review is closely watched since the index forms the basis of stocks that are a...

Brian Freitas

Conclusions of the Corporate WVR Consultation: Small Changes for Now

The HKEX has published the conclusions of the consultation on corporate WVR beneficiaries. There are no major changes, but the proposed changes...

Brian Freitas

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