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>We see three new listings as potential inclusions to the HSCI in December. One is already in Stock Connect, one will be added to Stock Connect while one will not.</li>
<li>Given the large market moves, there will be many changes to the HSCI in March 2023. Quite a few stocks could remain in the HSCI but drop out of Connect.</li>
<li>Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.</li>
</ul>


We see three new listings as potential inclusions to the HSCI in December. One is already in Stock Connect, one will be added to Stock Connect while one will not.
Given the large market moves, there will be many changes to the HSCI in March 2023. Quite a few stocks could remain in the HSCI but drop out of Connect.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.


HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There's a Lot!)

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

Mapletree North Asia Commercial Trust / Event-Driven

Mapletree North Asia Commercial Trust (MAGIC SP)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mapletree-commercial-trust" target="_blank" data-smartkarma-citation="entities:106:1" rel="noopener">Mapletree Commercial Trust (MCT SP)</a>’s EGM, <a href="https://www.smartkarma.com/entities/mapletree-north-asia-commercial-trust" target="_blank" data-smartkarma-citation="entities:5127:1" rel="noopener">Mapletree North Asia Commercial Trust (MAGIC SP)</a>/MNACT’s EGM and trust scheme meeting will take place on 23 May. The effective date is 8 August.</li>
<li>The IFA considers the scheme consideration to be fair. We think that IFA’s valuation approach is broadly sound with some areas for improvement. </li>
<li>For a 17 August payment, the gross and annualised spread of the cash-only consideration (including permitted clean-up DPU) is 1.6% and 5.6%, respectively. </li>
</ul>



Mapletree Commercial Trust (MCT SP)’s EGM, Mapletree North Asia Commercial Trust (MAGIC SP)/MNACT’s EGM and trust scheme meeting will take place on 23 May. The effective date is 8 August.
The IFA considers the scheme consideration to be fair. We think that IFA’s valuation approach is broadly sound with some areas for improvement. 
For a 17 August payment, the gross and annualised spread of the cash-only consideration (including permitted clean-up DPU) is 1.6% and 5.6%, respectively. 


MNACT's Scheme Meeting on 23 May, IFA Opinion

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

* New Transaction In Australia: On November 7, 2021, Link REIT (823.HK) [Link] announced a proposed acquisition of a 50% stake three shopping malls in Sydney for AUD 538 mn or HKD 3.3 bn, in a deal where it has no control of the properties;  * Limited Disclosure Raises Eyebrows: Link did not disclose the annual income on the properties, nor the projected tenant lease expiry and changes in foot traffic between pre and post COVID-19; and  *Hong Kong Pressures Are Very Apparent: This transaction so far away from Link REIT’s core competency that it speaks volumes as to where it believes its core Hong Kong retail business is heading. This doesn’t seem like smart diversification and smells more of panic leverage when one considers the thre price and location of this deal.

 * New Transaction In Australia: On November 7, 2021, Link REIT (823.HK) [Link] announced a proposed acquisition of a 50% stake three shopping malls in Sydney for AUD 538 mn or HKD 3.3 bn, in a deal where it has no control of the properties;  * Limited Disclosure Raises Eyebrows: Link did not disclose the annual income on the properties, nor the projected tenant lease expiry and changes in foot traffic between pre and post COVID-19; and  *Hong Kong Pressures Are Very Apparent: This transaction so far away from Link REIT’s core competency that it speaks volumes as to where it believes its core Hong Kong retail business is heading. This doesn’t seem like smart diversification and smells more of panic leverage when one considers the thre price and location of this deal. 

*Worries In Both Hong Kong and Mainland China: The Hong Kong retail portfolio's rental reversion rate continued to be challenged YOY in FY 1H22, albeit slightly improving from a negative 1.8% in FY 2H21 to a barely positive low single digits. Not surprisingly, this weakness would appear to be with us for an extended period - especially given the continued border closures amid the COVID-19 disruption.  The mainland Chinese expansion remains worrisome, given the likely carry-on impact of stress seen in the broader mainland Chinese property market and its lenders; and*Poor Capital Management Becoming A Big Problem: Link REIT (823.HK) [Link] management also appears hell-bent on destroying shareholder value with deals which make little financial sense. Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou where the current annualized NPI yield barely covering the project’s cost of funding. In order to improve occupancy, it would appear that Link would likely need to offer significant tenant enticements, and investment massively in asset enhancement. Bizarrely instead of weighing buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend shares against short-selling.

*Worries In Both Hong Kong and Mainland China: The Hong Kong retail portfolio's rental reversion rate continued to be challenged YOY in FY 1H22, albeit slightly improving from a negative 1.8% in FY 2H21 to a barely positive low single digits. Not surprisingly, this weakness would appear to be with us for an extended period - especially given the continued border closures amid the COVID-19 disruption.  The mainland Chinese expansion remains worrisome, given the likely carry-on impact of stress seen in the broader mainland Chinese property market and its lenders; and*Poor Capital Management Becoming A Big Problem: Link REIT (823.HK) [Link] management also appears hell-bent on destroying shareholder value with deals which make little financial sense. Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou where the current annualized NPI yield barely covering the project’s cost of funding. In order to improve occupancy, it would appear that Link would likely need to offer significant tenant enticements, and investment massively in asset enhancement. Bizarrely instead of weighing buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend shares against short-selling. 

*Better, But Weak Metrics: Link REIT (823.HK) [Link REIT] reported a positive FY 2H21 bottom-line result of HKD 5.3 bn, increasing HKD 9.4 bn over the HKD 4.1 bn in losses posted in FY 1H21. However, when we exclude Link’s non-cash FV marks of HKD 2.0 bn, operating performance cam in at just HKD 3.3 bn – improving just HKD 143 mn (4.5%) HOH. The positive HOH operating performance was driven by an increase in revenues from mainland China and overseas related property;  *Worries Remain In Hong Kong: Hong Kong retail portfolio's rental reversion rate continued to be challenged YOY in FY 2H21, albeit slightly improving from a negative 2.6% in FY 1H21 to a negative 1.8%. Although not a enormous surprise, this trend would appear to be with us for an extended period in Hong Kong - especially given the continued border closures amid the COVID-19 disruption; and*Poor Capital Management Becoming A Big Problem: Link management also appears hellbent on destroying shareholder value with deals that make little financial sense. Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou where the current annualized NPI yield barely covering the project’s cost of funding. In order to improve occupancy, it would appear that Link would likely need to offering significant tenant enticements, and investment massively in asset enhancement. Bizarrely instead of weighing buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend shares against short-selling.

*Better, But Weak Metrics: Link REIT (823.HK) [Link REIT] reported a positive FY 2H21 bottom-line result of HKD 5.3 bn, increasing HKD 9.4 bn over the HKD 4.1 bn in losses posted in FY 1H21. However, when we exclude Link’s non-cash FV marks of HKD 2.0 bn, operating performance cam in at just HKD 3.3 bn – improving just HKD 143 mn (4.5%) HOH. The positive HOH operating performance was driven by an increase in revenues from mainland China and overseas related property;  *Worries Remain In Hong Kong: Hong Kong retail portfolio's rental reversion rate continued to be challenged YOY in FY 2H21, albeit slightly improving from a negative 2.6% in FY 1H21 to a negative 1.8%. Although not a enormous surprise, this trend would appear to be with us for an extended period in Hong Kong - especially given the continued border closures amid the COVID-19 disruption; and*Poor Capital Management Becoming A Big Problem: Link management also appears hellbent on destroying shareholder value with deals that make little financial sense. Link recently announced the acquisition of Happy Valley Shopping Mall in Guangzhou where the current annualized NPI yield barely covering the project’s cost of funding. In order to improve occupancy, it would appear that Link would likely need to offering significant tenant enticements, and investment massively in asset enhancement. Bizarrely instead of weighing buybacks return versus new investment ROI, management views share buybacks as a mechanism to defend shares against short-selling.

Link REIT – Hong Kong “Stabilizing”

Hong Kong

Champion Real Estate Investment Trust is a Hong Kong-based real estate investment trust that owns and invests in income-producing office and retail properties, focusing on Grade-A commercial properties in prime locations. Its portfolio includes landmark properties such as Three Garden Road and Langham Place in Hong Kong, and a joint venture stake in 66 Shoe Lane in Central London. The company was established in 2006 and is headquartered in Hong Kong.

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Champion Real Estate (2778 HK)

HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There's a Lot!)

There could be 3 adds in December while there will be MANY more changes in March. The adds should outnumber the deletes, but there will be many...

Brian Freitas

MNACT's Scheme Meeting on 23 May, IFA Opinion

The IFA considers the scheme consideration to be fair. For a 17 August payment, the annualised spread of the cash-only consideration (including...

Arun George

Link REIT – Another Odd Deal

LINK REIT: Link announced a proposed acquisition of a 50% stake three shopping malls in Sydney for HKD 3.3 bn, in a deal where it has no control of...

Thomas J. Monaco

Link REIT – Looking For Handouts

LINK REIT: The Hong Kong's rental reversion rate remained challenged in FY 1H22 at positive single digits. Mainland expansion likely will be...

Thomas J. Monaco

Link REIT – Hong Kong “Stabilizing”

LINK REIT: Link operating results only improved 4.5% HOH, driven by mainland China and overseas. Hong Kong retail portfolio remains a challenge, as...

Thomas J. Monaco

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