HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China International Capital Corporation / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a>'s 1H25 positive profit alert is encouraging, with 1H25 results growing by 55-78% YoY.  </li>
<li>YTD, CICC has a 59.5% share of the HK IPO market. The solid H-share IPO pipeline of A-share companies is beneficial, as this is its major area of strength.</li>
<li>Market consensus has underestimated its FY25 earnings, inflating its PER multiples. The current 51% discount of its H-share to A-share is just too steep (average 37.7%).</li>
</ul>



China International Capital Corporation (3908 HK)'s 1H25 positive profit alert is encouraging, with 1H25 results growing by 55-78% YoY.  
YTD, CICC has a 59.5% share of the HK IPO market. The solid H-share IPO pipeline of A-share companies is beneficial, as this is its major area of strength.
Market consensus has underestimated its FY25 earnings, inflating its PER multiples. The current 51% discount of its H-share to A-share is just too steep (average 37.7%).


CICC (3908 HK): It Is the Best of the Time

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>
<a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart (9992 HK)</a> and <a href="https://www.smartkarma.com/entities/s-f-holding" target="_blank" data-smartkarma-citation="entities:44093:1" rel="noopener">S.F. Holding (6936 HK)</a> will replace <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group (390 HK)</a> and <a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities (6099 HK)</a> in the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">iShares China Large-Cap (FXI) (FXI US)</a>. </li>
<li>Passive trackers will need to buy between 0.4-0.6x ADV in the adds and sell between 0.5-1.3x ADV in the deletes. There are some small capping flows too.</li>
<li>There are a lot of shorts in <a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart (9992 HK)</a>, <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group Ltd H (390 HK)</a> and China <a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities Co Ltd (H) (6099 HK)</a>.   </li>
</ul>



Pop Mart (9992 HK) and S.F. Holding (6936 HK) will replace China Railway Group (390 HK) and China Merchants Securities (6099 HK) in the iShares China Large-Cap (FXI) (FXI US). 
Passive trackers will need to buy between 0.4-0.6x ADV in the adds and sell between 0.5-1.3x ADV in the deletes. There are some small capping flows too.
There are a lot of shorts in Pop Mart (9992 HK), China Railway Group Ltd H (390 HK) and China China Merchants Securities Co Ltd (H) (6099 HK).   


FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out

<ul>
<li>The changes to the CSI All Share Investment Banking &amp; Brokerage Index were announced after market close on 30 May and will be implemented at the close on 13 June.</li>
<li>
<a href="https://www.smartkarma.com/entities/northeast-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:6022:1" rel="noopener">Northeast Securities (000686 CH)</a> will be added to the index while <a href="https://www.smartkarma.com/entities/harbin-hatou-investment-co-ltd" target="_blank" data-smartkarma-citation="entities:13056:1" rel="noopener">Harbin Hatou Investment Co, Ltd. (600864 CH)</a> will be deleted.</li>
<li>There is over 2.5x ADV to trade in both stocks and much smaller impact of funding/capping flows on the other index constituents.</li>
</ul>


The changes to the CSI All Share Investment Banking &amp; Brokerage Index were announced after market close on 30 May and will be implemented at the close on 13 June.

Northeast Securities (000686 CH) will be added to the index while Harbin Hatou Investment Co, Ltd. (600864 CH) will be deleted.
There is over 2.5x ADV to trade in both stocks and much smaller impact of funding/capping flows on the other index constituents.


CSI All Share IB & Brokerage Index Rebalance: Northeast Replaces Harbin Hatou

<ul>
<li>With two days left in the review period, <a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart International Group L (9992 HK)</a> could replace <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group Ltd H (390 HK)</a> in the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">FXI</a> ETF in June.</li>
<li>The inclusion of <a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart International Group L (9992 HK)</a> in the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">iShares China Large-Cap (FXI) (FXI US)</a> will add to the potential inclusion of the stock in other indices.</li>
<li>Short interest has been increasing in both stocks. Multiple index inclusions could result in short covering in <a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart</a> while <a href="https://www.smartkarma.com/entities/china-railway-group-ltd-h" target="_blank" data-smartkarma-citation="entities:264:1" rel="noopener">China Railway Group</a>'s stock price has been bouncing off its lows.</li>
</ul>


With two days left in the review period, Pop Mart International Group L (9992 HK) could replace China Railway Group Ltd H (390 HK) in the FXI ETF in June.
The inclusion of Pop Mart International Group L (9992 HK) in the iShares China Large-Cap (FXI) (FXI US) will add to the potential inclusion of the stock in other indices.
Short interest has been increasing in both stocks. Multiple index inclusions could result in short covering in Pop Mart while China Railway Group's stock price has been bouncing off its lows.


FXI Rebalance Preview: Pop Mart (9992 HK) Pops Up Again

iShares China Large-Cap (FXI) / Index Rebalance

<ul>
<li>There could be 1/2 changes to the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">iShares China Large-Cap (FXI) (FXI US)</a> in March. Then there will be more changes as large Chinese companies list H-shares on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX</a>.</li>
<li>Fast Entries and regular inclusion of newly listed H-shares will change the characteristics of the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">FXI</a> and there could be further deviations from 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>. </li>
<li>That will provide opportunities for index rebalance traders as well as volatility traders that are active on the <a href="https://www.smartkarma.com/entities/ishares-china-large-cap-etf" target="_blank" data-smartkarma-citation="entities:766:1" rel="noopener">iShares China Large-Cap (FXI) (FXI US)</a> options.</li>
</ul>


There could be 1/2 changes to the iShares China Large-Cap (FXI) (FXI US) in March. Then there will be more changes as large Chinese companies list H-shares on the HKEX.
Fast Entries and regular inclusion of newly listed H-shares will change the characteristics of the FXI and there could be further deviations from the Hang Seng China Enterprises Index (HSCEI INDEX). 
That will provide opportunities for index rebalance traders as well as volatility traders that are active on the iShares China Large-Cap (FXI) (FXI US) options.


FXI ETF: Potential Changes in the Year of the Snake

China

China Merchants Securities Co., Ltd. provides securities services. The Company offers securities brokerage, securities investment consulting, securities underwriting, and other services. China Merchants Securities also operates investment management.

China Merchants Securities Co Ltd (A) (600999 CH)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Merchants Securities Co Ltd (A) (600999 CH)

CICC (3908 HK): It Is the Best of the Time

CICC is alerting a strong 1H25 profit growth, leading in the HK IPO market with a promising H-share IPO pipeline of A-share companies. The market...

Osbert Tang, CFA

FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out

Pop Mart and SF Holdings replace China Railway and China Merchant Securities in the FXI ETF at the close on 20 June. SF Holding will also be added...

Brian Freitas

FXI Rebalance Preview: Pop Mart (9992 HK) Pops Up Again

Pop Mart could replace China Railway in the FXI ETF. Pop Mart is also a potential inclusion to other indices. Shorts have been increasing in both...

Brian Freitas

FXI ETF: Potential Changes in the Year of the Snake

There could be many constituent changes to the FXI this year. That will alter the returns, volatility and drawdown of the ETF and open up trading...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CICC (3908 HK): It Is the Best of the Time

​CICC is alerting a strong 1H25 profit growth, leading in the HK IPO market with a promising H-share IPO pipeline of A-share companies. The market...

Osbert Tang, CFA

FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out

Pop Mart and SF Holdings replace China Railway and China Merchant Securities in the FXI ETF at the close on 20 June. SF Holding will also be added...

Brian Freitas

CSI All Share IB & Brokerage Index Rebalance: Northeast Replaces Harbin Hatou

Northeast Securities will be added and Harbin Hatou will be deleted. Both stocks have 2.6x ADV to trade. There could be further upside till...

Brian Freitas

FXI Rebalance Preview: Pop Mart (9992 HK) Pops Up Again

Pop Mart could replace China Railway in the FXI ETF. Pop Mart is also a potential inclusion to other indices. Shorts have been increasing in both...

Brian Freitas

FXI ETF: Potential Changes in the Year of the Snake

There could be many constituent changes to the FXI this year. That will alter the returns, volatility and drawdown of the ETF and open up trading...

Brian Freitas

CICC is alerting a strong 1H25 profit growth, leading in the HK IPO market with a promising H-share IPO pipeline of A-share companies. The market...