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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Hang Seng Indexes will announce the results of the December 2021 review of the Hang Seng Family of Indexes on 19 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ended on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for 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>.With Hang Seng Indexes looking to get up to 80 <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> members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.As of the close on 3 November, index turnover is 1.3% from capping and other changes to the current index constituents. That gives the index committee a lot of room to add some big stocks to the index without increasing the turnover to levels seen at the last two rebalances in June and September.We identify 12 stocks that could be added to the index based on market coverage and the impact of recent regulatory changes. Of the 12 stocks, 8 are higher probability changes and 4 are lower probability.All 12 inclusions will result in a one-way turnover of 6.37% while the inclusion of the 8 high probability changes will result in a one-way turnover of 4.98%.There is large short interest on most of the stocks and index inclusion could set off a round of short covering and could drive the stocks higher.

Hang Seng Indexes will announce the results of the December 2021 review of the Hang Seng Family of Indexes on 19 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ended on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).With Hang Seng Indexes looking to get up to 80 Hong Kong Hang Seng Index (HSI INDEX) members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.As of the close on 3 November, index turnover is 1.3% from capping and other changes to the current index constituents. That gives the index committee a lot of room to add some big stocks to the index without increasing the turnover to levels seen at the last two rebalances in June and September.We identify 12 stocks that could be added to the index based on market coverage and the impact of recent regulatory changes. Of the 12 stocks, 8 are higher probability changes and 4 are lower probability.All 12 inclusions will result in a one-way turnover of 6.37% while the inclusion of the 8 high probability changes will result in a one-way turnover of 4.98%.There is large short interest on most of the stocks and index inclusion could set off a round of short covering and could drive the stocks higher.

Hang Seng Index Rebalance Preview: The Road to 80 Constituents

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

Thematic (Sector/Industry)

Real Estate exposure is close to its lowest levels on record among active Asia Ex-Japan investors.  Average weights have fallen to 3.07% following an aggressive decline that took hold in April 2020 when average holding weights were above 5%.Real Estate is now the 3rd least widely held sector among active Asia Ex-Japan investors, slipping behind Health Care and Materials earlier this year for the first time in a decade.Underweights are widespread, led by the lightly held <a href="https://www.smartkarma.com/entities/ck-asset-holdings-ltd" target="_blank" data-smartkarma-citation="entities:22650:1" rel="noopener">CK Asset Holdings (1113 HK)</a>, <a href="https://www.smartkarma.com/entities/wharf-real-estate-investment" target="_blank" data-smartkarma-citation="entities:26031:1" rel="noopener">Wharf Real Estate Investment (1997 HK)</a> and <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK).</a>  <a href="https://www.smartkarma.com/entities/capitaland-investment-ltd-si" target="_blank" data-smartkarma-citation="entities:33774:1" rel="noopener">Capitaland Investment (CLI SP)</a>, a 0.1% weight in the MSCI AAXJ index is held by none of the active strategies in our analysis.Activity over the last 6-months shows a clear rotation out of China &amp; HK and Singapore Real Estate and in to India.  Indian Real Estate ownership metrics all moved higher, with average weights increasing by 0.17%, funds invested by +4.3%, more funds buying than selling and positive fund flows.Analysis taken from our Asia Ex-Japan research, covering 96 active strategies with combined AUM of $85bn

Real Estate exposure is close to its lowest levels on record among active Asia Ex-Japan investors.  Average weights have fallen to 3.07% following an aggressive decline that took hold in April 2020 when average holding weights were above 5%.Real Estate is now the 3rd least widely held sector among active Asia Ex-Japan investors, slipping behind Health Care and Materials earlier this year for the first time in a decade.Underweights are widespread, led by the lightly held CK Asset Holdings (1113 HK), Wharf Real Estate Investment (1997 HK) and Country Garden Holdings Co (2007 HK).  Capitaland Investment (CLI SP), a 0.1% weight in the MSCI AAXJ index is held by none of the active strategies in our analysis.Activity over the last 6-months shows a clear rotation out of China &amp; HK and Singapore Real Estate and in to India.  Indian Real Estate ownership metrics all moved higher, with average weights increasing by 0.17%, funds invested by +4.3%, more funds buying than selling and positive fund flows.Analysis taken from our Asia Ex-Japan research, covering 96 active strategies with combined AUM of $85bn

Asia Ex-Japan Real Estate:  Hitting the Lows.  China to India Rotation

The September rebalance of 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> was implemented at the close of trading on 3 September. Hang Seng Indexes should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for 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>.There were 3 inclusions at the June rebalance and 3 inclusions and 1 exclusion at the September rebalance to take the number of index constituents to 60.With Hang Seng Indexes looking to get up to 80 <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> members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.Stocks that are ranked towards the top of their Industry group and are potential inclusions are <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a>, <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-beer-holdings" target="_blank" data-smartkarma-citation="entities:399:1" rel="noopener">China Resources Beer Holdings (291 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a>, <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>, <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao (1378 HK)</a> and <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>.Given that the index committee consciously avoided including stocks from sectors that were targeted by tightening regulations in China, this list will be revised closer to the index committee meeting in November. Another factor that will determine the number of inclusions is the turnover at the rebalance - while it is less than 4% now with the 10 inclusions, that number will move higher as stocks move around and there are capping changes on the largest constituents.

The September rebalance of the Hong Kong Hang Seng Index (HSI INDEX) was implemented at the close of trading on 3 September. Hang Seng Indexes should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).There were 3 inclusions at the June rebalance and 3 inclusions and 1 exclusion at the September rebalance to take the number of index constituents to 60.With Hang Seng Indexes looking to get up to 80 Hong Kong Hang Seng Index (HSI INDEX) members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.Stocks that are ranked towards the top of their Industry group and are potential inclusions are Smoore International (6969 HK), Nongfu Spring (9633 HK), China Resources Beer Holdings (291 HK), China Resources Mixc Lifestyle Services (1209 HK), Sunac China Holdings (1918 HK), China Gas Holdings (384 HK), JD Health (6618 HK), Hansoh Pharmaceutical (3692 HK), China Hongqiao (1378 HK) and Fosun International (656 HK).Given that the index committee consciously avoided including stocks from sectors that were targeted by tightening regulations in China, this list will be revised closer to the index committee meeting in November. Another factor that will determine the number of inclusions is the turnover at the rebalance - while it is less than 4% now with the 10 inclusions, that number will move higher as stocks move around and there are capping changes on the largest constituents.

HSI Index Rebalance Preview: Potential Inclusions in December

APAC IPOs & Placements

Zhen Zhou, Toh

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.

Event-Driven

China Resources Mixc Lifestyle / Event-Driven

<a href="https://www.smartkarma.com/entities/china-resources-mixc-lifestyle-services" target="_blank" data-smartkarma-citation="entities:29285:1" rel="noopener">China Resources Mixc Lifestyle Services (1209 HK)</a> (CRML) was listed on the Hong Kong Exchange on 9th December, 2020. Its IPO lock-up will expire on 9th June, 2021.CRML is the property management arm of China Resources Land (CR Land). The company provides property management and value-added services (VAS) to residential properties. It also manages and operates a portfolio of commercial properties that includes shopping malls and office buildings. In this note, we will look at the deal dynamics and provide a table with implied valuation at different share price levels.We have previously covered the IPO in:<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/cr-mixc-lifestyle-services-pre-ipo-a-balance-of-residential-and-commercial-properties" target="_blank" data-smartkarma-citation="insights:43376" rel="noopener">CR Mixc Lifestyle Services (华润万象生活) Pre-IPO - A Balance of Residential and Commercial Properties</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/cr-mixc-lifestyle-services-pre-ipo-soe-linked-parentage-didn-t-help" target="_blank" data-smartkarma-citation="insights:45187" rel="noopener">CR Mixc Lifestyle Services (华润万象生活) Pre-IPO - SOE-Linked Parentage Didn’t Help</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/cr-mixc-lifestyle-services-ipo-needs-time-to-prove-itself" target="_blank" data-smartkarma-citation="insights:45644" rel="noopener">CR Mixc Lifestyle Services (华润万象生活) IPO - Needs Time to Prove Itself</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/cr-mixc-lifestyle-services-ipo-trading-better-demand-than-recent-peers-ipos" target="_blank" data-smartkarma-citation="insights:46143" rel="noopener">CR Mixc Lifestyle Services (华润万象生活) IPO Trading - Better Demand than Recent Peers' IPOs</a> </li>
</ul>

China Resources Mixc Lifestyle Services (1209 HK) (CRML) was listed on the Hong Kong Exchange on 9th December, 2020. Its IPO lock-up will expire on 9th June, 2021.CRML is the property management arm of China Resources Land (CR Land). The company provides property management and value-added services (VAS) to residential properties. It also manages and operates a portfolio of commercial properties that includes shopping malls and office buildings. In this note, we will look at the deal dynamics and provide a table with implied valuation at different share price levels.We have previously covered the IPO in:

CR Mixc Lifestyle Services (华润万象生活) Pre-IPO - A Balance of Residential and Commercial Properties 

CR Mixc Lifestyle Services (华润万象生活) Pre-IPO - SOE-Linked Parentage Didn’t Help 

CR Mixc Lifestyle Services (华润万象生活) IPO - Needs Time to Prove Itself 

CR Mixc Lifestyle Services (华润万象生活) IPO Trading - Better Demand than Recent Peers' IPOs 


CR Mixc Svcs (华润万象生活)  Lock-Up Expiry - Quick Note - Solid Performance Since IPO

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.

Sichuan Languang Justbon Service Group / Event-Driven

<a href="https://www.smartkarma.com/entities/sichuan-languang-justbon-service-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:28337:1" rel="noopener">Sichuan Languang Justbon Service Group (2606 HK)</a> has despatched the composite document in relation to <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a> and <a href="https://www.smartkarma.com/entities/harbin-electric-co-ltd-h" target="_blank" data-smartkarma-citation="entities:11116:1" rel="noopener">Harbin Electric Co Ltd H (1133 HK)</a> have previously failed due to the inability to meet the 90% minimum acceptance condition.  <div class="content-highlight">Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.</div>

Sichuan Languang Justbon Service Group (2606 HK) has despatched the composite document in relation to Country Garden Services Holdings (6098 HK) base and enhanced offer. Currently, Country Garden owns 71.17% of the outstanding shares comprising 66.99% of the domestic shares and 71.20% of the H Shares. The base offer is an unconditional mandatory cash offer for all the issued shares is HK$51.0571 per H-share (RMB42.8547 per domestic share. The enhanced share offer, which is payable only if the delisting is approved, is HK$54.3000 per H-share (RMB45.5768 per domestic share). Unsurprisingly, the IFA considers the base and enhanced offer to be fair and reasonable. We broadly agree with the IFA analysis with the exception that the peer multiple comparisons could be improved. The two key conditions for the delisting will be approval by at least 75% independent H-shareholders (&lt;10% of all independent H-shareholders rejection) and the satisfaction of the minimum acceptance condition (90% of H-shares held by independent H-shareholders). Satisfaction of the minimum acceptance condition is the key hurdle. We note the privatisation proposals for Beijing Jingneng Clean Energy (579 HK) and Harbin Electric Co Ltd H (1133 HK) have previously failed due to the inability to meet the 90% minimum acceptance condition.  Country Garden Services has bought itself some leeway by having the right to extend the closing date from 17 June to not later than 3 September. In theory, the extended time period should provide a greater chance of meeting the 90% threshold. At the last close, the gross spread to the enhanced offer price of HK$54.3000 stands at 4.9%.

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

China

China Resources Mixc Lifestyle Services Limited offer property management services. The Company provides residential property management, community value added services, commercial operational services, commercial subleasing services, and other services. China Resources Mixc Lifestyle Services provides its services throughout Hong Kong.

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China Resources Mixc Lifestyle (1209 HK)

Hang Seng Index Rebalance Preview: The Road to 80 Constituents

The HSI has 60 members and the target is to reach 80 constituents over the next 3 rebalances. There could be a lot of stocks added at the Dec rebal...

Brian Freitas

Asia Ex-Japan Real Estate: Hitting the Lows. China to India Rotation

Real Estate exposure is close to its lowest levels on record among active Asia Ex-Japan investors. As China Real Estate suffers an exodus, India...

Steven Holden

HSI Index Rebalance Preview: Potential Inclusions in December

There could be 10 inclusions to the HSI at the Dec rebalance to help reach the 80 index member count by mid-2022. Index turnover & regulations will...

Brian Freitas

CR Mixc Svcs (华润万象生活) Lock-Up Expiry - Quick Note - Solid Performance Since IPO

China Resources Mixc Lifestyle Services (1209 HK) (CRML) was listed on the Hong Kong Exchange on 9th December, 2020. Its IPO lock-up will expire on...

Zhen Zhou, Toh

Languang Justbon’s Composite Document, IFA Opinion and Extended Closing Date

Satisfaction of the minimum acceptance condition is the key hurdle. At the last close, the gross spread to the enhanced offer price of HK$54.3000...

Arun George

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