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/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a> is still suspended from trading and could be deleted from the index in July and replaced by <a href="https://www.smartkarma.com/entities/sensetime-group-inc" target="_blank" data-smartkarma-citation="entities:34319:1" rel="noopener">SenseTime Group (20 HK)</a> or <a href="https://www.smartkarma.com/entities/petrochina-co-ltd-h" target="_blank" data-smartkarma-citation="entities:262:1" rel="noopener">PetroChina (857 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/sensetime-group-inc" target="_blank" data-smartkarma-citation="entities:34319:1" rel="noopener">SenseTime (20 HK)</a> or <a href="https://www.smartkarma.com/entities/petrochina-co-ltd-h" target="_blank" data-smartkarma-citation="entities:262:1" rel="noopener">PetroChina (857 HK)</a>, <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall (2333 HK)</a> and <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng (881 HK)</a> could replace <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/china-pacific-insurance-group" target="_blank" data-smartkarma-citation="entities:6177:1" rel="noopener">CPIC (2601 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health (241 HK)</a> in September.</li>
<li>There will be buying on <a href="https://www.smartkarma.com/entities/sensetime-group-inc" target="_blank" data-smartkarma-citation="entities:34319:1" rel="noopener">SenseTime Group (20 HK)</a> from <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI INDEX</a> and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH INDEX</a> trackers. But there is also a big lock-up expiry on 29 June.</li>
</ul>



Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK). 

SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.


HSCEI Index Rebalance Preview: Four Sets of Changes from July to September

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yancoal-australia-ltd" target="_blank" data-smartkarma-citation="entities:4145:1" rel="noopener">Yancoal Australia (YAL AU)</a>’s independent board committee unanimously concluded that <a href="https://www.smartkarma.com/entities/yankuang-energy-group" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yankuang Energy Group (1171 HK)</a>’s H-Share CBs offer is not in the best interests of Yancoal’s minority shareholders. </li>
<li>Yankuang is open to continuing its discussions with <a href="https://www.smartkarma.com/entities/yancoal-australia" target="_blank" data-smartkarma-citation="entities:8427:1" rel="noopener">Yancoal Australia (3668 HK)</a> but maintains that the offer was based on long-term factors including expectations of future coal prices.</li>
<li>Overall, the wording of Yankuang’s response suggests that it is more inclined to bide its time rather than return with a better offer. Required FIRB approval remains an overhang.</li>
</ul>



Yancoal Australia (YAL AU)’s independent board committee unanimously concluded that Yankuang Energy Group (1171 HK)’s H-Share CBs offer is not in the best interests of Yancoal’s minority shareholders. 
Yankuang is open to continuing its discussions with Yancoal Australia (3668 HK) but maintains that the offer was based on long-term factors including expectations of future coal prices.
Overall, the wording of Yankuang’s response suggests that it is more inclined to bide its time rather than return with a better offer. Required FIRB approval remains an overhang.


Yankuang’s Response Suggests that It Rather Wait than Improve Its Offer for Yancoal

<ul>
<li>
<a href="https://www.smartkarma.com/entities/glencore-plc" target="_blank" data-smartkarma-citation="entities:764:1" rel="noopener">Glencore Plc (GLEN LN)</a> is likely to reject <a href="https://www.smartkarma.com/entities/yanzhou-coal-mining-company-limited-h" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yanzhou Coal Mining Company Limited H (1171 HK)</a>’s H-Share CBs of US$3.60 (HK$28.26/A$5.07) per <a href="https://www.smartkarma.com/entities/yancoal-australia-ltd" target="_blank" data-smartkarma-citation="entities:4145:1" rel="noopener">Yancoal Australia (YAL AU)</a> share, <a href="https://www.reuters.com/markets/europe/glencore-reject-offer-yancoal-australia-stake-too-low-sources-2022-06-02/" target="_blank" rel="noopener">according to Reuters</a>.</li>
<li>If the privatisation succeeds, we estimate that Yankuang’s additional claim on <a href="https://www.smartkarma.com/entities/yancoal-australia" target="_blank" data-smartkarma-citation="entities:8427:1" rel="noopener">Yancoal Australia (3668 HK)</a>’s three-year FCF would broadly cover the total potential consideration of US$1,794 million.</li>
<li>The fixed coupon on the CBs would likely need to match the foregone dividend yield. We think it challenging for Yankuang to bridge the gap to Glencore’s “right price”. </li>
</ul>



Glencore Plc (GLEN LN) is likely to reject Yanzhou Coal Mining Company Limited H (1171 HK)’s H-Share CBs of US$3.60 (HK$28.26/A$5.07) per Yancoal Australia (YAL AU) share, according to Reuters.
If the privatisation succeeds, we estimate that Yankuang’s additional claim on Yancoal Australia (3668 HK)’s three-year FCF would broadly cover the total potential consideration of US$1,794 million.
The fixed coupon on the CBs would likely need to match the foregone dividend yield. We think it challenging for Yankuang to bridge the gap to Glencore’s “right price”. 


Glencore and Yankuang’s Disparate Valuations of Yancoal

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yanzhou-coal-mining-company-limited-h" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yanzhou Coal Mining Company Limited H (1171 HK)</a>/Yankuang, a 62.26% shareholder, aims to offer H Share convertible bonds for US$3.60 (HK$28.26 or A$5.07) per <a href="https://www.smartkarma.com/entities/yancoal-australia-ltd" target="_blank" data-smartkarma-citation="entities:4145:1" rel="noopener">Yancoal Australia (YAL AU)</a> share.</li>
<li>Yankuang’s implied offer price is -16.6% and -14.5% below the last close price on the ASX and HKEx, respectively. At first glance, the offer seems to be a non-starter.  </li>
<li>Yankuang’s end game is likely to provide large shareholders with a liquidity event to hit the 90% compulsory acquisition threshold. This ploy could work subject to FIRB approval. </li>
</ul>



Yanzhou Coal Mining Company Limited H (1171 HK)/Yankuang, a 62.26% shareholder, aims to offer H Share convertible bonds for US$3.60 (HK$28.26 or A$5.07) per Yancoal Australia (YAL AU) share.
Yankuang’s implied offer price is -16.6% and -14.5% below the last close price on the ASX and HKEx, respectively. At first glance, the offer seems to be a non-starter.  
Yankuang’s end game is likely to provide large shareholders with a liquidity event to hit the 90% compulsory acquisition threshold. This ploy could work subject to FIRB approval. 


Yancoal’s Unusual Low Bid from Yankuang Energy

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Our outlook remains bearish at the index level as downtrends remain intact on the MSCI broad global indexes and also within Japan, Hong Kong, Europe, Germany, and China.</li>
<li>Our preferred Sector overweights continue to be defensives (Utilities, Staples, and Health Care) and commodity Sectors (Energy and Materials).</li>
<li>The secular bull market in commodities (Bloomberg Commodity index, WTI and Brent crude oil, etc.) remains intact, which continues to support our overweight recommendations on the Energy and Materials Sectors.</li>
</ul>


Our outlook remains bearish at the index level as downtrends remain intact on the MSCI broad global indexes and also within Japan, Hong Kong, Europe, Germany, and China.
Our preferred Sector overweights continue to be defensives (Utilities, Staples, and Health Care) and commodity Sectors (Energy and Materials).
The secular bull market in commodities (Bloomberg Commodity index, WTI and Brent crude oil, etc.) remains intact, which continues to support our overweight recommendations on the Energy and Materials Sectors.


Still Bearish at the Index Level; Remain Overweight Defensives & Commodity Sectors

China

China Shenhua Energy Company Limited is an integrated coal-based energy company focusing on the coal and power businesses in China.  The Company also owns and operates an integrated coal transportation network consisting of dedicated rail lines and port facilities.

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China Shenhua Energy Co H (1088 HK)

HSCEI Index Rebalance Preview: Four Sets of Changes from July to September

There should be one change to the HSCEI in July and then three more in September. Sensetime, Petrochina, GWM and Zhongsheng are expected to replace...

Brian Freitas

Yankuang’s Response Suggests that It Rather Wait than Improve Its Offer for Yancoal

Yancoal unsurprisingly batted away Yankuang's low-ball offer. The wording in Yankuang's response suggests that it is unlikely to offer improved...

Arun George

Glencore and Yankuang’s Disparate Valuations of Yancoal

Glencore is likely to reject Yankuang’s offer, according to Reuters. While Glencore is said to be a willing seller, we think that Yankuang will...

Arun George

Yancoal’s Unusual Low Bid from Yankuang Energy

Yankuang’s implied offer price is materially below the last close price on both the ASX and HKEx. The strategy is likely to secure large...

Arun George

Still Bearish at the Index Level; Remain Overweight Defensives & Commodity Sectors

Our outlook remains bearish at the index level as downtrends remain intact on the MSCI broad global indexes and also within Japan, Hong Kong,...

Vermilion Research

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