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/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> is a potential deletion in December and that could result in <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> being added to the index.</li>
<li>Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.</li>
<li>There is a very small impact on the fair value of the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a> 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.</li>
</ul>



Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.


HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)

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.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tuhu-car" target="_blank" data-smartkarma-citation="entities:36012:1" rel="noopener">Tuhu Car (2007986D HK)</a>, a leading integrated online and offline platform for automotive service in China, is set to open books for its US$300 million IPO.   </li>
<li>Among independent aftermarket (IAM) stores in China, Tuhu ranked first in terms of both number of stores as of 31 December 2022 and annual automotive service revenue in 2022.</li>
<li>The investment case rests on the return to growth, improving gross margin, a shift to profitability and a return to cash generation.</li>
</ul>



Tuhu Car (2007986D HK), a leading integrated online and offline platform for automotive service in China, is set to open books for its US$300 million IPO.   
Among independent aftermarket (IAM) stores in China, Tuhu ranked first in terms of both number of stores as of 31 December 2022 and annual automotive service revenue in 2022.
The investment case rests on the return to growth, improving gross margin, a shift to profitability and a return to cash generation.


External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

China Yongda Automobiles Services / Equity Bottom-Up

China Yongda Automobiles Services (3669 HK)

<ul><li>Maintain BUY. Yongda’s 1H23 net profit fell 40% YoY to RMB 407mn, slightly lower than our prior forecast but higher than some investors’ pessimistic expectation.</li><li>Yongda’s 1H23 earnings YoY decline was between Zhongsheng (881 HK, NR) and Meidong (1268 HK, HOLD).</li><li>We expect Yongda’s new-car GPM to improve slightly HoH. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Maintain BUY. Yongda’s 1H23 net profit fell 40% YoY to RMB 407mn, slightly lower than our prior forecast but higher than some investors’ pessimistic expectation.Yongda’s 1H23 earnings YoY decline was between Zhongsheng (881 HK, NR) and Meidong (1268 HK, HOLD).We expect Yongda’s new-car GPM to improve slightly HoH. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Yongda Automobiles (3669 HK) – New-Car GPM May Bottom Out in 2H23E

<ul>
<li>
<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> and <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> are high probability deletions in September, while <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a> is a high probability inclusion.</li>
<li>The second add could be <a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene Ltd (6160 HK)</a> if it passes the velocity test. If not, <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a> will be added.</li>
<li>With the exception of <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a>, short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.</li>
</ul>



Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.


HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

<ul><li>Maintain BUY. We project Yongda’s 1H23E net profit to fall 34% YoY to RMB 445mn amid price war and we cut our FY23E net profit to RMB 1.2bn.</li><li>Given that major luxury automakers in China provided significant additional rebates to dealers in 1H23, we are of the view that new-car GPM of about 1% could be a bottom for Yongda.</li><li>We project 1H23E net profit to be RMB 445mn. We project Yongda’s newcar sales volume to rise 16% YoY to about 89,000 units in 1H23E due to low base, with average selling price falling about 11% YoY amid price war.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Maintain BUY. We project Yongda’s 1H23E net profit to fall 34% YoY to RMB 445mn amid price war and we cut our FY23E net profit to RMB 1.2bn.Given that major luxury automakers in China provided significant additional rebates to dealers in 1H23, we are of the view that new-car GPM of about 1% could be a bottom for Yongda.We project 1H23E net profit to be RMB 445mn. We project Yongda’s newcar sales volume to rise 16% YoY to about 89,000 units in 1H23E due to low base, with average selling price falling about 11% YoY amid price war.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Yongda Automobiles (3669 HK) – 1H23E Preview: New-Car GPM Could Be a Bottom

China

China Yongda Automobiles Services is a large-scale conglomerate focused on dealership services for international luxury automobile brands and new energy vehicle brands. The company provides new vehicle sales, after-sales services, automobile finance and insurance, pre-owned vehicle replacement and sales, and auto spare parts and maintenance. It was established in 1992 and is headquartered in Shanghai, China.

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China Yongda Automobiles Services (3669 HK)

HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)

China Unicom could replace Zhongsheng Holdings in the HSCEI in Dec. Passives need to trade over 1x ADV on both stocks. There will be the usual...

Brian Freitas

TUHU Car IPO: The Investment Case

The investment case rests on the return to growth, improving gross margin, a shift to profitability and a return to cash generation.

Arun George

Yongda Automobiles (3669 HK) – New-Car GPM May Bottom Out in 2H23E

Maintain BUY. Yongda’s 1H23 net profit fell 40% YoY to RMB 407mn, slightly lower than our prior forecast but higher than some investors’...

CMB International

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

The two potential adds have outperformed the two potential deletes by 42% since end May and by 52% since end June. Shorts have jumped on Beigene...

Brian Freitas

Yongda Automobiles (3669 HK) – 1H23E Preview: New-Car GPM Could Be a Bottom

Maintain BUY. We project Yongda’s 1H23E net profit to fall 34% YoY to RMB 445mn amid price war and we cut our FY23E net profit to RMB 1.2bn.

CMB International

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