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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<ul>
<li>Short notional in Hong Kong is HK$488bn and has been falling mainly as a result of a falling market. Short interest has increased substantially from end January.</li>
<li>From 31 January to 4 March, the largest shorts have been built on Tencent, China Merchants Bank, AIA Group Ltd, Alibaba, JD.com, Meituan, Xiaomi, JD Health and Xinyi Solar.</li>
<li>Over the same period, shorts have covered on COSCO Shipping Holdings, HKEX, Longfor Properties, China Construction Bank, Ping An Insurance, Yanzhou Coal Mining Company and HSBC Holdings.</li>
</ul>


Short notional in Hong Kong is HK$488bn and has been falling mainly as a result of a falling market. Short interest has increased substantially from end January.
From 31 January to 4 March, the largest shorts have been built on Tencent, China Merchants Bank, AIA Group Ltd, Alibaba, JD.com, Meituan, Xiaomi, JD Health and Xinyi Solar.
Over the same period, shorts have covered on COSCO Shipping Holdings, HKEX, Longfor Properties, China Construction Bank, Ping An Insurance, Yanzhou Coal Mining Company and HSBC Holdings.


Hong Kong: Where Have Shorts Increased & Decreased?

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

<ul>
<li>DBS reported a weak set of 4Q21 results of SGD 1.4 bn, down SGD 307 mn (18.1%) linked quarter and driven by negative operating jaws; </li>
<li>While provisions weren’t reversed this quarter, reserves should still be shored up in the neighborhood of SGD 1.1 bn – amounting to about a half quarter of operating results; and  </li>
<li>Three transactions in the span of a year is too much. DBS needs to focus on improving its own legacy issues before taking on those of other financial institutions. </li>
</ul>


DBS reported a weak set of 4Q21 results of SGD 1.4 bn, down SGD 307 mn (18.1%) linked quarter and driven by negative operating jaws; 
While provisions weren’t reversed this quarter, reserves should still be shored up in the neighborhood of SGD 1.1 bn – amounting to about a half quarter of operating results; and  
Three transactions in the span of a year is too much. DBS needs to focus on improving its own legacy issues before taking on those of other financial institutions. 


DBS Group Holdings – Weak Print, But Credit Improves

<ul>
<li>It has been an interesting year and short interest has varied a lot across countries, sectors and stocks. We look at changes in Hong Kong, Japan, Korea and Taiwan.</li>
<li>Shorts have soared in Korea following the resumption of short selling, while short interest has increased in the other countries too.</li>
<li>Ping An Insurance and BYD had the biggest short covering, while China Merchants Bank saw the largest increase in shorts over the year.</li>
</ul>


It has been an interesting year and short interest has varied a lot across countries, sectors and stocks. We look at changes in Hong Kong, Japan, Korea and Taiwan.
Shorts have soared in Korea following the resumption of short selling, while short interest has increased in the other countries too.
Ping An Insurance and BYD had the biggest short covering, while China Merchants Bank saw the largest increase in shorts over the year.


<ul>
<li>The December rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituents at 8%. This will lead to large flows.</li>
<li>The largest passive outflows as a result of capping will be on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> due to their weight exceeding 8% in all three indices.</li>
<li>There are large funding outflows (in terms of days of ADV to trade) on quite a few Hong Kong property stocks as well as stocks from the financials sector.</li>
</ul>


The December rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituents at 8%. This will lead to large flows.
The largest passive outflows as a result of capping will be on Meituan (3690 HK) and Tencent (700 HK) due to their weight exceeding 8% in all three indices.
There are large funding outflows (in terms of days of ADV to trade) on quite a few Hong Kong property stocks as well as stocks from the financials sector.


HSI, HSCEI, HSTECH: December Rebalance Flows Post Capping

*Overstated 3Q21 Result: DBS Group Holdings (DBS.SP) [DBS] reported 3Q21 results of SGD 1.7 bn, flat linked quarter. When one accounts for the unnecessary negative loss provision of SGD 70 mn (down 188.6%) while credit was weaker, DBS’ results would appear to be grossly overstated;*Watch Your Credit: We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. We feel that reserves should be shored up in the neighborhood of SGD 1.1 bn – amounting now to about a half quarter of operating results; and *Deal Distractions Mount:  While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.

*Overstated 3Q21 Result: DBS Group Holdings (DBS.SP) [DBS] reported 3Q21 results of SGD 1.7 bn, flat linked quarter. When one accounts for the unnecessary negative loss provision of SGD 70 mn (down 188.6%) while credit was weaker, DBS’ results would appear to be grossly overstated;*Watch Your Credit: We struggle continue to believe that DBS’ due diligence had actually caught all of LVB’s risk (see discussion below), and remain unconvinced that the moratorium exits are anything more than additional reliance on government schemes and relief programs. DBS has disclosed absolutely nothing about Shenzhen Rural Commercial Bank’s (SRCB) fundamentals. We feel that reserves should be shored up in the neighborhood of SGD 1.1 bn – amounting now to about a half quarter of operating results; and *Deal Distractions Mount:  While SRCB dos not appear to be riddled with problems the way LVB is, no doubt there will be issues to contend with.  DBS apparently isn’t done with its shopping spree, being in the running for parts of Citigroup's (C.US) consumer business in Asia. Frankly, DBS needs to focus on improving its own legacy issues before it starts both taking on those of other financial institutions.

DBS Group Holdings – Pushing The Envelope

Hong Kong

Hang Seng Bank Limited and its subsidiaries provide banking and related financial services.

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Hang Seng Bank (11 HK)

Hong Kong: Where Have Shorts Increased & Decreased?

From 31 Jan to 4 March, most shorted stocks are Tencent, China Merchants Bank, AIA Group, Alibaba, JD.com, Meituan, Xiaomi, JD Health and Xinyi...

Brian Freitas

DBS Group Holdings – Weak Print, But Credit Improves

DBS: DBS 4Q21 declined 18.1% QOQ and driven by negative operating jaws; While loss provisions weren’t reversed this quarter, reserves should be...

Thomas J. Monaco

Asia: The Year in Shorts

There have been large increases and decreases in short interest on stocks across HK, Japan, Korea and Taiwan over the year. We look at the biggest...

Brian Freitas

HSI, HSCEI, HSTECH: December Rebalance Flows Post Capping

The Dec rebalance of the HK indices will use today's closing prices to cap the stocks at 8%. Meituan and Tencent will see large outflows due to...

Brian Freitas

DBS Group Holdings – Pushing The Envelope

DBS: DBS reported flat 3Q21 QOQ results. Accounting for the unnecessary negative loss provision of SGD 70 mn (down 188.6%) while credit was weaker,...

Thomas J. Monaco

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