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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Haidilao International Holding / Index Rebalance

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the 2020 Q3 review of the Hang Seng Family of Indexes on 6 November. The constituent changes will be effective after the close of trading on 4 December.With only 3 changes permitted in the September <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> review post the methodology change that included WVR securities and Secondary Listings in the eligible Universe, there could be as many as 9 changes in the December review.We see a high probability of <a href="https://www.smartkarma.com/entities/china-overseas-land-invest" target="_blank" data-smartkarma-citation="entities:419:1" rel="noopener">China Overseas Land &amp; Investment Ltd (688 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <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-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing (981 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-real-estate-group-limited" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a> being included in 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>, and of <a href="https://www.smartkarma.com/entities/china-taiping-insurance-hldgs-co-ltd" target="_blank" data-smartkarma-citation="entities:489:1" rel="noopener">China Taiping Insurance Hldgs (966 HK)</a>, <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a>, <a href="https://www.smartkarma.com/entities/china-minsheng-banking-h" target="_blank" data-smartkarma-citation="entities:8983:1" rel="noopener">China Minsheng Banking H (1988 HK)</a>, <a href="https://www.smartkarma.com/entities/china-vanke-co-ltd-h" target="_blank" data-smartkarma-citation="entities:18368:1" rel="noopener">China Vanke Co Ltd (H) (2202 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/china-citic-bank-corp-ltd-ea6c25fd-4b20-45cb-a4a6-df7a60136f03" target="_blank" data-smartkarma-citation="entities:653:1" rel="noopener">China Citic Bank Corp Ltd H (998 HK)</a> and <a href="https://www.smartkarma.com/entities/china-shenhua-energy-co-h" target="_blank" data-smartkarma-citation="entities:382:1" rel="noopener">China Shenhua Energy Co H (1088 HK)</a> being deleted from the index.Depending on price movements between now and 30 September, <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> and <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> could be included in the index, which would see <a href="https://www.smartkarma.com/entities/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a> and <a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty H (2328 HK)</a> being deleted.Estimated one-way turnover for the rebalance is 9.63% which is lower than the turnover at the September rebalance, but significant nonetheless.The expected review changes will alter the sectoral composition of the index with an increase in the weight of the Consumer Discretionary, Information Technology and Health Care sectors at the expense of Financials and Energy. There will also be an impact on the HSCEI 2021 dividend futures, a large part of which has already been discounted by the market.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the 2020 Q3 review of the Hang Seng Family of Indexes on 6 November. The constituent changes will be effective after the close of trading on 4 December.With only 3 changes permitted in the September Hang Seng China Enterprises Index (HSCEI INDEX) review post the methodology change that included WVR securities and Secondary Listings in the eligible Universe, there could be as many as 9 changes in the December review.We see a high probability of China Overseas Land &amp; Investment Ltd (688 HK), JD.com (HK) (9618 HK), Alibaba Health Information Technology (241 HK), Haidilao (6862 HK), China Feihe (6186 HK), Semiconductor Manufacturing (981 HK) and Evergrande Real Estate Group (3333 HK) being included in the Hang Seng China Enterprises Index (HSCEI INDEX), and of China Taiping Insurance Hldgs (966 HK), China Telecom Corp Ltd (H) (728 HK), China Minsheng Banking H (1988 HK), China Vanke Co Ltd (H) (2202 HK), Fosun International (656 HK), China Citic Bank Corp Ltd H (998 HK) and China Shenhua Energy Co H (1088 HK) being deleted from the index.Depending on price movements between now and 30 September, NetEase (9999 HK) and Hansoh Pharmaceutical (3692 HK) could be included in the index, which would see Want Want (151 HK) and PICC Property &amp; Casualty H (2328 HK) being deleted.Estimated one-way turnover for the rebalance is 9.63% which is lower than the turnover at the September rebalance, but significant nonetheless.The expected review changes will alter the sectoral composition of the index with an increase in the weight of the Consumer Discretionary, Information Technology and Health Care sectors at the expense of Financials and Energy. There will also be an impact on the HSCEI 2021 dividend futures, a large part of which has already been discounted by the market.

HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

With everything almost done and dusted on the HSCEI 2020 dividend futures, the focus has shifted firmly to the HSCEI dividend futures contract expiring in 2021.The HSCEI 2021 dividend futures contract has dropped from a high of almost 500 index points in May 2018 and 400 index points in January 2020 to just 278 index points now. The change is mostly driven by Hang Seng Indexes' decision to include WVR securities and Secondary Listings in 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>, and with COVID-19 contributing to a sharp drop in company earnings.The HSCEI 2021 dividend futures are trading near our fair value at the moment. However, there are still many more catalysts that will keep things interesting for the next few months. Further changes in the index composition and the capping applied to WVR securities and Secondary Listings, pressure on megabanks to support the real economy at the expense of profits and shareholder return, and companies that have never paid dividends starting to pay are just some of them.We discuss all this in more detail below.

With everything almost done and dusted on the HSCEI 2020 dividend futures, the focus has shifted firmly to the HSCEI dividend futures contract expiring in 2021.The HSCEI 2021 dividend futures contract has dropped from a high of almost 500 index points in May 2018 and 400 index points in January 2020 to just 278 index points now. The change is mostly driven by Hang Seng Indexes' decision to include WVR securities and Secondary Listings in the Hang Seng China Enterprises Index (HSCEI INDEX), and with COVID-19 contributing to a sharp drop in company earnings.The HSCEI 2021 dividend futures are trading near our fair value at the moment. However, there are still many more catalysts that will keep things interesting for the next few months. Further changes in the index composition and the capping applied to WVR securities and Secondary Listings, pressure on megabanks to support the real economy at the expense of profits and shareholder return, and companies that have never paid dividends starting to pay are just some of them.We discuss all this in more detail below.

HSCEI Dividends: Multiple Catalysts to Drive Fair Value Changes

On 20 July, the Hang Seng Indexes Company announced that they would be launching the Hang Seng TECH Index on 27 July. The next day the index jumped 7.2%, helped in no small part by the news of <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a>'s impending listing. <div>
The Hang Seng TECH index (HSTECH) is a free float adjusted market cap weighted index that tracks the 30 largest technology stocks listed in Hong Kong and covers companies that have high business exposure to selected technology themes, including internet, fintech, cloud, e-commerce and digital activities. Eligible candidates are further screened by whether they operate via a technology-enabled platform, their research and development expenses to revenue ratio, and their revenue growth.
We wondered when ETFs tracking the index would be launched. We did not have to wait too long. On 28 August, CSOP launched the first ETF (3033 HK) linked to the HSTECH index. The fund raised around HKD 180m in seed money prior to listing. The first day of trading saw 382.16m shares (HKD 3.045bn of notional) trade, making it the highest traded volume for an ETF on launch day since the Tracker Fund (2800 HK) in 1999. It was also sixth most traded listing for the day on the HKEX behind <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan Dianping (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a>. 
There are two more ETFs tracking the HSTECH index that will be launched shortly: Hang Seng TECH Index ETF (3032 HK) and ChinaAMC Hang Seng TECH Index ETF (3088 HK).
In this Insight, we take a look at the index, the index methodology, the impact on the stocks, and what the Fast Entry of large listings could mean for smaller names in the index.
</div>

On 20 July, the Hang Seng Indexes Company announced that they would be launching the Hang Seng TECH Index on 27 July. The next day the index jumped 7.2%, helped in no small part by the news of Ant Financial (1051260D CH)'s impending listing. 
The Hang Seng TECH index (HSTECH) is a free float adjusted market cap weighted index that tracks the 30 largest technology stocks listed in Hong Kong and covers companies that have high business exposure to selected technology themes, including internet, fintech, cloud, e-commerce and digital activities. Eligible candidates are further screened by whether they operate via a technology-enabled platform, their research and development expenses to revenue ratio, and their revenue growth.
We wondered when ETFs tracking the index would be launched. We did not have to wait too long. On 28 August, CSOP launched the first ETF (3033 HK) linked to the HSTECH index. The fund raised around HKD 180m in seed money prior to listing. The first day of trading saw 382.16m shares (HKD 3.045bn of notional) trade, making it the highest traded volume for an ETF on launch day since the Tracker Fund (2800 HK) in 1999. It was also sixth most traded listing for the day on the HKEX behind Xiaomi Corp (1810 HK), Tencent Holdings (700 HK), Alibaba Group (9988 HK), Meituan Dianping (3690 HK) and AIA Group Ltd (1299 HK). 
There are two more ETFs tracking the HSTECH index that will be launched shortly: Hang Seng TECH Index ETF (3032 HK) and ChinaAMC Hang Seng TECH Index ETF (3088 HK).
In this Insight, we take a look at the index, the index methodology, the impact on the stocks, and what the Fast Entry of large listings could mean for smaller names in the index.


Hang Seng TECH Index - 'NASDAQ of the East' ETFs Are Here

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

FTSE China A50 Index / Technical Analysis

<a href="https://www.smartkarma.com/entities/ftse-china-a50-index" target="_blank" data-smartkarma-citation="entities:22905:1" rel="noopener">FTSE China A50 Index (XIN9I INDEX)</a> triggered a fresh breakout today above the 15,500 pivot resistance. The following is from our weekend report. A shares have been a core long from March 2020 with renewed vigor on the upside break above 15k. A50 – 15,500 and 14,700 long action points. Base long from late March and late June. Pullback from early July appears corrective. A fresh rally cycle is due to re test the 16,300/400 high with projection 16,780 and the macro projection at 17, 600.The breakout triggered an H share breakout above 10,300 while the HSI displays a less bullish target at the topside of the rising wedge near 26,000.

FTSE China A50 Index (XIN9I INDEX) triggered a fresh breakout today above the 15,500 pivot resistance. The following is from our weekend report. A shares have been a core long from March 2020 with renewed vigor on the upside break above 15k. A50 – 15,500 and 14,700 long action points. Base long from late March and late June. Pullback from early July appears corrective. A fresh rally cycle is due to re test the 16,300/400 high with projection 16,780 and the macro projection at 17, 600.The breakout triggered an H share breakout above 10,300 while the HSI displays a less bullish target at the topside of the rising wedge near 26,000.

The Hang Seng Indexes Company Limited (HSIL) <a href="https://www.hsi.com.hk/static/uploads/contents/en/news/pressRelease/20200814T000000.pdf" target="_blank" rel="noopener">announced</a> the results of its September review of the Hang Seng Family of Indexes post market close on 14 August.Apart from the index changes that were announced, the Index Advisory Committee reviewed the innovation and new economy sectors and Hang Seng Indexes said that they would conduct a comprehensive study 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> on aspects relating to composition and selection of constituents, number of constituents, weighting, industry and geographical representation etc. and submit a report with its finding and recommendations to the Hang Seng Index Advisory Committee within six months. The number of constituents 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> may increase during this period.With large mainland China companies from the innovation and new economy sectors listing in Hong Kong and being 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> and <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>, both indices look increasingly similar and the correlation between the indices will keep increasing.In this Insight, we look at the main indices in Hong Kong and possible changes that could be made to 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> to ensure it represents the Hong Kong stock market and maintains its identity.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its September review of the Hang Seng Family of Indexes post market close on 14 August.Apart from the index changes that were announced, the Index Advisory Committee reviewed the innovation and new economy sectors and Hang Seng Indexes said that they would conduct a comprehensive study of the Hong Kong Hang Seng Index (HSI INDEX) on aspects relating to composition and selection of constituents, number of constituents, weighting, industry and geographical representation etc. and submit a report with its finding and recommendations to the Hang Seng Index Advisory Committee within six months. The number of constituents of the Hong Kong Hang Seng Index (HSI INDEX) may increase during this period.With large mainland China companies from the innovation and new economy sectors listing in Hong Kong and being eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX) and Hang Seng China Enterprises Index (HSCEI INDEX), both indices look increasingly similar and the correlation between the indices will keep increasing.In this Insight, we look at the main indices in Hong Kong and possible changes that could be made to the Hong Kong Hang Seng Index (HSI INDEX) to ensure it represents the Hong Kong stock market and maintains its identity.

Hang Seng Index - Possible Changes in Upcoming Reviews

China

The Hang Seng China Enterprises Index is a free-float capitalization-weighted index comprised of H-Shares listed on the Hong Kong Stock Exchange and included in the Hang Seng Mainland Composite Index. The base value of this index is 2000 as of Jan 3, 2000. This index replaced the old HSCE index on Oct. 3, 2001.

Hang Seng China Enterprises Index (HSCEI INDEX)

Hang Seng China Enterprises Index (HSCEI INDEX)

HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q2 review of the Hang Seng Family of Indexes in mid August. The...

Brian Freitas

HSCEI Dividends: Multiple Catalysts to Drive Fair Value Changes

With multiple catalysts driving fair value estimates, there will be significant trading opportunities in the HSCEI 2021 dividend futures.

Brian Freitas

Hang Seng TECH Index - 'NASDAQ of the East' ETFs Are Here

On 20 July, the Hang Seng Indexes Company announced that they would be launching the Hang Seng TECH Index on 27 July. The next day the index jumped...

Brian Freitas

Hang Seng Index - Possible Changes in Upcoming Reviews

The Hang Seng Indexes Company Limited (HSIL) announced the results of its September review of the Hang Seng Family of Indexes post market close on...

Brian Freitas

HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q2 review of the Hang Seng Family of Indexes in mid August. The...

Brian Freitas

HSCEI Dividends: Multiple Catalysts to Drive Fair Value Changes

With multiple catalysts driving fair value estimates, there will be significant trading opportunities in the HSCEI 2021 dividend futures.

Brian Freitas

Hang Seng TECH Index - 'NASDAQ of the East' ETFs Are Here

On 20 July, the Hang Seng Indexes Company announced that they would be launching the Hang Seng TECH Index on 27 July. The next day the index jumped...

Brian Freitas

A Share 15,500 Breakout

FTSE China A50 Index (XIN9I INDEX) triggered a fresh breakout today above the 15,500 pivot resistance. The following is from our weekend report. A...

Thomas Schroeder

Hang Seng Index - Possible Changes in Upcoming Reviews

The Hang Seng Indexes Company Limited (HSIL) announced the results of its September review of the Hang Seng Family of Indexes post market close on...

Brian Freitas