Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

Equity Derivatives

<ul>
<li>HSI and HSCEI were down every day this past week.</li>
<li>HSI total Put volume heavier than total Call volume on the two largest down days this week showing rising concern amongst investors.</li>
<li>Having dropped 5.6% to start the year HSI has already moved well past the implied move at the start of the month.</li>
</ul>


HSI and HSCEI were down every day this past week.
HSI total Put volume heavier than total Call volume on the two largest down days this week showing rising concern amongst investors.
Having dropped 5.6% to start the year HSI has already moved well past the implied move at the start of the month.


EQD | Hong Kong Index Options Weekly - HSI and HSCEI January 06 - 10

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

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bloks-group" target="_blank" data-smartkarma-citation="entities:43648:1" rel="noopener">Bloks Group (1850960D CH)</a> was massively oversubscribed, traded 82% higher on Friday and closed its listing day 40% higher than the IPO price.</li>
<li>
<a href="https://www.smartkarma.com/entities/bloks-group" target="_blank" data-smartkarma-citation="entities:43648:1" rel="noopener">Bloks Group (1850960D CH)</a> now has a full market cap of US$2.7bn. However, lock-ups and cornerstone allocations result in a much lower free float.</li>
<li>Index inclusions could take place in August and September, but the passive buying is a fraction of the number of shares that will come off lock-up expiry in early July.</li>
</ul>



Bloks Group (1850960D CH) was massively oversubscribed, traded 82% higher on Friday and closed its listing day 40% higher than the IPO price.

Bloks Group (1850960D CH) now has a full market cap of US$2.7bn. However, lock-ups and cornerstone allocations result in a much lower free float.
Index inclusions could take place in August and September, but the passive buying is a fraction of the number of shares that will come off lock-up expiry in early July.


Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline

<ul>
<li>
<a href="https://www.smartkarma.com/entities/jiangsu-hengrui-medicine-co-ltd" target="_blank" data-smartkarma-citation="entities:14128:1" rel="noopener">Jiangsu Hengrui Medicine (600276 CH)</a> has filed for a listing on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and reports indicate that the raise will be at least US$2bn.</li>
<li>In line with the <a href="https://www.smartkarma.com/entities/midea-group-co-ltd" target="_blank" data-smartkarma-citation="entities:43993:1" rel="noopener">Midea Group (300 HK)</a> and <a href="https://www.smartkarma.com/entities/s-f-holding" target="_blank" data-smartkarma-citation="entities:44093:1" rel="noopener">S.F. Holding (6936 HK)</a> H-share listings, the discount on the H-shares could be in the 20-25% range.</li>
<li>There will be no Fast Entry in any indices but there will be index inclusions in multiple indices if the raise is larger or once the cornerstone investor lock-up ends.</li>
</ul>



Jiangsu Hengrui Medicine (600276 CH) has filed for a listing on the HKEX (388 HK) and reports indicate that the raise will be at least US$2bn.
In line with the Midea Group (300 HK) and S.F. Holding (6936 HK) H-share listings, the discount on the H-shares could be in the 20-25% range.
There will be no Fast Entry in any indices but there will be index inclusions in multiple indices if the raise is larger or once the cornerstone investor lock-up ends.


Jiangsu Hengrui Pharma (600276 CH): Index Inclusion Post H-Share Listing

<ul>
<li>Tough start to the New Year, implied vols rose with market decline on the first day of the year. Both markets are now trading at or near peak open interest.</li>
<li>Volumes perked up, well ahead of the prior weeks levels with Calls still making up the bulk of trading in Hang Seng at 57% of all trades.</li>
<li>Looking ahead, January has historically been one of the most  volatile months of the year for HSI, trailing only October for average historic volatility.</li>
</ul>


Tough start to the New Year, implied vols rose with market decline on the first day of the year. Both markets are now trading at or near peak open interest.
Volumes perked up, well ahead of the prior weeks levels with Calls still making up the bulk of trading in Hang Seng at 57% of all trades.
Looking ahead, January has historically been one of the most  volatile months of the year for HSI, trailing only October for average historic volatility.


EQD | Hong Kong Index Options Weekly - HSI and HSCEI Dec 30 – Jan 03

Index Rebalance

<ul>
<li>
<a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene</a> and <a href="https://www.smartkarma.com/entities/zto-express-cayman-inc" target="_blank" data-smartkarma-citation="entities:33488:1" rel="noopener">ZTO Express Cayman</a> are potential inclusions for 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</a> in March while <a href="https://www.smartkarma.com/entities/sino-biopharmaceutical" target="_blank" data-smartkarma-citation="entities:230:1" rel="noopener">Sino Biopharmaceutical</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning</a> are potential deletions.</li>
<li>There is a lower probability of <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> replacing <a href="https://www.smartkarma.com/entities/sunny-optical-technology-group" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical Technology Group (2382 HK)</a> in the index in March.</li>
<li>There could be a few more index inclusions for <a href="https://www.smartkarma.com/entities/zto-express-cayman-inc" target="_blank" data-smartkarma-citation="entities:33488:1" rel="noopener">ZTO Express Cayman</a> in March and the stock could outperform its peers over the next few months.</li>
</ul>



BeiGene and ZTO Express Cayman are potential inclusions for the Hang Seng China Enterprises Index in March while Sino Biopharmaceutical and Li Ning are potential deletions.
There is a lower probability of Yum China Holdings (9987 HK) replacing Sunny Optical Technology Group (2382 HK) in the index in March.
There could be a few more index inclusions for ZTO Express Cayman in March and the stock could outperform its peers over the next few months.


HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March

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)

EQD | Hong Kong Index Options Weekly - HSI and HSCEI January 06 - 10

HSI and HSCEI experienced a downward trend all week, with heavier Put volume than Call volume on major down days, indicating growing investor...

John Ley

Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline

Bloks could be added to the HSCI and Southbound Connect in June. Then comes a big lock-up expiry early July. Then index inclusions in August and...

Brian Freitas

EQD | Hong Kong Index Options Weekly - HSI and HSCEI Dec 30 – Jan 03

Implied vols rose with market decline on New Year's Day, Hang Seng and HSCEI both trading at peak open interest. January historically a volatile...

John Ley

HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March

There could be up to 3 changes for the HSCEI in March. Estimated one-way turnover is 5.24% resulting in a round-trip trade of HK$5,276m (US$680m)....

Brian Freitas

EQD | Hong Kong Index Options Weekly - HSI and HSCEI January 06 - 10

​HSI and HSCEI experienced a downward trend all week, with heavier Put volume than Call volume on major down days, indicating growing investor...

John Ley

Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline

Bloks could be added to the HSCI and Southbound Connect in June. Then comes a big lock-up expiry early July. Then index inclusions in August and...

Brian Freitas

Jiangsu Hengrui Pharma (600276 CH): Index Inclusion Post H-Share Listing

Jiangsu Hengrui has filed an application proof for an HKEX listing. Reports indicate a US$2bn raise. There will be no index Fast Entry but...

Brian Freitas

EQD | Hong Kong Index Options Weekly - HSI and HSCEI Dec 30 – Jan 03

​Implied vols rose with market decline on New Year's Day, Hang Seng and HSCEI both trading at peak open interest. January historically a volatile...

John Ley

HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March

There could be up to 3 changes for the HSCEI in March. Estimated one-way turnover is 5.24% resulting in a round-trip trade of HK$5,276m (US$680m)....

Brian Freitas

HSI and HSCEI experienced a downward trend all week, with heavier Put volume than Call volume on major down days, indicating growing investor...

Implied vols rose with market decline on New Year's Day, Hang Seng and HSCEI both trading at peak open interest. January historically a volatile...