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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<div>The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.</div><div>
For 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> there are 3 inclusions - <a href="https://www.smartkarma.com/entities/xinyi-glass-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11940:1" rel="noopener">Xinyi Glass Holdings (868 HK)</a>, <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> and <a href="https://www.smartkarma.com/entities/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a> and 1 exclusion - <a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a>. This takes the number of index constituents to 60.
Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>'s weight will be capped at 8% leading to outflows from the stock. 
One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$13.77bn.
There are only 10 trading days to implementation of the changes. We expect all inclusions to open higher on Monday. <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> and <a href="https://www.smartkarma.com/entities/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a> are surprise inclusions while <a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a> is a surprise deletion. The largest passive impact will be on <a href="https://www.smartkarma.com/entities/bank-of-communications-co-h" target="_blank" data-smartkarma-citation="entities:659:1" rel="noopener">Bank Of Communications Co H (3328 HK)</a> where there will be over 7 days of ADV to sell. <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a>has been announced as an inclusion to 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> as well.
Big Tech is conspicuous by its absence among the inclusions in the review. HSIL seems to have consciously avoided the stocks due to the constantly changing regulatory landscape in China. HSIL is also taking its time in moving towards it goal of reaching 80 index constituents by mid-2022. That leaves 20 stocks to be included at the next 3 index reviews.
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The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.
For the Hong Kong Hang Seng Index (HSI INDEX) there are 3 inclusions - Xinyi Glass Holdings (868 HK), Li Ning Co Ltd (2331 HK) and China Merchants Bank H (3968 HK) and 1 exclusion - Bank Of Communications Co H (3328 HK). This takes the number of index constituents to 60.
Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, Alibaba Group (9988 HK)'s weight will be capped at 8% leading to outflows from the stock. 
One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$13.77bn.
There are only 10 trading days to implementation of the changes. We expect all inclusions to open higher on Monday. Li Ning Co Ltd (2331 HK) and China Merchants Bank H (3968 HK) are surprise inclusions while Bank Of Communications Co H (3328 HK) is a surprise deletion. The largest passive impact will be on Bank Of Communications Co H (3328 HK) where there will be over 7 days of ADV to sell. Li Ning Co Ltd (2331 HK)has been announced as an inclusion to the Hang Seng China Enterprises Index (HSCEI INDEX) as well.
Big Tech is conspicuous by its absence among the inclusions in the review. HSIL seems to have consciously avoided the stocks due to the constantly changing regulatory landscape in China. HSIL is also taking its time in moving towards it goal of reaching 80 index constituents by mid-2022. That leaves 20 stocks to be included at the next 3 index reviews.


HSI Index Rebalance: Big Tech Avoided; Few Changes Now Means More Changes Later

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.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 (HSCEI INDEX)</a>, there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</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 Co Ltd (2331 HK)</a> while the deletions are <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a> and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>. One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.<a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> was a forecast inclusion 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> but was not expected to be included 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>. Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.<a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) while the deletions are Shimao Property Holdings (813 HK) and Anhui Conch Cement (914 HK). One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, Alibaba Group (9988 HK)'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.Li Ning Co Ltd (2331 HK) was a forecast inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) but was not expected to be included in the Hong Kong Hang Seng Index (HSI INDEX). Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.JD Logistics (2618 HK) is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

Quantitative Analysis

The property sector in China has been in the spotlight over the last few years. Regulators have made various attempts to temper price growth but the silver bullet has been elusive so far.The powers that be realise that the lack of affordable housing is one of the reasons for China's birth rate dropping and there is now a renewed effort to ensure that property prices do not continue to run up. As part of the measures that started with the 'Three Red Lines' almost a year ago, Bloomberg reports that China has halted PE funds from raising money to invest in residential property developments.We take a look at some of the regulatory changes that have been implemented over the last year and see how the companies in the sector are faring. We then look for stocks with similar characteristics but different stock returns over the last year to find trade opportunities.

The property sector in China has been in the spotlight over the last few years. Regulators have made various attempts to temper price growth but the silver bullet has been elusive so far.The powers that be realise that the lack of affordable housing is one of the reasons for China's birth rate dropping and there is now a renewed effort to ensure that property prices do not continue to run up. As part of the measures that started with the 'Three Red Lines' almost a year ago, Bloomberg reports that China has halted PE funds from raising money to invest in residential property developments.We take a look at some of the regulatory changes that have been implemented over the last year and see how the companies in the sector are faring. We then look for stocks with similar characteristics but different stock returns over the last year to find trade opportunities.

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

China A50 break below 16,500 important support now becomes fresh resistance. HSI below 27,000 represents the fresh pivot level and H shares 10,000. These were important floors that were broken and shifts the trading range lower.HSI has been a top short in Asia from back at 30k and the A50 break of critical support at 16,500 unleashed selling pressure and an impulsive decline that will set up a fresh short.Let's see if the short covering bounce can extend.

China A50 break below 16,500 important support now becomes fresh resistance. HSI below 27,000 represents the fresh pivot level and H shares 10,000. These were important floors that were broken and shifts the trading range lower.HSI has been a top short in Asia from back at 30k and the A50 break of critical support at 16,500 unleashed selling pressure and an impulsive decline that will set up a fresh short.Let's see if the short covering bounce can extend.

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)

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HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

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China Property Sector: Trading Ideas

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China/HK Short and Support Points

China A50 break below 16,500 important support now becomes fresh resistance. HSI below 27,000 represents the fresh pivot level. These were...

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