HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>The HSI has already recovered to 2.2% above the pre-"reciprocal tariff" level, and the top 10 best-performing constituents have registered an average return of 15.6%.</li>
<li>Despite so, there are still 40 under-performing stocks, with 32 of them remain in the negative zone with an average of 4.8% loss. </li>
<li>Among them, <a href="https://www.smartkarma.com/entities/zto-express-cayman-inc" target="_blank" data-smartkarma-citation="entities:33488:1" rel="noopener">ZTO Express Cayman (2057 HK)</a>, <a href="https://www.smartkarma.com/entities/budweiser-brewing-co-apac-ltd" target="_blank" data-smartkarma-citation="entities:28077:1" rel="noopener">Budweiser Brewing APAC (1876 HK)</a>, <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a>, and <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> look well-positioned to catch up.</li>
</ul>


The HSI has already recovered to 2.2% above the pre-"reciprocal tariff" level, and the top 10 best-performing constituents have registered an average return of 15.6%.
Despite so, there are still 40 under-performing stocks, with 32 of them remain in the negative zone with an average of 4.8% loss. 
Among them, ZTO Express Cayman (2057 HK), Budweiser Brewing APAC (1876 HK), BYD Electronics (285 HK), and Meituan (3690 HK) look well-positioned to catch up.


HK Strategy: What Are Some of the HSI Laggards to Pick Up?

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/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/zto-express-cayman-inc" target="_blank" data-smartkarma-citation="entities:33488:1" rel="noopener">ZTO Express Cayman (2057 HK)</a> will be added to the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> in June to take us up to 85 index constituents.</li>
<li>Estimated one-way turnover is 2.9% and the estimated round-trip trade is HK$11.3bn (US$1.44bn) with over 1x ADV to trade in the adds and in one stock with a FAF increase.</li>
<li>There could be a short-term drop in the AH premium for <a href="https://www.smartkarma.com/entities/midea-group-co-ltd" target="_blank" data-smartkarma-citation="entities:43993:1" rel="noopener">Midea Group</a> while this inclusion ensures <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> is a member of all major indices where eligible.</li>
</ul>



Midea Group (300 HK) and ZTO Express Cayman (2057 HK) will be added to the Hang Seng Index (HSI INDEX) in June to take us up to 85 index constituents.
Estimated one-way turnover is 2.9% and the estimated round-trip trade is HK$11.3bn (US$1.44bn) with over 1x ADV to trade in the adds and in one stock with a FAF increase.
There could be a short-term drop in the AH premium for Midea Group while this inclusion ensures ZTO Express Cayman is a member of all major indices where eligible.


Hang Seng Index (HSI) Rebalance: Midea (300 HK) & ZTO Express (2057 HK) Added; Inching Towards a 100

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> will be added to the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng TECH Index (HSTECH INDEX)</a> in June following the launch of God's Eye, its Advanced Driver-Assistance System (ADAS).</li>
<li>
<a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>'s inclusion results in <a href="https://www.smartkarma.com/entities/china-literature-ltd" target="_blank" data-smartkarma-citation="entities:24388:1" rel="noopener">China Literature (772 HK)</a> being deleted from the index. <a href="https://www.smartkarma.com/entities/china-literature-ltd" target="_blank" data-smartkarma-citation="entities:24388:1" rel="noopener">China Literature</a> stock should drop over the near-term.</li>
<li>Estimated one-way turnover at the rebalance is 13% resulting in a round-trip trade of HK$46.5bn (US$5.95bn). There are 16 stocks that have at least 1x ADV to trade from passives.</li>
</ul>


As expected, BYD (1211 HK) will be added to the Hang Seng TECH Index (HSTECH INDEX) in June following the launch of God's Eye, its Advanced Driver-Assistance System (ADAS).

BYD (1211 HK)'s inclusion results in China Literature (772 HK) being deleted from the index. China Literature stock should drop over the near-term.
Estimated one-way turnover at the rebalance is 13% resulting in a round-trip trade of HK$46.5bn (US$5.95bn). There are 16 stocks that have at least 1x ADV to trade from passives.


HSTECH Index Rebalance: BYD (1211 HK) To Replace China Literature (772 HK) As Trade Hits US$6bn

<ul>
<li>We had <a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart International (9992 HK)</a> at the cusp of index inclusion. An increase in <a href="https://www.smartkarma.com/entities/postal-savings-bank-of-china-c-2a9047eb-af5e-4621-85c4-3cac677a1d13" target="_blank" data-smartkarma-citation="entities:22848:1" rel="noopener">Postal Savings Bank of China (1658 HK)</a>'s FAF led to <a href="https://www.smartkarma.com/entities/pop-mart-international-group-l" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">Pop Mart</a> missing out.</li>
<li>Estimated one-way turnover at the rebalance is 3.18% leading to a round-trip trade of HK$3.8bn (US$489m).</li>
<li>There are large inflows for <a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <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 Group (9961 HK)</a> and <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a> due to a FAF methodology change for Secondary Listings.</li>
</ul>


We had Pop Mart International (9992 HK) at the cusp of index inclusion. An increase in Postal Savings Bank of China (1658 HK)'s FAF led to Pop Mart missing out.
Estimated one-way turnover at the rebalance is 3.18% leading to a round-trip trade of HK$3.8bn (US$489m).
There are large inflows for NetEase (9999 HK), Trip.com Group (9961 HK) and Baidu (9888 HK) due to a FAF methodology change for Secondary Listings.


HSCEI Index Rebalance: Why Did Pop Mart (9992 HK) Miss?

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

<ul>
<li>Reprieve on the tariff front gives investors the opportunity to sell/short.</li>
<li>Despite market action, a global slowdown and a US recession are still on the cards.</li>
<li>We look at some stocks that will not perform well in this environment.</li>
</ul>


Reprieve on the tariff front gives investors the opportunity to sell/short.
Despite market action, a global slowdown and a US recession are still on the cards.
We look at some stocks that will not perform well in this environment.


Time for Some Shorts For the Hong Kong Summer

Hong Kong

The Hang Seng Index is a free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindices: Commerce and Industry, Finance, Utilities, and Properties. The index was developed with a base level of 100 as of July 31, 1964.

Hang Seng Index (HSI INDEX)

HK Strategy: What Are Some of the HSI Laggards to Pick Up?

HSI has rebounded above pre-reciprocal tariff levels, with top stocks up 15.6%. However, 32 stocks remain negative, with ZTO Express, Budweiser...

Osbert Tang, CFA

Hang Seng Index (HSI) Rebalance: Midea (300 HK) & ZTO Express (2057 HK) Added; Inching Towards a 100

Midea and ZTO Express will be added to the HSI after market close on 6 June. Estimated turnover is 2.9% and the estimated trade is HK$11.3bn. Watch...

Brian Freitas

HSTECH Index Rebalance: BYD (1211 HK) To Replace China Literature (772 HK) As Trade Hits US$6bn

In a change that was not widely forecast, BYD will replace China Literature in the index. That change plus large FAF changes set off a huge trade....

Brian Freitas

HSCEI Index Rebalance: Why Did Pop Mart (9992 HK) Miss?

Pop Mart misses inclusion due to a float increase for a different stock. Estimated turnover is 3.18% and trade is HK$3.8bn. NetEase, Trip.com,...

Brian Freitas

Time for Some Shorts For the Hong Kong Summer

Investors can sell/short certain sectors as tariff reprieve offers temporary relief, but a global slowdown and US recession still loom, impacting...

Rikki Malik

HK Strategy: What Are Some of the HSI Laggards to Pick Up?

​HSI has rebounded above pre-reciprocal tariff levels, with top stocks up 15.6%. However, 32 stocks remain negative, with ZTO Express, Budweiser...

Osbert Tang, CFA

Hang Seng Index (HSI) Rebalance: Midea (300 HK) & ZTO Express (2057 HK) Added; Inching Towards a 100

Midea and ZTO Express will be added to the HSI after market close on 6 June. Estimated turnover is 2.9% and the estimated trade is HK$11.3bn. Watch...

Brian Freitas

HSTECH Index Rebalance: BYD (1211 HK) To Replace China Literature (772 HK) As Trade Hits US$6bn

In a change that was not widely forecast, BYD will replace China Literature in the index. That change plus large FAF changes set off a huge trade....

Brian Freitas

HSCEI Index Rebalance: Why Did Pop Mart (9992 HK) Miss?

Pop Mart misses inclusion due to a float increase for a different stock. Estimated turnover is 3.18% and trade is HK$3.8bn. NetEase, Trip.com,...

Brian Freitas

Time for Some Shorts For the Hong Kong Summer

​Investors can sell/short certain sectors as tariff reprieve offers temporary relief, but a global slowdown and US recession still loom, impacting...

Rikki Malik

HSI has rebounded above pre-reciprocal tariff levels, with top stocks up 15.6%. However, 32 stocks remain negative, with ZTO Express, Budweiser...

Investors can sell/short certain sectors as tariff reprieve offers temporary relief, but a global slowdown and US recession still loom, impacting...