Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Since announcing <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC (5 HK)</a>'s Offer, <a href="https://www.smartkarma.com/entities/hang-seng-bank-ltd" target="_blank" data-smartkarma-citation="entities:24:1" rel="noopener">Hang Seng Bank (11 HK)</a> has traded tight-ish to terms, at a ~3.9% gross spread (including dividends). Or ~10% annualised if a five month offramp.</li>
<li>Annualised spreads for clean liquid deals in Asia-Pac, do tend to widen after day 1. Meaning, the gross spread remains roughly static as investors hit their full quota early on.  </li>
<li>HSBC shareholders are questioning the deal merits. For Hang Seng minorities, this is a great exit. Inside this report, I take a deeper dive into Hong Kong bank takeover precedents.
</li>
</ul>


Since announcing HSBC (5 HK)'s Offer, Hang Seng Bank (11 HK) has traded tight-ish to terms, at a ~3.9% gross spread (including dividends). Or ~10% annualised if a five month offramp.
Annualised spreads for clean liquid deals in Asia-Pac, do tend to widen after day 1. Meaning, the gross spread remains roughly static as investors hit their full quota early on.  
HSBC shareholders are questioning the deal merits. For Hang Seng minorities, this is a great exit. Inside this report, I take a deeper dive into Hong Kong bank takeover precedents.



Hang Seng (11 HK)'s Offer: HSBC Investors Are Not Sold On The Strategic Benefits

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>Box trades are gaining popularity on the Hong Kong Stock Exchange. These arbitrage strategies exploit price discrepancies in options markets for near risk-free profits.</li>
<li>Long box trades involve simultaneously buying bull call spreads and bear put spreads with identical strikes and expiration dates, creating a fixed payoff regardless of the underlying asset's price movement.</li>
<li>Box trades require careful execution consideration of spreads, commissions, margins, and fees, with risks primarily in execution and operations rather than market exposure.</li>
</ul>


Box trades are gaining popularity on the Hong Kong Stock Exchange. These arbitrage strategies exploit price discrepancies in options markets for near risk-free profits.
Long box trades involve simultaneously buying bull call spreads and bear put spreads with identical strikes and expiration dates, creating a fixed payoff regardless of the underlying asset's price movement.
Box trades require careful execution consideration of spreads, commissions, margins, and fees, with risks primarily in execution and operations rather than market exposure.


Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong's Options Market

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>Hang Seng Indexes announces changes 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</a>, <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>, <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</a>, HSIII Index and HSCI Index (among others) post market close today. </li>
<li>The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.</li>
<li>Capping will lead to most inflows to <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> while the largest outflows will be from <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a> and <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>. </li>
</ul>


Hang Seng Indexes announces changes to the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index, HSIII Index and HSCI Index (among others) post market close today. 
The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.
Capping will lead to most inflows to Meituan (3690 HK) while the largest outflows will be from Alibaba Group Holding (9988 HK) and Xiaomi Corp (1810 HK). 


Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Equity Bottom-Up

<ul>
<li>HSBC will release its results on Thursday and there remains risk of far worse credit metrics, not only related to CRE lending in HK and China</li>
<li>Construction loan risks are tangentially related to CRE and are also considered fairly high risk, where HSBC can see sizable migration to stage 3 loans</li>
<li>HSBC remains highly concentrated in UK and N America in its wholesale lending book, which we do not believe is well understood, and risky given economies</li>
</ul>


HSBC will release its results on Thursday and there remains risk of far worse credit metrics, not only related to CRE lending in HK and China
Construction loan risks are tangentially related to CRE and are also considered fairly high risk, where HSBC can see sizable migration to stage 3 loans
HSBC remains highly concentrated in UK and N America in its wholesale lending book, which we do not believe is well understood, and risky given economies


HSBC - Results on Thursday, Risk of BoCom Mark Down, Heavy UK, US Corporate Lending Not Positive

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.

<ul>
<li>The US election is the ultimate of known unknowns. The markets have endured both Trump and Biden/Harris so impactful policy surprises should be limited. </li>
<li>Hedging cost are running high for Asian equities post August unwind and September stimulus combined with election. </li>
<li>Markets have some momentum and in some cases mean reversion to the price move on the day after the election. </li>
</ul>


The US election is the ultimate of known unknowns. The markets have endured both Trump and Biden/Harris so impactful policy surprises should be limited. 
Hedging cost are running high for Asian equities post August unwind and September stimulus combined with election. 
Markets have some momentum and in some cases mean reversion to the price move on the day after the election. 


EQD | US Election -  Hedge Considerations

United Kingdom

HSBC Holdings Plc is a British universal bank and financial services group operating worldwide. It offers a wide range of services including retail and personal banking, wealth management, commercial banking, global banking, and markets and securities services. The company was founded in British Hong Kong in 1865 and is headquartered in London, England.

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HSBC (HSBA LN)

Hang Seng (11 HK)'s Offer: HSBC Investors Are Not Sold On The Strategic Benefits

Hang Seng Bank (11 HK) has announced that the Scheme Doc dispatch will be pushed out to the 17 December 2025, a little under a week ahead of my...

David Blennerhassett

Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong's Options Market

JD.com (9618 HK) Earnings Call tonight 8:00 pm HKT. After yesterday's 3.06% move up, the ATM strike is now 165. Straddles offer an opportunity to...

Gaudenz Schneider

Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)

Hang Seng Indexes announces post market close today. There will be changes for the HSI, HSCEI, HSTECH, HSIII and HSCI indices. The net round-trip...

Brian Freitas

HSBC - Results on Thursday, Risk of BoCom Mark Down, Heavy UK, US Corporate Lending Not Positive

Bank of Nova Scotia's further and sizeable goodwill impairment on its China bank holding during its 4Q ending October 2024, suggests that HSBC may...

Daniel Tabbush

EQD | US Election - Hedge Considerations

The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...

John Ley

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52-week Range

Market Cap (USDm)

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Hang Seng (11 HK)'s Offer: HSBC Investors Are Not Sold On The Strategic Benefits

Hang Seng Bank (11 HK) has announced that the Scheme Doc dispatch will be pushed out to the 17 December 2025, a little under a week ahead of my...

David Blennerhassett

Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong's Options Market

JD.com (9618 HK) Earnings Call tonight 8:00 pm HKT. After yesterday's 3.06% move up, the ATM strike is now 165. Straddles offer an opportunity to...

Gaudenz Schneider

Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)

Hang Seng Indexes announces post market close today. There will be changes for the HSI, HSCEI, HSTECH, HSIII and HSCI indices. The net round-trip...

Brian Freitas

HSBC - Results on Thursday, Risk of BoCom Mark Down, Heavy UK, US Corporate Lending Not Positive

Bank of Nova Scotia's further and sizeable goodwill impairment on its China bank holding during its 4Q ending October 2024, suggests that HSBC may...

Daniel Tabbush

EQD | US Election - Hedge Considerations

​The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...

John Ley

The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...