Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>The Hang Seng Internet &amp; IT (HSIII) index represents the top 30 stocks related to internet and information technology businesses listed in Hong Kong (HKEX).</li>
<li>In this insight, we take a look at our capping flow expectations for the December 2024 index rebal event.</li>
<li>We have also presented our index change expectations for the next semiannual index review which will take place in March 2025.</li>
</ul>


The Hang Seng Internet &amp; IT (HSIII) index represents the top 30 stocks related to internet and information technology businesses listed in Hong Kong (HKEX).
In this insight, we take a look at our capping flow expectations for the December 2024 index rebal event.
We have also presented our index change expectations for the next semiannual index review which will take place in March 2025.


Quiddity Leaderboard HS Internet & IT: Dec 24 Flow Expectations and Mar 25 Expected ADDs/DELs

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

<ul>
<li>There will be 3 changes for the Hang Seng Internet &amp; Information Technology Index (HSIII) at the September rebalance. There are some surprises.</li>
<li>Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.</li>
<li>
<a href="https://www.smartkarma.com/entities/weimob-inc" target="_blank" data-smartkarma-citation="entities:27394:1" rel="noopener">Weimob Inc. (2013 HK)</a> is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.</li>
</ul>


There will be 3 changes for the Hang Seng Internet &amp; Information Technology Index (HSIII) at the September rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.

Weimob Inc. (2013 HK) is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.


Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises

<ul>
<li>The constituent changes 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>, <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> and HSIII Index will be announced after market close on Friday.</li>
<li>We forecast 2 changes 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>, 1 change for 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> and 3 changes for the HSIII Index.</li>
<li>With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.</li>
</ul>


The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.


HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning

Event-Driven

<ul>
<li>The review cutoff date for the September rebalance of the HSIII was 28 June. The changes will be announced on 16 August and become effective after the close 6 September.</li>
<li>There could be 3 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.</li>
<li>Capping will result in passives buying <a href="https://www.smartkarma.com/entities/kuaishou-technology" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> and <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (9618 HK)</a> while selling <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>.</li>
</ul>


The review cutoff date for the September rebalance of the HSIII was 28 June. The changes will be announced on 16 August and become effective after the close 6 September.
There could be 3 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
Capping will result in passives buying Kuaishou Technology (1024 HK) and JD.com (9618 HK) while selling Meituan (3690 HK) and Tencent (700 HK).


Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Three Adds/Deletes & Capping Changes

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of June 7th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight flows for China Mobile, Tencent, BOC, China Hongqiao, Yankuang Energy.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of June 7th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for China Mobile, Tencent, BOC, China Hongqiao, Yankuang Energy.


Hong Kong Connect Flows (Jun 7th): China Mobile, Tencent, BOC, China Hongqiao, Yankuang Energy

China

Huitongda Network Co., Ltd. develops a sinking market retail industry transaction and service platform. The Company provides supply chain solutions development, deal matching, logistics and after sales supporting, and other services. Huitongda Network provides its services throughout China.

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Huitongda (9878 HK)

Quiddity Leaderboard HS Internet & IT: Dec 24 Flow Expectations and Mar 25 Expected ADDs/DELs

We estimate there to be one-way capping flows of US$190mn in December 2024. This translates to a turnover of approximately 5%.

Janaghan Jeyakumar, CFA

Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises

There are 3 changes for the HSIII in Sep. Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn...

Brian Freitas

HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning

We expect 2 changes for the HSCEI, 1 for the HSTECH, 2 for the HSIII. Tne-way trade is estimated at HK$5.2bn (US$672m). There is same-way and...

Brian Freitas

Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Three Adds/Deletes & Capping Changes

There could be 3 changes for the HSIII in September. The passive buying on the adds is small while selling on the deletes is much larger. Lock-up...

Brian Freitas

Hong Kong Connect Flows (Jun 7th): China Mobile, Tencent, BOC, China Hongqiao, Yankuang Energy

We analyzed southbound Hong Kong connect flows in the past week and highlight flows for China Mobile, Tencent, BOC, China Hongqiao, Yankuang Energy.

Ke Yan, CFA, FRM

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52-week Range

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