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>In a surprise, the Hang Seng index committee has decided not to make any 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">Hong Kong Hang Seng Index (HSI INDEX)</a> at the March rebalance.</li>
<li>This further delays the timeline for the index to reach 80 constituents. The earliest we will reach the target now is June 2023 (a year later than targeted).</li>
<li>Despite no changes to the index constituents, capping and float changes will lead to a one-way turnover of 2.61% resulting in a one-way trade of HK$5.1bn.</li>
</ul>


In a surprise, the Hang Seng index committee has decided not to make any changes to the Hong Kong Hang Seng Index (HSI INDEX) at the March rebalance.
This further delays the timeline for the index to reach 80 constituents. The earliest we will reach the target now is June 2023 (a year later than targeted).
Despite no changes to the index constituents, capping and float changes will lead to a one-way turnover of 2.61% resulting in a one-way trade of HK$5.1bn.


HSI Index Rebalance: No Changes & Further Delays to Reaching the 80 Member Target

<ul>
<li>There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.</li>
<li>We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.</li>
<li>All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.</li>
</ul>


There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.


HSI Index Rebalance Preview: Better Late Than Never?

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sinotrans-limited-h" target="_blank" data-smartkarma-citation="entities:1321:1" rel="noopener">Sinotrans (598 HK)</a> posted a 17.7% YoY net profit growth for 1Q22, providing evidences that it can weather the slowing trade momentum. More encouragingly, net profit surged 54.9% QoQ.</li>
<li>Gross margin expanded 1.3pp YoY, signaling better cost performance. DHL-Sinotrans continued to provide very promising contribution, reflecting in a 14.3% growth in investment income. </li>
<li>Operation parameters are solid and gearing stays healthy (7.6%), providing room for higher dividend payout. Even at last year's payout, it trade on 10.9% yield; and it's on 3.3x PER.</li>
</ul>



Sinotrans (598 HK) posted a 17.7% YoY net profit growth for 1Q22, providing evidences that it can weather the slowing trade momentum. More encouragingly, net profit surged 54.9% QoQ.
Gross margin expanded 1.3pp YoY, signaling better cost performance. DHL-Sinotrans continued to provide very promising contribution, reflecting in a 14.3% growth in investment income. 
Operation parameters are solid and gearing stays healthy (7.6%), providing room for higher dividend payout. Even at last year's payout, it trade on 10.9% yield; and it's on 3.3x PER.


Sinotrans (598 HK): Another Very Promising Quarter

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

<a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>'s 2Q21 results may not seem inspirational, but a closer look under the hood reveals a solid business that is continuing to improve.  Considering the regulatory overhang and the near-term losses from the new community group buying business offsetting the overall profit growth, poor investor sentiment may continue for the Chinese e-commerce stocks including JD.  However, I remain constructive on JD's fundamentals, and I believe JD is a good rebound candidate when the overhang is lifted.      What I saw under the hood: <ul>
<li>Solid top-line growth of 26%. </li>
<li>Historic quarterly active user additions.</li>
<li>Rising appeal from lower-tier market users.</li>
<li>Higher engagement from existing users. </li>
<li>Acceleration of order volume growth.</li>
<li>Healthy core JD retail operating profit  </li>
</ul>

JD.com Inc (ADR) (JD US)'s 2Q21 results may not seem inspirational, but a closer look under the hood reveals a solid business that is continuing to improve.  Considering the regulatory overhang and the near-term losses from the new community group buying business offsetting the overall profit growth, poor investor sentiment may continue for the Chinese e-commerce stocks including JD.  However, I remain constructive on JD's fundamentals, and I believe JD is a good rebound candidate when the overhang is lifted.      What I saw under the hood: 
Solid top-line growth of 26%. 
Historic quarterly active user additions.
Rising appeal from lower-tier market users.
Higher engagement from existing users. 
Acceleration of order volume growth.
Healthy core JD retail operating profit  


JD.com (JD US): Solid Growth Flying Under the Radar

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Equity Capital Markets

Lalatech Holdings Co Ltd / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lalatech-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:36848:1" rel="noopener">Lalatech Holdings</a> is looking to raise about US$1bn in its upcoming HK IPO.</li>
<li>Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services.</li>
<li>We have looked at the company’s past performance in our earlier notes. In this note we will talk about the updates from its refiling.</li>
</ul>



Lalatech Holdings is looking to raise about US$1bn in its upcoming HK IPO.
Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services.
We have looked at the company’s past performance in our earlier notes. In this note we will talk about the updates from its refiling.


Lalatech Holdings Limited Pre-IPO - Refiling Updates - Continues to Improve, Valuation Gap Narrowing

China

JD Logistics, Inc. offers logistics services. The Company provides cargo transportation, cargo distribution, warehousing, and other services. JD Logistics is located in China.

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JD Logistics (2618 HK)

HSI Index Rebalance: No Changes & Further Delays to Reaching the 80 Member Target

In a surprise, there are no adds/deletes in March. There are some large capping changes that result in a one-way turnover of 2.6% and a one-way...

Brian Freitas

HSI Index Rebalance Preview: Better Late Than Never?

Adding 4 stocks gets us to 80 members - a target that was to be reached by mid-2022. We list 10 potential adds where passive trackers will need to...

Brian Freitas

Sinotrans (598 HK): Another Very Promising Quarter

We consider Sinotrans' 17.7% growth in 1Q22 net profit a demonstration of the underlying strength of its operations. We think it is encouraging to...

Osbert Tang, CFA

JD.com (JD US): Solid Growth Flying Under the Radar

JD's results may not seem inspirational, but a closer look under the hood reveals a business growing faster than market expectations. I believe JD...

Mitchell Kim

Lalatech Holdings Limited Pre-IPO - Refiling Updates - Continues to Improve, Valuation Gap Narrowing

Lalatech Holdings is looking to raise about US$1bn in its upcoming HK IPO. In this note, we look at the updates from its most recent refiling.

Sumeet Singh

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