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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Member of the Hang Seng Composite Index (HSCI) are included in the Southbound Stock Connect program if their market cap exceeds HK$5bn. However, Secondary Listings and Biotech stocks that listed under Chapter 18A of the Listing Rules were excluded from the Stock Connect program.This headline "*H.K. TO INCLUDE SECONDARY-LISTED COS IN STOCK CONNECT: SING TAO" could drive stocks that are HSCI members but not a part of Stock Connect higher. If Chapter 18A listed Biotech stocks are added to Stock Connect, they could run even more.In this Insight, we take a look at stocks that are a part of the HSCI or are expected to join the HSCI in the next review and could be eligible to be included in the Stock Connect program.

Member of the Hang Seng Composite Index (HSCI) are included in the Southbound Stock Connect program if their market cap exceeds HK$5bn. However, Secondary Listings and Biotech stocks that listed under Chapter 18A of the Listing Rules were excluded from the Stock Connect program.This headline "*H.K. TO INCLUDE SECONDARY-LISTED COS IN STOCK CONNECT: SING TAO" could drive stocks that are HSCI members but not a part of Stock Connect higher. If Chapter 18A listed Biotech stocks are added to Stock Connect, they could run even more.In this Insight, we take a look at stocks that are a part of the HSCI or are expected to join the HSCI in the next review and could be eligible to be included in the Stock Connect program.

Stock Connect - Secondary Listings and Biotech Stocks to Become Eligible?

Index Rebalance

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.Read on for more details and stocks affected by the changes.

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.Read on for more details and stocks affected by the changes.

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 13 November. The constituent changes will be effective after the close of trading on 4 December.For the Hang Seng TECH Index, there are 2 inclusions and 2 exclusions.The inclusions are <a href="https://www.smartkarma.com/entities/ming-yuan-cloud-group" target="_blank" data-smartkarma-citation="entities:29268:1" rel="noopener">Ming Yuan Cloud Group (909 HK)</a> and <a href="https://www.smartkarma.com/entities/archosaur-games" target="_blank" data-smartkarma-citation="entities:28948:1" rel="noopener">Archosaur Games (9990 HK)</a>, while the deletions are <a href="https://www.smartkarma.com/entities/hengten-networks-group-ltd" target="_blank" data-smartkarma-citation="entities:3296:1" rel="noopener">HengTen Ltd (136 HK)</a> and <a href="https://www.smartkarma.com/entities/netdragon-websoft-inc" target="_blank" data-smartkarma-citation="entities:3703:1" rel="noopener">Netdragon Websoft (777 HK)</a>. One way turnover is 7.97% due to the inclusions/ exclusions, capping, and free float changes.Both inclusions have 0.67 days of ADV to buy, <a href="https://www.smartkarma.com/entities/hengten-networks-group-ltd" target="_blank" data-smartkarma-citation="entities:3296:1" rel="noopener">HengTen Ltd (136 HK)</a> has 0.6 days of ADV to sell, while <a href="https://www.smartkarma.com/entities/netdragon-websoft-inc" target="_blank" data-smartkarma-citation="entities:3703:1" rel="noopener">Netdragon Websoft (777 HK)</a> has 1 day of ADV to sell.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 13 November. The constituent changes will be effective after the close of trading on 4 December.For the Hang Seng TECH Index, there are 2 inclusions and 2 exclusions.The inclusions are Ming Yuan Cloud Group (909 HK) and Archosaur Games (9990 HK), while the deletions are HengTen Ltd (136 HK) and Netdragon Websoft (777 HK). One way turnover is 7.97% due to the inclusions/ exclusions, capping, and free float changes.Both inclusions have 0.67 days of ADV to buy, HengTen Ltd (136 HK) has 0.6 days of ADV to sell, while Netdragon Websoft (777 HK) has 1 day of ADV to sell.

Hang Seng TECH Index Rebalance: Two Changes as Assets Continue to Grow

China and US Equity Analyst

Roger Xie

Equity Bottom-Up

Hong Kong Exchanges and Clearing / Equity Bottom-Up

Hong Kong Exchanges and Clearing (388 HK)

<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> September ADT (Average Daily Turnover) remain strong. This in in contrast to usual weak seasonality in trading activities into Q4. For the first 9 months this year, HKEx ADT has reaccelerated the year-over-year growth rate to 38.9% , fueled by  IPO listings and investors' sanguine view on China. </li>
<li>HKEx had a busy month for the IPO market with 9 new listings in September. The most noticeable IPOs are <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK), </a><a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings Inc (9987 HK),</a><a href="https://www.smartkarma.com/entities/ming-yuan-cloud-group" target="_blank" data-smartkarma-citation="entities:29268:1" rel="noopener">Ming Yuan Cloud Group (909 HK)</a>, and <a href="https://www.smartkarma.com/entities/joy-spreader-interactive-technology" target="_blank" data-smartkarma-citation="entities:29271:1" rel="noopener">Joy Spreader Interactive Technology (6988 HK).</a> We expect mega IPO and Chinese ADR homecoming to reshape the landscape of Hong Kong capital market. And Ant Group has just won approval from the China Securities Regulatory Commission (CSRC) for its blockbuster initial public offering in Hong Kong.</li>
<li>Derivative volumes improved 19% quarter-over-quarter in 3Q, on the back of Heng Seng Index and China Enterprises Index futures. We expect volume will be boosted by MSCI suite of products and reach critical mass in the next 12 months. A-share futures should be the most important driver of HKEx derivative volume. We estimate that MSCI China A-share future could contribute additional 6% revenue for <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> after its launch. We remain bullish on <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and reiterate TP of HKD 400. </li>
</ul>



HKEX (388 HK) September ADT (Average Daily Turnover) remain strong. This in in contrast to usual weak seasonality in trading activities into Q4. For the first 9 months this year, HKEx ADT has reaccelerated the year-over-year growth rate to 38.9% , fueled by  IPO listings and investors' sanguine view on China. 
HKEx had a busy month for the IPO market with 9 new listings in September. The most noticeable IPOs are Nongfu Spring (9633 HK), Yum China Holdings Inc (9987 HK),Ming Yuan Cloud Group (909 HK), and Joy Spreader Interactive Technology (6988 HK). We expect mega IPO and Chinese ADR homecoming to reshape the landscape of Hong Kong capital market. And Ant Group has just won approval from the China Securities Regulatory Commission (CSRC) for its blockbuster initial public offering in Hong Kong.
Derivative volumes improved 19% quarter-over-quarter in 3Q, on the back of Heng Seng Index and China Enterprises Index futures. We expect volume will be boosted by MSCI suite of products and reach critical mass in the next 12 months. A-share futures should be the most important driver of HKEx derivative volume. We estimate that MSCI China A-share future could contribute additional 6% revenue for HKEX (388 HK) after its launch. We remain bullish on HKEX (388 HK) and reiterate TP of HKD 400. 


HKEx (388.HK): September Trading Volume Indicated Strong Activities Trend into Q4

APAC IPOs & Placements

Zhen Zhou, Toh

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

<div>
<a href="https://www.smartkarma.com/entities/ming-yuan-cloud-group" target="_blank" data-smartkarma-citation="entities:29268:1" rel="noopener">Ming Yuan Cloud Group (909 HK)</a> (MYCG) raised US$796m at HK$16.50 per share, at the top-end of its IPO price range.
MYCG is a software solution provider in China with a focus on real estate. The company provides enterprise resource planning (ERP) solutions and SaaS products to property developers and other industry participants in the real estate value chain in China. As per Frost &amp; Sullivan (F&amp;S), the company is ranked first among software providers for property developers in China and has a dominant 24.6% market share in terms of contract value in 2019.
In this note, we will look at the deal dynamics and provide a table with implied valuation at different share price levels.
Our previous coverage of the IPO:
</div>
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<ul style="list-style-type: disc;">
<li dir="ltr">
<a href="https://www.smartkarma.com/insights/ming-yuan-cloud-pre-ipo-leaning-on-regional-partners-for-growth-but-hefty-commissions-paid" target="_blank" data-smartkarma-citation="insights:42977" rel="noopener">Ming Yuan Cloud (明源云) Pre-IPO - Leaning on Regional Partners for Growth but Hefty Commissions Paid</a> 
</li>
<li dir="ltr">
<a href="https://www.smartkarma.com/insights/ming-yuan-cloud-ipo-better-disclosure-and-a-leader-in-the-industry" target="_blank" data-smartkarma-citation="insights:43229" rel="noopener">Ming Yuan Cloud (明源云) IPO - Better Disclosure and a Leader in the Industry</a> </li>
</ul>
</div>


Ming Yuan Cloud Group (909 HK) (MYCG) raised US$796m at HK$16.50 per share, at the top-end of its IPO price range.
MYCG is a software solution provider in China with a focus on real estate. The company provides enterprise resource planning (ERP) solutions and SaaS products to property developers and other industry participants in the real estate value chain in China. As per Frost &amp; Sullivan (F&amp;S), the company is ranked first among software providers for property developers in China and has a dominant 24.6% market share in terms of contract value in 2019.
In this note, we will look at the deal dynamics and provide a table with implied valuation at different share price levels.
Our previous coverage of the IPO:




Ming Yuan Cloud (明源云) Pre-IPO - Leaning on Regional Partners for Growth but Hefty Commissions Paid 


Ming Yuan Cloud (明源云) IPO - Better Disclosure and a Leader in the Industry 



Ming Yuan Cloud (明源云) Trading - Max Clawback Triggered but Still Decent Amount Left for Insti

China

Ming Yuan Cloud is an investment holding company that provides cloud services and on-premises software and services in China, primarily for property developers and other real estate industry participants. The company offers a comprehensive suite of enterprise-grade SaaS products, including CRM Cloud, Construction Cloud, Procurement Cloud, and Asset Management Cloud, alongside ERP solutions to optimize various business operations. Ming Yuan Cloud was founded in 1997 and is headquartered in Shenzhen, China.

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Ming Yuan Cloud (909 HK)

Stock Connect - Secondary Listings and Biotech Stocks to Become Eligible?

A rule change that admits Secondary listings and Chapter 18A listed Biotech stocks to the Southbound Stock Connect could see Alibaba, JD and...

Brian Freitas

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

While the HSCI does not have assets benchmarked to it, the index review is closely watched since the index forms the basis of stocks that are a...

Brian Freitas

Hang Seng TECH Index Rebalance: Two Changes as Assets Continue to Grow

The first review of the Hang Seng TECH index has 2 inclusions and 2 deletions. Assets benchmarked to the index are north of US$1.1bn and will...

Brian Freitas

HKEx (388.HK): September Trading Volume Indicated Strong Activities Trend into Q4

We expect Hong Kong Exchange has strong trading activities in Q4, in contrast to usual weak seasonality. Now is a better time to go long on HKEx...

Roger Xie

Ming Yuan Cloud (明源云) Trading - Max Clawback Triggered but Still Decent Amount Left for Insti

Our previous coverage of the IPO: Ming Yuan Cloud (明源云) Pre-IPO - Leaning on Regional Partners for Growth but Hefty Commissions Paid Ming...

Zhen Zhou, Toh

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