HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Statistics supported "Sell in May, go away" for the HSI. Since 2013, the average return for May is -2%, and is negative in 8 out of the last 12 years.</li>
<li>On average, May is the worst month since 2020, too. This even eclipsed the month of Oct, which is widely believed to be normally the worst month.</li>
<li>If a weak May happens, the heavily weighted yet strongly performed constituents like <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>, <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 (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> are to suffer. </li>
</ul>


Statistics supported "Sell in May, go away" for the HSI. Since 2013, the average return for May is -2%, and is negative in 8 out of the last 12 years.
On average, May is the worst month since 2020, too. This even eclipsed the month of Oct, which is widely believed to be normally the worst month.
If a weak May happens, the heavily weighted yet strongly performed constituents like BYD (1211 HK), Alibaba Group (9988 HK), and Xiaomi Corp (1810 HK) are to suffer. 


HK Strategy: Sell in May, Go Away? The History Says Yes!

US-EU Index Rebalances / Quantitative Researcher, ORTEX

Dimitris Ioannidis

US-EU Index Rebalances / Quantitative Researcher

Global Financial Data and Analytics Platform

ORTEX

ORTEX is a global financial data and analytics platform providing real-time securities lending and short interest data, index rebalance data, holdings and insider transactions, trading signals, corporate actions and news,  stock machine learning and factor scores and other analytics. The majority of the data are downloadable and accessible through APIs.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/laopu-gold-co-ltd" target="_blank" data-smartkarma-citation="entities:44036:1" rel="noopener">Laopu Gold (6181 HK)</a> is expected to fail the fcap threshold at the December 2024 review due to low free float unless its price surges ~22% in the next week.</li>
<li>The 6-month lock-up expiry will lift the fcap closely above the threshold significantly increasing the probability of inclusion at the March 2025 review.</li>
<li>If the mcap qualifies for the small-cap segment, its inclusion is possible at the November 2024 review due to lower fcap requirements. </li>
</ul>



Laopu Gold (6181 HK) is expected to fail the fcap threshold at the December 2024 review due to low free float unless its price surges ~22% in the next week.
The 6-month lock-up expiry will lift the fcap closely above the threshold significantly increasing the probability of inclusion at the March 2025 review.
If the mcap qualifies for the small-cap segment, its inclusion is possible at the November 2024 review due to lower fcap requirements. 


Laopu Gold (6181 HK): IPO Lock-Up Expiry Might Prove Golden for Global Index Inclusion

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>Over the past five trading days, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.</li>
<li>
Popular Strategies: Call/Put Spreads account for 70% of all strategies. With a bias towards bullish views, Bull Call Spreads outnumber Bear Put Spreads by 2:1.</li>
<li>
Lottery Trades: following observations of such strategies in other stocks, a lotter trade bets on a low probability event with a high payout. Trade size tends to be sizable.</li>
</ul>


Over the past five trading days, Tencent (700 HK) multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.

Popular Strategies: Call/Put Spreads account for 70% of all strategies. With a bias towards bullish views, Bull Call Spreads outnumber Bear Put Spreads by 2:1.

Lottery Trades: following observations of such strategies in other stocks, a lotter trade bets on a low probability event with a high payout. Trade size tends to be sizable.


Tencent (700 HK): Top Trades and Strategic Insights from HKEX Options Trading

<ul>
<li>
Implied Volatility Trends: One-month implied volatility for <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> has declined from recent peaks, aligning near its 3-year median, indicating a potential stabilization in market expectations.</li>
<li>
Skew and Term Structure Dynamics: The term structure is largely flat with a slight uplift due to the upcoming earnings on 14 May 2025. A pronounced volatility smile favors spreads.</li>
<li>
Open Interest Distribution: Liquidity is concentrated in near-term (April, May) and quarterly expiries, with call open interest slightly outweighing puts (48-60%).</li>
</ul>



Implied Volatility Trends: One-month implied volatility for Tencent (700 HK) has declined from recent peaks, aligning near its 3-year median, indicating a potential stabilization in market expectations.

Skew and Term Structure Dynamics: The term structure is largely flat with a slight uplift due to the upcoming earnings on 14 May 2025. A pronounced volatility smile favors spreads.

Open Interest Distribution: Liquidity is concentrated in near-term (April, May) and quarterly expiries, with call open interest slightly outweighing puts (48-60%).


Tencent (700 HK): Volatility Smile Signals Strategic Opportunities in Options Trading

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/laopu-gold-co-ltd" target="_blank" data-smartkarma-citation="entities:44036:1" rel="noopener">Laopu Gold (6181 HK)</a> was on track to be added to a global index given its large H-share market cap and a free float that was close to 20%.</li>
<li>Completion of the full circulation in April pushed H-share market cap higher while free float market cap remained the same. Crucially, free float dropped below 15%.</li>
<li>
<a href="https://www.smartkarma.com/entities/laopu-gold-co-ltd" target="_blank" data-smartkarma-citation="entities:44036:1" rel="noopener">Laopu Gold (6181 HK)</a> could miss index inclusion in May, while inclusion in August will need some selling from non-float investors following lock-up expiry in June.</li>
</ul>



Laopu Gold (6181 HK) was on track to be added to a global index given its large H-share market cap and a free float that was close to 20%.
Completion of the full circulation in April pushed H-share market cap higher while free float market cap remained the same. Crucially, free float dropped below 15%.

Laopu Gold (6181 HK) could miss index inclusion in May, while inclusion in August will need some selling from non-float investors following lock-up expiry in June.


Laopu Gold (6181 HK): Global Index Inclusion Likely Derailed by Full Circulation

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

HK Strategy: Sell in May, Go Away? The History Says Yes!

Statistics show "Sell in May, go away" holds true for HSI with negative returns in May since 2013, making it the worst one, even surpassing Oct....

Osbert Tang, CFA

Laopu Gold (6181 HK): IPO Lock-Up Expiry Might Prove Golden for Global Index Inclusion

Potentially failed fcap threshold in March 2025 due to not unlocking cornerstones or treating them as strategic. Following the share conversion on...

Dimitris Ioannidis

Tencent (700 HK): Top Trades and Strategic Insights from HKEX Options Trading

Tencent's multi-leg option strategies show a bullish bias, with Call/Put Spreads dominating and Lottery Trades making an appearance.

Gaudenz Schneider

Tencent (700 HK): Volatility Smile Signals Strategic Opportunities in Options Trading

Implied volatility for Tencent stabilizes, term structure flat with upcoming earnings, call open interest slightly outweighs puts.

Gaudenz Schneider

Laopu Gold (6181 HK): Global Index Inclusion Likely Derailed by Full Circulation

Full circulation should result in Laopu Gold missing out on index inclusion in May. Inclusion in August will require some selling from pre-IPO...

Brian Freitas

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HK Strategy: Sell in May, Go Away? The History Says Yes!

​Statistics show "Sell in May, go away" holds true for HSI with negative returns in May since 2013, making it the worst one, even surpassing Oct....

Osbert Tang, CFA

Laopu Gold (6181 HK): IPO Lock-Up Expiry Might Prove Golden for Global Index Inclusion

Potentially failed fcap threshold in March 2025 due to not unlocking cornerstones or treating them as strategic. Following the share conversion on...

Dimitris Ioannidis

Tencent (700 HK): Top Trades and Strategic Insights from HKEX Options Trading

​Tencent's multi-leg option strategies show a bullish bias, with Call/Put Spreads dominating and Lottery Trades making an appearance.

Gaudenz Schneider

Tencent (700 HK): Volatility Smile Signals Strategic Opportunities in Options Trading

​Implied volatility for Tencent stabilizes, term structure flat with upcoming earnings, call open interest slightly outweighs puts.

Gaudenz Schneider

Laopu Gold (6181 HK): Global Index Inclusion Likely Derailed by Full Circulation

Full circulation should result in Laopu Gold missing out on index inclusion in May. Inclusion in August will require some selling from pre-IPO...

Brian Freitas

Statistics show "Sell in May, go away" holds true for HSI with negative returns in May since 2013, making it the worst one, even surpassing Oct....

Tencent's multi-leg option strategies show a bullish bias, with Call/Put Spreads dominating and Lottery Trades making an appearance.

Implied volatility for Tencent stabilizes, term structure flat with upcoming earnings, call open interest slightly outweighs puts.