Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine.</li>
<li>Inflows into consumer staple were offset by the outflows from materials.</li>
<li>We highlight inflows into Moutai, East Money, Gree, Wuxi Apptec, and Tongwei.</li>
</ul>


We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine.
Inflows into consumer staple were offset by the outflows from materials.
We highlight inflows into Moutai, East Money, Gree, Wuxi Apptec, and Tongwei.


Northbound Flows: Moutai, East Money, Gree, Wuxi Apptec, Tongwei

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> replaces <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> in 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> at the close of trading on 4 March.</li>
<li>Using prices from the close on 18 February to cap the stocks, estimated one-way turnover at the rebalance is 4.37% and will result in a one-way trade of HK$3,350m.</li>
<li>Short interest on <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> is 13 days of ADV to cover. While the inclusion was expected, short covering could take the stock higher.</li>
</ul>


As expected, Xinyi Solar Holdings (968 HK) replaces Evergrande Property Services (6666 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close of trading on 4 March.
Using prices from the close on 18 February to cap the stocks, estimated one-way turnover at the rebalance is 4.37% and will result in a one-way trade of HK$3,350m.
Short interest on Xinyi Solar Holdings (968 HK) is 13 days of ADV to cover. While the inclusion was expected, short covering could take the stock higher.


HSCEI Index Rebalance: Another Evergrande Stock Is Deleted; Xinyi Solar IN

<ul>
<li>The review period for the March rebalance of 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</a> ended on 31 December. The changes will be announced on 18 February and implemented on 4 March.</li>
<li>
<a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> is a potential inclusion, replacing <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> though both names are very close to the cutoffs.</li>
<li>Changes in the free-float adjustment factors could result in no change to the index, while there is an outside chance of <a href="https://www.smartkarma.com/entities/bilibili-inc-83a27302-cd7d-4e6a-a1de-bcf93eb022c3" target="_blank" data-smartkarma-citation="entities:32215:1" rel="noopener">Bilibili (9626 HK)</a> being included in the index.</li>
</ul>


The review period for the March rebalance of the Hang Seng China Enterprises Index ended on 31 December. The changes will be announced on 18 February and implemented on 4 March.

Xinyi Solar Holdings (968 HK) is a potential inclusion, replacing Evergrande Property Services (6666 HK) though both names are very close to the cutoffs.
Changes in the free-float adjustment factors could result in no change to the index, while there is an outside chance of Bilibili (9626 HK) being included in the index.


HSCEI Index Rebalance Preview (March 2022): One Potential Change with Caveats

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review cut-off date are eligible for inclusion in 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>.At the December review, we see a high probability of <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> being included in the index and of <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a> being deleted.<a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a> is a close add for now and its inclusion would put <a href="https://www.smartkarma.com/entities/china-pacific-insurance-group" target="_blank" data-smartkarma-citation="entities:6177:1" rel="noopener">China Pacific Insurance (2601 HK)</a> at risk of deletion from the index.<a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> and <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a> are unlikely to be included in 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> at the December rebalance since they have failed the velocity test in August.With the one change, estimated one-way index turnover is 1.26% and will result in one-way turnover of HK$995m. This number will change over the next couple of months as stocks move around and the turnover increases due to capping changes on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the December 2021 review of the Hang Seng Family of Indexes on 12 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ends on 30 September and stocks that have at least 3 month of trading history by the review cut-off date are eligible for inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX).At the December review, we see a high probability of Xinyi Solar Holdings (968 HK) being included in the index and of Evergrande Real Estate Group (3333 HK) being deleted.Innovent Biologics Inc (1801 HK) is a close add for now and its inclusion would put China Pacific Insurance (2601 HK) at risk of deletion from the index.XPeng (9868 HK) and Li Auto (2015 HK) are unlikely to be included in the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance since they have failed the velocity test in August.With the one change, estimated one-way index turnover is 1.26% and will result in one-way turnover of HK$995m. This number will change over the next couple of months as stocks move around and the turnover increases due to capping changes on Alibaba Group (9988 HK), Tencent (700 HK) and Meituan (3690 HK).

HSCEI Index Rebalance Preview: Xinyi Solar Should Replace China Evergrande

Over 25-yrs in Global Materials & Soft Commodities

Charles Spencer

Equity Bottom-Up

INVESTMENT VIEW: <a href="https://www.smartkarma.com/entities/172" target="_blank" data-smartkarma-citation="entities:172:1" rel="noopener">Wilmar International (WIL SP)</a> shares have rallied over 20% YTD on optimism that its upcoming A-share listing will unlock value.  Perhaps some optimism is justified as <a href="https://www.smartkarma.com/entities/14405" target="_blank" data-smartkarma-citation="entities:14405:1" rel="noopener">Tongwei Co Ltd A (600438 CH)</a> has rallied as much as 70% YTD.  We had earlier identified Tongwei as Wilmar China's closest A-share comparable in this note: <a href="https://www.smartkarma.com/insights/wilmar-china-listing-at-20x-might-prove-too-optimistic" target="_blank" data-smartkarma-citation="insights:27756" rel="noopener">Wilmar: China Listing at ~20x Might Prove Too Optimistic.</a>  Despite the strong share performance, underlying business conditions for Wilmar in China in fact weak and investors may pay more attention to that when they report 2Q results on August 13th. We recommend being defensively positioning on WIL shares into results.

INVESTMENT VIEW: Wilmar International (WIL SP) shares have rallied over 20% YTD on optimism that its upcoming A-share listing will unlock value.  Perhaps some optimism is justified as Tongwei Co Ltd A (600438 CH) has rallied as much as 70% YTD.  We had earlier identified Tongwei as Wilmar China's closest A-share comparable in this note: Wilmar: China Listing at ~20x Might Prove Too Optimistic.  Despite the strong share performance, underlying business conditions for Wilmar in China in fact weak and investors may pay more attention to that when they report 2Q results on August 13th. We recommend being defensively positioning on WIL shares into results. 

China

Tongwei Co., Ltd. produces and markets aquatic and animal feeds. The Company also sells animal medicines.

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Tongwei Co Ltd A (600438 CH)

Northbound Flows: Moutai, East Money, Gree, Wuxi Apptec, Tongwei

We highlight northbound Hong Kong Connect inflows into Moutai, East Money, Gree, Wuxi Apptec, and Tongwei from offshore investors.

Ke Yan, CFA, FRM

HSCEI Index Rebalance: Another Evergrande Stock Is Deleted; Xinyi Solar IN

Xinyi Solar replaces Evergrande Prop Serv in the HSCEI at the close on 4 March. Xinyi Solar is up 20% from its early Jan lows. Short interest on...

Brian Freitas

HSCEI Index Rebalance Preview (March 2022): One Potential Change with Caveats

Xinyi Solar could replace Evergrande Property Services in the HSCEI at the March rebalance. Changes in the FAF for the stocks could either mean no...

Brian Freitas

HSCEI Index Rebalance Preview: Xinyi Solar Should Replace China Evergrande

Xinyi Solar could replace China Evergrande at the HSCEI December rebalance. Over 20% of Xinyi Solar is held by passive investors and the stock...

Brian Freitas

Wilmar: China IPO Looks Priced In

INVESTMENT VIEW: Wilmar International (WIL SP) shares have rallied over 20% YTD on optimism that its upcoming A-share listing will unlock value....

Charles Spencer

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