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>Post market close on Friday, Hang Seng Indexes will announce the changes for the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> that will be implemented at the close on 4 September.</li>
<li>We highlight 7 stocks that have a higher probability of being added to the index. With the index committee entitled to a lot of discretion, there will be differences.</li>
<li>The Healthcare industry continues to remain the most underweight and there could be more additions from the industry as we near the 100-stock target.</li>
</ul>


Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 4 September.
We highlight 7 stocks that have a higher probability of being added to the index. With the index committee entitled to a lot of discretion, there will be differences.
The Healthcare industry continues to remain the most underweight and there could be more additions from the industry as we near the 100-stock target.


Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for Sep26

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Thematic (Sector/Industry)

<ul><li>Feb sales came out at a strong beat both in terms of strength at 30% YoY (cons -5%), but also the timing of turning positive (cons in April).</li><li>We think the momentum would be more sustainable than market expectation as 1) our leading indicator GAIN jumped to the highest since 2021 indicating ST sales would continue to be strong.</li><li>2) Our channel check suggests home buyers are much more than pent-up demand. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Feb sales came out at a strong beat both in terms of strength at 30% YoY (cons -5%), but also the timing of turning positive (cons in April).We think the momentum would be more sustainable than market expectation as 1) our leading indicator GAIN jumped to the highest since 2021 indicating ST sales would continue to be strong.2) Our channel check suggests home buyers are much more than pent-up demand. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Property Sector – Feb sales a strong beat; Raise 2023 forecast

<ul><li>Given still weak property sales and volatile stock market, we suggest investors to play the spread of housing completion over new start.</li><li>In the short term, we think the ensuring completion fund will support the housing completion as a total fund size of RMB140bn has been distributed to the needed projects that could lead to 100mn sqm completion area (13% of 2021 total completion).</li><li>On the contrary, new start could remain weak due to lackluster property sales and piling inventory.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Given still weak property sales and volatile stock market, we suggest investors to play the spread of housing completion over new start.In the short term, we think the ensuring completion fund will support the housing completion as a total fund size of RMB140bn has been distributed to the needed projects that could lead to 100mn sqm completion area (13% of 2021 total completion).On the contrary, new start could remain weak due to lackluster property sales and piling inventory.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Property Sector – Long completion, short new start

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

Shenton Research

Shenton 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 analysed the earning revision of component stocks of HSI in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on XINYI SOLAR, CNOOC, PING AN, HSBC, CHINA LIFE, LONGFOR, JD.COM.</li>
</ul>


We analysed the earning revision of component stocks of HSI in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on XINYI SOLAR, CNOOC, PING AN, HSBC, CHINA LIFE, LONGFOR, JD.COM.


HSI Index Earning Revision (Jul): XINYI SOLAR, CNOOC, PING AN, HSBC, CHINA LIFE, LONGFOR, JD.COM

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

China allocations among Global active managers have fallen to below pre 2017 levels.  Average holding weights among the 381 funds in our analysis dropped to 3.76%, underweight the MSCI All Country World index by -1.18% with just 28.3% overweight the benchmark. This allocation drop is in stark contrast to what is occurring in the USA, with allocations powering to all-time highs of 53.70%.  The difference between US and China weights are at all-time wides.The most widely held stocks are <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US), </a><a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 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>, with the trio accounting for 40.6% of total China allocations.  If Global managers are to increase weights in China, they will likely have to broaden their investment horizons.  Comparing Global stock holdings in China with their Global Emerging Market peers suggests a number of stocks that could enter the radar of Global investors.  We highlight <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> , <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <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> as stocks lightly held by Global managers but well invested by EM active funds.

China allocations among Global active managers have fallen to below pre 2017 levels.  Average holding weights among the 381 funds in our analysis dropped to 3.76%, underweight the MSCI All Country World index by -1.18% with just 28.3% overweight the benchmark. This allocation drop is in stark contrast to what is occurring in the USA, with allocations powering to all-time highs of 53.70%.  The difference between US and China weights are at all-time wides.The most widely held stocks are Alibaba Group (BABA US), AIA Group Ltd (1299 HK) and Tencent (700 HK), with the trio accounting for 40.6% of total China allocations.  If Global managers are to increase weights in China, they will likely have to broaden their investment horizons.  Comparing Global stock holdings in China with their Global Emerging Market peers suggests a number of stocks that could enter the radar of Global investors.  We highlight Ping An Insurance (H) (2318 HK) , Meituan (3690 HK) and JD.com Inc (ADR) (JD US) as stocks lightly held by Global managers but well invested by EM active funds.

Global Funds China Fall:  Gap to US Largest in History

Hong Kong

Xinyi Glass is a leading integrated glass manufacturer specializing in high-quality float glass, automobile glass, and energy-saving architectural glass. The company also produces automobile rubber and plastic components. It was founded in 1988 and is headquartered in Hong Kong, China.

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Xinyi Glass (868 HK)

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for Sep26

We highlight 7 potential adds to the HSI in September. Healthcare continues to be underrepresented and that could change as we near 100 members....

Brian Freitas

China Property Sector – Feb sales a strong beat; Raise 2023 forecast

Feb sales came out at a strong beat both in terms of strength at 30% YoY (cons -5%), but also the timing of turning positive (cons in April).

CMB International

China Property Sector – Long completion, short new start

Given still weak property sales and volatile stock market, we suggest investors to play the spread of housing completion over new start.

CMB International

HSI Index Earning Revision (Jul): XINYI SOLAR, CNOOC, PING AN, HSBC, CHINA LIFE, LONGFOR, JD.COM

We analyzed HSI's consensus for Jul 2026 and highlighted changes of EPS in XINYI SOLAR, CNOOC, PING AN, HSBC, CHINA LIFE, LONGFOR, JD.COM.

Ke Yan, CFA, FRM

Global Funds China Fall: Gap to US Largest in History

China allocations among Global active funds have fallen to below pre 2017 levels. Average holding weights among the 381 funds in our analysis...

Steven Holden

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