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>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 7 March.</li>
<li>With no constituent changes, one-way turnover will be 2.75% with 3 stocks being capped downward. This gives the index committee the opportunity to add more stocks without significantly increasing turnover.</li>
<li>The return of the high and medium probability inclusions has matched the performance of 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</a> over the last few months, Shorts have climbed in some names.</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 7 March.
With no constituent changes, one-way turnover will be 2.75% with 3 stocks being capped downward. This gives the index committee the opportunity to add more stocks without significantly increasing turnover.
The return of the high and medium probability inclusions has matched the performance of the Hang Seng Index over the last few months, Shorts have climbed in some names.


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

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>2024 marks another year that our "Buy the worst" strategy underperformed the HSI. The strategy yielded -1.7% YTD, against HSI's +17.9%. <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> is the only winner.</li>
<li>For 2025, the strategy will switch to <a href="https://www.smartkarma.com/entities/budweiser-brewing-co-apac-ltd" target="_blank" data-smartkarma-citation="entities:28077:1" rel="noopener">Budweiser Brewing (1876 HK)</a>, <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook (1929 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Props (101 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a>, and <a href="https://www.smartkarma.com/entities/cspc-pharmaceutical-group-ltd" target="_blank" data-smartkarma-citation="entities:229:1" rel="noopener">CSPC Pharmaceutical (1093 HK)</a>.  </li>
<li>The top five HSI winners YTD 2024 have generated an average gain of 92.7%, outperforming the HSI massively. Given their current high valuations, this is unlikely to repeat in 2025.</li>
</ul>


2024 marks another year that our "Buy the worst" strategy underperformed the HSI. The strategy yielded -1.7% YTD, against HSI's +17.9%. Meituan (3690 HK) is the only winner.
For 2025, the strategy will switch to Budweiser Brewing (1876 HK), Chow Tai Fook (1929 HK), Hang Lung Props (101 HK), Wuxi Biologics (2269 HK), and CSPC Pharmaceutical (1093 HK).  
The top five HSI winners YTD 2024 have generated an average gain of 92.7%, outperforming the HSI massively. Given their current high valuations, this is unlikely to repeat in 2025.


"Buy the Worst" HSI Strategy: Another Disappointing Year in 2024, Let's See 2025

<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 6 December.</li>
<li>With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.</li>
<li>Short interest is especially large in <a href="https://www.smartkarma.com/entities/sinotruk-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:19764:1" rel="noopener">Sinotruk</a>, <a href="https://www.smartkarma.com/entities/giant-biogene-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:35950:1" rel="noopener">Giant Biogene</a>, <a href="https://www.smartkarma.com/entities/kuaishou-technology" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology</a>, <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASMPT</a> and <a href="https://www.smartkarma.com/entities/jd-logistics-inc" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics</a> and inclusion could set off some short covering.</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 6 December.
With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.
Short interest is especially large in Sinotruk, Giant Biogene, Kuaishou Technology, ASMPT and JD Logistics and inclusion could set off some short covering.


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

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

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.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of November 15th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight flows for Alibaba, Xiaomi, SMIC, Tencent, Ping An Insurance, HKEx, CNOOC.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of November 15th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for Alibaba, Xiaomi, SMIC, Tencent, Ping An Insurance, HKEx, CNOOC.


Hong Kong Connect Flows (Nov 15th): Alibaba, Xiaomi, SMIC, Tencent, Ping An Insurance, HKEx, CNOOC

Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Equity Bottom-Up

<ul>
<li>Zhongsheng share price surged by 26% on Friday as investors warms up to China, and accumulate beaten down consumer stocks. Zhongsheng was the top performing HSI stock.  </li>
<li>Businesswise, nothing has changed and consensus earnings for Zhongsheng remain largely unchanged. It is all about positive re-rating of the Chinese markets. </li>
<li>Our fair value is raised to HKD16-20.5, based on historical mean PE of 9.4x and ceiling of 12x. Zhongsheng is still cheap and have further upside potential in our view. </li>
</ul>


Zhongsheng share price surged by 26% on Friday as investors warms up to China, and accumulate beaten down consumer stocks. Zhongsheng was the top performing HSI stock.  
Businesswise, nothing has changed and consensus earnings for Zhongsheng remain largely unchanged. It is all about positive re-rating of the Chinese markets. 
Our fair value is raised to HKD16-20.5, based on historical mean PE of 9.4x and ceiling of 12x. Zhongsheng is still cheap and have further upside potential in our view. 


Zhongsheng Group Holdings (881 HK, BUY, TP:HKD16.0-20.5): Long Overdue PoP, Still More Valuation Gap

China

Zhongsheng Group Holdings Ltd. retails automobiles.  The Company imports and retails primarily luxury and mid- to high-end automobile brands.

Price Gauge
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Zhongsheng Group (881 HK)

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

We highlight 9 potential inclusions to the HSI in March. Downward capping on Tencent and Alibaba gives the index committee an opportunity to add...

Brian Freitas

"Buy the Worst" HSI Strategy: Another Disappointing Year in 2024, Let's See 2025

The 2024 "Buy the worst" strategy has underperformed HSI, and the new picks for 2025 are Budweiser APAC, Chow Tai Fook, Hang Lung Properties, Wuxi...

Osbert Tang, CFA

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

We highlight 10 potential inclusions for the HSI in Dec. The number of constituents has not increased this year and the target to reach 100 members...

Brian Freitas

Hong Kong Connect Flows (Nov 15th): Alibaba, Xiaomi, SMIC, Tencent, Ping An Insurance, HKEx, CNOOC

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Alibaba, Xiaomi, SMIC, Tencent, Ping An Insurance, HKEx,...

Ke Yan, CFA, FRM

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD16.0-20.5): Long Overdue PoP, Still More Valuation Gap

Zhongsheng share price has finally popped after 3-year underperformance. The stock remains cheap based on historical valuation ranges, and we think...

Mohshin Aziz

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

We highlight 9 potential inclusions to the HSI in March. Downward capping on Tencent and Alibaba gives the index committee an opportunity to add...

Brian Freitas

"Buy the Worst" HSI Strategy: Another Disappointing Year in 2024, Let's See 2025

​The 2024 "Buy the worst" strategy has underperformed HSI, and the new picks for 2025 are Budweiser APAC, Chow Tai Fook, Hang Lung Properties, Wuxi...

Osbert Tang, CFA

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

We highlight 10 potential inclusions for the HSI in Dec. The number of constituents has not increased this year and the target to reach 100 members...

Brian Freitas

Hong Kong Connect Flows (Nov 15th): Alibaba, Xiaomi, SMIC, Tencent, Ping An Insurance, HKEx, CNOOC

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Alibaba, Xiaomi, SMIC, Tencent, Ping An Insurance, HKEx,...

Ke Yan, CFA, FRM

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD16.0-20.5): Long Overdue PoP, Still More Valuation Gap

Zhongsheng share price has finally popped after 3-year underperformance. The stock remains cheap based on historical valuation ranges, and we think...

Mohshin Aziz

The 2024 "Buy the worst" strategy has underperformed HSI, and the new picks for 2025 are Budweiser APAC, Chow Tai Fook, Hang Lung Properties, Wuxi...