In today’s briefing:
- HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
- HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
- Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally
- Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
- Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals
- ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm
- Hong Kong CEO & Director Dealings (18 Nov): Cross Harbour, Grand Ming, Ganglong, Pharmaron, JL Mag
- Travelsky (696): Beneficiary from Potential Reopening in China
- EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
- The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
- Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
- Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.
HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
- There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
- Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
- Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.
Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally
- Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
- The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
- The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash. In slightly better market conditions, this could be a 6 HKD stock.
Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
- Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
- There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
- There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.
Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals
- The in-specie distribution is basically a forward block sale of Meituan (3690 HK). You know it’s coming. You don’t know how large it is. It is not unlike a lockup situation.
- China Hainan Rubber Industry (601118 CH) will start with 36% in Halcyon Agri (HACL SP). Founders and friends have ~10%. Getting to 50%+ will be easy.
- The Swire Pacific (B) / Swire Pacific (A) ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks.
ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Indian IPOs delivered some decent performance while HK IPOs are likely to pick up as well.
- There were a number of placement and blocks this week, after the expiry of lockups in a few Indian names.
Hong Kong CEO & Director Dealings (18 Nov): Cross Harbour, Grand Ming, Ganglong, Pharmaron, JL Mag
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
- These insights may flag those companies where shares have been pledged. Stocks mentioned include Cross Harbour (32 HK), Grand Ming (1271 HK), and Ganglong China Property (6968 HK)
Travelsky (696): Beneficiary from Potential Reopening in China
- Travelsky Technology Ltd H (696 HK) is a system provider for airports in China that benefit from the reopening plan.
- The company is not sensitive to the oil price and it has low debt which makes it attractive compared to the airlines.
- The stock is trading at a 40% PBR discount to Shanghai International Airport. Historically, the company is trading at a 50% discount to its 5-year high on PBR.
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
- Weekly summary of vol changes and moves across Global Markets
- Analysing ATM volatility and skew changes over the last 5 days
- We suggest a few trades to take advantage of the implied vol surfaces
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