In today’s briefing:
- STAR50/STAR100 Index Rebalance: Methodology Changes & Some Surprises
- A/H Premium Tracker (To 28 Feb 2025): AH Premia Continue to Fall; Expect Widening
- HK Connect SOUTHBOUND Flows (To 28 Feb 2025); Big Volumes, HUGE Net Buys on Blue Chips, Tech-Y Names
- Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong’s Options Market
- Chifeng Jilong Gold Mining (6693 HK) IPO: H-Share Offering Details & Index Inclusion
- HSCEI Index Options Weekly (Feb 24-28): Shifting Sentiment
- MIXUE IPO Trading – Strong Demand, Set to Break the Tea Chain Jinx
- Hong Kong Single Stock Options Weekly (Feb 24 – 28): Broad Deterioration
- BeiGene (6160.HK/ONC US) 2024 Results – The Performance Is Outstanding
- Chifeng Jilong A/H Listing: Why Not Own International Peers Instead?
STAR50/STAR100 Index Rebalance: Methodology Changes & Some Surprises
- There are 3 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the March rebalance that will be implemented at the close on 14 March.
- The last-minute methodology change could lead to under/over positioning on some names and those stocks could move the most over the next few days.
- Performance has been mixed in the changes to the STAR50 INDEX but the outright adds have continued to outperform the outright deletes for the STAR100 Index.
A/H Premium Tracker (To 28 Feb 2025): AH Premia Continue to Fall; Expect Widening
- AH Premia continue to fall. Spread curve torsion reverses again with narrow premia trades seeing Hs perform the best.
- Warning signs are starting to flash on spreads. This week I have the biggest week of changes recommended that I have ever had. By a long ways.
- This week threatens to be a very strange week geopolitically. Being smaller in crowded trades is probably a good thing.
HK Connect SOUTHBOUND Flows (To 28 Feb 2025); Big Volumes, HUGE Net Buys on Blue Chips, Tech-Y Names
- Gross SOUTHBOUND volumes cleared HK$800bn for the second week in a row. NET buying by SOUTHBOUND was HK$75bn which was perhaps a new record.
- Notable again is the HUGE back-and-forth. If HK$865bn traded and SOUTHBOUND “only” bought HK$75bn, HK$395bn was round-tripped for short-term purposes.
- Last week I flipped to short Alibaba Group Holding (9988 HK). Sentiment may worsen and there’s lots to sell later this week. Staying short Alibaba for now.
Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong’s Options Market
- Box trades are gaining popularity on the Hong Kong Stock Exchange. These arbitrage strategies exploit price discrepancies in options markets for near risk-free profits.
- Long box trades involve simultaneously buying bull call spreads and bear put spreads with identical strikes and expiration dates, creating a fixed payoff regardless of the underlying asset’s price movement.
- Box trades require careful execution consideration of spreads, commissions, margins, and fees, with risks primarily in execution and operations rather than market exposure.
Chifeng Jilong Gold Mining (6693 HK) IPO: H-Share Offering Details & Index Inclusion
- Chifeng Jilong Gold Mining (600988 CH) has launched an H-share offering that could raise up to US$554m if the offer size adjustment option and overallocation option are both exercised.
- The price range of HK$13.72-HK$15.83/share is a discount of 18.7-29.5% to the A-shares and between 17-26% of the offering will be allocated to cornerstone investors.
- The small issue size will result in the stock staying out the global indices for the foreseeable future. Inclusion in Southbound Stock Connect will take place in April.
HSCEI Index Options Weekly (Feb 24-28): Shifting Sentiment
- Put trading as a percentage of total volume continues to increase and coupled with a shift in the skew highlights changing sentiment.
- Volatile price action this week with Wednesday and Friday both moving ~3.50%.
- Implied and historic volatilities were all up on the week and seasonal setup over next two weeks not favorble.
MIXUE IPO Trading – Strong Demand, Set to Break the Tea Chain Jinx
- Mixue Group (2097 HK) raised around US$450m in its Hong Kong IPO.
- MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
- We have covered various aspects of the deal in our previous notes. In this note, we will talk about the trading dynamics.
Hong Kong Single Stock Options Weekly (Feb 24 – 28): Broad Deterioration
- Broad based weakness, less than ½ of optionable stocks were up on the week with the average size of losses larger than average size of gains.
- Total single stock Put option volume the highest in the past 4 months pushing the Put/Call ratio to a local extreme.
- Laggards from the rally holding on, rally leaders broadly weak.
BeiGene (6160.HK/ONC US) 2024 Results – The Performance Is Outstanding
- BeiGene’s 2024 results beat expectations, mainly driven by strong sales growth of BRUKINSA. In 2025, BRUKINSA’s sales would exceed Calquence for the first time.But sales performance of tislelizumab remains lackluster.
- Based on positive trend, turning losses into profits is just a matter of time. BeiGene is expected to achieve positive GAAP operating income in 2025, which is an inflection point.
- US$24.5-26.5 billion is the valuation bottom line, below which BeiGene is undervalued. Our forecast is that market value would reach US$37.5 billion. So, there is still upside potential in valuation.
Chifeng Jilong A/H Listing: Why Not Own International Peers Instead?
- Chifeng Jilong Gold Mining (600988 CH) , a gold mining company in China, is now looking to raise up to US$419m in its H-share listing in Hong Kong.
- It operates six gold mines in Asia and Africa and has been listed on the Shenzhen Stock Exchange since 2004.
- We have covered the company and deal background in our previous notes. In this note, we talk about the IPO pricing.
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