In today’s briefing:
- HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June25
- CSI 500/1000 Index Rebalance Preview: Strong Near-Term Outperformance
- FXI Rebalance Preview: Pop Mart (9992 HK) Pops Up Again
- ChiNext/ChiNext50 Index Rebalance Preview: Whole Lotta Change
- [Japan M&A] TechnoPro Holdings (6028) May Be Up For Grabs
- HEW: Dovish Arguments Ageing Poorly
- Hang Seng Internet & IT Index (HSIII) Rebalance: Float & Capping Changes
- HSCI Index Rebalance: Bloks (325 HK), Guming (1364 HK) & MIXUE (2097 HK) Added
- HSCEI Index Rebalance: Why Did Pop Mart (9992 HK) Miss?
HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade
- The review period for the June rebalance of the HSTECH INDEX ended on 31 March, the changes will be announced on 16 May and implemented on 6 June.
- Following the launch of the God’s Eye ADAS, BYD (1211 HK) could become eligible for index inclusion after meeting the Autonomous theme and Innovation screening.
- The inclusion of BYD (1211 HK) in the index could result in China Literature (772 HK) being deleted from the index in June.
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June25
- 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 June.
- With no constituent changes, one-way turnover will be 1.9% with 3 stocks being capped and FAF changes for a few stocks due to a methodology change for Secondary Listings.
- We highlight 7 stocks that have a higher probability of being added to the index. Everything depends on the index committee, and we would not be surprised by zero changes.
CSI 500/1000 Index Rebalance Preview: Strong Near-Term Outperformance
- With the review period complete, there could be 50 changes for the CSI Smallcap 500 Index and 100 changes for the CSI 1000 Index in June.
- There are a lot of migrations expected between the two indices and the impacts for those stocks are lower with much of the flow cancelling out.
- The outright adds have outperformed the outright deletes over the last few months with the profit-taking in March giving way to renewed outperformance in April.
FXI Rebalance Preview: Pop Mart (9992 HK) Pops Up Again
- With two days left in the review period, Pop Mart International Group L (9992 HK) could replace China Railway Group Ltd H (390 HK) in the FXI ETF in June.
- The inclusion of Pop Mart International Group L (9992 HK) in the iShares China Large-Cap (FXI) (FXI US) will add to the potential inclusion of the stock in other indices.
- Short interest has been increasing in both stocks. Multiple index inclusions could result in short covering in Pop Mart while China Railway Group‘s stock price has been bouncing off its lows.
ChiNext/ChiNext50 Index Rebalance Preview: Whole Lotta Change
- With the review period complete, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in June.
- The largest flows will be in stocks that are adds/deletes for both indices – and there are a few of those. Plus there are some overlaps with other indices.
- While the forecast adds have outperformed the forecast deletes for both indices since January, near-term performance has not been great. That could change as we near the announcement date.
[Japan M&A] TechnoPro Holdings (6028) May Be Up For Grabs
- Technopro Holdings (6028 JP) is a temp/contract staffing platform which specialises in engineering staff (IT engineers far more than machinery, construction, chemicals). The company has been growing.
- Overnight, an article appeared in MergerMarket – a high-dollar M&A-related news service – saying the company was going through a sale process. The company confirmed it was one possibility.
- The stock went limit up. This quick writeup looks at the framework of the idea, and possibilities.
HEW: Dovish Arguments Ageing Poorly
- Equity and rates market prices normalised further as data remains too resilient to prompt cuts, and US trade policy still seems to be reversing its destructive aspects.
- UK GDP boomed beyond expectations again, albeit amid residual seasonality. US CPI data were soft and stable, as companies appeared to have smoothed the tariff shock.
- Next week’s UK inflation data could compound the pressure by exceeding the consensus to reach 3.4% on the CPI. The flash PMIs and RBA decision are other timely highlights.
Hang Seng Internet & IT Index (HSIII) Rebalance: Float & Capping Changes
- There are no constituent changes for the Hang Seng Internet & IT Index (HSIII) in June but there will be float and capping changes.
- Estimated one-way turnover is 5.95% and that leads to a round-trip trade of HK$3.2bn (US$410m). There are a few stocks with over 0.5x ADV to trade from passive trackers.
- The inflows to NetEase (9999 HK) and Baidu (9888 HK) and the outflows from Kuaishou Technology (1024 HK) and Bilibili (9626 HK) will add to the flows from other indices.
HSCI Index Rebalance: Bloks (325 HK), Guming (1364 HK) & MIXUE (2097 HK) Added
- As expected, Bloks Group (325 HK), Guming Holdings (1364 HK) and Mixue Group (2097 HK) will be added to the Hang Seng Composite Index (HSCI) in June.
- The HSCI inclusion will result in the stocks being added to Southbound Stock Connect from the open of trading on 9 June and that could result in sizeable inflows.
- Use stock price spikes to trim positions in Bloks Group (325 HK) ahead of lock-up expiry in July, and in Guming Holdings (1364 HK) ahead of lock-up expiry in August.
HSCEI Index Rebalance: Why Did Pop Mart (9992 HK) Miss?
- We had Pop Mart International (9992 HK) at the cusp of index inclusion. An increase in Postal Savings Bank of China (1658 HK)‘s FAF led to Pop Mart missing out.
- Estimated one-way turnover at the rebalance is 3.18% leading to a round-trip trade of HK$3.8bn (US$489m).
- There are large inflows for NetEase (9999 HK), Trip.com Group (9961 HK) and Baidu (9888 HK) due to a FAF methodology change for Secondary Listings.
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