In today’s briefing:
- Hang Seng Internet & IT Index (HSIII): Methodology Change & Impact
- HSTECH Index Rebalance: No Constituent Changes; Float/Capping Changes Lead to US$4bn Trade
- HSCI Index Rebalance: 24 Adds, 22 Deletes, Changes to Southbound Stock Connect & BIG Outperformance
- HSCEI Index Rebalance: Pop Mart Pops Ahead of Double Index Inclusion
- Hang Seng Index (HSI) Rebalance: Pop Mart, China Telecom, JD Logistics Added to Get to 88 Members
- Hang Seng Biotech Index Rebalance: 1 Add & 21 Deletes as Methodology Changes
- Hang Seng Internet & IT Index (HSIII) Rebalance: 3 Changes; Big FAF Increase for Horizon Robotics
- Fast Retailing (9983 JP) Tactical Outlook: Turning OVERSOLD, Potential BUY Ahead of Sep-25 Rebalance
- HEW: Policy Under Pressure
- (Mostly) Asia-Pac M&A: Santos, Mayne Pharma, Shengjing Bank, Carenet, Austindo Nusantara, Ashimori
Hang Seng Internet & IT Index (HSIII): Methodology Change & Impact
- Last evening, Hang Seng announced a methodology change for the Hang Seng Internet & Information Technology Index (HSIII Index) with implementation in two phases.
- The capping methodology will be updated at the September rebalance and the turnover and sector requirements will be updated at the December rebalance.
- The updated capping scheme increases turnover and flow in September, while there could be one constituent change for the index at the December rebalance.
HSTECH Index Rebalance: No Constituent Changes; Float/Capping Changes Lead to US$4bn Trade
- There are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in September. However, there are float and capping changes.
- Estimated one-way turnover is 6.3% leading to a round-trip trade of HK$31.1bn (US$4bn). There is plenty to buy in Horizon Robotics (9660 HK), BYD (1211 HK) and Meituan (3690 HK).
- Short interest is elevated in some of the stocks with large flows and shorts could be active in the stocks over the next couple of weeks.
HSCI Index Rebalance: 24 Adds, 22 Deletes, Changes to Southbound Stock Connect & BIG Outperformance
- There are 24 adds and 22 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 504.
- We expect 20 of the 24 HSCI inclusions to be Stock Connect adds from the open on 8 September. 19 of the 22 deletions could be removed from Stock Connect.
- On average, stocks that are expected to be added to Southbound Stock Connect have outperformed stocks that are expected to be removed from Southbound Stock Connect.
HSCEI Index Rebalance: Pop Mart Pops Ahead of Double Index Inclusion
- As forecast, Pop Mart (9992 HK) will replace J&T Global Express (1519 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 5 September.
- Estimated one-way turnover at the rebalance is 3% resulting in a round-trip trade of HK$4.8bn (US$612m). The final capping will use the close of trading on 2 September.
- Pop Mart is also being added to the Hang Seng Index (HSI INDEX) and that marks the end of inclusion in major indices for the stock.
Hang Seng Index (HSI) Rebalance: Pop Mart, China Telecom, JD Logistics Added to Get to 88 Members
- China Telecom (H) (728 HK), JD Logistics (2618 HK) and Pop Mart (9992 HK) will be added to the Hang Seng Index (HSI INDEX) at the close on 5 September.
- Estimated one-way turnover is 2.5% and the estimated round-trip trade is HK$11.25bn (US$1.44bn). The official capping will be done based on closing prices from 2 September.
- At 88 constituents, we near the 100-index member target. The target is likely to be reached by early-2027 – maybe 2026 given mainland companies listing of H-shares on the HKEX.
Hang Seng Biotech Index Rebalance: 1 Add & 21 Deletes as Methodology Changes
- There is 1 add and 21 deletions for the Hang Seng Biotech Index (HSHKBIO Index) at the September rebalance.
- Estimated one-way turnover at the rebalance is 11.25% resulting in a round-trip trade of HK$1.77bn (US$226m).
- The deletes have underperformed the HSHKBIO Index since the start of the year with the gap opening up over the last two months following the announcement of the methodology change.
Hang Seng Internet & IT Index (HSIII) Rebalance: 3 Changes; Big FAF Increase for Horizon Robotics
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII Index) at the September rebalance.
- Estimated one-way turnover at the rebalance is 10.3% resulting in a round-trip trade of HK$6.4bn (US$818m). There are a bunch of stocks with over 0.5x ADV to trade.
- There is a huge FAF increase for Horizon Robotics and that will bring passive buying from the HSTECH trackers too. The stock is being added to a global index on Tuesday.
Fast Retailing (9983 JP) Tactical Outlook: Turning OVERSOLD, Potential BUY Ahead of Sep-25 Rebalance
- In his recent insight, Brian Freitas stated that Fast Retailing (9983 JP)‘s CPAF will stay the same at the September 25 Nikkei 225 Index rebalance.
- The stock is turning oversold—not yet extreme, but notable. Historically, this short-term downtrend pattern often reversed after two weeks of declines; we are now in the second consecutive week lower.
- Monitor the 47150 support level: the stock is trading at 47810 at the moment of writing, if it goes at or below 47150 it will start to be clearly oversold.
HEW: Policy Under Pressure
- President Trump’s attempt to fire Governor Cook, potentially gaining a supportive majority on the Fed, raises the risk that US policy overstimulates the economy.
- Policy peers should not be pressured to mirror mistakes. The ECB faces data that keep accumulating hawkish pressures, but others are more susceptible, like the BOK.
- Non-farm payroll data provide the last hope of blocking a Fed rate cut in September. Meanwhile, a rise in EA inflation to 2.1% should help rule out another ECB rate cut.
(Mostly) Asia-Pac M&A: Santos, Mayne Pharma, Shengjing Bank, Carenet, Austindo Nusantara, Ashimori
- I tally 44 – mostly firm, mostly Asia-Pac – arb transactions currently being discussed and analysed on Smartkarma.
- Three new deal was discussed on Smartkarma this week: Dongfeng (489 HK), Austindo Nusantara Jaya (ANJT IJ), Shengjing Bank (2066 HK), and HD Heavy (329180 KS)/HD Mipo (010620 KS). .
- Key updates/news took place on Santos Ltd (STO AU), Mayne Pharma (MYX AU), PointsBet Holdings (PBH AU), Carenet Inc (2150 JP), and Ashimori Industry (3526 JP).
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