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Event-Driven

Hang Seng China Enterprises Index / Event-Driven

Hang Seng China Enterprises Index (HSCEI INDEX)

Last evening, Hang Seng Indexes announced the conclusions of the market consultation on the "Proposal to enhance the Hang Seng Index as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market".Apart from the changes to the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>, it was also decided that the weight of all <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> constituents, including Secondary Listings and WVR Securities, would be capped at 8%. While this was not a part of the market consultation, we had highlighted this as a possibility in our earlier <a href="https://www.smartkarma.com/insights/hscei-dividends-structural-sell-bank-dividends-the-swing-factor" target="_blank" rel="noopener">Insight</a>.Post the 2 inclusions and 4 deletions in the March review, we see a further 3 potential changes at the June review.The big impact of the 8% cap on index constituents will be felt on the HSCEI dividend futures market. With a bulk of the 2021 dividends scheduled to go ex after the implementation of the rebalance, the dividend futures should move lower. The HSCEI 2021/22 dividend steepener should trade less negative than where it has been trading prior to the announcement.In this Insight, we look at the potential changes and their impact on the stocks and the dividend futures.<div class="content-highlight">This Insight is marked Bearish since we expect the HSCEI 2021 dividend futures to move lower.</div>

Last evening, Hang Seng Indexes announced the conclusions of the market consultation on the "Proposal to enhance the Hang Seng Index as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market".Apart from the changes to the Hong Kong Hang Seng Index (HSI INDEX), it was also decided that the weight of all Hang Seng China Enterprises Index (HSCEI INDEX) constituents, including Secondary Listings and WVR Securities, would be capped at 8%. While this was not a part of the market consultation, we had highlighted this as a possibility in our earlier Insight.Post the 2 inclusions and 4 deletions in the March review, we see a further 3 potential changes at the June review.The big impact of the 8% cap on index constituents will be felt on the HSCEI dividend futures market. With a bulk of the 2021 dividends scheduled to go ex after the implementation of the rebalance, the dividend futures should move lower. The HSCEI 2021/22 dividend steepener should trade less negative than where it has been trading prior to the announcement.In this Insight, we look at the potential changes and their impact on the stocks and the dividend futures.This Insight is marked Bearish since we expect the HSCEI 2021 dividend futures to move lower.

HSCEI June Index Rebalance Preview: Potential Changes & Impact of 8% Cap on Dividends