Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>With one week left to go for Hang Seng Indexes (HSIL) to announce the changes to the <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 as part of the December 2020 index review, we take a look at the performance of the expected inclusions and exclusions and try to formulate some trades.</p><p>HSIL will make the index review announcement after the close of trading on 13 November, with all changes becoming effective after the close of trading on 4 December. There are 15 trading days between the announcement of the index review and the implementation date.</p><p>The suspension of the <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> means that we are back our original expectation of 9 inclusions and 9 exclusions at the upcoming review.</p><div>
<p>We see a high probability of <a href="https://www.smartkarma.com/entities/china-overseas-land-invest" target="_blank" data-smartkarma-citation="entities:419:1" rel="noopener">China Overseas Land &amp; Investment Ltd (688 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/china-feihe-ltd" target="_blank" data-smartkarma-citation="entities:24413:1" rel="noopener">China Feihe (6186 HK)</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing (981 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-real-estate-group-limited" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a> being included in the <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>, and of <a href="https://www.smartkarma.com/entities/china-taiping-insurance-hldgs-co-ltd" target="_blank" data-smartkarma-citation="entities:489:1" rel="noopener">China Taiping Insurance Hldgs (966 HK)</a>, <a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a>, <a href="https://www.smartkarma.com/entities/china-minsheng-banking-h" target="_blank" data-smartkarma-citation="entities:8983:1" rel="noopener">China Minsheng Banking H (1988 HK)</a>, <a href="https://www.smartkarma.com/entities/china-vanke-co-ltd-h" target="_blank" data-smartkarma-citation="entities:18368:1" rel="noopener">China Vanke Co Ltd (H) (2202 HK)</a>, <a href="https://www.smartkarma.com/entities/fosun-international-ltd" target="_blank" data-smartkarma-citation="entities:433:1" rel="noopener">Fosun International (656 HK)</a>, <a href="https://www.smartkarma.com/entities/china-citic-bank-corp-ltd-ea6c25fd-4b20-45cb-a4a6-df7a60136f03" target="_blank" data-smartkarma-citation="entities:653:1" rel="noopener">China Citic Bank Corp Ltd H (998 HK)</a> and <a href="https://www.smartkarma.com/entities/china-shenhua-energy-co-h" target="_blank" data-smartkarma-citation="entities:382:1" rel="noopener">China Shenhua Energy Co H (1088 HK)</a> being deleted from the index.</p>
<p><a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> and <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a> are very close to the buffer zone and could be included in the index, which would see <a href="https://www.smartkarma.com/entities/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a> and <a href="https://www.smartkarma.com/entities/picc-property-casualty-h" target="_blank" data-smartkarma-citation="entities:350:1" rel="noopener">PICC Property &amp; Casualty H (2328 HK)</a> being deleted.</p>
<p>In this Insight, we take a look at the updated short interest, the recent performance on the stocks and stocks that could see positions being built up in the week to announcement.</p>
</div>

With one week left to go for Hang Seng Indexes (HSIL) to announce the changes to the Hang Seng China Enterprises Index (HSCEI INDEX) constituents as part of the December 2020 index review, we take a look at the performance of the expected inclusions and exclusions and try to formulate some trades.HSIL will make the index review announcement after the close of trading on 13 November, with all changes becoming effective after the close of trading on 4 December. There are 15 trading days between the announcement of the index review and the implementation date.The suspension of the Ant Group (6688 HK) means that we are back our original expectation of 9 inclusions and 9 exclusions at the upcoming review.
We see a high probability of China Overseas Land &amp; Investment Ltd (688 HK), JD.com (HK) (9618 HK), Alibaba Health Information Technology (241 HK), Haidilao (6862 HK), China Feihe (6186 HK), Semiconductor Manufacturing (981 HK) and Evergrande Real Estate Group (3333 HK) being included in the Hang Seng China Enterprises Index (HSCEI INDEX), and of China Taiping Insurance Hldgs (966 HK), China Telecom Corp Ltd (H) (728 HK), China Minsheng Banking H (1988 HK), China Vanke Co Ltd (H) (2202 HK), Fosun International (656 HK), China Citic Bank Corp Ltd H (998 HK) and China Shenhua Energy Co H (1088 HK) being deleted from the index.
NetEase (9999 HK) and Hansoh Pharmaceutical (3692 HK) are very close to the buffer zone and could be included in the index, which would see Want Want (151 HK) and PICC Property &amp; Casualty H (2328 HK) being deleted.
In this Insight, we take a look at the updated short interest, the recent performance on the stocks and stocks that could see positions being built up in the week to announcement.


HSCEI Dec20 Index Rebalance Preview: One Week to Announcement

<p><a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> almost raised US$35bn in the largest IPO in history. While the IPO may eventually proceed, we are unsure of the valuations the company could demand the next time around.</p><p>Following the suspension of listing on the STAR Market by the Shanghai Stock Exchange due to a 'major event', <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> announced the suspension of the H-share listing too. The company also said that the refund of the application monies will be made as soon as possible to Hong Kong retail investors.</p><p>This 'major event' will have knock-on implications for a host of other trades/strategies as well. In this Insight, we take a look at some of them.</p>

Ant Group (6688 HK) almost raised US$35bn in the largest IPO in history. While the IPO may eventually proceed, we are unsure of the valuations the company could demand the next time around.Following the suspension of listing on the STAR Market by the Shanghai Stock Exchange due to a 'major event', Ant Group (6688 HK) announced the suspension of the H-share listing too. The company also said that the refund of the application monies will be made as soon as possible to Hong Kong retail investors.This 'major event' will have knock-on implications for a host of other trades/strategies as well. In this Insight, we take a look at some of them.

Hang Seng China Enterprises Index / Event-Driven

<p>After staying negative on the <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> dividend futures expiring in 2021 for most of the year, we finally think a near term bottom has been formed. The dividend futures are 28% lower over the period, and adjusted for a strengthening <a href="https://www.smartkarma.com/entities/cny" target="_blank" data-smartkarma-citation="entities:22820:1" rel="noopener">CNY (USDCNY CURNCY)</a> are around 35% lower.</p><p>Most of the drop has come about as a result of the changes (and upcoming changes) to the constituents of the <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>, with the damage done by COVID-19 adding to the selloff.</p><p>Post the inclusion of <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> in the HSCEI and the changes in the upcoming review to be announced on 13 November (and implemented at the close on 4 December), we do not see any major changes to the index.</p><p>The company Q3 results announced over the last couple of weeks do not provide any major catalysts, and the future direction of the 2021 dividend futures will be driven by news flow, expectations around the dividends to be paid out by the megabanks, and expectations around further changes to the <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> capping on WVR securities.</p><p>With the market trading near our estimated fair value of 271.825 index points, we take a look at some catalysts that could cause our estimates to move higher/ lower. Spoiler: there are a lot more catalysts for the dividend futures to move lower than higher.</p>

After staying negative on the Hang Seng China Enterprises Index (HSCEI INDEX) dividend futures expiring in 2021 for most of the year, we finally think a near term bottom has been formed. The dividend futures are 28% lower over the period, and adjusted for a strengthening CNY (USDCNY CURNCY) are around 35% lower.Most of the drop has come about as a result of the changes (and upcoming changes) to the constituents of the Hang Seng China Enterprises Index (HSCEI INDEX), with the damage done by COVID-19 adding to the selloff.Post the inclusion of Ant Group (6688 HK) in the HSCEI and the changes in the upcoming review to be announced on 13 November (and implemented at the close on 4 December), we do not see any major changes to the index.The company Q3 results announced over the last couple of weeks do not provide any major catalysts, and the future direction of the 2021 dividend futures will be driven by news flow, expectations around the dividends to be paid out by the megabanks, and expectations around further changes to the Hang Seng China Enterprises Index (HSCEI INDEX) capping on WVR securities.With the market trading near our estimated fair value of 271.825 index points, we take a look at some catalysts that could cause our estimates to move higher/ lower. Spoiler: there are a lot more catalysts for the dividend futures to move lower than higher.

HSCEI Dividends: Finely Poised; Negative Catalysts Overwhelm the Positive

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a>, <a href="https://www.smartkarma.com/entities/pccw-ltd" target="_blank" data-smartkarma-citation="entities:873:1" rel="noopener">PCCW Ltd (8 HK)</a>, <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a> and <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. Shorts increased in Communication Services, Consumer Staples and Financials stocks and decreased in Consumer Discretionary names.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/nexon-co-ltd" target="_blank" data-smartkarma-citation="entities:16032:1" rel="noopener">Nexon (3659 JP)</a>, <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">Ana Holdings (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">Sbi Holdings (8473 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/familymart-co-ltd" target="_blank" data-smartkarma-citation="entities:320:1" rel="noopener">FamilyMart Co Ltd (8028 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-group-inc" target="_blank" data-smartkarma-citation="entities:217:1" rel="noopener">Sumitomo Mitsui Financial Group (8316 JP)</a> and <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>. Sectorally, shorts increased on Communication Services, while shorts were covered on Information Technology and Consumer Staples names.</p></div><div><p>Shorts increased in Korea for the week. Biggest increase in shorts were on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> and <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">Au Optronics (2409 TT)</a>, <a href="https://www.smartkarma.com/entities/acer-inc" target="_blank" data-smartkarma-citation="entities:15726:1" rel="noopener">Acer Inc (2353 TT)</a> and <a href="https://www.smartkarma.com/entities/catcher-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:4957:1" rel="noopener">Catcher Technology (2474 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/walsin-technology-corp" target="_blank" data-smartkarma-citation="entities:11084:1" rel="noopener">Walsin Technology (2492 TT)</a>, <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a>, <a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a> and <a href="https://www.smartkarma.com/entities/ta-chen-stainless-pipe-co" target="_blank" data-smartkarma-citation="entities:2519:1" rel="noopener">Ta Chen Stainless Pipe Co (2027 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on ICBC (H) (1398 HK), PCCW Ltd (8 HK), China Construction Bank H (939 HK) and Ping An Insurance (H) (2318 HK) while there was short covering on Meituan (3690 HK), Alibaba Group (9988 HK), HKEX (388 HK) and HSBC Holdings (5 HK). Shorts increased in Communication Services, Consumer Staples and Financials stocks and decreased in Consumer Discretionary names.In Japan, stocks that saw the most shorts were Nexon (3659 JP), Ana Holdings (9202 JP), Fast Retailing (9983 JP) and Sbi Holdings (8473 JP) while shorts decreased on FamilyMart Co Ltd (8028 JP), Toshiba Corp (6502 JP), Sumitomo Mitsui Financial Group (8316 JP) and Advantest Corp (6857 JP). Sectorally, shorts increased on Communication Services, while shorts were covered on Information Technology and Consumer Staples names.Shorts increased in Korea for the week. Biggest increase in shorts were on Samsung Electronics (005930 KS), SK Hynix (000660 KS), LG Household &amp; Health Care (051900 KS), LG Chem Ltd (051910 KS) and Naver Corp (035420 KS). Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), Au Optronics (2409 TT), Acer Inc (2353 TT) and Catcher Technology (2474 TT) while shorts were covered on Walsin Technology (2492 TT), Nanya Technology (2408 TT), Novatek Microelectronics Corp (3034 TT) and Ta Chen Stainless Pipe Co (2027 TT). 

Asia Short Interest Weekly: ICBC, PCCW, Meituan, HKEX, Nexon, FamilyMart, Samsung, TSMC, Acer

<p>On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>, <a href="https://www.hkex.com.hk/News/Regulatory-Announcements/2020/201030news?sc_lang=en" target="_blank" rel="noopener">published</a> the conclusions to its consultation on the Corporate WVR beneficiaries.</p><p>The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.</p><p>Qualifying corporate WVR issuers will need to meet the following requirements:</p><ul>
<li>a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.</li>
<li>be an 'innovative company' as part of the suitability for listing</li>
<li>demonstrate that the laws, rules and regulations provide certain shareholder protection standards</li>
</ul><p>The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.</p><p>This paves the way for <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a> and <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a>, among others, to pursue a secondary listing on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>. </p>

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of HKEX (388 HK), published the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:
a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.
be an 'innovative company' as part of the suitability for listing
demonstrate that the laws, rules and regulations provide certain shareholder protection standards
The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for Tencent Music (TME US) and iQIYI Inc (IQ US), among others, to pursue a secondary listing on the HKEX (388 HK). 

Conclusions of the Corporate WVR Consultation: Small Changes for Now

China

Meituan operates as a web based shopping platform for locally found consumer products and retail services. The Company offers deals of the day by selling vouchers on local services and entertainment, dining, delivery, and other services. Meituan provides its services throughout China.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Meituan (3690 HK)

HSCEI Dec20 Index Rebalance Preview: One Week to Announcement

With 6 trading days to go to the announcement of the HSCEI December index review, we take a look at the performance of the expected inclusions/...

Brian Freitas

Ant Group: IPO Suspension Implications

With Ant Group suspending the H-share listing following SSE's suspension of the A-share listing, there will be multiple implications for trades and...

Brian Freitas

HSCEI Dividends: Finely Poised; Negative Catalysts Overwhelm the Positive

The HSCEI dividend futures expiring in 2021 are trading near our estimated fair value, but there are a lot more catalysts that could take the...

Brian Freitas

Asia Short Interest Weekly: ICBC, PCCW, Meituan, HKEX, Nexon, FamilyMart, Samsung, TSMC, Acer

We highlight the largest changes in short interest on stocks across Hong Kong, Japan, Korea and Taiwan to provide insight into the positions being...

Brian Freitas

Conclusions of the Corporate WVR Consultation: Small Changes for Now

The HKEX has published the conclusions of the consultation on corporate WVR beneficiaries. There are no major changes, but the proposed changes...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)