Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Biden's New Executive Order, MMC, Invesco Office, WH Group, EPS, Link

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the September 2021 review of the Hang Seng Family of Indexes on 13 August. The constituent changes will be effective after the close of trading on 3 September.The review period for the September rebalance ends on 30 June and stocks that have at least 1 month of trading history by that date are eligible for inclusion 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>.At the September review, we see <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 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>, replacing <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a> and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement Co Ltd H (914 HK)</a>.<a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a>, <a href="https://www.smartkarma.com/entities/bilibili-inc-83a27302-cd7d-4e6a-a1de-bcf93eb022c3" target="_blank" data-smartkarma-citation="entities:32215:1" rel="noopener">Bilibili Inc (9626 HK)</a> and <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a> are close adds.Estimated one-way turnover at the rebalance is 2.78% and will result in a one-way trade of HK$1.86bn.The expected inclusions will have a higher index weight and a lower dividend yield as compared to the expected exclusions and this could push the HSCEI 2022 dividends and the 2021/22 steepener lower.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the September 2021 review of the Hang Seng Family of Indexes on 13 August. The constituent changes will be effective after the close of trading on 3 September.The review period for the September rebalance ends on 30 June and stocks that have at least 1 month of trading history by that date are eligible for inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX).At the September review, we see JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) being included in the Hang Seng China Enterprises Index (HSCEI INDEX), replacing Shimao Property Holdings (813 HK) and Anhui Conch Cement Co Ltd H (914 HK).Innovent Biologics Inc (1801 HK), Bilibili Inc (9626 HK) and Xinyi Solar Holdings (968 HK) are close adds.Estimated one-way turnover at the rebalance is 2.78% and will result in a one-way trade of HK$1.86bn.The expected inclusions will have a higher index weight and a lower dividend yield as compared to the expected exclusions and this could push the HSCEI 2022 dividends and the 2021/22 steepener lower.

HSCEI Sep 2021 Index Rebalance Preview: JD Logistics, Li Ning Are Potential Adds

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

Despite playing such a minor role in China investment portfolios, Materials allocations have been on the rise.  Current holding weights represent an 8-year high and the percentage of funds invested is at the top of the 6 year range.  Activity over the last 6-months shows some of the pure metal plays gaining tracking with China investors.  A further 11.2% of funds added Steel exposure over the period and 10.3% Aluminum.  In contrast, Construction Materials suffered outflows and a scaling back of exposure from active managers.We would highlight stocks such as <a href="https://www.smartkarma.com/entities/beijing-oriental-yuhong-a" target="_blank" data-smartkarma-citation="entities:3060:1" rel="noopener">Beijing Oriental Yuhong A (002271 CH) </a>, <a href="https://www.smartkarma.com/entities/wanhua-chemical-group-co-a" target="_blank" data-smartkarma-citation="entities:5049:1" rel="noopener">Wanhua Chemical Group Co A (600309 CH)</a> , <a href="https://www.smartkarma.com/entities/shandong-sinocera-functional-material-a" target="_blank" data-smartkarma-citation="entities:6865:1" rel="noopener">Shandong Sinocera Functional Material (300285 CH)</a> , <a href="https://www.smartkarma.com/entities/china-molybdenum-co-ltd-d9c46a67-e31f-431f-9f5f-02222265d701" target="_blank" data-smartkarma-citation="entities:8585:1" rel="noopener">China Molybdenum Co Ltd H (3993 HK)</a> and <a href="https://www.smartkarma.com/entities/baoshan-iron-steel-co-a" target="_blank" data-smartkarma-citation="entities:3891:1" rel="noopener">Baoshan Iron &amp; Steel Co A (600019 CH)</a> as seeing investment levels rise from a very low base, having previously being off the radar for the majority of active China investors.Relative to 5-year history, allocations are now looking overstretched, but relative to 10 year history, allocations still have some way to go, and absolute weights are still tiny compared to the large allocations awarded to Consumer and Communication Services stocks.  In short, are the recent moves part of a short-term shift in momentum, or the early part of a longer-term structural shift?Taken from our active China fund universe, consisting of 116 funds with AUM $65bn.

Despite playing such a minor role in China investment portfolios, Materials allocations have been on the rise.  Current holding weights represent an 8-year high and the percentage of funds invested is at the top of the 6 year range.  Activity over the last 6-months shows some of the pure metal plays gaining tracking with China investors.  A further 11.2% of funds added Steel exposure over the period and 10.3% Aluminum.  In contrast, Construction Materials suffered outflows and a scaling back of exposure from active managers.We would highlight stocks such as Beijing Oriental Yuhong A (002271 CH) , Wanhua Chemical Group Co A (600309 CH) , Shandong Sinocera Functional Material (300285 CH) , China Molybdenum Co Ltd H (3993 HK) and Baoshan Iron &amp; Steel Co A (600019 CH) as seeing investment levels rise from a very low base, having previously being off the radar for the majority of active China investors.Relative to 5-year history, allocations are now looking overstretched, but relative to 10 year history, allocations still have some way to go, and absolute weights are still tiny compared to the large allocations awarded to Consumer and Communication Services stocks.  In short, are the recent moves part of a short-term shift in momentum, or the early part of a longer-term structural shift?Taken from our active China fund universe, consisting of 116 funds with AUM $65bn.

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Conch Venture Holdings / Equity Bottom-Up

We take the FY21 guidances for <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> positively and believe they are more important than the FY20 result. In fact, despite a slowdown from 40-50% YoY growth in the previous two years, Conch Venture's 24.6% growth in its core environmental business in FY20 is still a very decent show under a COVID-19 impacted situation.Conch Venture is expecting 76% growth in solid waste treatment volume and a 65% growth in municipal waste treated in its waste incineration business in FY21, on the back of capacity completion. We believe such volume growth should easily support over 80% surge in core environment profit in this year. Its solid project pipeline will further ensure growth beyond FY21. Adding low gearing and undemanding valuation multiples, Conch Venture is well placed in China's environment sector.

We take the FY21 guidances for China Conch Venture Holdings (586 HK) positively and believe they are more important than the FY20 result. In fact, despite a slowdown from 40-50% YoY growth in the previous two years, Conch Venture's 24.6% growth in its core environmental business in FY20 is still a very decent show under a COVID-19 impacted situation.Conch Venture is expecting 76% growth in solid waste treatment volume and a 65% growth in municipal waste treated in its waste incineration business in FY21, on the back of capacity completion. We believe such volume growth should easily support over 80% surge in core environment profit in this year. Its solid project pipeline will further ensure growth beyond FY21. Adding low gearing and undemanding valuation multiples, Conch Venture is well placed in China's environment sector. 

Conch Venture (586 HK): Still Very Well Placed

Evergrande Property Services / Event-Driven

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the June 2021 review of the Hang Seng Family of Indexes on 21 May. The constituent changes will be effective after the close of trading on 4 June.The review period for the June review ended on 31 March and stocks that had at least 1 month of trading history by that date are eligible for inclusion 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>.<a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a> will be a Fast Entry inclusion into the index at the close of trading on 8 April and no stock will be deleted on that date.At the June review, we see a high probability of <a href="https://www.smartkarma.com/entities/china-evergrande-new-energy-vehicle-group-ltd" target="_blank" data-smartkarma-citation="entities:713:1" rel="noopener">Evergrande Auto (708 HK)</a> and <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> and being included in the index, and of <a href="https://www.smartkarma.com/entities/china-tower-corp-ltd" target="_blank" data-smartkarma-citation="entities:27037:1" rel="noopener">China Tower (788 HK)</a>, <a href="https://www.smartkarma.com/entities/guangdong-investment-ltd" target="_blank" data-smartkarma-citation="entities:12109:1" rel="noopener">Guangdong Investment (270 HK)</a> and <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> being deleted from the index.There is a slightly lower probability of <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> being included in the index and of <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement Co Ltd H (914 HK)</a> being excluded.<a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> is a close add and the corresponding deletion is <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a>.The June review also sees a change in the index methodology where all stocks will be capped at 8% of the index weight.

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the June 2021 review of the Hang Seng Family of Indexes on 21 May. The constituent changes will be effective after the close of trading on 4 June.The review period for the June review ended on 31 March and stocks that had at least 1 month of trading history by that date are eligible for inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX).Baidu (9888 HK) will be a Fast Entry inclusion into the index at the close of trading on 8 April and no stock will be deleted on that date.At the June review, we see a high probability of Evergrande Auto (708 HK) and BYD (1211 HK) and being included in the index, and of China Tower (788 HK), Guangdong Investment (270 HK) and China Unicom Hong Kong (762 HK) being deleted from the index.There is a slightly lower probability of Evergrande Property Services (6666 HK) being included in the index and of Anhui Conch Cement Co Ltd H (914 HK) being excluded.Li Ning Co Ltd (2331 HK) is a close add and the corresponding deletion is Shimao Property Holdings (813 HK).The June review also sees a change in the index methodology where all stocks will be capped at 8% of the index weight.

HSCEI June 2021 Index Rebalance Preview - Three Adds, Four Deletes Possible

China

Anhui Conch Cement Company Limited manufactures cement products. The Company produces silicate cements, slag silicate cements, composite silicate cements, cement clinkers, and other products. Anhui Conch Cement Cement markets its products throughout China and worldwide.

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Anhui Conch Cement (600585 CH)

Last Week in Event SPACE: Biden's New Executive Order, MMC, Invesco Office, WH Group, EPS, Link

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

HSCEI Sep 2021 Index Rebalance Preview: JD Logistics, Li Ning Are Potential Adds

There could be 2 sets of changes to the HSCEI at the September review with JD Logistics and Li Ning being included and Shimao Property and Anhui...

Brian Freitas

China Materials: Exposure on the Rise

China Materials allocations are on the rise. Current holding weights represent an 8-year high and the percentage of funds invested is at the top...

Steven Holden

Conch Venture (586 HK): Still Very Well Placed

Conch Venture's core environmental profit will grow by at least 80% in FY21, based on guidances for solid waste and waste incineration volume. Its...

Osbert Tang, CFA

HSCEI June 2021 Index Rebalance Preview - Three Adds, Four Deletes Possible

We forecast 3 inclusions and 4 exclusions from the HSCEI at the June review. Along with capping changes, we estimate a one-way turnover of 9.75%....

Brian Freitas

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