Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - August 2023 - Lucror Analytics

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a> and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.</li>
<li>There will be a few announcements next week with <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225</a> early in the week and the MVIS series post close on Friday. Plus the <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">STAR50</a> rebalances on Friday.</li>
<li>Another week of huge inflows into mainland China ETFs focused on the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300 Index</a>, <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">STAR50 INDEX</a> and <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI Smallcap 500 Index</a>.</li>
</ul>


The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.


Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.</li>
<li>There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.</li>
<li>Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.</li>
</ul>


The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.


Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

<ul>
<li>The September rebalance of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a> and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a> indices will use today's closing prices to cap the index constituent weights at 8%. This will lead to large flows.</li>
<li>The largest passive inflows will be on <a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy (1797 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (9618 HK)</a>, <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 (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/sinopharm-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:32:1" rel="noopener">Sinopharm (1099 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a> and <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961)</a>.</li>
<li>The largest passive outflows will be on <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies (2018 HK)</a>, <a href="https://www.smartkarma.com/entities/kuaishou-technology" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">COGARD (2007)</a> and <a href="https://www.smartkarma.com/entities/country-garden-services-holdin" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">CG Services (6098)</a>.</li>
</ul>


The September rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).


HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

AAC Technologies Holdings / Equity Bottom-Up

<ul><li>AAC’s 1H23 net profit of RMB 150mn (-57.1% YoY) was in-line with previous profit warning (RMB 122mn-157mn), mainly due to 1) global smartphone market weakness, 2) intensified competition in acoustics/optics, 3) lower GPM on sales mix shift in ED&amp;PM. For 2H23E, we believe AAC’s revenue/earnings should recover sequentially given inventory restocking, stabilizing optics ASP/margin, client wins in ED&amp;PM and product upgrade in multiple segments.</li><li>To reflect GPM weakness on product mix shift and lower optics margin, we trimmed FY23/24E EPS by 6/1% and our EPS are 36%/20% below consensus.</li><li>While we are positive on seasonal strength in 2H23E and AAC’s non-smartphone product outlook, the stock is now trading at 27.6x/15.7x FY23/24E P/E, which is fair in our view. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

AAC’s 1H23 net profit of RMB 150mn (-57.1% YoY) was in-line with previous profit warning (RMB 122mn-157mn), mainly due to 1) global smartphone market weakness, 2) intensified competition in acoustics/optics, 3) lower GPM on sales mix shift in ED&amp;PM. For 2H23E, we believe AAC’s revenue/earnings should recover sequentially given inventory restocking, stabilizing optics ASP/margin, client wins in ED&amp;PM and product upgrade in multiple segments.To reflect GPM weakness on product mix shift and lower optics margin, we trimmed FY23/24E EPS by 6/1% and our EPS are 36%/20% below consensus.While we are positive on seasonal strength in 2H23E and AAC’s non-smartphone product outlook, the stock is now trading at 27.6x/15.7x FY23/24E P/E, which is fair in our view. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

AAC Tech (2018 HK) – 1H23 Weakness In-Line; Maintain HOLD on Fair Valuation

China

AAC Technologies Holdings Inc designs, develops and manufactures a broad range of miniaturized components that include speakers, receivers and microphones in the acoustic segment and others such as haptics vibrators, RF and antennas, and optical lenses. AAC's products are found in mobile devices such as smartphones, tablets, wearables, ultrabooks, notebooks and electronic book-readers.

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AAC Technologies Holdings (2018 HK)

Asia HY Monthly - August 2023 - Lucror Analytics

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top...

Lucror Analytics

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

The Hang Seng indices will be rebalanced at the close of 1 Sep based on FAF and name changes announced 18 August, and capping flows based on 29...

Travis Lundy

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)

The September rebalance of the Hang Seng family of indices will use today's closing prices for capping. The one-way trade across all stocks across...

Brian Freitas

AAC Tech (2018 HK) – 1H23 Weakness In-Line; Maintain HOLD on Fair Valuation

While we are positive on seasonal strength in 2H23E and AAC’s non-smartphone product outlook, the stock is now trading at 27.6x/15.7x FY23/24E P/E,...

CMB International

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