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>
<a href="https://www.smartkarma.com/entities/sensetime-group-inc" target="_blank" data-smartkarma-citation="entities:34319:1" rel="noopener">SenseTime Group (20 HK)</a>'s Free-Float Adjustment Factor (FAF) increases from 3% to 40% following lock-up expiry and the stock will replace <a href="https://www.smartkarma.com/entities/china-pacific-insurance-group" target="_blank" data-smartkarma-citation="entities:6177:1" rel="noopener">China Pacific Insurance (2601 HK)</a> in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI INDEX</a>. </li>
<li>Using prices from the close on 19 August, estimated one-way turnover is 3.82% and will result in a one-way trade of HK$2,751m at the close on 2 September.</li>
<li>Increase in the FAF on a couple of stocks saves them from index deletion in September but is probably not enough to save them from index deletion in December.</li>
</ul>



SenseTime Group (20 HK)'s Free-Float Adjustment Factor (FAF) increases from 3% to 40% following lock-up expiry and the stock will replace China Pacific Insurance (2601 HK) in the HSCEI INDEX. 
Using prices from the close on 19 August, estimated one-way turnover is 3.82% and will result in a one-way trade of HK$2,751m at the close on 2 September.
Increase in the FAF on a couple of stocks saves them from index deletion in September but is probably not enough to save them from index deletion in December.


HSCEI Index Rebalance: SenseTime (20 HK) Added As FAF Increases Dramatically

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Alibaba Health Information Tec / Equity Bottom-Up

<ul>
<li>On 22nd June, China released a draft rule that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.</li>
<li>Alibaba Health’s share price is down more than 10% since the announcement of the draft rule, however, third-party e-commerce platforms accounts for about 10% of Ali Health’s revenues.</li>
<li>Pharmaceutical direct sales business has been generating lower GPM compared to JD Health’s direct biz, and the company’s margins have continued to deteriorate during the last 2-years.</li>
</ul>


On 22nd June, China released a draft rule that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.
Alibaba Health’s share price is down more than 10% since the announcement of the draft rule, however, third-party e-commerce platforms accounts for about 10% of Ali Health’s revenues.
Pharmaceutical direct sales business has been generating lower GPM compared to JD Health’s direct biz, and the company’s margins have continued to deteriorate during the last 2-years.


Alibaba Health: New Digital Healthcare Policy to Have Less Impact but Tumbling Margins Is Worrying

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

Huayiwang Technology / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/huayiwang-technology-inc" target="_blank" data-smartkarma-citation="entities:35518:1" rel="noopener">Huayiwang Technology (1985554D HK)</a> is strong in its digital medical education solutions, which is the cornerstone business for the continuous expansion of other solution offerings and ecosystem.</li>
<li>HUAYIWANG charges service fees mainly from pharmaceutical companies, which could be a more sustainable profit model than charging from patients directly.</li>
<li>However, the increasing competition and potential risk of losing medical professionals could shake the foundations of HUAYIWANG's business. </li>
</ul>



Huayiwang Technology (1985554D HK) is strong in its digital medical education solutions, which is the cornerstone business for the continuous expansion of other solution offerings and ecosystem.
HUAYIWANG charges service fees mainly from pharmaceutical companies, which could be a more sustainable profit model than charging from patients directly.
However, the increasing competition and potential risk of losing medical professionals could shake the foundations of HUAYIWANG's business. 


Pre-IPO Huayiwang Technology - The Business Model Is Reasonable, but There Are Also Challenges

HK/China Equity Long-Short

Osbert Tang, CFA

Quantitative Analysis

<ul>
<li>YTD, our "Buy the Worst" strategy has underperformed the HSI by a marginal 2pp. The portfolio has a significant rebound against the Index starting mid-Jun. </li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China Ltd (1928 HK)</a> is the best-performing one while <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> is the worst. We see room for the portfolio to catch up in 2H22.</li>
<li>The long-term performance of the strategy stays very solid. On a 5-year basis, "Buy the Worst" strategy has outperformed the HSI by an immense 30.9pp. </li>
</ul>


YTD, our "Buy the Worst" strategy has underperformed the HSI by a marginal 2pp. The portfolio has a significant rebound against the Index starting mid-Jun. 

Sands China Ltd (1928 HK) is the best-performing one while Xiaomi Corp (1810 HK) is the worst. We see room for the portfolio to catch up in 2H22.
The long-term performance of the strategy stays very solid. On a 5-year basis, "Buy the Worst" strategy has outperformed the HSI by an immense 30.9pp. 


A Mid-Year Review of Our “Buy the Worst” Strategy 2022: In Tandem with the HSI

<ul>
<li>Alibaba Health’s core pharmaceutical direct sales business is facing challenges in terms of increasing competition as well as lower revenue growth and margins, dragging down the overall performance.</li>
<li>The recent new policies about online drug sales on third-party digital healthcare platforms and online diagnosis and treatment would add more uncertainties on Alibaba Health’s business and outlook.</li>
<li>If such unfavorable trend continues, the gap between Alibaba Health and JD Health would be wider. It’s not easy to break the deadlock. Investors may need to take heed.</li>
</ul>


Alibaba Health’s core pharmaceutical direct sales business is facing challenges in terms of increasing competition as well as lower revenue growth and margins, dragging down the overall performance.
The recent new policies about online drug sales on third-party digital healthcare platforms and online diagnosis and treatment would add more uncertainties on Alibaba Health’s business and outlook.
If such unfavorable trend continues, the gap between Alibaba Health and JD Health would be wider. It’s not easy to break the deadlock. Investors may need to take heed.


Alibaba Health Information Technology (241.HK) - It’s Not Easy to Break a Deadlock

China

Alibaba Health Information Technology Limited is an integrated healthcare information and content service provider. The Company uses product identification, authentication, and tracking system data for its healthcare information.

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Alibaba Health Information Tec (241 HK)

HSCEI Index Rebalance: SenseTime (20 HK) Added As FAF Increases Dramatically

SenseTime's FAF increases from 3% to 40% & the stock will replace CPIC in the HSCEI. Passive trackers will need to buy 7 days of ADV on SenseTime...

Brian Freitas

Alibaba Health: New Digital Healthcare Policy to Have Less Impact but Tumbling Margins Is Worrying

We expect the impact from the new draft rule on Digital healthcare platforms to be minimal on Ali Health. However, eroding margins is a concern and...

Shifara Samsudeen, ACMA, CGMA

Pre-IPO Huayiwang Technology - The Business Model Is Reasonable, but There Are Also Challenges

The business model of taking medical professional network as the foundation for expansion of other solution offerings/ecosystem is logical....

Xinyao (Criss) Wang

A Mid-Year Review of Our “Buy the Worst” Strategy 2022: In Tandem with the HSI

While "Buy the Worst" strategy only performed in line with the HSI YTD, there is potential for the portfolio to catch up in 2H22. Meanwhile, "Buy...

Osbert Tang, CFA

Alibaba Health Information Technology (241.HK) - It’s Not Easy to Break a Deadlock

Alibaba Health is facing challenges in both business and policy sides,with declining performance.The gap with JD Health becomes wider.It’s not easy...

Xinyao (Criss) Wang

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