Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.</li>
<li>The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.</li>
<li>Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September. </li>
</ul>


In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.
Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September. 


Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade

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

<ul>
<li>
<a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> and <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> are high probability deletions in September, while <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 HK)</a> is a high probability inclusion.</li>
<li>The second add could be <a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene Ltd (6160 HK)</a> if it passes the velocity test. If not, <a href="https://www.smartkarma.com/entities/chow-tai-fook-jewellery-group" target="_blank" data-smartkarma-citation="entities:549:1" rel="noopener">Chow Tai Fook Jewellery (1929 HK)</a> will be added.</li>
<li>With the exception of <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a>, short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.</li>
</ul>



Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.


HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>BeiGene maintained strong product sales in 23H1 and its net loss continued to narrow. This means that BeiGene has realized the cost control problem and entered a healthy growth phase.</li>
<li>Our revenue forecast indicates BeiGene is approaching the minimum threshold for turning losses into profits. A more likely scenario is revenue need to reach over US$4 billion to be breakeven</li>
<li>However, regardless of the calculation, BeiGene ‘s valuation is still unreasonably high. Its potential/certainty is nowhere near that of Alnylam. Maintaining sustained high growth is not easy because "accidents" remain.</li>
</ul>


BeiGene maintained strong product sales in 23H1 and its net loss continued to narrow. This means that BeiGene has realized the cost control problem and entered a healthy growth phase.
Our revenue forecast indicates BeiGene is approaching the minimum threshold for turning losses into profits. A more likely scenario is revenue need to reach over US$4 billion to be breakeven
However, regardless of the calculation, BeiGene ‘s valuation is still unreasonably high. Its potential/certainty is nowhere near that of Alnylam. Maintaining sustained high growth is not easy because "accidents" remain.


BeiGene (6160.HK/​BGNE.US) 23H1 - "Accidents" Behind the Strong Growth

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<ul>
<li>A better week for HK stocks as A-shares rebound on National Team buying, a PBOC RRR cut, and potentially other measures to boost the market. Foreigners stopped selling; that helped.</li>
<li>Southbound saw decent net buying on ETFs late in the week, but otherwise the week was pretty flat in single-stock land - net buying of SOEs, selling of tech.</li>
<li>Net SOUTHBOUND buying was HK$4.5bn on the week, mostly through Shanghai (interestingly, 90+% of the decent NORTHBOUND buy was also through Shanghai). </li>
</ul>


A better week for HK stocks as A-shares rebound on National Team buying, a PBOC RRR cut, and potentially other measures to boost the market. Foreigners stopped selling; that helped.
Southbound saw decent net buying on ETFs late in the week, but otherwise the week was pretty flat in single-stock land - net buying of SOEs, selling of tech.
Net SOUTHBOUND buying was HK$4.5bn on the week, mostly through Shanghai (interestingly, 90+% of the decent NORTHBOUND buy was also through Shanghai). 


HK Connect SOUTHBOUND Flows (To 26 Jan 2024); ETFs and High Div SOEs Again BIG Buys, Tech Sold

<ul>
<li>In a surprise, the Hang Seng index committee has decided not to make any 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> at the March rebalance.</li>
<li>This further delays the timeline for the index to reach 80 constituents. The earliest we will reach the target now is June 2023 (a year later than targeted).</li>
<li>Despite no changes to the index constituents, capping and float changes will lead to a one-way turnover of 2.61% resulting in a one-way trade of HK$5.1bn.</li>
</ul>


In a surprise, the Hang Seng index committee has decided not to make any changes to the Hong Kong Hang Seng Index (HSI INDEX) at the March rebalance.
This further delays the timeline for the index to reach 80 constituents. The earliest we will reach the target now is June 2023 (a year later than targeted).
Despite no changes to the index constituents, capping and float changes will lead to a one-way turnover of 2.61% resulting in a one-way trade of HK$5.1bn.


HSI Index Rebalance: No Changes & Further Delays to Reaching the 80 Member Target

China

Chongqing Zhifei Biological Products Company Ltd. researches, manufactures, and sells vaccines and biological products including prevention products, blood products, diagnostic reagents, and therapeutic agents.

Chongqing Zhifei Biological Products (300122 CH)

Beijing Tiantan Biological Products Corporation Limited researches, develops, and commercializes biological products.  The Company provides treatment for hepatitis and offers a line of vaccine products including hepatitis vaccines and rubella vaccines.

Beijing Tiantan Biological Products (600161 CH)

Innovent Biologics, Inc. operates as a biopharmaceutical company. The Company develops, manufactures, and distributes monoclonal antibody drug candidates for the treatment of oncology, ophthalmology, autoimmune, cardiovascular, and other diseases. Innovent Biologics serves customers in China.

Hualan Biological Engineering Inc. produces and markets human serum albumin (HSA), gamma globulin, frozen prothrombin (PCC), and other related biological products.

Hualan Biological Engineering (002007 CH)

Walvax Biotechnology Company Limited develops, manufactures and sells bio-pharmaceutical vaccination products.  The Company's products include haemophilus influenzae type b conjugate vaccine and meningococcal group A,C bivalent polysaccharide conjugate vaccine.

Jiangxi Boya Bio-Pharmaceutical company Limited develops, produces and sells blood product. The Company's main products include human serum albumin, intravenous immunoglobulin (static C) and fibrinogen.

Jiangxi Boya Bio Pharmaceutical (300294 CH)

Shenzhen Kangtai Biological Products Co., Ltd. operates biological product manufacturing businesses. The Company produces biological vaccines and other vaccine products. Shenzhen Kangtai Biological Products conducts businesses in China.

Shenzhen Kangtai Biological Pr (300601 CH)

3SBio, Inc. is a biotechnology company located in China. The Company focuses on mammalian cell-based biopharmaceuticals in the biotechnology industry. 3SBio also develops, manufactures and markets biopharmaceutical products globally.

Zai Lab Limited operates as a bio-pharmaceutical company. The Company researches and develops therapeutic technology for antibody-based oncology, autoimmune, and infectious diseases treatments. Zai Lab also manufactures drugs in the form of capsules, injections, and liquids. Zai Lab serves patients worldwide.

BGI Genomics Co., Ltd offers researching and testing services. The Company provides deoxyribonucleic acid sequencing, food science, health care researching, cancer prevention, drug discovery, and DNA sequencing. BGI Genomics offers services to medical and scientific research institutions worldwide.

BioMarin Pharmaceutical Inc. develops and commercializes therapeutic enzyme products.  The Company has applied its proprietary enzyme technology to develop products for lysosomal storage diseases and for the treatment of serious burns. BioMarin's subsidiary provides analytical and diagnostic products and services in the area of carbohydrate biology.

Insmed, Inc. is a biopharmaceutical company focused on developing and commercializing novel, targeted inhaled therapies for patients with high unmet need battling serious orphan lung diseases.

United Therapeutics Corporation develops pharmaceuticals to treat vascular diseases such as pulmonary hypertension and peripheral vascular disease.  The Company's lead products are stable synthetic forms of prostacyclin and are delivered orally or subcutaneously.

Natera, Inc. operates as a diagnostics company. The Company provides preconception and prenatal genetic testing services. Natera also offers pre-implantation genetic diagnosis, aneuploidy screening, translocation, and single gene testing services.

Neurocrine Biosciences, Inc. is focused on the discovery and development of therapeutics for neuropsychiatric, neuroinflammatory, and neurodegenerative diseases and disorders.  The Company is developing therapeutic interventions for anxiety, depression, Alzheimer's disease, insomnia, stroke, malignant brain tumors, multiple sclerosis, obesity, and diabetes.

Alteogen Inc. is a pharmaceutical research company.  The Company researches and develops bio-medicines such as bio-better and bio-similar.

Sarepta Therapeutics, Inc. is a biopharmaceutical company focused on the discovery and development of unique RNA-based therapeutics for the treatment of both rare and infectious diseases. The Company offers its products to the medical industry in countries around the world.

Incyte Corp is a biopharmaceutical company. The Company discovers, develops and commercializes proprietary small molecule drugs, primarily used in oncology.

Genmab A/S operates as a biotechnology company. The Company creates and develops human antibody products for the treatment of life threatening and debilitating diseases. Genmab focuses on products to treat cancer, rheumatoid arthritis and other inflammatory conditions, and psoriasis. The Company develops new products through partnerships. Genmab operates in Europe and the United States.

Genmab A/S operates as a biotechnology company. The Company specializes in development of antibody therapeutics for the treatment of cancer. Genmab serves customers worldwide.

BeiGene, Ltd. operates as a commercial stage biopharmaceutical company. The Company focuses on discovery, development, and commercialization of molecularly targeted and immuno-oncology drugs for the treatment of cancer. BeiGene serves patients worldwide.

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BeiGene (6160 HK)

Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade

Hang Seng Index Sep 23 index changes and indicative weights could be published after the close on Friday 18th August 2023. The Hang Seng Index...

Janaghan Jeyakumar, CFA

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

The two potential adds have outperformed the two potential deletes by 42% since end May and by 52% since end June. Shorts have jumped on Beigene...

Brian Freitas

BeiGene (6160.HK/BGNE.US) 23H1 - "Accidents" Behind the Strong Growth

BeiGene's financial performance starts to become healthier in 23H1. As BeiGene approaches breakeven, it's particularly crucial to avoid "accidents"...

Xinyao (Criss) Wang

HK Connect SOUTHBOUND Flows (To 26 Jan 2024); ETFs and High Div SOEs Again BIG Buys, Tech Sold

SOUTHBOUND flows were positive on the week but most of the net buying was in the big two ETFs. The trend of buying low PER high div SOEs continues....

Travis Lundy

HSI Index Rebalance: No Changes & Further Delays to Reaching the 80 Member Target

In a surprise, there are no adds/deletes in March. There are some large capping changes that result in a one-way turnover of 2.6% and a one-way...

Brian Freitas

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52-week Range

Market Cap (USDm)

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Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade

Hang Seng Index Sep 23 index changes and indicative weights could be published after the close on Friday 18th August 2023. The Hang Seng Index...

Janaghan Jeyakumar, CFA

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

The two potential adds have outperformed the two potential deletes by 42% since end May and by 52% since end June. Shorts have jumped on Beigene...

Brian Freitas

BeiGene (6160.HK/​BGNE.US) 23H1 - "Accidents" Behind the Strong Growth

BeiGene's financial performance starts to become healthier in 23H1. As BeiGene approaches breakeven, it's particularly crucial to avoid "accidents"...

Xinyao (Criss) Wang

HK Connect SOUTHBOUND Flows (To 26 Jan 2024); ETFs and High Div SOEs Again BIG Buys, Tech Sold

SOUTHBOUND flows were positive on the week but most of the net buying was in the big two ETFs. The trend of buying low PER high div SOEs continues....

Travis Lundy

HSI Index Rebalance: No Changes & Further Delays to Reaching the 80 Member Target

In a surprise, there are no adds/deletes in March. There are some large capping changes that result in a one-way turnover of 2.6% and a one-way...

Brian Freitas

BeiGene (6160.HK/BGNE.US) 23H1 - "Accidents" Behind the Strong Growth