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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

As we have said many time before, 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> 2021 and 2022 dividend futures are a structural sell due to changes to the index composition that will lower the fair value of the futures.There were 18 inclusions and 17 deletions from 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> in 2020 with a shift from higher dividend yield Financials and Energy stocks to lower dividend yield stocks (or zero dividend yield stocks) from the Consumer Discretionary and Information Technology sectors.We see this trend continuing in 2021 with quite a few changes front-loaded that will affect the fair value of the HSCEI 2021 dividend futures. More changes at the back end along with potential changes to the index methodology could lower the fair value of the HSCEI 2022 dividend futures too.In this Insight, we lay out the possible changes to the index constituents and 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> methodology that will impact the dividend futures.

As we have said many time before, the Hang Seng China Enterprises Index (HSCEI INDEX) 2021 and 2022 dividend futures are a structural sell due to changes to the index composition that will lower the fair value of the futures.There were 18 inclusions and 17 deletions from the Hang Seng China Enterprises Index (HSCEI INDEX) in 2020 with a shift from higher dividend yield Financials and Energy stocks to lower dividend yield stocks (or zero dividend yield stocks) from the Consumer Discretionary and Information Technology sectors.We see this trend continuing in 2021 with quite a few changes front-loaded that will affect the fair value of the HSCEI 2021 dividend futures. More changes at the back end along with potential changes to the index methodology could lower the fair value of the HSCEI 2022 dividend futures too.In this Insight, we lay out the possible changes to the index constituents and to the Hang Seng China Enterprises Index (HSCEI INDEX) methodology that will impact the dividend futures.

HSCEI Dividends - Structural Sell; Bank Dividends the Swing Factor

There are a lot of changes expected 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> over the next 6 months.<a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>, JD Logistics, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>'s Douyin and a possible revival of the shelved <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> IPO.Then there is the possibility of some large 'homecoming' listings getting 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> over the next few reviews. <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> and <a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili Inc (BILI US)</a> as other names on the list.In this Insight, we lay out the potential roadmap of upcoming 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> along with the impact on the stocks.

There are a lot of changes expected to the Hang Seng China Enterprises Index (HSCEI INDEX) over the next 6 months.Kuaishou Technology (1024 HK) lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are DiDi Chuxing (1284375D CH), JD Logistics, ByteDance (1460967D CH)'s Douyin and a possible revival of the shelved Ant Group (6688 HK) IPO.Then there is the possibility of some large 'homecoming' listings getting included in the Hang Seng China Enterprises Index (HSCEI INDEX) over the next few reviews. Baidu (BIDU US) is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with Pinduoduo (PDD US) and Bilibili Inc (BILI US) as other names on the list.In this Insight, we lay out the potential roadmap of upcoming changes to the Hang Seng China Enterprises Index (HSCEI INDEX) along with the impact on the stocks.

HSCEI Index Rebalances - The Year of the Ox and of More Change

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

Since their last reported fair value (3Q20) <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>’s listed investees have continued their meteoric share price rise which, along with the <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> IPO, have helped propel Tencent to be one of the top-performing Global Emerging Market shares in the short period we have had year-to-date. 
Given the meteoric rise in Tencent’s share price, the continued extremely bullish market sentiment around the sector, the continued sharp share price appreciation of their main listed investees, as well as the likely impact of the Kuaishou listing on their aggregate fair value, in this insight, I have updated my analysis on the impact of Tencent’s listed associates on the implied valuation of Tencent’s consolidated operations.

Since their last reported fair value (3Q20) Tencent Holdings (700 HK)’s listed investees have continued their meteoric share price rise which, along with the Kuaishou Technology (1024 HK) IPO, have helped propel Tencent to be one of the top-performing Global Emerging Market shares in the short period we have had year-to-date. 
Given the meteoric rise in Tencent’s share price, the continued extremely bullish market sentiment around the sector, the continued sharp share price appreciation of their main listed investees, as well as the likely impact of the Kuaishou listing on their aggregate fair value, in this insight, I have updated my analysis on the impact of Tencent’s listed associates on the implied valuation of Tencent’s consolidated operations.

Tencent: An Update on Investees and the Implied Valuation of Consolidated Operations

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 Capital Markets

Kuaishou Technology / Equity Capital Markets

Reuters and Bloomberg reported that the Chinese short video and live streaming platform, <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Beijing Kuaishou Technology Co Ltd (1496219D CH)</a>  has set the terms for its IPO and is aiming to raise about HK$38-42bn (approximately US$4.9-5.4bn) through issuing 365.2m shares (excluding the green shoe option) at an indicative IPO price range of HK$105-115 per share. At the above IPO price range, the company will be valued at HK$431-465bn (approximately US$55.6-60bn excl. the green shoe option).In our previous insights on the company’s IPO, we discussed in detail the company’s business model, segments, earnings and also compared the company against Momo Inc.Read our previous insights on Kuaishou's IPO:<a href="https://www.smartkarma.com/insights/kuaishou-phip-monetisation-of-online-marketing-and-others-help-offset-decline-in-live-streaming" target="_blank" data-smartkarma-citation="insights:47100" rel="noopener">Kuaishou (PHIP): Monetisation of Online Marketing and Others Help Offset Decline in Live Streaming</a> <a href="https://www.smartkarma.com/insights/kuaishou-pre-ipo-strengthening-top-line-and-ample-monetisation-opportunities" target="_blank" data-smartkarma-citation="insights:46027" rel="noopener">Kuaishou Pre-IPO: Strengthening Top Line and Ample Monetisation Opportunities</a> <a href="https://www.smartkarma.com/insights/kuaishou-ipo-stable-profits-seem-possible-with-cost-discipline-and-expanding-revenues" target="_blank" data-smartkarma-citation="insights:46570" rel="noopener">Kuaishou IPO: Stable Profits Seem Possible with Cost Discipline and Expanding Revenues</a> <a href="https://www.smartkarma.com/insights/kuaishou-ipo-broadly-outperforming-peers-profits-should-materialise-as-sales-and-marketing-falls" target="_blank" data-smartkarma-citation="insights:47192" rel="noopener">Kuaishou IPO: Broadly Outperforming Peers; Profits Should Materialise as Sales and Marketing Falls</a>

Reuters and Bloomberg reported that the Chinese short video and live streaming platform, Beijing Kuaishou Technology Co Ltd (1496219D CH)  has set the terms for its IPO and is aiming to raise about HK$38-42bn (approximately US$4.9-5.4bn) through issuing 365.2m shares (excluding the green shoe option) at an indicative IPO price range of HK$105-115 per share. At the above IPO price range, the company will be valued at HK$431-465bn (approximately US$55.6-60bn excl. the green shoe option).In our previous insights on the company’s IPO, we discussed in detail the company’s business model, segments, earnings and also compared the company against Momo Inc.Read our previous insights on Kuaishou's IPO:Kuaishou (PHIP): Monetisation of Online Marketing and Others Help Offset Decline in Live Streaming Kuaishou Pre-IPO: Strengthening Top Line and Ample Monetisation Opportunities Kuaishou IPO: Stable Profits Seem Possible with Cost Discipline and Expanding Revenues Kuaishou IPO: Broadly Outperforming Peers; Profits Should Materialise as Sales and Marketing Falls 

Kuaishou IPO Valuation: Attractive Valuation

<a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili Inc (BILI US)</a> , the Chinese mobile games and video platform has confidentially filed for a secondary listing on the Hong Kong Stock Exchange and the company could raise over US$3.5bn. In our previous insight <a href="https://www.smartkarma.com/insights/bilibili-secondary-listing-diversifying-revenue-mix-should-make-profits-possible-in-the-medium-term" target="_blank" data-smartkarma-citation="insights:47049" rel="noopener">Bilibili Secondary Listing: Diversifying Revenue Mix Should Make Profits Possible in the Medium Term</a> , we examined the company’s business model, segments, drivers and margins.In this insight, we would be comparing the company against its closest peer <a href="https://www.smartkarma.com/entities/huya-inc" target="_blank" data-smartkarma-citation="entities:26983:1" rel="noopener">HUYA Inc (HUYA US)</a> , who is a leading player in the game livestreaming market in China. In addition to offering games, Huya also has expanded its offerings to cover non-game entertainment content such as anime, outdoor activities, live chats and online theatre.

Bilibili Inc (BILI US) , the Chinese mobile games and video platform has confidentially filed for a secondary listing on the Hong Kong Stock Exchange and the company could raise over US$3.5bn. In our previous insight Bilibili Secondary Listing: Diversifying Revenue Mix Should Make Profits Possible in the Medium Term , we examined the company’s business model, segments, drivers and margins.In this insight, we would be comparing the company against its closest peer HUYA Inc (HUYA US) , who is a leading player in the game livestreaming market in China. In addition to offering games, Huya also has expanded its offerings to cover non-game entertainment content such as anime, outdoor activities, live chats and online theatre.

Bilibili Vs Huya:Strong Top Line Growth; Outspending Huya on Marketing-Reason for Absence of Profits

China

Bilibili Inc. provides online entertainment services. The Company offers a platform that covers a wide array of genres and media formats, including videos, live broadcasting, mobile games, animation, and comics. Bilibili serves customers in China.

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Bilibili (BILI US)

HSCEI Dividends - Structural Sell; Bank Dividends the Swing Factor

We see downside in the HSCEI 2021 and 2022 div futures due to changes in the index composition and potential changes in the index methodology....

Brian Freitas

HSCEI Index Rebalances - The Year of the Ox and of More Change

There will be a lot of changes to the HSCEI this year that will impact the sectoral composition and open up trading opportunities on the stocks and...

Brian Freitas

Tencent: An Update on Investees and the Implied Valuation of Consolidated Operations

In this insight, I account for the increase in fair value of Tencent’s investees, including the Kuaishou IPO, which indicates that consolidated...

Wium Malan, CFA

Kuaishou IPO Valuation: Attractive Valuation

Reuters and Bloomberg reported that the Chinese short video and live streaming platform, Kuaishou Technology has set the terms for its IPO. In this...

Shifara Samsudeen, ACMA, CGMA

Bilibili Vs Huya:Strong Top Line Growth; Outspending Huya on Marketing-Reason for Absence of Profits

Bilibili has filed for a secondary listing on the HKEX and in this insight, we would be comparing the company against its closest peer Huya.

Shifara Samsudeen, ACMA, CGMA

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