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>There are 24 adds and 14 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.</li>
<li>19 of the 24 HSCI inclusions will be added to Southbound Stock Connect, while 12 of the 14 HSCI deletions will be removed from Southbound Stock Connect.</li>
<li>Five of the HSCI constituents could be removed from Southbound Stock Connect only since the average market cap over the last year is less than HK$5bn.</li>
</ul>


There are 24 adds and 14 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
19 of the 24 HSCI inclusions will be added to Southbound Stock Connect, while 12 of the 14 HSCI deletions will be removed from Southbound Stock Connect.
Five of the HSCI constituents could be removed from Southbound Stock Connect only since the average market cap over the last year is less than HK$5bn.


HSCI Index Rebalance: 24 Adds, 14 Deletes & Changes to Stock Connect

<ul>
<li>We see 28 potential inclusions to the HSCI in September, plus another 9 stocks that are close to the inclusion cutoff. Some stocks are already a part of Stock Connect.</li>
<li>There could be 22 deletions from the index on market cap, liquidity and prolonged suspension. Most of the deletions would be moved to the 'sell-only' Southbound Stock Connect list.</li>
<li>Some of the stocks that remain in the HSCI could move to the 'sell-only' Southbound Stock Connect list since their average market cap drops below HKD 5bn.</li>
</ul>


We see 28 potential inclusions to the HSCI in September, plus another 9 stocks that are close to the inclusion cutoff. Some stocks are already a part of Stock Connect.
There could be 22 deletions from the index on market cap, liquidity and prolonged suspension. Most of the deletions would be moved to the 'sell-only' Southbound Stock Connect list.
Some of the stocks that remain in the HSCI could move to the 'sell-only' Southbound Stock Connect list since their average market cap drops below HKD 5bn.


HSCI Index Rebalance and Stock Connect: Potential Changes in September

China Huarong Asset Management / Event-Driven

<ul>
<li>We see seven new listings as potential inclusions to the HSCI in June. One is already a part of Connect while five will be added to Southbound Stock Connect.</li>
<li>We see 19 potential changes to the HSCI in September. Seven of the deletions are on market cap, four on liquidity, and eight due to prolonged trading suspension.</li>
<li>Some of the potential deletions have large Southbound holdings and some of these could be trimmed over the next couple of months.</li>
</ul>


We see seven new listings as potential inclusions to the HSCI in June. One is already a part of Connect while five will be added to Southbound Stock Connect.
We see 19 potential changes to the HSCI in September. Seven of the deletions are on market cap, four on liquidity, and eight due to prolonged trading suspension.
Some of the potential deletions have large Southbound holdings and some of these could be trimmed over the next couple of months.


HSCI Index Rebalance and Stock Connect: Potential Changes in June and September

<ul>
<li>The review period for the March review of the HSCI ended on 31 December. There are a lot of new listings that should be included in the index.</li>
<li>SenseTime is a high probability inclusion to the index, though it will only be added to Stock Connect in July once it completes 6 months and 20 trading days.</li>
<li>Xpeng and Li Auto will be added to Stock Connect in Feb/March if they pass the velocity test. We see Li Auto as failing the test, while Xpeng is close.</li>
</ul>


The review period for the March review of the HSCI ended on 31 December. There are a lot of new listings that should be included in the index.
SenseTime is a high probability inclusion to the index, though it will only be added to Stock Connect in July once it completes 6 months and 20 trading days.
Xpeng and Li Auto will be added to Stock Connect in Feb/March if they pass the velocity test. We see Li Auto as failing the test, while Xpeng is close.


HSCI Index Rebalance and Stock Connect: Plenty of New Listings Should Be Included

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>China Education Sector, specifically <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a>, should see better performance in 2022 as regulatory concerns gradually ease. 1H22 result for higher education segment should be a proof.</li>
<li>
<a href="https://www.smartkarma.com/entities/shenzhen-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:9:1" rel="noopener">Shenzhen International (152 HK)</a> could reverse the bad fortune in 2022 on the back of realisation of undervalued assets, expansion of logistics facilities and better performance at Shenzhen Airlines.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-dongxiang-group-co" target="_blank" data-smartkarma-citation="entities:1068:1" rel="noopener">China Dongxiang (3818 HK)</a> remains an undervalued asset play. Its ability to realise value of its investment portfolio, potential resumption of dividend payout and recovery of sportswear business are drivers.</li>
</ul>


China Education Sector, specifically China Education Group (839 HK), should see better performance in 2022 as regulatory concerns gradually ease. 1H22 result for higher education segment should be a proof.

Shenzhen International (152 HK) could reverse the bad fortune in 2022 on the back of realisation of undervalued assets, expansion of logistics facilities and better performance at Shenzhen Airlines.

China Dongxiang (3818 HK) remains an undervalued asset play. Its ability to realise value of its investment portfolio, potential resumption of dividend payout and recovery of sportswear business are drivers.


Our Three Worst Calls in Last Year and Any Room for a Reversal in 2022?

China

Sinoer Men's Wear Company Limited designs, manufactures and markets suits, shirts and other apparel products. The Company sales its products through outlets, franchises, group orders, original equipment manufacturers and direct sales.

Jiangsu lianfa textile Co.Ltd. Manufactures and sell woven fabric, apparel and textile.  The Company's products include pure cotton fabric, cotton yarn, special fiber, and shirt.

Goldleaf Jewelry Co Ltd is a jewelry company based on China. Its main business is investing in gold mining and juwelry retail sales.

Zhejiang Aokang Shoes Co. Ltd. manufactures shoes. The Company develops, designs, and produces leather shoes for men, women, and children, as well as offers custom-made shoes. Zhejiang Aokang Shoes also manufactures and sells leather belts, wallets, suitcases, and other leather products.

Zhejiang Bangjie Digital Knitting Share Company Limited develops, produces and sells seamless garments. The Company's main products include seamless underwear, sportswear, casual wear, and suits.

Zhejiang Golden Eagle Co., Ltd. manufactures and sells a variety of textile products, including spun silk and linen products.  The Company also designs and produces apparel and textile machinery.

Xinlong Holding (Group) Co., Ltd. manufactures and markets nonwoven fabrics and other products. The Company's operations include spunlace and thermal bond nonwovens, electrolutic copper, cellular phone, and other products.

Xinlong Holding (Group) Company Ltd (000955 CH)

Best Pacific International Holdings Limited, through its subsidiaries, provides lingerie materials. The Company manufactures elastic fabrics, webbing and lace.

Best Pacific International Holdings (2111 HK)

Zhejiang Giuseppe Garment Company Limited manufactures and sells business suits, men's and casual wear. The Company's main products include men's and women's suits, trousers, vests, skirts, shirts, jackets, and windbreakers.

Sou Yu Te Fashion Company Limited mainly engages in sale of garments,footwear, textiles and leather products. It also provides services in Internet retail, trade brokerage, warehouse and catering.

TSUTSUMI JEWELRY CO., LTD. designs, manufactures, and sells wholesale and retail jewelry.  The Company sells mainly rings, necklaces, and bracelets.  Tsutsumi Jewelry operates directly managed stores based in Saitama prefecture.

MORITO CO., LTD., founded in 1908 is a distributor primarily handling footwear, apparel, and wide-use materials.  The Company designs, manufactures, and distributes products such as apparel accessories, shoes materials, auto interior parts, and camera related products. The company also operates business in Europe, America, China, and Southeast Asia countries.

Nitin Spinners Ltd. manufactures yarns and knitted fabrics. The Company produces yarns for terrycloth towels, denims, furnishing fabrics, carpets and industrial fabrics, and knitted fabrics for the apparel industry.

Shinsung Tongsang Co., Ltd. designs, manufactures, and sells ladies' and men's garments.  The Company's products include shirts, sweaters, jackets, suits, pants, and skirts.  Shinsung Tongsang markets its products under the brand names such as Union Bay, Olzen, and Ziozia and supplies them to JC Penney, Sears, and Target. In addition, the Company operates construction business.

Magni-Tech Industries Berhad is an investment holding company which provides management services. Through its subsidiaries, the Company manufactures and distributes flexible plastic packaging materials, inner packaging boxes, fiberboards, cartons, and boxes for industrial and commercial uses.

Hong Ho Precision Textile Co., Ltd. manufactures a variety of fabrics and clothes.

Handsome Co., Ltd. manufactures and retails women's and men's apparel, furs, and accessories.  The Company provides its products to domestic department stores.

Sinotop Holding Bhd manufactures textiles and apparel. The Company manufactures customized woven fabrics from cotton and synthetic and mixed yarns, and apparel for men and children.

Sabina PCL manufactures women's underwear.  The Company produces panties, brassieres, and lingerie.

Tah Hsin Industrial Corp manufactures raincoats, garments, plastic wardrobes, leather products, bags, corrugated boards, folders, and shoes.  The Company markets its products under the CARRY, PRO RAINER, RED LEDGE, and OIA brand names.  Also, Tah Hsin Industrial operates as a distributor to sell the ECCO, REGAL, and MADRAS shoes.

China Dongxiang Group Co Ltd retails sportswear apparel products.

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China Dongxiang (3818 HK)

HSCI Index Rebalance: 24 Adds, 14 Deletes & Changes to Stock Connect

There are 24 adds and 14 deletes for the HSCI at the September rebalance. 19 stocks will be added to Stock Connect and 12 will be removed. Some of...

Brian Freitas

HSCI Index Rebalance and Stock Connect: Potential Changes in September

We see 28 potential adds and 9 close adds for the HSCI in September. There are 22 potential deletes on market cap, liquidity and prolonged...

Brian Freitas

HSCI Index Rebalance and Stock Connect: Potential Changes in June and September

We forecast 7 adds to the HSCI in June. For the September rebalance, we forecast 19 adds & 19 deletes (7 on mkt cap, 4 on liquidity, 8 on long...

Brian Freitas

HSCI Index Rebalance and Stock Connect: Plenty of New Listings Should Be Included

There could be up to 34 adds and 22 deletes for the HSCI in March based on market cap, liquidity and prolonged suspensions. A lot of new listings,...

Brian Freitas

Our Three Worst Calls in Last Year and Any Room for a Reversal in 2022?

China Education Sector, Shenzhen Intl and China Dongxiang are the three worst calls that we made in last year. We believe there is room for a...

Osbert Tang, CFA

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