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 4 adds and 4 deletes for 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> at the December rebalance. The only surprises are some non-adds and non-deletes.</li>
<li>Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.</li>
<li>Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group</a> is huge.</li>
</ul>


There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.


HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of September 16th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight inflows into Wuxi Biologics (Cayman) Inc and CNOOC. </li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of September 16th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight inflows into Wuxi Biologics (Cayman) Inc and CNOOC. 


Hong Kong Connect Flows (Sep 16th): Chinese Buying Wuxi Biologics After Biden's New Executive Order

<ul>
<li>There could be up to 6 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> at the December rebalance, mainly driven by the deletions.</li>
<li>If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.</li>
<li>There is large short interest on quite a lot of stocks and will play an important role in the rebalance.</li>
</ul>


There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
There is large short interest on quite a lot of stocks and will play an important role in the rebalance.


HSCEI Index Rebalance Preview: Could Be A BIG One

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Core net profit rose a healthy 10.9% at <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> in 1H22 despite challenges from pandemic lockdowns and surge in input costs.</li>
<li>We expect to see sequential improvement in both dollar margin for gas sales and overall gross margin in 2H22. Excellent integrated energy pipeline should add to earnings momentum.</li>
<li>Gearing improved 2.2pp in 1H22 and there is more room to deleverage in 2H22. While the stock's valuation is not particularly cheap, it has probably already hit the trough. </li>
</ul>


Core net profit rose a healthy 10.9% at ENN Energy (2688 HK) in 1H22 despite challenges from pandemic lockdowns and surge in input costs.
We expect to see sequential improvement in both dollar margin for gas sales and overall gross margin in 2H22. Excellent integrated energy pipeline should add to earnings momentum.
Gearing improved 2.2pp in 1H22 and there is more room to deleverage in 2H22. While the stock's valuation is not particularly cheap, it has probably already hit the trough. 


ENN Energy (2688 HK): Seeing Sign of an Upturn

<ul>
<li>We continued to be cautious on <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> given the challenges faced. It guided for a flat dollar margin in FY23 but we think this is optimistic.</li>
<li>Connection fees are likely to stay under pressure after a 42.1% decline in FY22. It only projects 2.6-2.9m new residential connections for FY23, compared with 2.9m in FY22.</li>
<li>Although China Gas is now the cheapest Hong Kong-listed China gas utilities company, it takes time to regain market confidence. At similar valuation, <a href="https://www.smartkarma.com/entities/kunlun-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:10054:1" rel="noopener">Kunlun Energy (135 HK)</a> looks more interesting. </li>
</ul>


We continued to be cautious on China Gas Holdings (384 HK) given the challenges faced. It guided for a flat dollar margin in FY23 but we think this is optimistic.
Connection fees are likely to stay under pressure after a 42.1% decline in FY22. It only projects 2.6-2.9m new residential connections for FY23, compared with 2.9m in FY22.
Although China Gas is now the cheapest Hong Kong-listed China gas utilities company, it takes time to regain market confidence. At similar valuation, Kunlun Energy (135 HK) looks more interesting. 


China Gas Holdings (384 HK): Not Giving It the Benefit of Doubt

Hong Kong

Zhongyu Gas Holdings Limited operates in exploration, exploitation, development and production of coal bed methane and the sale of coalbed methane in the PRC. It also develops, constructs and operates natural gas projects in PRC, which include design and construction of natural gas pipeline network and ancillary facilities, and sale and maintenance of natural gas and its appliances.

China Resources Gas Group Ltd distributes natural gas and petroleum gas in the cities of Chengdu, Fuyang, Huaibei, Linhai, Suzhou and Wuxi in the PRC. The Company also operates compressed natural gas filling stations in Chengdu, Nanjing and Wuxi. The group also is involved in bottled liquefied petroleum gas distribution in cities of Fuyang, Suzhou and Wuxi.

Towngas China Company Ltd. distributes and markets gas.  The Company sells LPG (liquefied petroleum gas) in  bulk and in cylinder, provides piped LPG and natural gas, constructs gas pipelines, operates city gas-pipeline networks and gas stations, and sells LPG  and natural gas household appliances.

Binhai Investment Company Ltd, through its subsidiaries, operates gas businesses.  The Company constructs gas pipeline networks, provides piped gas to customers in mainland China, wholesales and retails liquefied petroleum gas (LPG) by way of refueling gas cylinders or tanks for domestic, industrial and commercial customers, and sell LPG equipment and domestic gas appliances.

China Power International Development Limited, through its subsidiaries, develops, constructs, owns, manages, and operates large power plants in China.

HK Electric Investments and HK Electric Investments Limited is a fixed single investment trust in Hong Kong with a focus on the power industry. The Trust is a vertically integrated power utility and its operations comprise the generation, transmission, distribution, and supply of electricity to Hong Kong Island and Lamma Island.

Guangdong Investment Limited, through its subsidiaries, operates water supply, power and electricity, and infrastructure businesses.  The Company also invests in and develops real estate properties, operates department stores, and provides financial services.

China Oil and Gas Group Ltd. is engaged in the investments in, and the operation and management of the natural gas and energy related business. Gas operations include city piped gas business, natural gas vehicle refilling stations, pipeline construction and operation, as well as transportation, delivery and distribution of compressed natural gas (CNG) and liquefied natural gas (LNG).

Beijing Gas Blue Sky Holdings Limited operates as an integrated natural gas provider, distributor, and operator. The Company offers natural gas transportation, trading, and distribution services. Beijing Gas Blue Sky Holdings serves customers in Hong Kong.

Beijing Enterprises Water Group Limited, through its subsidiaries, develops water treatment systems.  The Group specializes in water services and environmental protection businesses, with waste water treatment as its core business segment.

Southwest Gas Corporation purchases, transports, and distributes natural gas to residential, commercial, and industrial customers in portions of Arizona, Nevada, and California.  The Company also provides construction services to utility companies, including trenching and installation, replacement, and maintenance services for energy distribution systems.

National Fuel Gas Company is an integrated natural gas company with operations in all segments of the natural gas industry, including utility, pipeline and storage, exploration and production, and marketing operations.  The Company operates across the United States.

Indraprastha Gas Limited processes and distributes compressed natural gas and liquefied petroleum gas. The Company has been jointly promoted by Bharat Petroleum Corporation and Gas Authority of India.

UGI Corporation distributes and markets energy products and services.  The Company is a domestic and international distributor of propane.  UGI also distributes and markets natural gas and electricity, and sells related products and services in the Middle Atlantic region of the United States.

New Jersey Resources Corporation provides retail and wholesale energy services to customers in New Jersey and in states from the Gulf Coast to New England, and Canada.  The Company's principal subsidiary, New Jersey Natural Gas Co., is a local distribution company serving customers in central and northern New Jersey.

Gujarat Gas Limited provides natural gas. The Company supplies piped natural gas to residential, commercial, and industrial customers. Gujarat Gas serves customers in India.

ONE Gas, Inc. is a regulated natural gas utility. The Company distributes natural gas to customers in Oklahoma, Kansas and Texas. ONE Gas serves the residential, commercial, industrial, transportation, and wholesale industries.

Spire Inc. is a public utility company involved in the retail distribution of natural gas. The Company serves an area in eastern Missouri and parts of several other counties. Spire also operates underground natural gas storage fields and transports and stores liquid propane.

Enagas SA imports, stores, and transports natural gas. The Company imports liquid natural gas on methane carriers and operates regasification plants in Barcelona, Huelva, and Cartagena. Enagas also receives natural gas through pipelines over the Pyrenees Mountains and across the Strait of Gibraltar. The Company transports gas throughout Spain through its high-pressure pipelines.

Italgas S.p.A. provides gas distribution services. The Company offers delivery points management, pressure reduction plants, withdrawal cabins, fault reporting, and laboratory testing services. Italgas conducts its business in Italy.

China Gas Holdings Ltd. invests in, operates and manages natural gas distribution pipelines.  The Company distributes and sells natural gas to residential, commercial and industrial users, and bottles and sells compressed natural gas.  China Gas also constructs and operates gas stations.

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China Gas Holdings (384 HK)

HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls

There are 4 sets of changes for the HSCEI. Some stocks are notable non-adds/non-deletes. one-way turnover is 4.6%. Haier Smart Home is a double...

Brian Freitas

Hong Kong Connect Flows (Sep 16th): Chinese Buying Wuxi Biologics After Biden's New Executive Order

We analyzed Hong Connect flows last week and highlight Chinese purchase of Wuxi Biologics post new executive order signed on Monday.

Ke Yan, CFA, FRM

HSCEI Index Rebalance Preview: Could Be A BIG One

There could be up to 6 changes to the HSCEI in December resulting in one-way turnover of 6.47% and in a one-way trade of HK$4,124m. Short interest...

Brian Freitas

ENN Energy (2688 HK): Seeing Sign of an Upturn

Dollar margin recovery, strong integrated energy pipeline and value added business growth are key drivers for ENN Energy in 2H22 and FY23....

Osbert Tang, CFA

China Gas Holdings (384 HK): Not Giving It the Benefit of Doubt

China Gas has a diasppointing FY22 and we think its operating and financial guidances for FY23 are likely to be optimistic. We prefer Kunlun Energy...

Osbert Tang, CFA

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