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>With one trading day left in the review period, we expect one change with <a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities Co Ltd (H) (6099 HK)</a> replacing <a href="https://www.smartkarma.com/entities/yankuang-energy-group" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yankuang Energy Group (1171 HK)</a> in December.</li>
<li>Capping will result in selling for <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and buying in <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a>. </li>
<li>Short interest has jumped on both stocks, but the increase is far higher in <a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities Co Ltd (H) (6099 HK)</a> compared to <a href="https://www.smartkarma.com/entities/yankuang-energy-group" target="_blank" data-smartkarma-citation="entities:384:1" rel="noopener">Yankuang Energy Group (1171 HK)</a>. </li>
</ul>


With one trading day left in the review period, we expect one change with China Merchants Securities Co Ltd (H) (6099 HK) replacing Yankuang Energy Group (1171 HK) in December.
Capping will result in selling for Meituan (3690 HK) and buying in Tencent (700 HK) and Alibaba Group Holding (9988 HK). 
Short interest has jumped on both stocks, but the increase is far higher in China Merchants Securities Co Ltd (H) (6099 HK) compared to Yankuang Energy Group (1171 HK). 


FXI Rebalance Preview: One Change in December as Shorts Spike

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

Zhejiang Expressway Co H / Equity Bottom-Up

<ul>
<li>By way of its 54.79% ownership in <a href="https://www.smartkarma.com/entities/zheshang-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:29981:1" rel="noopener">Zheshang Securities (601878 CH)</a>, <a href="https://www.smartkarma.com/entities/zhejiang-expressway-co-h" target="_blank" data-smartkarma-citation="entities:2178:1" rel="noopener">Zhejiang Expressway Co H (576 HK)</a> is an attractive indirect vehicle to access the mainland securities sector.  </li>
<li>The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.</li>
<li>ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.</li>
</ul>


By way of its 54.79% ownership in Zheshang Securities (601878 CH), Zhejiang Expressway Co H (576 HK) is an attractive indirect vehicle to access the mainland securities sector.  
The attributable market cap of Zheshang equals 90% of ZJE's market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE's 1H24 profit.
ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.


Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Thematic (Sector/Industry)

<ul>
<li>China considers launching a stock stabilization fund which could release RmB800B in liquidity support for the market.  Securities firms and insurance companies will be the major beneficiaries.</li>
<li>The mega merger between  <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:5665:1" rel="noopener">Haitong Securities Co Ltd (H) (6837 HK)</a> and <a href="https://www.smartkarma.com/entities/guotai-junan-securities-co-ltd-5dfaf2c5-76d3-4f34-a77d-118787fd7091" target="_blank" data-smartkarma-citation="entities:23752:1" rel="noopener">Guotai Junan Securities (2611 HK)</a> could be the precursor to further industry consolidation.</li>
<li>Hong Kong trading volumes and IPO's set to surge as Beijing lifts sentiment.</li>
</ul>


China considers launching a stock stabilization fund which could release RmB800B in liquidity support for the market.  Securities firms and insurance companies will be the major beneficiaries.
The mega merger between  Haitong Securities Co Ltd (H) (6837 HK) and Guotai Junan Securities (2611 HK) could be the precursor to further industry consolidation.
Hong Kong trading volumes and IPO's set to surge as Beijing lifts sentiment.


China International Capital Corporation / Equity Bottom-Up

<ul>
<li>China's securities industry is under a wave of consolidation. <a href="https://www.smartkarma.com/entities/china-international-capital-corporation-ltd" target="_blank" data-smartkarma-citation="entities:1071:1" rel="noopener">China International Capital Corporation (3908 HK)</a> is interesting given its leadership in the investment banking business.</li>
<li>A combination with <a href="https://www.smartkarma.com/entities/china-galaxy-securities-co-h" target="_blank" data-smartkarma-citation="entities:165:1" rel="noopener">China Galaxy Securities (H) (6881 HK)</a> may bring synergy, given their different focuses. This will create the 3rd largest securities house in China. </li>
<li>Even without a merger, CICC also looks attractive with the US interest rate trending down. It is best set to gain upon the revival of the Hong Kong IPO market. </li>
</ul>


China's securities industry is under a wave of consolidation. China International Capital Corporation (3908 HK) is interesting given its leadership in the investment banking business.
A combination with China Galaxy Securities (H) (6881 HK) may bring synergy, given their different focuses. This will create the 3rd largest securities house in China. 
Even without a merger, CICC also looks attractive with the US interest rate trending down. It is best set to gain upon the revival of the Hong Kong IPO market. 


<ul>
<li>Hong Kong markets continue to outperform this year with the HSCEI up 30% year to date.  Market breadth continues to be healthy with 80% of stocks over &gt; 200 DMA.</li>
<li>
<a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> announced its new hybrid technology which gives vehicles a range of more than 870 miles (1400 Kms).  The company has delivered more than 120k vehicles YTD.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-merchants-securities-co-4f5d644c-0051-426f-9706-eaa74b0ba280" target="_blank" data-smartkarma-citation="entities:22738:1" rel="noopener">China Merchants Securities Co Ltd (H) (6099 HK)</a> benefits from increased market turnover.   <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> beat consensus for 3Q24 earnings and will continue its buyback program.</li>
</ul>


Hong Kong markets continue to outperform this year with the HSCEI up 30% year to date.  Market breadth continues to be healthy with 80% of stocks over &gt; 200 DMA.

XPeng (9868 HK) announced its new hybrid technology which gives vehicles a range of more than 870 miles (1400 Kms).  The company has delivered more than 120k vehicles YTD.

China Merchants Securities Co Ltd (H) (6099 HK) benefits from increased market turnover.   Yum China Holdings (9987 HK) beat consensus for 3Q24 earnings and will continue its buyback program.


The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 7)

China

China Merchants Securities Co., Ltd. provides securities services. The Company offers securities brokerage, securities investment consulting, securities underwriting, and other services. China Merchants Securities also operates investment management.

China Merchants Securities Co Ltd (H) (6099 HK)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Merchants Securities Co Ltd (H) (6099 HK)

FXI Rebalance Preview: One Change in December as Shorts Spike

China Merchants Sec could replace Yankuang Energy in the ETF in Dec. There is over 1x ADV to sell in Yankuang. Capping will lead to selling in...

Brian Freitas

Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

Hong Kong/China Brokers: TAKE THE OFFER!

The HK/China brokers: 6030, 3908, 6886, 6806, 6881, 1776, 6178, 1456, 165, and 6099 have gained between 90% and 100% since the report was published...

David Mudd

CICC (3908 HK): M&A Possibility

China's securities industry is consolidating. A potential merger between CICC and CGS could create the 3rd largest securities house in China. CICC...

Osbert Tang, CFA

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 7)

Hong Kong markets are among the top performers this year. Short selling has declined as Southbound buying increases. Xpeng introduced a new hybrid...

David Mudd

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

FXI Rebalance Preview: One Change in December as Shorts Spike

China Merchants Sec could replace Yankuang Energy in the ETF in Dec. There is over 1x ADV to sell in Yankuang. Capping will lead to selling in...

Brian Freitas

Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector

​Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

Osbert Tang, CFA

Hong Kong/China Brokers: TAKE THE OFFER!

The HK/China brokers: 6030, 3908, 6886, 6806, 6881, 1776, 6178, 1456, 165, and 6099 have gained between 90% and 100% since the report was published...

David Mudd

CICC (3908 HK): M&A Possibility

​China's securities industry is consolidating. A potential merger between CICC and CGS could create the 3rd largest securities house in China. CICC...

Osbert Tang, CFA

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (November 7)

Hong Kong markets are among the top performers this year. Short selling has declined as Southbound buying increases. Xpeng introduced a new hybrid...

David Mudd

Zhejiang Expressway provides indirect cheap access to mainland securities through its ownership in Zheshang Securities, with a stable toll road...

China's securities industry is consolidating. A potential merger between CICC and CGS could create the 3rd largest securities house in China. CICC...