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>
<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> and <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> could replace <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> at the upcoming rebalance in September.</li>
<li>Estimated one-way turnover at the rebalance is 1.2% resulting in a one-way trade of HK$744m. The official capping will be done based on closing prices from 29 August.</li>
<li>Short interest has been rising on the potential adds and short covering could take the stocks higher, especially <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>. </li>
</ul>



Trip.com (9961 HK) and Chow Tai Fook Jewellery (1929 HK) could replace Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) at the upcoming rebalance in September.
Estimated one-way turnover at the rebalance is 1.2% resulting in a one-way trade of HK$744m. The official capping will be done based on closing prices from 29 August.
Short interest has been rising on the potential adds and short covering could take the stocks higher, especially Chow Tai Fook Jewellery (1929 HK). 


HSCEI Index Rebalance Preview: Two Changes Likely in September

Research from Quam Securities, Quam Securities

Quam Securities Research

Research from Quam Securities

Quam Securities

Since its inception in 1986, Quam Securities Limited (Quam Securities) has grown to become one of the few mid-tier securities brokerages in Hong Kong with global execution capabilities for both private and institutional clients. It boasts a well-established network in Greater China including Taiwan and in major world markets through the Global Alliance Partners (GAP). Quam Securities is well-positioned not only to harness and drive business within the China Tonghai International Financial Limited but also between China and the world markets.

Thematic (Sector/Industry)

<ul><li>According to news reports, the three Chinese telcos are cutting staff costs, which account for ~27% of service opex ex-depreciation and amortization.</li><li>Incl. D&amp;A, staff costs account for ~20% of total service opex.</li><li>While the news reports suggested that some of the staff’s total pay could be halved, we believe any adjustments would be substantially less than that.</li></ul>

According to news reports, the three Chinese telcos are cutting staff costs, which account for ~27% of service opex ex-depreciation and amortization.Incl. D&amp;A, staff costs account for ~20% of total service opex.While the news reports suggested that some of the staff’s total pay could be halved, we believe any adjustments would be substantially less than that.

TMT – Chinese Telcos Trimming Staff Costs

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/aag-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:501:1" rel="noopener">Aag Energy Holdings (2686 HK)</a>’s disclosed a revised timetable to vote on <a href="https://www.smartkarma.com/entities/xinjiang-xintai-natural-gas-a" target="_blank" data-smartkarma-citation="entities:27036:1" rel="noopener">Xinjiang Xintai Natural Gas (603393 CH)</a>’s HK$1.85 offer. The new scheme meeting is set for 2 June. </li>
<li>Our analysis suggests that in the best case, Xinjiang Xintai would need to further swing NO votes representing 6.52%-8.34% of outstanding shares to YES to get the scheme approved. </li>
<li>AAG’s case is unprecedented. The risk-reward remains unattractive as the upside to a scheme pass (13.5% upside) is equal to the downside to a scheme fail (average 13.5% downside).</li>
</ul>



Aag Energy Holdings (2686 HK)’s disclosed a revised timetable to vote on Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer. The new scheme meeting is set for 2 June. 
Our analysis suggests that in the best case, Xinjiang Xintai would need to further swing NO votes representing 6.52%-8.34% of outstanding shares to YES to get the scheme approved. 
AAG’s case is unprecedented. The risk-reward remains unattractive as the upside to a scheme pass (13.5% upside) is equal to the downside to a scheme fail (average 13.5% downside).


AAG Energy (2686 HK): New Scheme Vote Date, Different Result?

Equity Bottom-Up

China Unicom Hong Kong / Equity Bottom-Up

<ul><li>1Q23 results dragged by slower than expected growth in industrial internet, which has been the brightest star of Chinese telcos in the past few years with that of CU growing at a 2017-22 revenue CAGR of 35%.</li><li>A higher base and the final impact of the pandemic late last year hit growth with 1Q slowed to 15%.</li><li>While that was countered by resilient traditional connectivity services, higher cost pressure prompted us to trim FY23-25 EBITDA by ~1-2% and adj. NP forecasts by ~1-3%.</li></ul>

1Q23 results dragged by slower than expected growth in industrial internet, which has been the brightest star of Chinese telcos in the past few years with that of CU growing at a 2017-22 revenue CAGR of 35%.A higher base and the final impact of the pandemic late last year hit growth with 1Q slowed to 15%.While that was countered by resilient traditional connectivity services, higher cost pressure prompted us to trim FY23-25 EBITDA by ~1-2% and adj. NP forecasts by ~1-3%.

China Unicom (762 HK) - The Brightest Star Dimmed a Little

<div><div><div><div><ul><li>The 3 Chinese telcos may not be renamed to China Computing anytime soon but it is computing that drives them forward.</li><li>Based on our latest forecasts, cloud, which is one of the key elements of computing services they offer, would contribute 20% of their combined revenue by 2025, up from 9% in 2022.</li><li>Among them, our top BUY is China Unicom, which has the best valuation-to-growth profile with a PEG of 0.51x. Our revised TP of HK$7.20 for CU offers 25% upside. </li></ul></div></div></div></div>

The 3 Chinese telcos may not be renamed to China Computing anytime soon but it is computing that drives them forward.Based on our latest forecasts, cloud, which is one of the key elements of computing services they offer, would contribute 20% of their combined revenue by 2025, up from 9% in 2022.Among them, our top BUY is China Unicom, which has the best valuation-to-growth profile with a PEG of 0.51x. Our revised TP of HK$7.20 for CU offers 25% upside. 

Hong Kong

China Unicom (Hong Kong) Limited, through its subsidiaries, provides telecommunications services in the People's Republic of China.  The Company's services include cellular, paging, long distance, data, and Internet services.

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China Unicom Hong Kong (762 HK)

HSCEI Index Rebalance Preview: Two Changes Likely in September

There should be 2 changes to the HSCEI in September with Trip.com & CTF replacing CG Services & Zhongsheng. Short interest has been increasing on...

Brian Freitas

TMT – Chinese Telcos Trimming Staff Costs

According to news reports, the three Chinese telcos are cutting staff costs, which account for ~27% of service opex ex-depreciation and amortization.

Quam Securities

AAG Energy (2686 HK): New Scheme Vote Date, Different Result?

Our analysis suggests that in the best case, Xinjiang Xintai would need to further swing NO votes representing 6.52%-8.34% of outstanding shares to...

Arun George

China Unicom (762 HK) - The Brightest Star Dimmed a Little

1Q23 results dragged by slower than expected growth in industrial internet, which has been the brightest star of Chinese telcos in the past few years

Quam Securities

TMT – Chinese Telcos China Computing

Based on our latest forecasts, cloud, which is one of the key elements of computing services they offer, would contribute 20% of their combined...

Quam Securities

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