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 will be 3 changes for the Hang Seng Internet &amp; Information Technology Index (HSIII) at the March rebalance. There are some surprises.</li>
<li>Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.</li>
<li>There is huge short interest on <a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy Holding (1797 HK)</a> and there could be some short covering ahead of the inclusion of the stock in the index.</li>
</ul>


There will be 3 changes for the Hang Seng Internet &amp; Information Technology Index (HSIII) at the March rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.


Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

Analyst

Steve Zhou, CFA

Equity Bottom-Up

China Beststudy Education Group / Equity Bottom-Up

<ul>
<li>China after-school tutoring remains one of the most attractive and visible sectors in the next 2-3 years time frame. </li>
<li>Even though <a href="https://www.smartkarma.com/entities/new-oriental-education-techn-cc88998e-fe0d-4a03-b544-f3e9836b06a2" target="_blank" data-smartkarma-citation="entities:531:1" rel="noopener">New Oriental Education &amp; Techn (EDU US)</a> had some hiccups in FY3Q24 results, they were mainly due to factors not related to the core after-school tutoring business.</li>
<li>My sector top pick is <a href="https://www.smartkarma.com/entities/china-beststudy-education-group" target="_blank" data-smartkarma-citation="entities:40632:1" rel="noopener">China Beststudy Education Group (3978 HK)</a>, as valuation is lower and growth is higher, though it has a much smaller market cap..</li>
</ul>


China after-school tutoring remains one of the most attractive and visible sectors in the next 2-3 years time frame. 
Even though New Oriental Education &amp; Techn (EDU US) had some hiccups in FY3Q24 results, they were mainly due to factors not related to the core after-school tutoring business.
My sector top pick is China Beststudy Education Group (3978 HK), as valuation is lower and growth is higher, though it has a much smaller market cap..


China After-School Tutoring:  Still In The Early Innings; Prefer China Beststudy Over EDU

Greater China Equity Long/Short Analyst

Eric Chen

<ul>
<li>Koolearn’s successful transformation into a live-streaming e-commerce business showcased outstanding entrepreneurship and leadership of its founder Michael Yu, whom we highly respect.</li>
<li>That said, we expect its growth to decelerate materially after hitting RMB18 billion GMV by 2024. We value Koolearn at RMB36 billion (20% downside), drawing reference to VIPShop growth trajectory.</li>
<li>While high-frequency data on live-streaming business will drive near-term stock price (and potentially to the upside), its current valuation doesn’t pay off for long -term investors in our view.</li>
</ul>


Koolearn’s successful transformation into a live-streaming e-commerce business showcased outstanding entrepreneurship and leadership of its founder Michael Yu, whom we highly respect.
That said, we expect its growth to decelerate materially after hitting RMB18 billion GMV by 2024. We value Koolearn at RMB36 billion (20% downside), drawing reference to VIPShop growth trajectory.
While high-frequency data on live-streaming business will drive near-term stock price (and potentially to the upside), its current valuation doesn’t pay off for long -term investors in our view.


Koolearn (1797 HK): Don't Overpay for Growth

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.</li>
<li>There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.</li>
<li>Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.</li>
</ul>


The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.


Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy Holding (1797 HK)</a> replaces <a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies Holdings (2018 HK)</a> in the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng TECH Index (HSTECH INDEX)</a> at the close on 1 September.</li>
<li>Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.</li>
<li>Short interest is 15% of float on both stocks. Short covering could take <a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy Holding (1797 HK)</a> higher while providing support for <a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies (2018 HK)</a> closer to deletion.</li>
</ul>


As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.


HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks

China

East Buy Holding Limited operates livestreaming platform businesses. The Company provides private label products including agricultural products, food, books, and household goods. East Buy Holding also conducts college education businesses.

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East Buy Holding (1797 HK)

Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

There are 3 changes for the HSIII in March. Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn...

Brian Freitas

China After-School Tutoring: Still In The Early Innings; Prefer China Beststudy Over EDU

China Beststudy Education (3978 HK) is up 15% today on good volume on the back of raised guidance for FY24 by management. The stock has more than...

Steve Zhou, CFA

Koolearn (1797 HK): Don't Overpay for Growth

We draw reference to VIPShop and value Koolearn at RMB36 billion by 2024 – 20% downside to its current valuation, based on 20x PE on RMB1.8 billion...

Eric Chen

Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

The Hang Seng indices will be rebalanced at the close of 1 Sep based on FAF and name changes announced 18 August, and capping flows based on 29...

Travis Lundy

HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks

East Buy (1797) replaces AAC Tech (2018) in the HSTECH in Sep. Two-way turnover is 7% and the round-trip trade is US$870m. There are big shorts on...

Brian Freitas

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