HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<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> posted weak 1H FY22 result with a 18.6% contraction in core profit, driven primarily by lower new connections and weaker dollar margin for gas sales. </li>
<li>Full-Year guidance on new connections has revised to 3m (vs. 5m) and dollar margin will further contract by HK$0.04-0.06/cu.m. in 2H FY22. Progress on LPG Smart MicroGrid has slowed. </li>
<li>The Shiyan gas explosion looks to have a more long-lasting effect than expected. Also, the need to divert management attention to safety enforcement also weighed on China Gas.</li>
</ul>



China Gas Holdings (384 HK) posted weak 1H FY22 result with a 18.6% contraction in core profit, driven primarily by lower new connections and weaker dollar margin for gas sales. 
Full-Year guidance on new connections has revised to 3m (vs. 5m) and dollar margin will further contract by HK$0.04-0.06/cu.m. in 2H FY22. Progress on LPG Smart MicroGrid has slowed. 
The Shiyan gas explosion looks to have a more long-lasting effect than expected. Also, the need to divert management attention to safety enforcement also weighed on China Gas.


China Gas Holdings (384 HK): Post-Result Call Takeaways, Looks like Not yet Reached the Bottom

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Shortly after <strong><a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel (KEP SP)</a></strong> revised their Offer to ~S$2.35 and FINAL, Cuscaden has come over the top. This complicates things because of the <strong><a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press (SPH SP)</a></strong>/Keppel Agreement timing.</li>
<li>
<a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener"><strong>Swire Pacific (19 HK)</strong></a>'s discount to NAV of ~50% is bang in line with its 12-month average, as <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific (293 HK)</a> is close to operating cash breakeven.</li>
<li>Blackstone and affiliates are offering shareholders of <strong><a href="https://www.smartkarma.com/entities/crown-resorts-ltd" target="_blank" data-smartkarma-citation="entities:808:1" rel="noopener">Crown Resorts (CWN AU)</a></strong> A$12.50/share in cash, a 26.2% premium to last close.</li>
</ul>


Shortly after Keppel (KEP SP) revised their Offer to ~S$2.35 and FINAL, Cuscaden has come over the top. This complicates things because of the Singapore Press (SPH SP)/Keppel Agreement timing.

Swire Pacific (19 HK)'s discount to NAV of ~50% is bang in line with its 12-month average, as Cathay Pacific (293 HK) is close to operating cash breakeven.
Blackstone and affiliates are offering shareholders of Crown Resorts (CWN AU) A$12.50/share in cash, a 26.2% premium to last close.


Last Week in Event SPACE: Singapore Press, Swire, Crown Resorts, Royal Dutch, Toshiba, Hollysys

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-resources-beer-holdings" target="_blank" data-smartkarma-citation="entities:399:1" rel="noopener">China Resources Beer Holdings (291 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> and <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> will be added to the HSI at the close on 3 December.</li>
<li>One-Way turnover is estimated at 5.05% and will result in a one-way trade of HK$10.1bn due to the inclusions, float changes and capping changes.</li>
<li>Currently at 64 members, Hang Seng Indexes is unlikely to reach its 80 index constituent target for the HSI by mid 2022 and the timeline is likely to be extended.</li>
</ul>



China Resources Beer Holdings (291 HK), ENN Energy (2688 HK), JD.com Inc. (9618 HK) and NetEase (9999 HK) will be added to the HSI at the close on 3 December.
One-Way turnover is estimated at 5.05% and will result in a one-way trade of HK$10.1bn due to the inclusions, float changes and capping changes.
Currently at 64 members, Hang Seng Indexes is unlikely to reach its 80 index constituent target for the HSI by mid 2022 and the timeline is likely to be extended.


HSI Index Rebalance: Tiptoeing to the 80 Index Member Target

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<p>For our next Webinar, we're excited to welcome back Insight Provider <a href="https://www.smartkarma.com/profiles/brian-freitas" target="_blank" data-smartkarma-citation="accounts:4091" rel="noopener">Brian Freitas</a>, who will cover the upcoming rebalance of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> as it pushes towards its target of 80 index members by mid-2022.</p>
<h3>The webinar will be hosted on Wednesday, 17 November 2021, 17:00 SGT/HKT.</h3>
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<h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=85212464246" target="_blank" rel="noopener">Register for the Webinar here</a></h2>
</div>
</div>
</div>
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<p>Brian Freitas is a highly experienced ex-delta one trader with over 17 years of experience. He was previously with Barclays, Macquarie, Credit Suisse, and BNP Paribas.</p>
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For our next Webinar, we're excited to welcome back Insight Provider Brian Freitas, who will cover the upcoming rebalance of the Hong Kong Hang Seng Index (HSI INDEX) as it pushes towards its target of 80 index members by mid-2022.
The webinar will be hosted on Wednesday, 17 November 2021, 17:00 SGT/HKT.



Register for the Webinar here




Brian Freitas is a highly experienced ex-delta one trader with over 17 years of experience. He was previously with Barclays, Macquarie, Credit Suisse, and BNP Paribas.


Smartkarma Webinar | Potential Inclusions to the Hang Seng Index (HSI INDEX)

<p>Hang Seng Indexes will announce the results of the December 2021 review of the Hang Seng Family of Indexes on 19 November. The constituent changes will be effective after the close of trading on 3 December.</p><p>The review period for the December rebalance ended on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>.</p><p>With Hang Seng Indexes looking to get up to 80 <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.</p><p>As of the close on 3 November, index turnover is 1.3% from capping and other changes to the current index constituents. That gives the index committee a lot of room to add some big stocks to the index without increasing the turnover to levels seen at the last two rebalances in June and September.</p><p>We identify 12 stocks that could be added to the index based on market coverage and the impact of recent regulatory changes. Of the 12 stocks, 8 are higher probability changes and 4 are lower probability.</p><p>All 12 inclusions will result in a one-way turnover of 6.37% while the inclusion of the 8 high probability changes will result in a one-way turnover of 4.98%.</p><p>There is large short interest on most of the stocks and index inclusion could set off a round of short covering and could drive the stocks higher.</p>

Hang Seng Indexes will announce the results of the December 2021 review of the Hang Seng Family of Indexes on 19 November. The constituent changes will be effective after the close of trading on 3 December.The review period for the December rebalance ended on 30 September and stocks that have at least 3 month of trading history by the review meeting date are eligible for inclusion in the Hong Kong Hang Seng Index (HSI INDEX).With Hang Seng Indexes looking to get up to 80 Hong Kong Hang Seng Index (HSI INDEX) members by mid-2022, there could be 20 inclusions over the next 3 index rebalances.As of the close on 3 November, index turnover is 1.3% from capping and other changes to the current index constituents. That gives the index committee a lot of room to add some big stocks to the index without increasing the turnover to levels seen at the last two rebalances in June and September.We identify 12 stocks that could be added to the index based on market coverage and the impact of recent regulatory changes. Of the 12 stocks, 8 are higher probability changes and 4 are lower probability.All 12 inclusions will result in a one-way turnover of 6.37% while the inclusion of the 8 high probability changes will result in a one-way turnover of 4.98%.There is large short interest on most of the stocks and index inclusion could set off a round of short covering and could drive the stocks higher.

Hang Seng Index Rebalance Preview: The Road to 80 Constituents

China

ENN Energy Holdings Ltd. distributes natural gas in China.  The Company, through its subsidiaries, invests in, operates, and manages gas pipelines, and sells and distributes piped and bottled gas in China.

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ENN Energy (2688 HK)

China Gas Holdings (384 HK): Post-Result Call Takeaways, Looks like Not yet Reached the Bottom

Weaker-than-expected result for 1H FY22 is negative and management turned more cautious on outlook for 2H FY22, pointing to lower new connections...

Osbert Tang, CFA

Last Week in Event SPACE: Singapore Press, Swire, Crown Resorts, Royal Dutch, Toshiba, Hollysys

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

HSI Index Rebalance: Tiptoeing to the 80 Index Member Target

CR Beer, ENN Energy, JD.com & Netease will join the HSI after the close on 3 Dec. Some were expected, some are surprises. Turnover is 5%+ & the...

Brian Freitas

Smartkarma Webinar | Potential Inclusions to the Hang Seng Index (HSI INDEX)

On Wednesday, 17 November, 5pm SGT, join our webinar with Brian Freitas, who will cover the upcoming rebalance of the Hong Kong Hang Seng Index.

Smartkarma Research

Hang Seng Index Rebalance Preview: The Road to 80 Constituents

The HSI has 60 members and the target is to reach 80 constituents over the next 3 rebalances. There could be a lot of stocks added at the Dec rebal...

Brian Freitas

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