Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

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<p>The H-Share/A-Share monitor is published every weekend for the data ending the last trading day of the previous week. It includes all H-Share/A-Share pairs where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...</p>
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<ul style="list-style-type: disc;">
<li>H/A Discount,</li>
<li>movement in H/A Discount over 5 and 20 days,</li>
<li>a 52-week Z-score for the spread,</li>
<li>A chart showing evolution of the H/A spread over the last 20 days,</li>
<li>Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, </li>
<li>There is also a chart showing the average sector spread and the individual spreads within each sector over the last three years. </li>
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<p>A recent addition is the possible status of H/A-share companies in the monitor which are subject to the Trump Executive Order on Chinese Military Companies. They are separated into three types (Possible Direct Qualifying Entity, Possible Indirect Qualifying Entity, and 20+%-owned by Qualifying Entity). They are color-coded as below.</p>
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<p>For more on the list of names, please see <a href="https://www.smartkarma.com/insights/trump-s-executive-order-on-chinese-military-companies" target="_blank" data-smartkarma-citation="insights:45259" rel="noopener">Trump's Executive Order on Chinese Military Companies</a>. </p>
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<p>This past week saw mixed movement in H/A spreads but on average they were narrower.</p>
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<p>Average performance of the 39 recommendations (long 27, short 12) from last week was for a profit of 0.67% per trade.</p>
<p>There are 43 recommendations for the upcoming week.</p>
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<p>The first sector discussed is <strong>Consumer</strong>, where liquid H/A spreads narrowed on average 0.6% this past week after narrowing 2.7% the week before. Spreads are now tighter by 2.1% on average over a four-week period. Four of six liquid Hs outperformed their As.</p>
<p>Southbound accounts were large-ish net buyers on the week. There were three net buys and three net sells but the net buying ended up being all <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, again. <a href="https://www.smartkarma.com/entities/guangzhou-automobile-group-co-ltd" target="_blank" data-smartkarma-citation="entities:11082:1" rel="noopener">Guangzhou Automobile Group (2238 HK)</a> saw significant net selling. </p>
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<p>Last week I recommended staying long the H vs A on <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a> and that spread gained 1.6% for the week (after gaining 4.7% the week before when it was also recommended). This past week I put out the Weekly late on Monday (after 2pm), when BYD in Hong Kong had gained 3.7% vs the As on the day, and so recommended implementing a short BYD (1211 HK) H vs A share trade and from that point or even from the end of the day or the next, the Hs actually underperformed the As by 0.4%. </p>
<p>See below the fold for this week's recommendations.</p>
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<section class="figure">For Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities, please read on.</section>
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The H-Share/A-Share monitor is published every weekend for the data ending the last trading day of the previous week. It includes all H-Share/A-Share pairs where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...



H/A Discount,
movement in H/A Discount over 5 and 20 days,
a 52-week Z-score for the spread,
A chart showing evolution of the H/A spread over the last 20 days,
Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, 
There is also a chart showing the average sector spread and the individual spreads within each sector over the last three years. 



A recent addition is the possible status of H/A-share companies in the monitor which are subject to the Trump Executive Order on Chinese Military Companies. They are separated into three types (Possible Direct Qualifying Entity, Possible Indirect Qualifying Entity, and 20+%-owned by Qualifying Entity). They are color-coded as below.





For more on the list of names, please see Trump's Executive Order on Chinese Military Companies. 



This past week saw mixed movement in H/A spreads but on average they were narrower.




Average performance of the 39 recommendations (long 27, short 12) from last week was for a profit of 0.67% per trade.
There are 43 recommendations for the upcoming week.



The first sector discussed is Consumer, where liquid H/A spreads narrowed on average 0.6% this past week after narrowing 2.7% the week before. Spreads are now tighter by 2.1% on average over a four-week period. Four of six liquid Hs outperformed their As.
Southbound accounts were large-ish net buyers on the week. There were three net buys and three net sells but the net buying ended up being all BYD (1211 HK), again. Guangzhou Automobile Group (2238 HK) saw significant net selling. 




Last week I recommended staying long the H vs A on Great Wall Motor (2333 HK) and that spread gained 1.6% for the week (after gaining 4.7% the week before when it was also recommended). This past week I put out the Weekly late on Monday (after 2pm), when BYD in Hong Kong had gained 3.7% vs the As on the day, and so recommended implementing a short BYD (1211 HK) H vs A share trade and from that point or even from the end of the day or the next, the Hs actually underperformed the As by 0.4%. 
See below the fold for this week's recommendations.











For Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities, please read on.


Quiddity Weekly H/​​A: Share Spread Monitor as of 27 Nov 2020

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>There has been some press recently on the value of stocks short sold in China reaching new records. So we decided to take a look at the margin securities loan and figure out if there was something more to it than meets the eye, or it was just a part of the market evolving and developing as China tries to open up new products to investors.</p><p>While it is true that short notional (as measured by the margin securities on loan) has increased steadily (and significantly) over the last year, there is nothing sinister to it as the short notional is tiny compared to the market capitalisation of the stocks in the Shanghai and Shenzhen composite indices. Short notional to market cap is around 0.13% compared to 1.2% for Hong Kong, indicating that there is room for short notional to increase without becoming too large as a percentage of the market.</p><p>Additionally, a lot of the short interest is in index stocks that have listed index futures which could be indicative of arbitrage related activity, while there is also a lot of short interest in stocks where the A-shares are trading at or near their highs versus the H-shares.</p>

There has been some press recently on the value of stocks short sold in China reaching new records. So we decided to take a look at the margin securities loan and figure out if there was something more to it than meets the eye, or it was just a part of the market evolving and developing as China tries to open up new products to investors.While it is true that short notional (as measured by the margin securities on loan) has increased steadily (and significantly) over the last year, there is nothing sinister to it as the short notional is tiny compared to the market capitalisation of the stocks in the Shanghai and Shenzhen composite indices. Short notional to market cap is around 0.13% compared to 1.2% for Hong Kong, indicating that there is room for short notional to increase without becoming too large as a percentage of the market.Additionally, a lot of the short interest is in index stocks that have listed index futures which could be indicative of arbitrage related activity, while there is also a lot of short interest in stocks where the A-shares are trading at or near their highs versus the H-shares.

Short Selling in China: Rising, But Not Material (Yet)

<p>The Hang Seng Stock Connect China AH Premium Index (HSAHP) measures the absolute price premium or discount of A-shares over H-shares for the largest and most liquid mainland China companies with both A-share and H-share listings.</p><p>The HSAHP Index has fluctuated a lot over the last 10 years, reaching a high of 149.03 (A-shares trading at a 49% premium to H-shares) in July 2015 and a low of 88.97 (A-shares trading at a discount of 11% to H-shares) in July 2014.</p><p>With retail investors rushing in to equities in China and pushing stocks higher in the mainland versus their Hong Kong line, a correction in markets could see the AH premium revert by around 10% as investors head for the exit. Insurance stocks and brokerages are trading at high AH premiums and near the top of the 5 year range.</p><p>In this Insight, we look at how the HSAHP index has moved over time and identify trading opportunities where the premium is trading near the high and low end of its historical ranges.</p>

The Hang Seng Stock Connect China AH Premium Index (HSAHP) measures the absolute price premium or discount of A-shares over H-shares for the largest and most liquid mainland China companies with both A-share and H-share listings.The HSAHP Index has fluctuated a lot over the last 10 years, reaching a high of 149.03 (A-shares trading at a 49% premium to H-shares) in July 2015 and a low of 88.97 (A-shares trading at a discount of 11% to H-shares) in July 2014.With retail investors rushing in to equities in China and pushing stocks higher in the mainland versus their Hong Kong line, a correction in markets could see the AH premium revert by around 10% as investors head for the exit. Insurance stocks and brokerages are trading at high AH premiums and near the top of the 5 year range.In this Insight, we look at how the HSAHP index has moved over time and identify trading opportunities where the premium is trading near the high and low end of its historical ranges.

China AH Premium: Trade Ideas As We Near Previous Highs

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

<p>The companies in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" rel="noopener" data-smartkarma-citation="entities:22900:1">Hang Seng China Enterprises Index (HSCEI INDEX)</a> have announced their FY2019 final results and have announced dividends that will go ex in the next couple of months and be paid soon after. The 2020 dividend futures rose as companies announced their dividends and then sold off suddenly once dividend cancellations by banks started to come through in Europe.</p><p>In this Insight, we look at recent market moves, the dividends declared by constituent companies, probability of cancellation of announced dividends by the banks, outlook for interim dividends for the rest of the year, and the impact of the upcoming index rebalance in June.</p>

The companies in the Hang Seng China Enterprises Index (HSCEI INDEX) have announced their FY2019 final results and have announced dividends that will go ex in the next couple of months and be paid soon after. The 2020 dividend futures rose as companies announced their dividends and then sold off suddenly once dividend cancellations by banks started to come through in Europe.In this Insight, we look at recent market moves, the dividends declared by constituent companies, probability of cancellation of announced dividends by the banks, outlook for interim dividends for the rest of the year, and the impact of the upcoming index rebalance in June.

HSCEI Dividend Futures - Fear Is In The Air

<div><p>The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q1 review of the Hang Seng Family of Indexes on 15 May 2020. The constituent changes will be effective from 8 June 2020 and the rebalancing trades will need to be done at the closing auction on 5 June 2020.</p></div><p>We see a high probability of <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" rel="noopener" data-smartkarma-citation="entities:354:1">China Mengniu Dairy Co (2319 HK)</a> and <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:1016:1">China Unicom Hong Kong (762 HK)</a> being included in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" rel="noopener" data-smartkarma-citation="entities:22900:1">Hang Seng China Enterprises Index (HSCEI INDEX)</a> and of <a href="https://www.smartkarma.com/entities/haitong-securities-co-ltd-h" target="_blank" rel="noopener" data-smartkarma-citation="entities:5665:1">Haitong Securities Co Ltd (H) (6837 HK)</a> and <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:265:1">China Communications Construction (1800 HK)</a> being deleted from the index. There is also a medium probability of <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" rel="noopener" data-smartkarma-citation="entities:8375:1">Shimao Property Holdings (813 HK)</a> being included in the index and <a href="https://www.smartkarma.com/entities/new-china-life-insurance-c-h" target="_blank" rel="noopener" data-smartkarma-citation="entities:377:1">New China Life Insurance (1336 HK)</a> being deleted from the index.</p><p>We see the HSCEI 2020 dividend futures fair value drop by 2.3 index points for the high probability adds and deletes and a 2.9 index point drop if all the changes are implemented.</p><p>In this Insight we look at the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" rel="noopener" data-smartkarma-citation="entities:22900:1">Hang Seng China Enterprises Index (HSCEI INDEX)</a> methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/ exclusion in this review and some of the details around the names, plus some potential trades.</p>

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q1 review of the Hang Seng Family of Indexes on 15 May 2020. The constituent changes will be effective from 8 June 2020 and the rebalancing trades will need to be done at the closing auction on 5 June 2020.We see a high probability of China Mengniu Dairy Co (2319 HK) and China Unicom Hong Kong (762 HK) being included in the Hang Seng China Enterprises Index (HSCEI INDEX) and of Haitong Securities Co Ltd (H) (6837 HK) and China Communications Construction (1800 HK) being deleted from the index. There is also a medium probability of Shimao Property Holdings (813 HK) being included in the index and New China Life Insurance (1336 HK) being deleted from the index.We see the HSCEI 2020 dividend futures fair value drop by 2.3 index points for the high probability adds and deletes and a 2.9 index point drop if all the changes are implemented.In this Insight we look at the Hang Seng China Enterprises Index (HSCEI INDEX) methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/ exclusion in this review and some of the details around the names, plus some potential trades.

China

Haitong Securities Co., Ltd. is a securities firm which acts as a broker, dealer for securities. The Company also provides investment advisory, placing and underwriting, nominee and custodian services.

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52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
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Haitong Securities Co Ltd (H) (6837 HK)

Short Selling in China: Rising, But Not Material (Yet)

There has been some press recently on the value of stocks short sold in China reaching new records.

Brian Freitas

China AH Premium: Trade Ideas As We Near Previous Highs

The Hang Seng Stock Connect China AH Premium Index (HSAHP) measures the absolute price premium or discount of A-shares over H-shares for the...

Brian Freitas

HSCEI Dividend Futures - Fear Is In The Air

The companies in the Hang Seng China Enterprises Index (HSCEI INDEX) have announced their FY2019 final results and have announced dividends that...

Brian Freitas

HSCEI Rebalance Preview - June 2020

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q1 review of the Hang Seng Family of Indexes on 15 May 2020. The...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Weekly H/​​A: Share Spread Monitor as of 27 Nov 2020

The weekly H/A Share Monitor and Trade Recommendations. Spreads narrower on the week. Last week's 39 trade recommendations gained 0.67% on average....

Travis Lundy

Short Selling in China: Rising, But Not Material (Yet)

There has been some press recently on the value of stocks short sold in China reaching new records.

Brian Freitas

China AH Premium: Trade Ideas As We Near Previous Highs

The Hang Seng Stock Connect China AH Premium Index (HSAHP) measures the absolute price premium or discount of A-shares over H-shares for the...

Brian Freitas

HSCEI Dividend Futures - Fear Is In The Air

The companies in the Hang Seng China Enterprises Index (HSCEI INDEX) have announced their FY2019 final results and have announced dividends that...

Brian Freitas

HSCEI Rebalance Preview - June 2020

The Hang Seng Indexes Company Limited (HSIL) will announce the results of the 2020 Q1 review of the Hang Seng Family of Indexes on 15 May 2020. The...

Brian Freitas

Quiddity Weekly H/A: Share Spread Monitor as of 27 Nov 2020