Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

<ul>
<li>Although vols have stabilized this week both HSI and HSCEI are still trading about 3-4 vol above where they were pre-stimulus and are still not monetizing.</li>
<li>Strong price action this wek helped keep a floor under implied vols. </li>
<li>Positions were added in both HSI and HSCEI with demand tilted towards up-strike Calls given the rally on the week.</li>
</ul>


Although vols have stabilized this week both HSI and HSCEI are still trading about 3-4 vol above where they were pre-stimulus and are still not monetizing.
Strong price action this wek helped keep a floor under implied vols. 
Positions were added in both HSI and HSCEI with demand tilted towards up-strike Calls given the rally on the week.


EQD | Hong Kong Index Options Weekly - HSI and HSCEI Dec 02-06, Sell HSCEI Vol

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

<ul>
<li>It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.</li>
<li>Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.</li>
<li>As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.</li>
</ul>


It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.
Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.
As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.


How Has the Index Rebalance Strategy Performed in 2024?

<ul>
<li>Along with its fiscal 2024 results, <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 (9988 HK)</a> announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.</li>
<li>If the conversion is completed by the end of August, <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 (9988 HK)</a> could be added to Southbound Stock Connect in September and that could bring in significant flows.</li>
<li>We do not forecast any passive inflows due to the change with <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> capped at 8% of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a> and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a> indices.</li>
</ul>


Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.


Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

Hang Seng China Enterprises Index / Technical Analysis

<ul>
<li>Our call has centered around buying a dip in HK at HSCEI 5,800 and HSI 17,000 for a final upside drive into December to form at top.</li>
<li>H shares (our long vehicle) - Met 5,800 long entry. 6,030 is the level to clear and hold above. PT at 6,600 just under the 6,700 MT barrier.</li>
<li>Macro trend remains down. HSI 19,400 represents an excellent short opportunity for Q1 weakness. December is touted to be a topping/ range ahead of a more bearish Q1.</li>
</ul>


Our call has centered around buying a dip in HK at HSCEI 5,800 and HSI 17,000 for a final upside drive into December to form at top.
H shares (our long vehicle) - Met 5,800 long entry. 6,030 is the level to clear and hold above. PT at 6,600 just under the 6,700 MT barrier.
Macro trend remains down. HSI 19,400 represents an excellent short opportunity for Q1 weakness. December is touted to be a topping/ range ahead of a more bearish Q1.


<ul>
<li>The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.</li>
<li>The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.</li>
<li>Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.</li>
</ul>


The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.
The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.
Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.


HSCEI Dividend Futures: Sell the 2024/25 Steepener

China

The Hang Seng China Enterprises Index is a free-float capitalization-weighted index comprised of H-Shares listed on the Hong Kong Stock Exchange and included in the Hang Seng Mainland Composite Index. The base value of this index is 2000 as of Jan 3, 2000. This index replaced the old HSCE index on Oct. 3, 2001.

Hang Seng China Enterprises Index (HSCEI INDEX)

Hang Seng China Enterprises Index (HSCEI INDEX)

EQD | Hong Kong Index Options Weekly - HSI and HSCEI Dec 02-06, Sell HSCEI Vol

Despite stabilizing volatility, HSI and HSCEI are still trading above pre-stimulus levels and not monetizing, look to sell HSCEI implied vol for...

John Ley

How Has the Index Rebalance Strategy Performed in 2024?

The index rebalance strategy has performed reasonably well this year. Accurate forecasting of index changes and optimal hedge selection have played...

Brian Freitas

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Alibaba expect to convert to a Primary Listing on the HKEX by end August. That could mean inclusion in Southbound Stock Connect in September. With...

Brian Freitas

HSCEI Buy Entry Met

Our call has centered around buying a dip in HK at HSCEI 5,800 and HSI 17,000 for a final upside drive into December to form at top.

Thomas Schroeder

HSCEI Dividend Futures: Sell the 2024/25 Steepener

The HSCEI 2054 div futures have moved higher following China banks announcing that interim dividends will be paid. There is some upside from...

Brian Freitas

EQD | Hong Kong Index Options Weekly - HSI and HSCEI Dec 02-06, Sell HSCEI Vol

​Despite stabilizing volatility, HSI and HSCEI are still trading above pre-stimulus levels and not monetizing, look to sell HSCEI implied vol for...

John Ley

How Has the Index Rebalance Strategy Performed in 2024?

The index rebalance strategy has performed reasonably well this year. Accurate forecasting of index changes and optimal hedge selection have played...

Brian Freitas

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Alibaba expect to convert to a Primary Listing on the HKEX by end August. That could mean inclusion in Southbound Stock Connect in September. With...

Brian Freitas

HSCEI Buy Entry Met

Our call has centered around buying a dip in HK at HSCEI 5,800 and HSI 17,000 for a final upside drive into December to form at top.

Thomas Schroeder

HSCEI Dividend Futures: Sell the 2024/25 Steepener

The HSCEI 2054 div futures have moved higher following China banks announcing that interim dividends will be paid. There is some upside from...

Brian Freitas

Despite stabilizing volatility, HSI and HSCEI are still trading above pre-stimulus levels and not monetizing, look to sell HSCEI implied vol for...