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/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> is a member of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index</a> and <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</a>, among others.</li>
<li>Capping of stocks at 8% of the index weight will lead to selling in <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi (1810 HK)</a> at the close on 1 December, mainly from <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</a> trackers.</li>
<li>Relative underperformance vs the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH Index</a> from now to Tuesday will require passive to sell less stock, while outperformance will lead to increased passive selling. That opens up trading opportunities.</li>
</ul>



Xiaomi Corp (1810 HK) is a member of the Hang Seng Index, Hang Seng China Enterprises Index and Hang Seng TECH Index, among others.
Capping of stocks at 8% of the index weight will lead to selling in Xiaomi (1810 HK) at the close on 1 December, mainly from Hang Seng TECH Index trackers.
Relative underperformance vs the HSTECH Index from now to Tuesday will require passive to sell less stock, while outperformance will lead to increased passive selling. That opens up trading opportunities.


Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities

<ul>
<li>For a second review running, <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> has avoided being deleted from the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>.</li>
<li>That means <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom Hong Kong (762 HK)</a> misses out on index inclusion, but there is still hope for the next one.</li>
<li>There does not appear to be any significant positioning on either stock and any large moves early in the coming week could be short lived.</li>
</ul>


For a second review running, Zhongsheng Group (881 HK) has avoided being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX).
That means China Unicom Hong Kong (762 HK) misses out on index inclusion, but there is still hope for the next one.
There does not appear to be any significant positioning on either stock and any large moves early in the coming week could be short lived.


HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life

<ul>
<li>As expected, there are no constituent changes for 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> in December. However, there are float and capping changes for a lot of stocks.</li>
<li>Estimated one-way turnover is 4.8% leading to a one-way trade of HK$5.29bn (US$679m). There are 4 stocks with over 1 day of ADV to trade.</li>
<li>The largest selling will be on <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> offset by buying in <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (9618 HK)</a> and <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>. </li>
</ul>


As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December. However, there are float and capping changes for a lot of stocks.
Estimated one-way turnover is 4.8% leading to a one-way trade of HK$5.29bn (US$679m). There are 4 stocks with over 1 day of ADV to trade.
The largest selling will be on Xiaomi Corp (1810 HK) offset by buying in Meituan (3690 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK). 


HSTECH Index Rebalance: No Constituent Changes; Round-Trip Trade of US$1.4bn

<ul>
<li>
<a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a> and <a href="https://www.smartkarma.com/entities/wuxi-apptec-co-ltd-bf4a1265-beef-48b6-b82d-29308426030f" target="_blank" data-smartkarma-citation="entities:27795:1" rel="noopener">WuXi AppTec (2359 HK)</a> will be added to the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng</a> at the close on 1 December taking the number of index constituents to 82.</li>
<li>Neither inclusion is a surprise. The non-inclusion of primary listed foreign companies is a bigger surprise - that could take place at the next rebalance.</li>
<li>Estimated one-way turnover is 3.53%, estimated one-way trade is HK$6.88bn (US$882m). Capping leads to buying in <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> and selling in <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC (5 HK)</a>. </li>
</ul>



Li Auto (2015 HK) and WuXi AppTec (2359 HK) will be added to the Hang Seng at the close on 1 December taking the number of index constituents to 82.
Neither inclusion is a surprise. The non-inclusion of primary listed foreign companies is a bigger surprise - that could take place at the next rebalance.
Estimated one-way turnover is 3.53%, estimated one-way trade is HK$6.88bn (US$882m). Capping leads to buying in Alibaba (9988 HK) and selling in Tencent (700 HK) and HSBC (5 HK). 


Hang Seng Index Rebalance: Li Auto (2015) & WuXi AppTec (2359) Added

<ul>
<li>
<a href="https://www.smartkarma.com/entities/wuxi-xdc-cayman-inc" target="_blank" data-smartkarma-citation="entities:39917:1" rel="noopener">WuXi XDC Cayman (1877628D HK)</a> is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).</li>
<li>
<a href="https://www.smartkarma.com/entities/wuxi-xdc-cayman-inc" target="_blank" data-smartkarma-citation="entities:39917:1" rel="noopener">WuXi XDC Cayman (1877628D HK)</a> will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.</li>
<li>Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.</li>
</ul>



WuXi XDC Cayman (1877628D HK) is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).

WuXi XDC Cayman (1877628D HK) will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.
Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.


WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines

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)

Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities

There will be passive selling in Xiaomi from HSTECH trackers at the close on 1 Dec. Relative underperformance till Tuesday will lead to less...

Brian Freitas

HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life

In a surprise, there are no constituent changes for the HSCEI in Dec. Estimated one-way turnover is 2.8% leading to a one-way trade of HK$1.85bn...

Brian Freitas

HSTECH Index Rebalance: No Constituent Changes; Round-Trip Trade of US$1.4bn

There are no constituent changes for the HSTECH in Dec. Float and capping changes will result in a round-trip trade of US$1.4bn. There could be...

Brian Freitas

Hang Seng Index Rebalance: Li Auto (2015) & WuXi AppTec (2359) Added

Li Auto and WuXi AppTec will join the HSI at the close on 1 Dec. Non-inclusion of foreign companies is a surprise. Capping increases turnover and...

Brian Freitas

WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines

WuXi XDC is looking to raise up to US$521m in its IPO. A large chunk is being taken by cornerstone investors. HSCI and Stock Connect inclusion...

Brian Freitas