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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

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 <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>.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.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 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

Evergrande Property Services / Event-Driven

Trading in <a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> was halted pre-market today along with <a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a> and <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a>.There are reports now that <a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> is looking to buy 51% in <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> at a valuation of more than HK$40bn. This amends an earlier report that <a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> would pay HK$40bn for 51% of <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a>. The HK$40bn number values <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> at HK$3.7/share, a 27.7% discount  to its last close.<a href="https://www.smartkarma.com/entities/hopson-development-holdings" target="_blank" data-smartkarma-citation="entities:8108:1" rel="noopener">Hopson Development (754 HK)</a> will need to make a Mandatory General Offer (MGO) to all existing shareholders in cash at HK$3.70/share or higher. With a closing low of HK$4.03/share since listing, it is unlikely that there will be many takers in the MGO.<a href="https://www.smartkarma.com/entities/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande (3333 HK)</a> is a very high probability deletion 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> at the December rebalance and is expected to be replaced by <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a>.<a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> is also an <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> constituent and is a high probability deletion from the index at the March 2022 review, where <a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a> is a potential inclusion.

Trading in Hopson Development (754 HK) was halted pre-market today along with Evergrande (3333 HK) and Evergrande Property Services (6666 HK).There are reports now that Hopson Development (754 HK) is looking to buy 51% in Evergrande Property Services (6666 HK) at a valuation of more than HK$40bn. This amends an earlier report that Hopson Development (754 HK) would pay HK$40bn for 51% of Evergrande Property Services (6666 HK). The HK$40bn number values Evergrande Property Services (6666 HK) at HK$3.7/share, a 27.7% discount  to its last close.Hopson Development (754 HK) will need to make a Mandatory General Offer (MGO) to all existing shareholders in cash at HK$3.70/share or higher. With a closing low of HK$4.03/share since listing, it is unlikely that there will be many takers in the MGO.Evergrande (3333 HK) is a very high probability deletion from the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance and is expected to be replaced by Xinyi Solar Holdings (968 HK).Evergrande Property Services (6666 HK) is also an Hang Seng China Enterprises Index (HSCEI INDEX) constituent and is a high probability deletion from the index at the March 2022 review, where Innovent Biologics Inc (1801 HK) is a potential inclusion.

Hopson (754 HK) To Buy 51% of Evergrande Property Services? Upcoming MGO & Potential HSCEI Changes

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

Korea Stock Exchange KOSPI 200 / Technical Analysis

Monday's turn call to sell down longs and put on additional shorts panned out. Now we are positioning for a mild bounce into the month/quarter end to lean on shorts. October still expected to see another leg down. Bigger cycle date comes in near October 7-8th.Top shorts in Asia are Korea (due to undershoot on the back of SEC) and HSI (nearing a low) and Taiwan as the recent addition to our short conviction group.A50 flirting with big breakout resistance at 15,500 and will drive H share direction. A shares show potential to buck the region negative trend if the A50 clears 15,500 pivot.

Monday's turn call to sell down longs and put on additional shorts panned out. Now we are positioning for a mild bounce into the month/quarter end to lean on shorts. October still expected to see another leg down. Bigger cycle date comes in near October 7-8th.Top shorts in Asia are Korea (due to undershoot on the back of SEC) and HSI (nearing a low) and Taiwan as the recent addition to our short conviction group.A50 flirting with big breakout resistance at 15,500 and will drive H share direction. A shares show potential to buck the region negative trend if the A50 clears 15,500 pivot.

SPX Trendline Rejection/Asia Short Targets

Hong Kong has been top short and currently pressing on the key lows at HSI 24,600 with a target of 24,000 and risk of an undershoot. H share decline in line toward the 8,300-500 target.Our primary downside target is at 24,000 and will then measure downside momentum for a low. Risk comes in near 23,200 after a bounce attempt from 24k. The recent bounce marks a corrective flat range with wave 5 downside risk on the back of policy pressure.

Hong Kong has been top short and currently pressing on the key lows at HSI 24,600 with a target of 24,000 and risk of an undershoot. H share decline in line toward the 8,300-500 target.Our primary downside target is at 24,000 and will then measure downside momentum for a low. Risk comes in near 23,200 after a bounce attempt from 24k. The recent bounce marks a corrective flat range with wave 5 downside risk on the back of policy pressure.

Orient Overseas International / Event-Driven

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June.The December review will see the inclusion of stocks that were newly listed from 1 July to 30 September and meet the criteria for joining the index.We expect <a href="https://www.smartkarma.com/entities/brii-biosciences" target="_blank" data-smartkarma-citation="entities:33014:1" rel="noopener">Brii Biosciences (2137 HK)</a>, <a href="https://www.smartkarma.com/entities/helen-s-international-holdings" target="_blank" data-smartkarma-citation="entities:34113:1" rel="noopener">Helen's International Holdings (9869 HK)</a>, <a href="https://www.smartkarma.com/entities/medlive-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:32985:1" rel="noopener">Medlive Technology (2192 HK)</a>, <a href="https://www.smartkarma.com/entities/keymed-biosciences-inc" target="_blank" data-smartkarma-citation="entities:33011:1" rel="noopener">Keymed Biosciences Inc (2162 HK)</a> and <a href="https://www.smartkarma.com/entities/sce-intelligent-commercial-management" target="_blank" data-smartkarma-citation="entities:33500:1" rel="noopener">SCE Intelligent Commercial Management (606 HK)</a> to be included in the index at the close of trading on 3 December.For the regular rebalance in March 2022, we see 17 potential inclusions to the index and 4 potential deletions. There are 4 stocks that are close adds and 5 that are close deletes.<div>Although there are no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. There is pre-positioning in the stocks in the lead up to the announcement and prior to the stocks being open for purchase by mainland investors.</div>

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June.The December review will see the inclusion of stocks that were newly listed from 1 July to 30 September and meet the criteria for joining the index.We expect Brii Biosciences (2137 HK), Helen's International Holdings (9869 HK), Medlive Technology (2192 HK), Keymed Biosciences Inc (2162 HK) and SCE Intelligent Commercial Management (606 HK) to be included in the index at the close of trading on 3 December.For the regular rebalance in March 2022, we see 17 potential inclusions to the index and 4 potential deletions. There are 4 stocks that are close adds and 5 that are close deletes.Although there are no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. There is pre-positioning in the stocks in the lead up to the announcement and prior to the stocks being open for purchase by mainland investors.

HSCI Index Rebalance and Stock Connect: Potential Changes in December and March

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)

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

Hopson (754 HK) To Buy 51% of Evergrande Property Services? Upcoming MGO & Potential HSCEI Changes

Hopson is reportedly looking to buy 51% in Evergrande Prop Serv for more than HK$40bn.That is a 41.7% premium to the last close and will trigger an...

Brian Freitas

SPX Trendline Rejection/Asia Short Targets

Monday's turn call to sell down longs and put on additional shorts panned out. Use a month/quarter end bounce to lean on shorts. October to see...

Thomas Schroeder

HK Washout Low Targets

Hong Kong has been top short and currently pressing on the key lows at HSI 24,600 with a target of 24,000 and risk of an undershoot. H share...

Thomas Schroeder

HSCI Index Rebalance and Stock Connect: Potential Changes in December and March

There could be 5 adds to the HSCI in December. In March, there could be 17 adds and 4 deletes. There will be pre-positioning on the inclusions...

Brian Freitas