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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Haidilao International Holding / Event-Driven

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.For 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>, there are 3 inclusions - <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a>, <a href="https://www.smartkarma.com/entities/longfor-properties" target="_blank" data-smartkarma-citation="entities:8149:1" rel="noopener">Longfor Properties (960 HK)</a> and <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>. This takes the number of index constituents to 55 and sets the stage for a further increase in the number of stocks as a part of the market consultation, the conclusions of which are to be announced on 1 March.One-way turnover is estimated at 2.65% and will result in a one-way trade of HK$6.08bn. The highest impact is on <a href="https://www.smartkarma.com/entities/longfor-properties" target="_blank" data-smartkarma-citation="entities:8149:1" rel="noopener">Longfor Properties (960 HK)</a> while the impact on <a href="https://www.smartkarma.com/entities/alibaba-health-information-technology-ltd" target="_blank" data-smartkarma-citation="entities:453:1" rel="noopener">Alibaba Health Information Technology (241 HK)</a> and <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a> is lower, though still substantial.There are only 10 trading days to implementation of the changes, so the three stocks should move up on Monday and outperform their peers till implementation date.Hang Seng Indexes is scheduled to announce the conclusions of the market consultation on Monday, 1 March and there will be a lot more changes to the index. These changes should commence at the June 2021 review and will most likely be implemented in 4 tranches, concluding at the March 2022 review.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.For the Hong Kong Hang Seng Index (HSI INDEX), there are 3 inclusions - Alibaba Health Information Technology (241 HK), Longfor Properties (960 HK) and Haidilao (6862 HK). This takes the number of index constituents to 55 and sets the stage for a further increase in the number of stocks as a part of the market consultation, the conclusions of which are to be announced on 1 March.One-way turnover is estimated at 2.65% and will result in a one-way trade of HK$6.08bn. The highest impact is on Longfor Properties (960 HK) while the impact on Alibaba Health Information Technology (241 HK) and Haidilao (6862 HK) is lower, though still substantial.There are only 10 trading days to implementation of the changes, so the three stocks should move up on Monday and outperform their peers till implementation date.Hang Seng Indexes is scheduled to announce the conclusions of the market consultation on Monday, 1 March and there will be a lot more changes to the index. These changes should commence at the June 2021 review and will most likely be implemented in 4 tranches, concluding at the March 2022 review.

Hang Seng Index Rebalance: Three Adds; Market Consultation Conclusions on 1 March

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

We called for covering short exposure and putting on risk in our bull group near SPX 3,800 support (hit 3,804.75) and did see a nice bull reversal in NY to short up the bull case off of SPX wedge support. The risk buckle came within the Feb 21 window. We now need to clear hurdle resistance levels to avert a downside re test.This insight focuses on upside resistances to clear to open the way to a new highs and supports to hold to validate the SPX bull reversal off of primary wedge support. Our bull group is where we added risk and outline where we want to add risk in Asia.

We called for covering short exposure and putting on risk in our bull group near SPX 3,800 support (hit 3,804.75) and did see a nice bull reversal in NY to short up the bull case off of SPX wedge support. The risk buckle came within the Feb 21 window. We now need to clear hurdle resistance levels to avert a downside re test.This insight focuses on upside resistances to clear to open the way to a new highs and supports to hold to validate the SPX bull reversal off of primary wedge support. Our bull group is where we added risk and outline where we want to add risk in Asia.

Quantitative Analysis

The China equity index futures market has come a long way since index futures started to trade on the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> in 2010. There have been booms and busts, volumes and open interest have soared and plummeted, rules have been relaxed and tightened and relaxed again, and the market continues to move forward.Currently, index futures trade on the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a>, the CSI500 Index, and the <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50 Index (SSE50 INDEX)</a>. There are no published statistics on the share of volume and open interest held by institutional and non-institutional investors, so we take a stab at trying to figure out broadly what it could be.Our analysis indicates that till mid 2015, most of the volume traded was driven by retail investors and they held a lions share of open interest too. Post the market crash and subsequent resurgence, retail investors share of volume traded and open interest has likely dropped substantially due to the market entry of more institutional investors, proprietary trading shops, and quant traders. Strategies employed by non-institutional investors mainly run counter to the retail flow and that has dampened the futures basis in the recent past.

The China equity index futures market has come a long way since index futures started to trade on the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in 2010. There have been booms and busts, volumes and open interest have soared and plummeted, rules have been relaxed and tightened and relaxed again, and the market continues to move forward.Currently, index futures trade on the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX), the CSI500 Index, and the SSE50 Index (SSE50 INDEX). There are no published statistics on the share of volume and open interest held by institutional and non-institutional investors, so we take a stab at trying to figure out broadly what it could be.Our analysis indicates that till mid 2015, most of the volume traded was driven by retail investors and they held a lions share of open interest too. Post the market crash and subsequent resurgence, retail investors share of volume traded and open interest has likely dropped substantially due to the market entry of more institutional investors, proprietary trading shops, and quant traders. Strategies employed by non-institutional investors mainly run counter to the retail flow and that has dampened the futures basis in the recent past.

China Equity Index Futures: Who Holds the Open Interest?

Hang Seng China Enterprises Index / Event-Driven

As we have said many time before, 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> 2021 and 2022 dividend futures are a structural sell due to changes to the index composition that will lower the fair value of the futures.There were 18 inclusions and 17 deletions 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> in 2020 with a shift from higher dividend yield Financials and Energy stocks to lower dividend yield stocks (or zero dividend yield stocks) from the Consumer Discretionary and Information Technology sectors.We see this trend continuing in 2021 with quite a few changes front-loaded that will affect the fair value of the HSCEI 2021 dividend futures. More changes at the back end along with potential changes to the index methodology could lower the fair value of the HSCEI 2022 dividend futures too.In this Insight, we lay out the possible changes to the index constituents and to 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> methodology that will impact the dividend futures.

As we have said many time before, the Hang Seng China Enterprises Index (HSCEI INDEX) 2021 and 2022 dividend futures are a structural sell due to changes to the index composition that will lower the fair value of the futures.There were 18 inclusions and 17 deletions from the Hang Seng China Enterprises Index (HSCEI INDEX) in 2020 with a shift from higher dividend yield Financials and Energy stocks to lower dividend yield stocks (or zero dividend yield stocks) from the Consumer Discretionary and Information Technology sectors.We see this trend continuing in 2021 with quite a few changes front-loaded that will affect the fair value of the HSCEI 2021 dividend futures. More changes at the back end along with potential changes to the index methodology could lower the fair value of the HSCEI 2022 dividend futures too.In this Insight, we lay out the possible changes to the index constituents and to the Hang Seng China Enterprises Index (HSCEI INDEX) methodology that will impact the dividend futures.

HSCEI Dividends - Structural Sell; Bank Dividends the Swing Factor

There are a lot of changes expected to 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> over the next 6 months.<a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a> lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a>, JD Logistics, <a href="https://www.smartkarma.com/entities/bytedance-technology" target="_blank" data-smartkarma-citation="entities:27936:1" rel="noopener">ByteDance (1460967D CH)</a>'s Douyin and a possible revival of the shelved <a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Group (6688 HK)</a> IPO.Then there is the possibility of some large 'homecoming' listings getting included in 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> over the next few reviews. <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> and <a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili Inc (BILI US)</a> as other names on the list.In this Insight, we lay out the potential roadmap of upcoming changes to 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> along with the impact on the stocks.

There are a lot of changes expected to the Hang Seng China Enterprises Index (HSCEI INDEX) over the next 6 months.Kuaishou Technology (1024 HK) lists on 5 February and we expect the stock to get Fast Entry to the index with the change implemented at the close of trading on 22 February.The Hang Seng Indexes Company Limited (HSIL) will announce the results of the March 2021 review of the Hang Seng Family of Indexes on 26 February. The constituent changes will be effective after the close of trading on 12 March. We expect 1 inclusion and 3 exclusions at the review.At the current time, we expect 3 changes at the June 2021 review. There are a few stocks that are close adds and deletes and the actual number of changes could be higher.There are a few large IPOs that could take place this year that could get those stocks Fast Entry/ regular entry into the index. The main ones are DiDi Chuxing (1284375D CH), JD Logistics, ByteDance (1460967D CH)'s Douyin and a possible revival of the shelved Ant Group (6688 HK) IPO.Then there is the possibility of some large 'homecoming' listings getting included in the Hang Seng China Enterprises Index (HSCEI INDEX) over the next few reviews. Baidu (BIDU US) is rumored to have picked banks and is said to plan a listing in Hong Kong in the first half of the year, with Pinduoduo (PDD US) and Bilibili Inc (BILI US) as other names on the list.In this Insight, we lay out the potential roadmap of upcoming changes to the Hang Seng China Enterprises Index (HSCEI INDEX) along with the impact on the stocks.

HSCEI Index Rebalances - The Year of the Ox and of More Change

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: Three Adds; Market Consultation Conclusions on 1 March

There are 3 inclusions to the HSI - Ali Health, Longfor Prop and Haidilao. With 10 days to implementation, the stocks should outperform....

Brian Freitas

SPX Hit 3,800 Long Risk Support

We called for covering short exposure and putting on risk in our bull group near SPX 3,800 support (hit 3,804.75) for the bull case from SPX wedge...

Thomas Schroeder

China Equity Index Futures: Who Holds the Open Interest?

We look at the change in the market landscape for the index futures in China and try to ascertain if retail investors still hold sway or if that...

Brian Freitas

HSCEI Dividends - Structural Sell; Bank Dividends the Swing Factor

We see downside in the HSCEI 2021 and 2022 div futures due to changes in the index composition and potential changes in the index methodology....

Brian Freitas

HSCEI Index Rebalances - The Year of the Ox and of More Change

There will be a lot of changes to the HSCEI this year that will impact the sectoral composition and open up trading opportunities on the stocks and...

Brian Freitas