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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

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 20 August. The constituent changes will be effective after the close of trading on 3 September.For 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>, there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> while the deletions are <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a> and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>. One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.<a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> was a forecast inclusion 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> but was not expected to be included 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>. Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.<a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) while the deletions are Shimao Property Holdings (813 HK) and Anhui Conch Cement (914 HK). One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, Alibaba Group (9988 HK)'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.Li Ning Co Ltd (2331 HK) was a forecast inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) but was not expected to be included in the Hong Kong Hang Seng Index (HSI INDEX). Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.JD Logistics (2618 HK) is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

China and US Equity Analyst

Roger Xie

Cross Asset Strategy

<ul>
<li>China’s tech sector has been in the spotlight in recent days. Beijing has released a series of rules aiming to remake private education and tech sectors. to curb cost pressure and better serve ordinary people.  we believe the magnitude of policy change on private education sector is unprecedent, which could surprise investors. This negative sentiments further spurs the fear of  anti-trust and unfair competition scrutiny on China Internet sector. It has led to capital flight from China tech sector. <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> has declined 40% from its high in February this year.</li>
<li>In the newly released policy, the State Council banned foreign capital from investing in education institutions through any approach, including VIE (Variable Interest Entity) structure. This has led to investor concerns whether the ban on foreign investments through VIE will be extended to other sectors. VIE is considered to be the foundation of offshore China ADR listing structure. Our assessment shows that the VIE structure will remain to stay, but the new oversea listings could face more scrutiny from regulators. The paradigm shift could fundamentally benefit <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> as the preferred listing venue for offshore China ADR. And the dual-listing status for many China tech giants will remain. </li>
<li>China central bank lowered bank reserve requirement ratio early this month and free up US$154bn from the system. The benchmark 10-year treasury  yield hovered around 2.9%  past few weeks indicating plenty of liquidity. Investors have been speculating that LPR (Loan Prime Rate) might be cut further to stimulate the growth. We believe structural monetary policy operations will continue. Likely, more support will be provided toward green energy, innovations and industry upgrade, but it might remain tightening for property and overcapacity sectors. The upcoming Politburo Meeting in end of July could give more hints about monetary policy stance. More than 40% of China A-share companies have released their 1H earning preview, which delivered 120% year-over-year growth (due to low base by pandemic in 2020). We remain sanguine on China equity market outlook in 2H 2021, but would recommend more clarity on policy for China tech giants.</li>
</ul>


China’s tech sector has been in the spotlight in recent days. Beijing has released a series of rules aiming to remake private education and tech sectors. to curb cost pressure and better serve ordinary people.  we believe the magnitude of policy change on private education sector is unprecedent, which could surprise investors. This negative sentiments further spurs the fear of  anti-trust and unfair competition scrutiny on China Internet sector. It has led to capital flight from China tech sector. Hang Seng Tech Index (HSTECH INDEX) has declined 40% from its high in February this year.
In the newly released policy, the State Council banned foreign capital from investing in education institutions through any approach, including VIE (Variable Interest Entity) structure. This has led to investor concerns whether the ban on foreign investments through VIE will be extended to other sectors. VIE is considered to be the foundation of offshore China ADR listing structure. Our assessment shows that the VIE structure will remain to stay, but the new oversea listings could face more scrutiny from regulators. The paradigm shift could fundamentally benefit HKEX (388 HK) as the preferred listing venue for offshore China ADR. And the dual-listing status for many China tech giants will remain. 
China central bank lowered bank reserve requirement ratio early this month and free up US$154bn from the system. The benchmark 10-year treasury  yield hovered around 2.9%  past few weeks indicating plenty of liquidity. Investors have been speculating that LPR (Loan Prime Rate) might be cut further to stimulate the growth. We believe structural monetary policy operations will continue. Likely, more support will be provided toward green energy, innovations and industry upgrade, but it might remain tightening for property and overcapacity sectors. The upcoming Politburo Meeting in end of July could give more hints about monetary policy stance. More than 40% of China A-share companies have released their 1H earning preview, which delivered 120% year-over-year growth (due to low base by pandemic in 2020). We remain sanguine on China equity market outlook in 2H 2021, but would recommend more clarity on policy for China tech giants.


China Equity Strategy: Tug of War, Policy Uncertainty and Plenty Liquidity

Beijing Huafeng Test & Control / Event-Driven

<div>The <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">SSE STAR 50 (STAR50 INDEX)</a> is a free float market cap weighted and is made up of the 50 largest stocks based on full market cap that are listed on the STAR Market.</div><div>The review period for the September rebalance ends on 31 July, the results of the rebalance will be announced towards the end of August and the changes will be implemented at the close of trading on 10 September.</div><div>
With only 2 trading days left in the review period, we see <a href="https://www.smartkarma.com/entities/shanghai-shen-lian-biomedical" target="_blank" data-smartkarma-citation="entities:30339:1" rel="noopener">Shanghai Shen Lian Biomedical (688098 CH)</a>, <a href="https://www.smartkarma.com/entities/piesat-information-technology" target="_blank" data-smartkarma-citation="entities:30328:1" rel="noopener">Piesat Information Technology (688066 CH)</a>, <a href="https://www.smartkarma.com/entities/guangzhou-fang-bang-electr-a" target="_blank" data-smartkarma-citation="entities:30313:1" rel="noopener">Guangzhou Fang Bang Electr-A (688020 CH)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-lifotronic-techno-a" target="_blank" data-smartkarma-citation="entities:30395:1" rel="noopener">Shenzhen Lifotronic Techno-A (688389 CH)</a> and <a href="https://www.smartkarma.com/entities/appotronics-corp-ltd" target="_blank" data-smartkarma-citation="entities:28235:1" rel="noopener">Appotronics Corp Ltd (688007 CH)</a> as high probability deletions from the index.
Coming up with a definitive list of inclusions is tougher given the subjectivity of the index rules for this review. The subjectivity comes from the whether the index committee uses a minimum listing history period of 12 months or 6 months.
Higher probability inclusions (if a 12 month minimum listing history is used) are <a href="https://www.smartkarma.com/entities/eyebright-medical-technology-beijing-co-ltd" target="_blank" data-smartkarma-citation="entities:33455:1" rel="noopener">Eyebright Medical Technology Beijing (688050 CH)</a>, <a href="https://www.smartkarma.com/entities/sinocelltech-group-ltd" target="_blank" data-smartkarma-citation="entities:33456:1" rel="noopener">Sinocelltech Group (688520 CH)</a>, <a href="https://www.smartkarma.com/entities/beijing-huafeng-test-control-technology-a" target="_blank" data-smartkarma-citation="entities:30367:1" rel="noopener">Beijing Huafeng Test &amp; Control Technology-A (688200 CH)</a>, <a href="https://www.smartkarma.com/entities/zhejiang-orient-gene-biotech-a" target="_blank" data-smartkarma-citation="entities:30379:1" rel="noopener">Zhejiang Orient Gene Biotech-A (688298 CH)</a> and <a href="https://www.smartkarma.com/entities/tinavi-medical-technologies-co-ltd" target="_blank" data-smartkarma-citation="entities:33453:1" rel="noopener">Tinavi Medical Technologies (688277 CH)</a>.
Lower probability inclusions (if a 6 month minimum listing history is used) are <a href="https://www.smartkarma.com/entities/zhejiang-supcon-technology-co" target="_blank" data-smartkarma-citation="entities:33457:1" rel="noopener">Zhejiang Supcon Technology (688777 CH)</a>, <a href="https://www.smartkarma.com/entities/tianneng-battery-group-co-ltd" target="_blank" data-smartkarma-citation="entities:33458:1" rel="noopener">Tianneng Battery Group (688819 CH)</a>, <a href="https://www.smartkarma.com/entities/bestechnic-shanghai-co-ltd" target="_blank" data-smartkarma-citation="entities:33459:1" rel="noopener">Bestechnic Shanghai (688608 CH)</a>, <a href="https://www.smartkarma.com/entities/3peak-inc" target="_blank" data-smartkarma-citation="entities:33460:1" rel="noopener">3peak (688536 CH)</a> and <a href="https://www.smartkarma.com/entities/pylon-technologies-co-ltd" target="_blank" data-smartkarma-citation="entities:33153:1" rel="noopener">Pylon Technologies Co Ltd (688063 CH)</a>.
The inclusions, exclusions and capping changes will result in a one-way turnover of 8.45% and result in a one-way trade of CNY3.3bn.
</div>

The SSE STAR 50 (STAR50 INDEX) is a free float market cap weighted and is made up of the 50 largest stocks based on full market cap that are listed on the STAR Market.The review period for the September rebalance ends on 31 July, the results of the rebalance will be announced towards the end of August and the changes will be implemented at the close of trading on 10 September.
With only 2 trading days left in the review period, we see Shanghai Shen Lian Biomedical (688098 CH), Piesat Information Technology (688066 CH), Guangzhou Fang Bang Electr-A (688020 CH), Shenzhen Lifotronic Techno-A (688389 CH) and Appotronics Corp Ltd (688007 CH) as high probability deletions from the index.
Coming up with a definitive list of inclusions is tougher given the subjectivity of the index rules for this review. The subjectivity comes from the whether the index committee uses a minimum listing history period of 12 months or 6 months.
Higher probability inclusions (if a 12 month minimum listing history is used) are Eyebright Medical Technology Beijing (688050 CH), Sinocelltech Group (688520 CH), Beijing Huafeng Test &amp; Control Technology-A (688200 CH), Zhejiang Orient Gene Biotech-A (688298 CH) and Tinavi Medical Technologies (688277 CH).
Lower probability inclusions (if a 6 month minimum listing history is used) are Zhejiang Supcon Technology (688777 CH), Tianneng Battery Group (688819 CH), Bestechnic Shanghai (688608 CH), 3peak (688536 CH) and Pylon Technologies Co Ltd (688063 CH).
The inclusions, exclusions and capping changes will result in a one-way turnover of 8.45% and result in a one-way trade of CNY3.3bn.


STAR50 Index Rebalance Preview: Big Turnover in a Volatile Market

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

Asia market long ideas into weakness are challenging with short themes dominating in Japan, HK and Korea (next to buckle). ASX banks tops our long list followed by bottom digging in HK tech. Taiwan is resting on bull/bear support.A clear bear lean is noted in Asia and parts of Europe compared to the US powerhouse upcycle that is near a tactical topping zone. Our cycle work calls for a ST US top today/Monday for a dip and then upside re test in late July with August seasonality turning bearish. Asia will front run a US top.

Asia market long ideas into weakness are challenging with short themes dominating in Japan, HK and Korea (next to buckle). ASX banks tops our long list followed by bottom digging in HK tech. Taiwan is resting on bull/bear support.A clear bear lean is noted in Asia and parts of Europe compared to the US powerhouse upcycle that is near a tactical topping zone. Our cycle work calls for a ST US top today/Monday for a dip and then upside re test in late July with August seasonality turning bearish. Asia will front run a US top.

Hang Seng Indexes has increased the number of index shares and free float for <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> 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>, <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> 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 (HSTECH INDEX)</a>, with no change made to the capping factor.This will lead to an increase in the index weight for <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> and passive funds benchmarked to the indices will need to buy the stock at the close of trading on 16 July while selling the other index constituents.For July, we estimate passive funds will need to buy 45.52m shares (HK$9.34bn; 2 days of ADV) of <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>. The largest impact of passive selling in terms of days of ADV will be on <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>, <a href="https://www.smartkarma.com/entities/clp-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14433:1" rel="noopener">CLP Holdings (2 HK)</a>, <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> and <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden Holdings Co (2007 HK)</a>.However, passive funds will need to sell <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a> at the implementation of the quarterly rebalance in September when the capping factor will be lowered to cap the weight of the stock at 8% in the three indices.

Hang Seng Indexes has increased the number of index shares and free float for Alibaba Group (9988 HK) in the Hong Kong Hang Seng Index (HSI INDEX), Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX), with no change made to the capping factor.This will lead to an increase in the index weight for Alibaba Group (9988 HK) and passive funds benchmarked to the indices will need to buy the stock at the close of trading on 16 July while selling the other index constituents.For July, we estimate passive funds will need to buy 45.52m shares (HK$9.34bn; 2 days of ADV) of Alibaba Group (9988 HK). The largest impact of passive selling in terms of days of ADV will be on HSBC Holdings (5 HK), CLP Holdings (2 HK), China Construction Bank H (939 HK), Hang Lung Properties (101 HK) and Country Garden Holdings Co (2007 HK).However, passive funds will need to sell Alibaba Group (9988 HK) at the implementation of the quarterly rebalance in September when the capping factor will be lowered to cap the weight of the stock at 8% in the three indices.

Alibaba (9988 HK): Passive Inflow from HSI, HSCEI, HSTECH Trackers in July

Hong Kong

The Hang Seng TECH Index aims to represent the 30 largest technology companies listed in Hong Kong which have high business exposure to the Innovative Tech Themes.

Hang Seng TECH Index (HSTECH INDEX EQUITY)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hang Seng TECH Index (HSTECH INDEX EQUITY)

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

Li Ning and JD Logistics have been added to the HSCEI while Anhui Conch and Shimao Prop have been deleted. Alibaba's weight in the index will be...

Brian Freitas

China Equity Strategy: Tug of War, Policy Uncertainty and Plenty Liquidity

We remain sanguine on China equity market outlook in 2H 2021 given the earning growth and plenty liquidity, but would wait for more clarity on...

Roger Xie

STAR50 Index Rebalance Preview: Big Turnover in a Volatile Market

We see 5 changes at the September rebalance and expect CSI/SSE to use a 12 month minimum listing history. One way turnover is around 8.45% and most...

Brian Freitas

Asia Long/Short Trades

Asia market short themes dominating in Japan, HK and Korea (next to buckle). ASX banks tops our long list followed by bottom digging in HK tech....

Thomas Schroeder

Alibaba (9988 HK): Passive Inflow from HSI, HSCEI, HSTECH Trackers in July

Following an increase in the number of CCASS shares and free float, Alibaba's index shares will be increased. Passive HSI/ HSCEI/ HSTECH trackers...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)