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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>Member of the Hang Seng Composite Index (HSCI) are included in the Southbound Stock Connect program if their market cap exceeds HK$5bn. However, Secondary Listings and Biotech stocks that listed under Chapter 18A of the Listing Rules were excluded from the Stock Connect program.</p><p>This headline "*H.K. TO INCLUDE SECONDARY-LISTED COS IN STOCK CONNECT: SING TAO" could drive stocks that are HSCI members but not a part of Stock Connect higher. If Chapter 18A listed Biotech stocks are added to Stock Connect, they could run even more.</p><p>In this Insight, we take a look at stocks that are a part of the HSCI or are expected to join the HSCI in the next review and could be eligible to be included in the Stock Connect program.</p>

Member of the Hang Seng Composite Index (HSCI) are included in the Southbound Stock Connect program if their market cap exceeds HK$5bn. However, Secondary Listings and Biotech stocks that listed under Chapter 18A of the Listing Rules were excluded from the Stock Connect program.This headline "*H.K. TO INCLUDE SECONDARY-LISTED COS IN STOCK CONNECT: SING TAO" could drive stocks that are HSCI members but not a part of Stock Connect higher. If Chapter 18A listed Biotech stocks are added to Stock Connect, they could run even more.In this Insight, we take a look at stocks that are a part of the HSCI or are expected to join the HSCI in the next review and could be eligible to be included in the Stock Connect program.

Stock Connect - Secondary Listings and Biotech Stocks to Become Eligible?

<p><a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> has <a href="http://www.iporesults.hkex.com.hk/listedco/listconews/sehk/2020/1118/9516503/2020111800032.pdf" target="_blank" rel="noopener">announced</a> that the offer price has been determined at HK$11.60/share and trading will start on 19 November. The offer price is the middle of the indicated range of HK$10.55-12.65 per share.</p><p>Based on the offer price of HK$11.6/share, the net proceeds from the global offering are estimated to be HK$7,859.7m. The company will receive additional net proceeds of HK$1,182.5m if the overallotment option is exercised.</p><p><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> trackers will receive shares in <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> by virtue of their holding of <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a>. We estimate passive trackers will need to sell around 1.1m shares at the close of trading on 19 November, though some of the selling could be done prior to the close.</p><p>Index arb traders will need to adjust their index compositions since the traded price of <a href="https://www.smartkarma.com/entities/sunac-services-holdings" target="_blank" data-smartkarma-citation="entities:29239:1" rel="noopener">Sunac Services (1516 HK)</a> will be used in the calculation of 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> level and will result in the index moving 1.5bps higher.</p>

Sunac Services (1516 HK) has announced that the offer price has been determined at HK$11.60/share and trading will start on 19 November. The offer price is the middle of the indicated range of HK$10.55-12.65 per share.Based on the offer price of HK$11.6/share, the net proceeds from the global offering are estimated to be HK$7,859.7m. The company will receive additional net proceeds of HK$1,182.5m if the overallotment option is exercised.Hang Seng China Enterprises Index (HSCEI INDEX) trackers will receive shares in Sunac Services (1516 HK) by virtue of their holding of Sunac China Holdings (1918 HK). We estimate passive trackers will need to sell around 1.1m shares at the close of trading on 19 November, though some of the selling could be done prior to the close.Index arb traders will need to adjust their index compositions since the traded price of Sunac Services (1516 HK) will be used in the calculation of the Hang Seng China Enterprises Index (HSCEI INDEX) level and will result in the index moving 1.5bps higher.

Sunac Services (1516 HK) - Listing Tomorrow; Passives Need to Sell at the Close

<p>The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 13 November. The constituent changes will be effective after the close of trading on 4 December.</p><p>For the Hang Seng TECH Index, there are 2 inclusions and 2 exclusions.</p><p>The inclusions are <a href="https://www.smartkarma.com/entities/ming-yuan-cloud-group" target="_blank" data-smartkarma-citation="entities:29268:1" rel="noopener">Ming Yuan Cloud Group (909 HK)</a> and <a href="https://www.smartkarma.com/entities/archosaur-games" target="_blank" data-smartkarma-citation="entities:28948:1" rel="noopener">Archosaur Games (9990 HK)</a>, while the deletions are <a href="https://www.smartkarma.com/entities/hengten-networks-group-ltd" target="_blank" data-smartkarma-citation="entities:3296:1" rel="noopener">HengTen Ltd (136 HK)</a> and <a href="https://www.smartkarma.com/entities/netdragon-websoft-inc" target="_blank" data-smartkarma-citation="entities:3703:1" rel="noopener">Netdragon Websoft (777 HK)</a>.</p><p> One way turnover is 7.97% due to the inclusions/ exclusions, capping, and free float changes.</p><p>Both inclusions have 0.67 days of ADV to buy, <a href="https://www.smartkarma.com/entities/hengten-networks-group-ltd" target="_blank" data-smartkarma-citation="entities:3296:1" rel="noopener">HengTen Ltd (136 HK)</a> has 0.6 days of ADV to sell, while <a href="https://www.smartkarma.com/entities/netdragon-websoft-inc" target="_blank" data-smartkarma-citation="entities:3703:1" rel="noopener">Netdragon Websoft (777 HK)</a> has 1 day of ADV to sell.</p>

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 13 November. The constituent changes will be effective after the close of trading on 4 December.For the Hang Seng TECH Index, there are 2 inclusions and 2 exclusions.The inclusions are Ming Yuan Cloud Group (909 HK) and Archosaur Games (9990 HK), while the deletions are HengTen Ltd (136 HK) and Netdragon Websoft (777 HK). One way turnover is 7.97% due to the inclusions/ exclusions, capping, and free float changes.Both inclusions have 0.67 days of ADV to buy, HengTen Ltd (136 HK) has 0.6 days of ADV to sell, while Netdragon Websoft (777 HK) has 1 day of ADV to sell.

Hang Seng TECH Index Rebalance: Two Changes as Assets Continue to Grow

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/yihai-int-l-holding-ltd" target="_blank" data-smartkarma-citation="entities:22803:1" rel="noopener">Yihai Int’L Holding (1579 HK)</a>, <a href="https://www.smartkarma.com/entities/haier-electronics-group-co" target="_blank" data-smartkarma-citation="entities:4877:1" rel="noopener">Haier Electronics Group Co (1169 HK)</a> and <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> while there was short covering on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>. Shorts increased in Industrials, Consumer Discretionary and Real Estate stocks and decreased in Financial names.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/square-enix-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15003:1" rel="noopener">Square Enix Holdings (9684 JP)</a>, <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" data-smartkarma-citation="entities:3700:1" rel="noopener">Anritsu Corp (6754 JP)</a>, <a href="https://www.smartkarma.com/entities/casio-computer-co-ltd" target="_blank" data-smartkarma-citation="entities:18338:1" rel="noopener">Casio Computer (6952 JP)</a> and <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha Holdings (3391 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 Inc (2413 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a> and <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">Ana Holdings (9202 JP)</a>. Sectorally, shorts increased on Communication Services, Health Care and Information Technology, while shorts were covered on Consumer Discretionary and Financials.</p></div><div><p>In Korea, the biggest increase in shorts was on <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a>, while shorts were covered on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a> and <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>. News <a href="https://www.businesskorea.co.kr/news/articleView.html?idxno=54911" target="_blank" rel="noopener">reports</a> have indicated that the FSC will lift the temporary short sell ban on 15 March 2021 and will apply to all stocks irrespective of market cap. Earlier reports had indicated that the short sell ban would stay in place for small cap stocks.</p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">Au Optronics (2409 TT)</a>, <a href="https://www.smartkarma.com/entities/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a>, <a href="https://www.smartkarma.com/entities/acer-inc" target="_blank" data-smartkarma-citation="entities:15726:1" rel="noopener">Acer Inc (2353 TT)</a> and <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>  while shorts were covered on <a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> and <a href="https://www.smartkarma.com/entities/walsin-technology-corp" target="_blank" data-smartkarma-citation="entities:11084:1" rel="noopener">Walsin Technology (2492 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Alibaba Group (9988 HK), Yihai Int’L Holding (1579 HK), Haier Electronics Group Co (1169 HK) and HKEX (388 HK) while there was short covering on Tencent Holdings (700 HK), Ping An Insurance (H) (2318 HK), Meituan (3690 HK) and NetEase (9999 HK). Shorts increased in Industrials, Consumer Discretionary and Real Estate stocks and decreased in Financial names.In Japan, stocks that saw the most shorts were Square Enix Holdings (9684 JP), Anritsu Corp (6754 JP), Casio Computer (6952 JP) and Tsuruha Holdings (3391 JP) while shorts decreased on M3 Inc (2413 JP), Canon Inc (7751 JP), Rakuten Inc (4755 JP) and Ana Holdings (9202 JP). Sectorally, shorts increased on Communication Services, Health Care and Information Technology, while shorts were covered on Consumer Discretionary and Financials.In Korea, the biggest increase in shorts was on Netmarble Corporation (251270 KS), while shorts were covered on Samsung Electronics (005930 KS), SK Innovation (096770 KS), Hyundai Motor Co (005380 KS) and Celltrion Inc (068270 KS). News reports have indicated that the FSC will lift the temporary short sell ban on 15 March 2021 and will apply to all stocks irrespective of market cap. Earlier reports had indicated that the short sell ban would stay in place for small cap stocks.Stocks in Taiwan that saw the highest increase in shorts were Au Optronics (2409 TT), Innolux Corp (3481 TT), Acer Inc (2353 TT) and TSMC (2330 TT)  while shorts were covered on Novatek Microelectronics Corp (3034 TT), Yageo Corporation (2327 TT), Largan Precision (3008 TT) and Walsin Technology (2492 TT).

Asia Short Interest Weekly: Shorts Continue to Rise in HK, Japan & Taiwan; Korea Ban to Be Lifted

China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul>
<li>
<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> just reported strong 3Q20 results, easily beating the consensus estimate. 3Q20 net income of HK$3,347mn is up 13% quarter-over-quarter, 52% year-over-year. 9M20 net income HK$8,580mn grows 16% year-over-year. 9M20 EPS HK$ 6.80 grows 15% from EPS HK$ 5.92 same period last year.</li>
<li>The strong result is driven by the record trading activities on cash market. Securities ADT improved 24% quarter-over-quarter; trading was strong +25% quarter-over-quarter and settlement fees jumped +33% quarter-over-quarter. Investment income was also better-than-expected.</li>
<li>We are encouraged by the progress of Chinese ADR dual-listing at Hong Kong. We observed continuous trading volume migration to <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> from other venue, and ADR conversion to Hong Kong-listed shares. We expect MSCI China A-share futures will be announced soon and strong trading activities to year end. Our TP for <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> remains at HK$ 400.</li>
</ul>



HKEX (388 HK) just reported strong 3Q20 results, easily beating the consensus estimate. 3Q20 net income of HK$3,347mn is up 13% quarter-over-quarter, 52% year-over-year. 9M20 net income HK$8,580mn grows 16% year-over-year. 9M20 EPS HK$ 6.80 grows 15% from EPS HK$ 5.92 same period last year.
The strong result is driven by the record trading activities on cash market. Securities ADT improved 24% quarter-over-quarter; trading was strong +25% quarter-over-quarter and settlement fees jumped +33% quarter-over-quarter. Investment income was also better-than-expected.
We are encouraged by the progress of Chinese ADR dual-listing at Hong Kong. We observed continuous trading volume migration to HKEX (388 HK) from other venue, and ADR conversion to Hong Kong-listed shares. We expect MSCI China A-share futures will be announced soon and strong trading activities to year end. Our TP for HKEX (388 HK) remains at HK$ 400.


HKEx (388.HK): Strong 3Q20 Result, Record Performance in Cash Market and IPOs

Hong Kong

Hong Kong Exchanges & Clearing Limited owns and operates the stock exchange, futures exchange, and their related clearing houses in Hong Kong.  The Company provides the trading platforms for a range of cash and derivatives products and the facilities for processing trades.

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HKEX (388 HK)

Stock Connect - Secondary Listings and Biotech Stocks to Become Eligible?

A rule change that admits Secondary listings and Chapter 18A listed Biotech stocks to the Southbound Stock Connect could see Alibaba, JD and...

Brian Freitas

Sunac Services (1516 HK) - Listing Tomorrow; Passives Need to Sell at the Close

Sunac Services has issued shares at HKD 11.6 and starts to trade tomorrow. HSCEI trackers will receive 1.1m shares of Sunac Services that they will...

Brian Freitas

Hang Seng TECH Index Rebalance: Two Changes as Assets Continue to Grow

The first review of the Hang Seng TECH index has 2 inclusions and 2 deletions. Assets benchmarked to the index are north of US$1.1bn and will...

Brian Freitas

Asia Short Interest Weekly: Shorts Continue to Rise in HK, Japan & Taiwan; Korea Ban to Be Lifted

Short interest continued to increase in HK, Japan and Taiwan, while the FSC has announced that the short sell ban in Korea will be lifted on 15...

Brian Freitas

HKEx (388.HK): Strong 3Q20 Result, Record Performance in Cash Market and IPOs

HKEx: Strong 3Q20 Result, Record Performance in Cash Market and IPOs. We expect HKEx will finish Q4 with record performance and remain bullish on...

Roger Xie

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