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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

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/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a>, <a href="https://www.smartkarma.com/entities/pccw-ltd" target="_blank" data-smartkarma-citation="entities:873:1" rel="noopener">PCCW Ltd (8 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> and <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> while there was short covering on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <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/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and <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>. Shorts increased in Communication Services, Consumer Staples and Financials stocks and decreased in Consumer Discretionary names.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/nexon-co-ltd" target="_blank" data-smartkarma-citation="entities:16032:1" rel="noopener">Nexon (3659 JP)</a>, <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>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">Sbi Holdings (8473 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/familymart-co-ltd" target="_blank" data-smartkarma-citation="entities:320:1" rel="noopener">FamilyMart Co Ltd (8028 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-group-inc" target="_blank" data-smartkarma-citation="entities:217:1" rel="noopener">Sumitomo Mitsui Financial Group (8316 JP)</a> and <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>. Sectorally, shorts increased on Communication Services, while shorts were covered on Information Technology and Consumer Staples names.</p></div><div><p>Shorts increased in Korea for the week. Biggest increase in shorts were 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-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-household-health-care" target="_blank" data-smartkarma-citation="entities:6501:1" rel="noopener">LG Household &amp; Health Care (051900 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> and <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <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>, <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/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/catcher-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:4957:1" rel="noopener">Catcher Technology (2474 TT)</a> while shorts were covered on <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>, <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a>, <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> and <a href="https://www.smartkarma.com/entities/ta-chen-stainless-pipe-co" target="_blank" data-smartkarma-citation="entities:2519:1" rel="noopener">Ta Chen Stainless Pipe Co (2027 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 ICBC (H) (1398 HK), PCCW Ltd (8 HK), China Construction Bank H (939 HK) and Ping An Insurance (H) (2318 HK) while there was short covering on Meituan (3690 HK), Alibaba Group (9988 HK), HKEX (388 HK) and HSBC Holdings (5 HK). Shorts increased in Communication Services, Consumer Staples and Financials stocks and decreased in Consumer Discretionary names.In Japan, stocks that saw the most shorts were Nexon (3659 JP), Ana Holdings (9202 JP), Fast Retailing (9983 JP) and Sbi Holdings (8473 JP) while shorts decreased on FamilyMart Co Ltd (8028 JP), Toshiba Corp (6502 JP), Sumitomo Mitsui Financial Group (8316 JP) and Advantest Corp (6857 JP). Sectorally, shorts increased on Communication Services, while shorts were covered on Information Technology and Consumer Staples names.Shorts increased in Korea for the week. Biggest increase in shorts were on Samsung Electronics (005930 KS), SK Hynix (000660 KS), LG Household &amp; Health Care (051900 KS), LG Chem Ltd (051910 KS) and Naver Corp (035420 KS). Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), Au Optronics (2409 TT), Acer Inc (2353 TT) and Catcher Technology (2474 TT) while shorts were covered on Walsin Technology (2492 TT), Nanya Technology (2408 TT), Novatek Microelectronics Corp (3034 TT) and Ta Chen Stainless Pipe Co (2027 TT). 

Asia Short Interest Weekly: ICBC, PCCW, Meituan, HKEX, Nexon, FamilyMart, Samsung, TSMC, Acer

Event-Driven

<p>On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of <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>, <a href="https://www.hkex.com.hk/News/Regulatory-Announcements/2020/201030news?sc_lang=en" target="_blank" rel="noopener">published</a> the conclusions to its consultation on the Corporate WVR beneficiaries.</p><p>The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.</p><p>Qualifying corporate WVR issuers will need to meet the following requirements:</p><ul>
<li>a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.</li>
<li>be an 'innovative company' as part of the suitability for listing</li>
<li>demonstrate that the laws, rules and regulations provide certain shareholder protection standards</li>
</ul><p>The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.</p><p>This paves the way for <a href="https://www.smartkarma.com/entities/tencent-music-entertainment" target="_blank" data-smartkarma-citation="entities:27255:1" rel="noopener">Tencent Music (TME US)</a> and <a href="https://www.smartkarma.com/entities/iqiyi-inc" target="_blank" data-smartkarma-citation="entities:26755:1" rel="noopener">iQIYI Inc (IQ US)</a>, among others, to pursue a secondary listing on the <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>. </p>

On Friday evening, the Stock Exchange of Hong Kong Limited (SEHK), a wholly-owned subsidiary of HKEX (388 HK), published the conclusions to its consultation on the Corporate WVR beneficiaries.The SEHK will treat Greater China issuers that are controlled by corporate Weighted Voting Rights (WVRR) beneficiaries and have a primary listing on a Qualifying Exchange in the same manner as current grandfathered Greater China issuers. The cut-off date for the grandfathered issues is 30 October 2020.Qualifying corporate WVR issuers will need to meet the following requirements:
a minimum market cap threshold of at least HK$40bn, or a market cap of at least HK$10bn and revenue of at least HK$1bn in its most recent audited financial year.
be an 'innovative company' as part of the suitability for listing
demonstrate that the laws, rules and regulations provide certain shareholder protection standards
The secondary listing applicant would also need to demonstrate that it is controlled by a single corporate WVR beneficiary, or a group of corporate beneficiaries acting in concert, controlling at least 30% of the total shareholder votes.This paves the way for Tencent Music (TME US) and iQIYI Inc (IQ US), among others, to pursue a secondary listing on the HKEX (388 HK). 

Conclusions of the Corporate WVR Consultation: Small Changes for Now

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<ul>
<li>Allocations in Asian Financials stocks have fallen to all-time lows in Asia Ex-Japan active portfolios this year.</li>
<li>Fund managers move to underweight following $3bn in net outflows.</li>
<li>Managers exit ASEAN banks, weights drop in China banks. </li>
<li>On a stock level, <a href="https://www.smartkarma.com/entities/icici-bank-ltd" target="_blank" data-smartkarma-citation="entities:547:1" rel="noopener">ICICI Bank Ltd (ICICIBC IN)</a> ,  <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> (-7.2%) and <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> are the hardest hit.</li>
</ul>


Allocations in Asian Financials stocks have fallen to all-time lows in Asia Ex-Japan active portfolios this year.
Fund managers move to underweight following $3bn in net outflows.
Managers exit ASEAN banks, weights drop in China banks. 
On a stock level, ICICI Bank Ltd (ICICIBC IN) ,  Bank Rakyat Indonesia Persero (BBRI IJ) (-7.2%) and Indusind Bank (IIB IN) are the hardest hit.


China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul style="list-style-type: disc;">
<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> September ADT (Average Daily Turnover) remain strong. This in in contrast to usual weak seasonality in trading activities into Q4. For the first 9 months this year, HKEx ADT has reaccelerated the year-over-year growth rate to 38.9% , fueled by  IPO listings and investors' sanguine view on China. </li>
<li>HKEx had a busy month for the IPO market with 9 new listings in September. The most noticeable IPOs are <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK), </a><a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings Inc (9987 HK),</a><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/joy-spreader-interactive-technology" target="_blank" data-smartkarma-citation="entities:29271:1" rel="noopener">Joy Spreader Interactive Technology (6988 HK).</a> We expect mega IPO and Chinese ADR homecoming to reshape the landscape of Hong Kong capital market. And Ant Group has just won approval from the China Securities Regulatory Commission (CSRC) for its blockbuster initial public offering in Hong Kong.</li>
<li>Derivative volumes improved 19% quarter-over-quarter in 3Q, on the back of Heng Seng Index and China Enterprises Index futures. We expect volume will be boosted by MSCI suite of products and reach critical mass in the next 12 months. A-share futures should be the most important driver of HKEx derivative volume. We estimate that MSCI China A-share future could contribute additional 6% revenue 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> after its launch. We remain bullish on <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> and reiterate TP of HKD 400. </li>
</ul>



HKEX (388 HK) September ADT (Average Daily Turnover) remain strong. This in in contrast to usual weak seasonality in trading activities into Q4. For the first 9 months this year, HKEx ADT has reaccelerated the year-over-year growth rate to 38.9% , fueled by  IPO listings and investors' sanguine view on China. 
HKEx had a busy month for the IPO market with 9 new listings in September. The most noticeable IPOs are Nongfu Spring (9633 HK), Yum China Holdings Inc (9987 HK),Ming Yuan Cloud Group (909 HK), and Joy Spreader Interactive Technology (6988 HK). We expect mega IPO and Chinese ADR homecoming to reshape the landscape of Hong Kong capital market. And Ant Group has just won approval from the China Securities Regulatory Commission (CSRC) for its blockbuster initial public offering in Hong Kong.
Derivative volumes improved 19% quarter-over-quarter in 3Q, on the back of Heng Seng Index and China Enterprises Index futures. We expect volume will be boosted by MSCI suite of products and reach critical mass in the next 12 months. A-share futures should be the most important driver of HKEx derivative volume. We estimate that MSCI China A-share future could contribute additional 6% revenue for HKEX (388 HK) after its launch. We remain bullish on HKEX (388 HK) and reiterate TP of HKD 400. 


HKEx (388.HK): September Trading Volume Indicated Strong Activities Trend into Q4

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<p><strong><em>*</em></strong><strong><em> Peak Value:</em></strong>So much value has been derived again on hope for the shares of Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx], which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. Cash and derivative volumes are also higher on HKEx YOY by 39% and 5%, respectively. As such, we witnessed HKEx’s 2020 share performance of 45.1% that has resulted in a global exchange leading valuation of 9.7x P/BV; and</p><p><strong><em>* 3Q20 Results Will Be Telling: </em></strong>HKEx will release its 3Q earnings result on November 11, 2020. <em>While its fund to hope and dream, the reality is that e</em>quity turnover velocity and volumes on HKEX have declined on the back of weaker price volatility. Cash equity ADTV has declined from a high of HKD 165 bn in July to HKD 135 bn in August to lower still at HKD 123 bn during September. The October figure to date has declined another 21.9% MOM to HKD 95 bn. Volume weakness was also seen in derivatives contracts from a July peak of 1.4 mn ADTV to 1.0 mn during Aug/Sep). To put these declines into perspective, volumes in the cash equity and derivatives amount to over 50% of HKEx's revenue.</p>

* Peak Value:So much value has been derived again on hope for the shares of Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx], which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. Cash and derivative volumes are also higher on HKEx YOY by 39% and 5%, respectively. As such, we witnessed HKEx’s 2020 share performance of 45.1% that has resulted in a global exchange leading valuation of 9.7x P/BV; and* 3Q20 Results Will Be Telling: HKEx will release its 3Q earnings result on November 11, 2020. While its fund to hope and dream, the reality is that equity turnover velocity and volumes on HKEX have declined on the back of weaker price volatility. Cash equity ADTV has declined from a high of HKD 165 bn in July to HKD 135 bn in August to lower still at HKD 123 bn during September. The October figure to date has declined another 21.9% MOM to HKD 95 bn. Volume weakness was also seen in derivatives contracts from a July peak of 1.4 mn ADTV to 1.0 mn during Aug/Sep). To put these declines into perspective, volumes in the cash equity and derivatives amount to over 50% of HKEx's revenue.

Hong Kong Exchanges & Clearing – Fully Discounted

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)

Asia Short Interest Weekly: ICBC, PCCW, Meituan, HKEX, Nexon, FamilyMart, Samsung, TSMC, Acer

We highlight the largest changes in short interest on stocks across Hong Kong, Japan, Korea and Taiwan to provide insight into the positions being...

Brian Freitas

Conclusions of the Corporate WVR Consultation: Small Changes for Now

The HKEX has published the conclusions of the consultation on corporate WVR beneficiaries. There are no major changes, but the proposed changes...

Brian Freitas

Asia Ex-Japan Financials: Long Drop

Allocations in Financial stocks drop to all-time lows in Asia Ex-Japan active funds. Financials now key underweight holding, led by selling in the...

Steven Holden

HKEx (388.HK): September Trading Volume Indicated Strong Activities Trend into Q4

We expect Hong Kong Exchange has strong trading activities in Q4, in contrast to usual weak seasonality. Now is a better time to go long on HKEx...

Roger Xie

Hong Kong Exchanges & Clearing – Fully Discounted

Hong Kong Exchanges & Clearing: Alot of Positives Surrounding China Opportunity Has Pushed Shares 45% Higher In 2020, But Recent Fundamentals Would...

Thomas J. Monaco

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