Senior Equity Derivatives Trader

Simon Harris

Event-Driven

<ul>
<li>Weekly summary of vol changes and moves across Global Markets</li>
<li>Analysing ATM volatility and skew changes over the last 5 days</li>
<li>We suggest a few trades to take advantage of the implied vol surfaces</li>
</ul>


Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces


EQD | Volatility Update: A Look at Global Indices - What Trades Make Sense?

Asia biased macro & technical analysis, Untying The Gordian Knot

Untying The Gordian Knot

Asia biased macro & technical analysis

A differentiated process with a primary focus on Asia. Technical Analysis as core and Macro drivers that could bring the view to fruition & changes that could make the idea fall apart. The objective is to be the best in class, hence corner shop.

Technical Analysis

Xinyi Solar Holdings / Technical Analysis

<ul><li>The main drivers for Hong Kong stock rallies are short covering, buybacks, and China government real estate support measures announcements.</li><li>Hang Seng Index and most of its constituents continue to read like bear porn. Without a meaningful reversal/impulse rally, it is hard to call for a reversal.</li><li>I hear and agree the case is so bad that it must be a buy signal. The sentiment is precious, BUT it needs a price action supporting the exhaustion thesis.</li></ul>

The main drivers for Hong Kong stock rallies are short covering, buybacks, and China government real estate support measures announcements.Hang Seng Index and most of its constituents continue to read like bear porn. Without a meaningful reversal/impulse rally, it is hard to call for a reversal.I hear and agree the case is so bad that it must be a buy signal. The sentiment is precious, BUT it needs a price action supporting the exhaustion thesis.

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>On 27 May, the SFC and CSRC announced that they had agreed in principle to the inclusion of Exchange Traded Funds by mainland and Hong Kong exchanges in Stock Connect.</li>
<li>We currently see 6 ETF being eligible for inclusion in Southbound Connect and another couple that could be included at a subsequent review.</li>
<li>Increased mainland participation in the ETF market could lead to sustained premium/discount on the ETFs and this will be transmitted to index futures and affect pricing of short-term/long-term repo.</li>
</ul>


On 27 May, the SFC and CSRC announced that they had agreed in principle to the inclusion of Exchange Traded Funds by mainland and Hong Kong exchanges in Stock Connect.
We currently see 6 ETF being eligible for inclusion in Southbound Connect and another couple that could be included at a subsequent review.
Increased mainland participation in the ETF market could lead to sustained premium/discount on the ETFs and this will be transmitted to index futures and affect pricing of short-term/long-term repo.


ETFs in Stock Connect: Criteria & Potential Southbound Inclusions

Founder of Antler Capital

Stanley Tsai, CFA

Macroeconomics

<ul>
<li>In the absence of an outright LPR cut later this month, the latest RRR move's impact on the real economy may be rather modest. </li>
<li>Assuming CNY500bn of MLFs will be withdrawn in the coming months, the net injection this time around is CNY700bn, about 40% of an average month's new loans.</li>
<li>We would watch out for a potential bubble in the onshore credit market before incremental liquidity benefits the broader economy.</li>
</ul>


In the absence of an outright LPR cut later this month, the latest RRR move's impact on the real economy may be rather modest. 
Assuming CNY500bn of MLFs will be withdrawn in the coming months, the net injection this time around is CNY700bn, about 40% of an average month's new loans.
We would watch out for a potential bubble in the onshore credit market before incremental liquidity benefits the broader economy.


China Macro: RRR Cuts' Diminishing Impact

<ul>
<li>Media reports indicate that <a href="https://www.smartkarma.com/entities/walmart-inc" target="_blank" data-smartkarma-citation="entities:11134:1" rel="noopener">Walmart (WMT US)</a> is looking to sell 144.5m shares of <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com (JD US)</a> to raise up to US$3.74bn. That would be substantially all of its stake.</li>
<li>There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.</li>
<li>There will be no passive buying from <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a> and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.</li>
</ul>


Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.


JD.com (9618 HK): Index Implications of Walmart Placement

Hong Kong

The Hang Seng Index is a free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindices: Commerce and Industry, Finance, Utilities, and Properties. The index was developed with a base level of 100 as of July 31, 1964.

Hang Seng Index (HSI INDEX)

EQD | Volatility Update: A Look at Global Indices - What Trades Make Sense?

A brief look at global vol changes over the last week, analysing vol and skew moves. We identify some trades that make sense based on the shape of...

Simon Harris

Xinyi Solar, BYD, and Bank of China

The main drivers for Hong Kong stock rallies are short covering, buybacks, and China government real estate support measures announcements.

Untying The Gordian Knot

ETFs in Stock Connect: Criteria & Potential Southbound Inclusions

SFC & CSRC have agreed in principle to the inclusion of HKEX listed ETFs in Southbound Connect. We see 6 ETFs as eligible for inclusion. There will...

Brian Freitas

China Macro: RRR Cuts' Diminishing Impact

In the absence of an LPR cut, the impact of the latest RRR move may be limited. We estimate that net of MLF maturities, the liquidity boost is...

Stanley Tsai, CFA

JD.com (9618 HK): Index Implications of Walmart Placement

Walmart is looking to sell its entire stake in JD.com. The ADR is lower in the aftermarket and the HK-line is down 10.8%. Passive trackers will buy...

Brian Freitas