Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> is a blue-chip index that represents the performance of the large cap stocks listed in the Hong Kong Stock Exchange.</li>
<li>The index is undergoing some significant composition changes and the index provider currently uses a highly subjective constituent selection process which is quite challenging to decode.</li>
<li>In this insight, we take a look at Quiddity's approach to solving this Hang Seng constituent selection puzzle and the historical performance of past rebalance events.</li>
</ul>


The Hang Seng Index (HSI INDEX) is a blue-chip index that represents the performance of the large cap stocks listed in the Hong Kong Stock Exchange.
The index is undergoing some significant composition changes and the index provider currently uses a highly subjective constituent selection process which is quite challenging to decode.
In this insight, we take a look at Quiddity's approach to solving this Hang Seng constituent selection puzzle and the historical performance of past rebalance events.


Quiddity Primer: The Ongoing Evolution of the Hang Seng Index

Founder of Antler Capital

Stanley Tsai, CFA

Thematic (Sector/Industry)

<ul>
<li>The Jan. PMI readings corroborate what investors had already known over the break. But it is noteworthy that SMEs appear much less upbeat than large corporations.  </li>
<li>SMEs account for 60% of GDP and an even higher proportion of job creation. Policy support has been keeping many of them afloat throughout the pandemic. </li>
<li>As the deadline on the PBOC's SME support program is fast approaching, small regional banks may bear the brunt of the impact on the financial system.</li>
</ul>


The Jan. PMI readings corroborate what investors had already known over the break. But it is noteworthy that SMEs appear much less upbeat than large corporations.  
SMEs account for 60% of GDP and an even higher proportion of job creation. Policy support has been keeping many of them afloat throughout the pandemic. 
As the deadline on the PBOC's SME support program is fast approaching, small regional banks may bear the brunt of the impact on the financial system.


China's Micro Loan Market: Key Takeaways from the Jan PMI

<ul>
<li>The PBOC has extended the use of its policy tools to support the green loan industry as part of the country's' drive towards carbon neutrality.</li>
<li>China's green loan market is already the largest in the world, if you agree with its definitions and can look past its limitations.</li>
<li>The state of green finance matters to investors, and not just those with explicit ESG mandates. We look at the potential pitfalls in the China.</li>
</ul>


The PBOC has extended the use of its policy tools to support the green loan industry as part of the country's' drive towards carbon neutrality.
China's green loan market is already the largest in the world, if you agree with its definitions and can look past its limitations.
The state of green finance matters to investors, and not just those with explicit ESG mandates. We look at the potential pitfalls in the China.


China's Green Loan Market: Fifty Shades of Green

<ul>
<li>We expect to see a strong start to the week for China financials names, with sentiments buoyed by upbeat consumer spending data over the new year holiday.</li>
<li>Early signs point to relatively loose conditions in the interbank market as trading resumes across the board on Monday. The central bank's easing bias will likely continue.</li>
<li>We see more momentum for the sector ahead of Q4 earnings (brokers &gt; insurers &gt; banks). Stock selection will become more important thereafter.</li>
</ul>


We expect to see a strong start to the week for China financials names, with sentiments buoyed by upbeat consumer spending data over the new year holiday.
Early signs point to relatively loose conditions in the interbank market as trading resumes across the board on Monday. The central bank's easing bias will likely continue.
We see more momentum for the sector ahead of Q4 earnings (brokers &gt; insurers &gt; banks). Stock selection will become more important thereafter.


China Financials Weekly: Jan 30 | A Bubbly Opening

<ul>
<li>In this insight, we take a look at the potential index changes and the resultant capping flows 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> in March 2023.</li>
<li>According to our estimation, there could be one change for the HSCEI in March 2023 and there could be one-way index flows of US$440mn.</li>
<li>The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.</li>
</ul>


In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng China Enterprises Index (HSCEI INDEX) in March 2023.
According to our estimation, there could be one change for the HSCEI in March 2023 and there could be one-way index flows of US$440mn.
The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.


Quiddity Flow Expectations HSCEI Mar 23: One Change + Caps for Meituan, Alibaba, and Tencent

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)

Quiddity Primer: The Ongoing Evolution of the Hang Seng Index

If the index provider is serious about achieving good sector wise balance, I believe adding Healthcare Names should be top priority. I do not...

Janaghan Jeyakumar, CFA

China's Micro Loan Market: Key Takeaways from the Jan PMI

For the most part, the Jan PMI gauges were in line with investor expectations, although the more pessimistic SME sector may be a cause for concern...

Stanley Tsai, CFA

China's Green Loan Market: Fifty Shades of Green

The PBOC is stepping up its efforts to channel financing to "green" industries. But how green is green? The answer may have implications for...

Stanley Tsai, CFA

China Financials Weekly: Jan 30 | A Bubbly Opening

We expect a strong start to the week for the China financials space, after a new year holiday that confirms investors' hopes for a speedy recovery...

Stanley Tsai, CFA

Quiddity Flow Expectations HSCEI Mar 23: One Change + Caps for Meituan, Alibaba, and Tencent

In terms of days-to-trade, only the Expected ADD China Shenhua Energy Co H (1088 HK) with 1.75 days to buy and Expected DEL China Feihe (6186 HK)...

Janaghan Jeyakumar, CFA