House of Market Insights, Market Radar

Market Radar

House of Market Insights

Quick market updates and lot of ideas for your investments from a multi-asset portfolio manager working for a family office.

Quick Market Updates

Macroeconomics

<ul><li>After four difficult months for markets, May is not going very well too. At least for equity investors.</li><li>On Friday, the S&amp;P 500 has been even in bear market for a couple of hours, before to jump in the last final hour.</li><li>What is scaring investors in such a big way? There are several factors, but the newest one is the fear of an incoming global “recession”, as you can even see from the monthly Fund Manager Survey from BofA.</li></ul>

After four difficult months for markets, May is not going very well too. At least for equity investors.On Friday, the S&amp;P 500 has been even in bear market for a couple of hours, before to jump in the last final hour.What is scaring investors in such a big way? There are several factors, but the newest one is the fear of an incoming global “recession”, as you can even see from the monthly Fund Manager Survey from BofA.

Investors fearful of a possible recession

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

Event-Driven

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO Inc (9866 HK)</a> will be added to the <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> at the close on 10 June replacing <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASM Pacific Technology (522 HK)</a>.</li>
<li>We estimate passive trackers will need to buy over 9 days of ADV on <a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO Inc (9866 HK)</a> while selling 11 days of ADV on <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASM Pacific Technology (522 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO Inc (9866 HK)</a>'s inclusion in the <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> could create significant arb opportunities versus <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> on 10 June.</li>
</ul>


As expected, NIO Inc (9866 HK) will be added to the Hang Seng Tech Index (HSTECH INDEX) at the close on 10 June replacing ASM Pacific Technology (522 HK).
We estimate passive trackers will need to buy over 9 days of ADV on NIO Inc (9866 HK) while selling 11 days of ADV on ASM Pacific Technology (522 HK). 

NIO Inc (9866 HK)'s inclusion in the Hang Seng Tech Index (HSTECH INDEX) could create significant arb opportunities versus NIO Inc (NIO US) on 10 June.


Hang Seng TECH Index Rebalance: NIO (9866 HK) To Replace ASM Pacific (522 HK)

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a> will replace <a href="https://www.smartkarma.com/entities/hansoh-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:23675:1" rel="noopener">Hansoh Pharmaceutical (3692 HK)</a> 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> after the close of trading on 10 June.</li>
<li>
<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> has been kept in the index for now, though suspension till 30 June will see it deleted early July.</li>
<li>Changes to the stocks, number of shares, float and capping results in an estimated one-way turnover of 3.7% and will result in a one-way trade of HK$2,977m.</li>
</ul>


As expected, Lenovo (992 HK) will replace Hansoh Pharmaceutical (3692 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) after the close of trading on 10 June.

Sunac China Holdings (1918 HK) has been kept in the index for now, though suspension till 30 June will see it deleted early July.
Changes to the stocks, number of shares, float and capping results in an estimated one-way turnover of 3.7% and will result in a one-way trade of HK$2,977m.


HSCEI Index Rebalance: Lenovo In, Hansoh Out; Sunac Survives (For Now)

Orient Overseas International / Event-Driven

<ul>
<li>The inclusion of <a href="https://www.smartkarma.com/entities/orient-overseas-international" target="_blank" data-smartkarma-citation="entities:801:1" rel="noopener">Orient Overseas International</a>, <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group</a>, <a href="https://www.smartkarma.com/entities/semiconductor-manufacturing-international-corp-smic" target="_blank" data-smartkarma-citation="entities:14231:1" rel="noopener">Semiconductor Manufacturing International Corp (SMIC)</a> and <a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao</a> plus the deletion of <a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies Holdings</a> takes us to 69 index stocks.</li>
<li>Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover is 3.43% and will result in a one-way trade of HK$7,444m.</li>
<li>There is huge short interest on <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> and <a href="https://www.smartkarma.com/entities/china-hongqiao-group-ltd" target="_blank" data-smartkarma-citation="entities:1909:1" rel="noopener">China Hongqiao (1378 HK)</a> and there could be some short covering from now to implementation.</li>
</ul>


The inclusion of Orient Overseas International, Zhongsheng Group, Semiconductor Manufacturing International Corp (SMIC) and China Hongqiao plus the deletion of AAC Technologies Holdings takes us to 69 index stocks.
Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover is 3.43% and will result in a one-way trade of HK$7,444m.
There is huge short interest on Zhongsheng Group (881 HK) and China Hongqiao (1378 HK) and there could be some short covering from now to implementation.


HSI Index Rebalance: Four Weddings & A Funeral

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Our outlook remains bearish at the index level as downtrends remain intact on the MSCI broad global indexes and also within Japan, Hong Kong, Europe, Germany, and China.</li>
<li>Our preferred Sector overweights continue to be defensives (Utilities, Staples, and Health Care) and commodity Sectors (Energy and Materials).</li>
<li>The secular bull market in commodities (Bloomberg Commodity index, WTI and Brent crude oil, etc.) remains intact, which continues to support our overweight recommendations on the Energy and Materials Sectors.</li>
</ul>


Our outlook remains bearish at the index level as downtrends remain intact on the MSCI broad global indexes and also within Japan, Hong Kong, Europe, Germany, and China.
Our preferred Sector overweights continue to be defensives (Utilities, Staples, and Health Care) and commodity Sectors (Energy and Materials).
The secular bull market in commodities (Bloomberg Commodity index, WTI and Brent crude oil, etc.) remains intact, which continues to support our overweight recommendations on the Energy and Materials Sectors.


Still Bearish at the Index Level; Remain Overweight Defensives & Commodity Sectors

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)

Investors fearful of a possible recession

What is scaring investors in such a big way? There are several factors, but the newest one is the fear of an incoming global “recession”

Market Radar

Hang Seng TECH Index Rebalance: NIO (9866 HK) To Replace ASM Pacific (522 HK)

NIO will replace ASM Pacific in the HSTECH at the close on 10 June. There are large shorts on ASM that could look to cover vs the passives. NIO's...

Brian Freitas

HSCEI Index Rebalance: Lenovo In, Hansoh Out; Sunac Survives (For Now)

As expected, Lenovo will replace Hansoh Pharma in the HSCEI at the close on 10 June. Sunac stays in the index for now but could be deleted in July....

Brian Freitas

HSI Index Rebalance: Four Weddings & A Funeral

There are 4 adds & 1 delete to take the number of HSI members to 69. There is reasonable impact on the stocks and huge short interest on some of...

Brian Freitas

Still Bearish at the Index Level; Remain Overweight Defensives & Commodity Sectors

Our outlook remains bearish at the index level as downtrends remain intact on the MSCI broad global indexes and also within Japan, Hong Kong,...

Vermilion Research