Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Suntien Green Energy / Event-Driven

<div>
<p>Several weeks ago, I gave the warning H/A spreads had moved tighter - too far too fast. The next week, spreads widened, they bounced back with a vengeance, then slightly wider in the short week at the start of Chinese New Year, and bouncing back in the post-CNY week.</p>
<p>They have started to move wider again, and given the global form in risk and higher volatility right now, I would not be surprised if they continued a bit wider.</p>
</div><div>
<p>Last week, in the first full week after the end of all the Chinese New Year festivities, all but one sector saw average spreads widen, and market-wide, spreads had their worst week in quite a while.</p>
<table class="table table-striped"><tbody>
<tr>
<td style="width: 198.182px;"><p>Sector</p></td>
<td style="text-align: right; width: 103.636px;"><p>Last Week</p></td>
<td style="text-align: right; width: 135.455px;"><p>Previous Week</p></td>
<td style="text-align: right; width: 100px;"><p>3wks Ago</p></td>
<td style="text-align: right; width: 102.727px;"><p>4wks Ago</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Consumer</p></td>
<td style="text-align: right; width: 103.636px;"><p>-  1.65%</p></td>
<td style="text-align: right; width: 135.455px;"><p>-  1.20%</p></td>
<td style="text-align: right; width: 100px;"><p>+ 2.55%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 2.32%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Energy</p></td>
<td style="text-align: right; width: 103.636px;"><p>+ 0.67%</p></td>
<td style="text-align: right; width: 135.455px;"><p>+ 1.43%</p></td>
<td style="text-align: right; width: 100px;"><p>-  1.64%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 1.98%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Financials &amp; Real Estate</p></td>
<td style="text-align: right; width: 103.636px;"><p>-  1.12%</p></td>
<td style="text-align: right; width: 135.455px;"><p>+ 0.10%</p></td>
<td style="text-align: right; width: 100px;"><p>+ 0.29%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 0.62%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Health Care &amp; Info Tech</p></td>
<td style="text-align: right; width: 103.636px;"><p>-  2.86%</p></td>
<td style="text-align: right; width: 135.455px;"><p>+ 1.45%</p></td>
<td style="text-align: right; width: 100px;"><p>-  1.52%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 2.29%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Industrials</p></td>
<td style="text-align: right; width: 103.636px;"><p>-  1.20%</p></td>
<td style="text-align: right; width: 135.455px;"><p>+ 0.26%</p></td>
<td style="text-align: right; width: 100px;"><p>-  0.62%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 2.48%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Materials</p></td>
<td style="text-align: right; width: 103.636px;"><p>-  0.84%</p></td>
<td style="text-align: right; width: 135.455px;"><p>+ 3.08%</p></td>
<td style="text-align: right; width: 100px;"><p>-  0.57%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 2.66%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Utilities</p></td>
<td style="text-align: right; width: 103.636px;"><p>-  0.14%</p></td>
<td style="text-align: right; width: 135.455px;"><p>+ 0.99%</p></td>
<td style="text-align: right; width: 100px;"><p>+ 0.25%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 1.06%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p>Sector Average</p></td>
<td style="text-align: right; width: 103.636px;"><p>-  1.02%</p></td>
<td style="text-align: right; width: 135.455px;"><p>+ 0.87%</p></td>
<td style="text-align: right; width: 100px;"><p>-  0.18%</p></td>
<td style="text-align: right; width: 102.727px;"><p>+ 1.92%</p></td>
</tr>
<tr>
<td style="width: 198.182px;"><p><strong>All Market Average</strong></p></td>
<td style="text-align: right; width: 103.636px;"><p><strong>-  1.22%</strong></p></td>
<td style="text-align: right; width: 135.455px;"><p><strong>+ 0.76%</strong></p></td>
<td style="text-align: right; width: 100px;"><p><strong>-  0.33%</strong></p></td>
<td style="text-align: right; width: 102.727px;"><p><strong>+ 1.80%</strong></p></td>
</tr>
</tbody></table>
<p>Developers saw their Hs rise dramatically on the week on new rules about land sales which would appear to favor large developers over smaller developers, but few have an H/A spread presence.</p>
</div><div><div>
<hr>
<h3>The H/A Spread Market</h3>
</div></div><div>
<p>The past week has seen H-shares come off sharply and spreads widen reasonably dramatically. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/191/379/original/Screenshot+2021-02-28+at+7.50.25+PM.png?1614513037" class="editor-image img-responsive" data-smartkarma-image-id="191379"></figure></section>
</div><p>The average discount appears not to want to tighten. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/191/402/original/Screenshot+2021-02-28+at+9.36.30+PM.png?1614519456" class="editor-image img-responsive" data-smartkarma-image-id="191402"></figure></section><p></p><h2>Last Week's Recommendations</h2><ul>
<li>There were 78 recommendations last week. </li>
<li>The 33 short recommendations gained an average of 1.70%, outperforming the market as a whole (which saw the average spread widen 1.22%). That is alpha of 48bp.</li>
<li>The 45 long recommendations averaged losses of 76bp during the week, outperforming the market as a whole by 46bp. The combined total package was up 0.27% for the week, with 92bp of alpha on the cross-bias. </li>
</ul><hr><section><div><h2>Consumer Sector</h2></div>
<div><p>The first sector discussed is Consumer, where liquid H/A spreads widened on average 1.65% over the past week, with the sector continuing to see significant bumpiness. </p></div>
<div><ul>
<li>
<a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> saw its spread move 2.9% narrower last week after widening 3.1% in the previous two weeks. It is now 3.7% narrower over four weeks.  <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a> narrowed too, but the others in the space widened. </li>
<li>All but one stock in the sector saw its H-share decline in double digit percentages. The average H in the sector moved down 15.9% in the week. Only <a href="https://www.smartkarma.com/entities/guangzhou-automobile-group-co-ltd" target="_blank" data-smartkarma-citation="entities:11082:1" rel="noopener">Guangzhou Automobile Group (2238 HK)</a> was spared that indignity, seeings its H fall 'only' 9.7%.</li>
<li>Southbound was a net seller of nearly HK$2bn of stock since the 10th of February, purchasing only <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> on a net basis.</li>
</ul></div>
<div><div><div class="content-highlight">
<p>Last week, I recommended staying long the <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>, and short <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, <a href="https://www.smartkarma.com/entities/hisense-home-appliances-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20107:1" rel="noopener">Hisense Home Appliances Group Co., Ltd. H (921 HK)</a>, and <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> H vs A. </p>
<p>Those four trades gained an average of 3.58% in spread terms on the week.</p>
</div></div></div>
<section><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/191/384/original/Screenshot+2021-02-28+at+8.09.50+PM.png?1614514204" class="editor-image img-responsive" data-smartkarma-image-id="191384"></figure><p></p></section></section></section><section><em>For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.</em></section></section>


Several weeks ago, I gave the warning H/A spreads had moved tighter - too far too fast. The next week, spreads widened, they bounced back with a vengeance, then slightly wider in the short week at the start of Chinese New Year, and bouncing back in the post-CNY week.
They have started to move wider again, and given the global form in risk and higher volatility right now, I would not be surprised if they continued a bit wider.

Last week, in the first full week after the end of all the Chinese New Year festivities, all but one sector saw average spreads widen, and market-wide, spreads had their worst week in quite a while.


Sector
Last Week
Previous Week
3wks Ago
4wks Ago


Consumer
-  1.65%
-  1.20%
+ 2.55%
+ 2.32%


Energy
+ 0.67%
+ 1.43%
-  1.64%
+ 1.98%


Financials &amp; Real Estate
-  1.12%
+ 0.10%
+ 0.29%
+ 0.62%


Health Care &amp; Info Tech
-  2.86%
+ 1.45%
-  1.52%
+ 2.29%


Industrials
-  1.20%
+ 0.26%
-  0.62%
+ 2.48%


Materials
-  0.84%
+ 3.08%
-  0.57%
+ 2.66%


Utilities
-  0.14%
+ 0.99%
+ 0.25%
+ 1.06%


Sector Average
-  1.02%
+ 0.87%
-  0.18%
+ 1.92%


All Market Average
-  1.22%
+ 0.76%
-  0.33%
+ 1.80%


Developers saw their Hs rise dramatically on the week on new rules about land sales which would appear to favor large developers over smaller developers, but few have an H/A spread presence.


The H/A Spread Market

The past week has seen H-shares come off sharply and spreads widen reasonably dramatically. 

The average discount appears not to want to tighten. Last Week's Recommendations
There were 78 recommendations last week. 
The 33 short recommendations gained an average of 1.70%, outperforming the market as a whole (which saw the average spread widen 1.22%). That is alpha of 48bp.
The 45 long recommendations averaged losses of 76bp during the week, outperforming the market as a whole by 46bp. The combined total package was up 0.27% for the week, with 92bp of alpha on the cross-bias. 
Consumer Sector
The first sector discussed is Consumer, where liquid H/A spreads widened on average 1.65% over the past week, with the sector continuing to see significant bumpiness. 


BYD (1211 HK) saw its spread move 2.9% narrower last week after widening 3.1% in the previous two weeks. It is now 3.7% narrower over four weeks.  Great Wall Motor (2333 HK) narrowed too, but the others in the space widened. 
All but one stock in the sector saw its H-share decline in double digit percentages. The average H in the sector moved down 15.9% in the week. Only Guangzhou Automobile Group (2238 HK) was spared that indignity, seeings its H fall 'only' 9.7%.
Southbound was a net seller of nearly HK$2bn of stock since the 10th of February, purchasing only Fuyao Glass Industry Group (3606 HK) on a net basis.


Last week, I recommended staying long the Great Wall Motor (2333 HK), and short BYD (1211 HK), Hisense Home Appliances Group Co., Ltd. H (921 HK), and Fuyao Glass Industry Group (3606 HK) H vs A. 
Those four trades gained an average of 3.58% in spread terms on the week.

For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.

Quiddity Weekly H/A: Strong Dispersion, Strong Alpha; Brokers Beat Banks

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<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 26 February. The constituent changes will be effective after the close of trading on 12 March.</p><p>For the Hang Seng Composite Index (HSCI) there are 36 inclusions and 29 deletions, taking the number of index constituents up to 500.</p><p>Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. Secondary Listings are not eligible for inclusion in the Stock Connect program.</p><p>Of the 36 inclusions, 4 are already a part of Stock Connect by virtue of having listed A-shares, 2 are Secondary listings and will not be included in Stock Connect, 9 will be added to Shanghai and Shenzhen Stock Connect, while 21 stocks will only be added to Shenzhen Stock Connect.</p><p>Of the 29 index deletions, 13 are not a part of Stock Connect, 7 will continue to remain a part of Stock Connect by virtue of having listed A-shares, while 9 will be deleted from the Stock Connect program.</p><p>We identify 4 stocks that could sell off ahead of their removal from the Stock Connect Buy list, while Biotech stocks could be in focus ahead of their inclusion in the Stock Connect Buy and Sell list.</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 26 February. The constituent changes will be effective after the close of trading on 12 March.For the Hang Seng Composite Index (HSCI) there are 36 inclusions and 29 deletions, taking the number of index constituents up to 500.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors. Secondary Listings are not eligible for inclusion in the Stock Connect program.Of the 36 inclusions, 4 are already a part of Stock Connect by virtue of having listed A-shares, 2 are Secondary listings and will not be included in Stock Connect, 9 will be added to Shanghai and Shenzhen Stock Connect, while 21 stocks will only be added to Shenzhen Stock Connect.Of the 29 index deletions, 13 are not a part of Stock Connect, 7 will continue to remain a part of Stock Connect by virtue of having listed A-shares, while 9 will be deleted from the Stock Connect program.We identify 4 stocks that could sell off ahead of their removal from the Stock Connect Buy list, while Biotech stocks could be in focus ahead of their inclusion in the Stock Connect Buy and Sell list.

HSCI Index Rebalance & Stock Connect: Inclusions & Exclusions

<p>Four weeks ago, I gave the warning that H/A spreads had moved tighter - too far too fast. The next week, spreads widened, they bounced back with a vengeance, then slightly wider in the short week at the start of Chinese New Year, and bouncing back in the post-CNY week.</p><p>In the two weeks from before to after Chinese New Year, the average sector spread moved about 70bp tighter, but the average spread moved only 42bp tighter.</p><table class="table table-striped"><tbody>
<tr>
<td><p>Sector</p></td>
<td style="text-align: right;"><p>Last<br>Week</p></td>
<td style="text-align: right;"><p>Previous<br>Week</p></td>
<td style="text-align: right;"><p>3wks<br>Ago</p></td>
<td style="text-align: right;"><p>4wks<br>Ago</p></td>
</tr>
<tr>
<td><p>Consumer</p></td>
<td style="text-align: right;"><p>-  1.20%</p></td>
<td style="text-align: right;"><p>+ 2.55%</p></td>
<td style="text-align: right;"><p>+ 2.32%</p></td>
<td style="text-align: right;"><p>-  2.62%</p></td>
</tr>
<tr>
<td><p>Energy</p></td>
<td style="text-align: right;"><p>+ 1.43%</p></td>
<td style="text-align: right;"><p>-  1.64%</p></td>
<td style="text-align: right;"><p>+ 1.98%</p></td>
<td style="text-align: right;"><p>-  0.59%</p></td>
</tr>
<tr>
<td><p>Financials &amp; Real Estate</p></td>
<td style="text-align: right;"><p>+ 0.10%</p></td>
<td style="text-align: right;"><p>+ 0.29%</p></td>
<td style="text-align: right;"><p>+ 0.62%</p></td>
<td style="text-align: right;"><p>-  1.73%</p></td>
</tr>
<tr>
<td><p>Health Care &amp; Info Tech</p></td>
<td style="text-align: right;"><p>+ 1.45%</p></td>
<td style="text-align: right;"><p>-  1.52%</p></td>
<td style="text-align: right;"><p>+ 2.29%</p></td>
<td style="text-align: right;"><p>-  0.27%</p></td>
</tr>
<tr>
<td><p>Industrials</p></td>
<td style="text-align: right;"><p>+ 0.26%</p></td>
<td style="text-align: right;"><p>-  0.62%</p></td>
<td style="text-align: right;"><p>+ 2.48%</p></td>
<td style="text-align: right;"><p>-  1.30%</p></td>
</tr>
<tr>
<td><p>Materials</p></td>
<td style="text-align: right;"><p>+ 3.08%</p></td>
<td style="text-align: right;"><p>-  0.57%</p></td>
<td style="text-align: right;"><p>+ 2.66%</p></td>
<td style="text-align: right;"><p>-  0.95%</p></td>
</tr>
<tr>
<td><p>Utilities</p></td>
<td style="text-align: right;"><p>+ 0.99%</p></td>
<td style="text-align: right;"><p>+ 0.25%</p></td>
<td style="text-align: right;"><p>+ 1.06%</p></td>
<td style="text-align: right;"><p>-  2.45%</p></td>
</tr>
<tr>
<td><p>Sector Average</p></td>
<td style="text-align: right;"><p>+ 0.87%</p></td>
<td style="text-align: right;"><p>-  0.18%</p></td>
<td style="text-align: right;"><p>+ 1.92%</p></td>
<td style="text-align: right;"><p>-  1.41%</p></td>
</tr>
</tbody></table><p>This week, the data is a bit cut short as the China Securities Depository and Clearing has not reported Southbound position data since the 10th as far as I can tell. </p><div class="content-highlight"><p>There were 75 recommendations last week.  The 32 short recommendations lost an average of 48bp, slightly underperforming the market as a whole. The 43 long recommendations averaged gains of 50bp over the two weeks, outperforming the market as a whole. The combined total package was up 0.084% over the two weeks. </p></div><div><div><h3>The H/A Spread Market</h3></div></div><div>
<p>The past two weeks straddling Chinese New Year saw mixed movement in H/A spreads, with 63 of 98 liquid spreads (64%) narrowing an average of 42bp. They are on average 92bp tighter over four weeks. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/832/original/Screenshot+2021-02-20+at+5.17.17+PM.png?1613812651" class="editor-image img-responsive" data-smartkarma-image-id="189832"></figure></section><hr>
</div><div><div><h3>Consumer Sector</h3></div></div><div>
<p>The first sector discussed is Consumer, where liquid H/A spreads narrowed on average 1.35% over the two weeks, but with some bumpiness. </p>
<p><a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> saw its spread move 3.1% wider over the two weeks and is now 7.1% wider over four weeks and it is no longer the narrowest liquid H/A spread in the sector, with <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> taking its place moving 2.4% in the two weeks and 10.7% in four.</p>
</div><div class="content-highlight">
<p>Two weeks ago, I recommended staying long the <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a>, and short <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, <a href="https://www.smartkarma.com/entities/hisense-home-appliances-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20107:1" rel="noopener">Hisense Home Appliances Group Co., Ltd. H (921 HK)</a>, and <a href="https://www.smartkarma.com/entities/fuyao-glass-industry-group-co-ltd" target="_blank" data-smartkarma-citation="entities:330:1" rel="noopener">Fuyao Glass Industry Group (3606 HK)</a> H vs A. </p>
<p>Those four trades gained an average of 1.67% in spread terms on the week.</p>
</div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/833/original/Screenshot+2021-02-20+at+5.28.45+PM.png?1613813350" class="editor-image img-responsive" data-smartkarma-image-id="189833"></figure></section><p>For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.</p>

Four weeks ago, I gave the warning that H/A spreads had moved tighter - too far too fast. The next week, spreads widened, they bounced back with a vengeance, then slightly wider in the short week at the start of Chinese New Year, and bouncing back in the post-CNY week.In the two weeks from before to after Chinese New Year, the average sector spread moved about 70bp tighter, but the average spread moved only 42bp tighter.

Sector
Last Week
Previous Week
3wks Ago
4wks Ago


Consumer
-  1.20%
+ 2.55%
+ 2.32%
-  2.62%


Energy
+ 1.43%
-  1.64%
+ 1.98%
-  0.59%


Financials &amp; Real Estate
+ 0.10%
+ 0.29%
+ 0.62%
-  1.73%


Health Care &amp; Info Tech
+ 1.45%
-  1.52%
+ 2.29%
-  0.27%


Industrials
+ 0.26%
-  0.62%
+ 2.48%
-  1.30%


Materials
+ 3.08%
-  0.57%
+ 2.66%
-  0.95%


Utilities
+ 0.99%
+ 0.25%
+ 1.06%
-  2.45%


Sector Average
+ 0.87%
-  0.18%
+ 1.92%
-  1.41%

This week, the data is a bit cut short as the China Securities Depository and Clearing has not reported Southbound position data since the 10th as far as I can tell. There were 75 recommendations last week.  The 32 short recommendations lost an average of 48bp, slightly underperforming the market as a whole. The 43 long recommendations averaged gains of 50bp over the two weeks, outperforming the market as a whole. The combined total package was up 0.084% over the two weeks. The H/A Spread Market
The past two weeks straddling Chinese New Year saw mixed movement in H/A spreads, with 63 of 98 liquid spreads (64%) narrowing an average of 42bp. They are on average 92bp tighter over four weeks. 

Consumer Sector
The first sector discussed is Consumer, where liquid H/A spreads narrowed on average 1.35% over the two weeks, but with some bumpiness. 
BYD (1211 HK) saw its spread move 3.1% wider over the two weeks and is now 7.1% wider over four weeks and it is no longer the narrowest liquid H/A spread in the sector, with Fuyao Glass Industry Group (3606 HK) taking its place moving 2.4% in the two weeks and 10.7% in four.

Two weeks ago, I recommended staying long the Great Wall Motor (2333 HK), and short BYD (1211 HK), Hisense Home Appliances Group Co., Ltd. H (921 HK), and Fuyao Glass Industry Group (3606 HK) H vs A. 
Those four trades gained an average of 1.67% in spread terms on the week.
For this week's recommendations on Consumer, and discussion of the Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities sectors, and all trade recommendations, please read on.

Quiddity Weekly H/A: High Volatility in Materials and Industrials and Spreads Over Lunar New Year

Beijing Kingsoft Office Softwa / Event-Driven

<p>The <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> consists of stocks from the Shanghai Stock Exchange and the Shenzhen Stock Exchange and is one of the most widely tracked A-share indices with passive tracking products listed in multiple markets globally. There are CFFEX listed futures that trade actively as well.</p><p>China Securities Index Co (CSI) will announce the changes end May/beginning June and the changes will be effective after the close of trading on 11 June.</p><p>There were 21 changes to the index at the June 2020 review and 26 changes at the December 2020 review. We expect 30 changes at the upcoming June 2021 index review - this is the maximum number of changes that are permitted at a single review. Estimated one-way turnover is 4.56%.</p><p>With passive tracking products holding around US$32bn of AUM, plus another US$53bn in open interest on the listed futures, plus active managers benchmarked to the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a>, there could be significant moves in the inclusion/exclusion names from now to the end of the review period. There will only be 9-10 trading days between the announcement of the changes and the implementation, so having a pre-position should pay off. There should not be too many changes in the possible list of inclusions and exclusions due to the averaging process over the last year of trading.</p>

The Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) consists of stocks from the Shanghai Stock Exchange and the Shenzhen Stock Exchange and is one of the most widely tracked A-share indices with passive tracking products listed in multiple markets globally. There are CFFEX listed futures that trade actively as well.China Securities Index Co (CSI) will announce the changes end May/beginning June and the changes will be effective after the close of trading on 11 June.There were 21 changes to the index at the June 2020 review and 26 changes at the December 2020 review. We expect 30 changes at the upcoming June 2021 index review - this is the maximum number of changes that are permitted at a single review. Estimated one-way turnover is 4.56%.With passive tracking products holding around US$32bn of AUM, plus another US$53bn in open interest on the listed futures, plus active managers benchmarked to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX), there could be significant moves in the inclusion/exclusion names from now to the end of the review period. There will only be 9-10 trading days between the announcement of the changes and the implementation, so having a pre-position should pay off. There should not be too many changes in the possible list of inclusions and exclusions due to the averaging process over the last year of trading.

CSI300 Index Rebalance Preview: Maxing Out the Number of Changes

Quantitative Analysis

<div>
<p>The H-Share/A-Share monitor is published every weekend for the data ending the last trading day of the previous week. It includes all H-Share/A-Share pairs where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...</p>
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<div>
<ul style="list-style-type: disc;">
<li>H/A Discount,</li>
<li>movement in H/A Discount over 5 and 20 days,</li>
<li>a 52-week Z-score for the spread,</li>
<li>A chart showing evolution of the H/A spread over the last 20 days,</li>
<li>Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, </li>
<li>There is also a chart showing the average sector spread and the individual spreads within each sector over the last three years. </li>
</ul>
</div>
<div>
<p>A recent addition is the possible status of H/A-share companies in the monitor which are subject to the Trump Executive Order on Chinese Military Companies. They are separated into three types (Possible Direct Qualifying Entity, Possible Indirect Qualifying Entity, and 20+%-owned by Qualifying Entity). They are color-coded as below.</p>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/784/original/image?1606541170" class="editor-image img-responsive" data-smartkarma-image-id="174784"></figure>
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<p>For more on the list of names, please see <a href="https://www.smartkarma.com/insights/trump-s-executive-order-on-chinese-military-companies" target="_blank" data-smartkarma-citation="insights:45259" rel="noopener">Trump's Executive Order on Chinese Military Companies</a>. </p>
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<p>This past week saw mixed movement in H/A spreads but on average they were narrower.</p>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/829/original/Screenshot%202020-11-28%20at%206.25.16%20PM.png?1606559131" class="editor-image img-responsive" data-smartkarma-image-id="174829"></figure>
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<p>Average performance of the 39 recommendations (long 27, short 12) from last week was for a profit of 0.67% per trade.</p>
<p>There are 43 recommendations for the upcoming week.</p>
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<hr>
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<p>The first sector discussed is <strong>Consumer</strong>, where liquid H/A spreads narrowed on average 0.6% this past week after narrowing 2.7% the week before. Spreads are now tighter by 2.1% on average over a four-week period. Four of six liquid Hs outperformed their As.</p>
<p>Southbound accounts were large-ish net buyers on the week. There were three net buys and three net sells but the net buying ended up being all <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a>, again. <a href="https://www.smartkarma.com/entities/guangzhou-automobile-group-co-ltd" target="_blank" data-smartkarma-citation="entities:11082:1" rel="noopener">Guangzhou Automobile Group (2238 HK)</a> saw significant net selling. </p>
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<p>Last week I recommended staying long the H vs A on <a href="https://www.smartkarma.com/entities/great-wall-motor-co-ltd-cb302af9-398c-4d2d-ba39-023e43287eef" target="_blank" data-smartkarma-citation="entities:128:1" rel="noopener">Great Wall Motor (2333 HK)</a> and that spread gained 1.6% for the week (after gaining 4.7% the week before when it was also recommended). This past week I put out the Weekly late on Monday (after 2pm), when BYD in Hong Kong had gained 3.7% vs the As on the day, and so recommended implementing a short BYD (1211 HK) H vs A share trade and from that point or even from the end of the day or the next, the Hs actually underperformed the As by 0.4%. </p>
<p>See below the fold for this week's recommendations.</p>
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/809/original/Screenshot%202020-11-28%20at%205.32.56%20PM.png?1606556000" class="editor-image img-responsive" data-smartkarma-image-id="174809"></figure>
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<section class="figure">For Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities, please read on.</section>
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The H-Share/A-Share monitor is published every weekend for the data ending the last trading day of the previous week. It includes all H-Share/A-Share pairs where the H-Share has a 90-day average daily value-traded of US$1.0mm or more. It shows basic data per H/A spread stock by sector, with...



H/A Discount,
movement in H/A Discount over 5 and 20 days,
a 52-week Z-score for the spread,
A chart showing evolution of the H/A spread over the last 20 days,
Southbound shares held (millions of shares), Net Change in Southbound (Shanghai and Shenzhen combined) shares held by millions of shares, and contribution of Net Southbound Volume to HK-traded volume over the past five days and 20 days, 
There is also a chart showing the average sector spread and the individual spreads within each sector over the last three years. 



A recent addition is the possible status of H/A-share companies in the monitor which are subject to the Trump Executive Order on Chinese Military Companies. They are separated into three types (Possible Direct Qualifying Entity, Possible Indirect Qualifying Entity, and 20+%-owned by Qualifying Entity). They are color-coded as below.





For more on the list of names, please see Trump's Executive Order on Chinese Military Companies. 



This past week saw mixed movement in H/A spreads but on average they were narrower.




Average performance of the 39 recommendations (long 27, short 12) from last week was for a profit of 0.67% per trade.
There are 43 recommendations for the upcoming week.



The first sector discussed is Consumer, where liquid H/A spreads narrowed on average 0.6% this past week after narrowing 2.7% the week before. Spreads are now tighter by 2.1% on average over a four-week period. Four of six liquid Hs outperformed their As.
Southbound accounts were large-ish net buyers on the week. There were three net buys and three net sells but the net buying ended up being all BYD (1211 HK), again. Guangzhou Automobile Group (2238 HK) saw significant net selling. 




Last week I recommended staying long the H vs A on Great Wall Motor (2333 HK) and that spread gained 1.6% for the week (after gaining 4.7% the week before when it was also recommended). This past week I put out the Weekly late on Monday (after 2pm), when BYD in Hong Kong had gained 3.7% vs the As on the day, and so recommended implementing a short BYD (1211 HK) H vs A share trade and from that point or even from the end of the day or the next, the Hs actually underperformed the As by 0.4%. 
See below the fold for this week's recommendations.











For Energy, Financials &amp; Real Estate, Health Care, Tech, Industrials, Materials, and Utilities, please read on.


Quiddity Weekly H/​​A: Share Spread Monitor as of 27 Nov 2020

China

Huadian Power International Corporation Limited generates and sells electricity which is all fed into the Shandong Provincial Grid operated by Shandong Electric Power (Group) Corporation (SEPCO), the immediate holding company of the Company.  The Company also sells heat.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Huadian Power Intl Corp H (1071 HK)

Quiddity Weekly H/A: Strong Dispersion, Strong Alpha; Brokers Beat Banks

Great alpha last week as shorts beat by 48bp, longs beat by 46bp. Southbound saw one really big sell day, but on the week, buying continued apace...

Travis Lundy

HSCI Index Rebalance & Stock Connect: Inclusions & Exclusions

There are 36 inclusions/ 29 exclusions for the Hang Seng Composite Index. 9 stocks will be deleted from the Stock Connect Buy list & there are a...

Brian Freitas

Quiddity Weekly H/A: High Volatility in Materials and Industrials and Spreads Over Lunar New Year

H/A spreads have been reasonably volatile over the CNY period, but again they net narrowed over two weeks. There are still several sectors where...

Travis Lundy

CSI300 Index Rebalance Preview: Maxing Out the Number of Changes

We see 30 potential inclusions/exclusions to the CSI300 index at the June review that will become effective COB 11 June. With a lot of benchmarked...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Weekly H/A: Strong Dispersion, Strong Alpha; Brokers Beat Banks

Great alpha last week as shorts beat by 48bp, longs beat by 46bp. Southbound saw one really big sell day, but on the week, buying continued apace...

Travis Lundy

HSCI Index Rebalance & Stock Connect: Inclusions & Exclusions

There are 36 inclusions/ 29 exclusions for the Hang Seng Composite Index. 9 stocks will be deleted from the Stock Connect Buy list & there are a...

Brian Freitas

Quiddity Weekly H/A: High Volatility in Materials and Industrials and Spreads Over Lunar New Year

H/A spreads have been reasonably volatile over the CNY period, but again they net narrowed over two weeks. There are still several sectors where...

Travis Lundy

CSI300 Index Rebalance Preview: Maxing Out the Number of Changes

We see 30 potential inclusions/exclusions to the CSI300 index at the June review that will become effective COB 11 June. With a lot of benchmarked...

Brian Freitas

Quiddity Weekly H/​​A: Share Spread Monitor as of 27 Nov 2020

The weekly H/A Share Monitor and Trade Recommendations. Spreads narrower on the week. Last week's 39 trade recommendations gained 0.67% on average....

Travis Lundy

Quiddity Weekly H/A: Share Spread Monitor as of 27 Nov 2020