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>There will be 3 changes for the Hang Seng Internet &amp; Information Technology Index (HSIII) at the March rebalance. There are some surprises.</li>
<li>Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.</li>
<li>There is huge short interest on <a href="https://www.smartkarma.com/entities/east-buy-holding-ltd" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">East Buy Holding (1797 HK)</a> and there could be some short covering ahead of the inclusion of the stock in the index.</li>
</ul>


There will be 3 changes for the Hang Seng Internet &amp; Information Technology Index (HSIII) at the March rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.


Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

Equity Bottom-Up

Kingdee International Software / Equity Bottom-Up

<ul><li>Kingdee reported its 1H23 results: revenue was up 16.8% YoY to RMB2.6bn, 1.2% shy of Bloomberg consensus, while the net loss of RMB284mn was 8% narrower than consensus estimate of RMB307mn loss, indicating an on-track loss reduction.</li><li>Core SaaS product Galaxy’s ARR growth momentum remained healthy with 28.6% YoY growth in subscription ARR.</li><li>Meanwhile, domestic substitution trend continues to drive solid large enterprise revenue growth (+38.4% YoY). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Kingdee reported its 1H23 results: revenue was up 16.8% YoY to RMB2.6bn, 1.2% shy of Bloomberg consensus, while the net loss of RMB284mn was 8% narrower than consensus estimate of RMB307mn loss, indicating an on-track loss reduction.Core SaaS product Galaxy’s ARR growth momentum remained healthy with 28.6% YoY growth in subscription ARR.Meanwhile, domestic substitution trend continues to drive solid large enterprise revenue growth (+38.4% YoY). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Kingdee (268 HK) – Loss reduction on track

<ul>
<li>The June rebalance of the <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> and <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a> indices will use today's closing prices to cap the index constituent weights at 8%. This will lead to large flows.</li>
<li>The largest inflows will be 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/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/zijin-mining-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:6358:1" rel="noopener">Zijin Mining (2899 HK)</a>, <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a>, <a href="https://www.smartkarma.com/entities/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com (9961 HK)</a> and <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a>. </li>
<li>The largest outflows will be on <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>, <a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a>, <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 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/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>. </li>
</ul>


The June rebalance of the HSI, HSCEI and HSTECH indices will use today's closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest inflows will be on Meituan (3690 HK), JD.com (9618 HK), Zijin Mining (2899 HK), Baidu (9888 HK), Trip.com (9961 HK) and JD Logistics (2618 HK). 
The largest outflows will be on HSBC Holdings (5 HK), Li Auto (2015 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and NetEase (9999 HK). 


HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyzed the latest HK SFC report for aggregate short position as of Mar 24th.</li>
<li>Top short increases and decreases were tabulated for one week and four week period. </li>
<li>We estimate the total short interest to  increase by 1.4% week on week and highlight short changes in Bidu, Baba, Byd Company.</li>
</ul>


We analyzed the latest HK SFC report for aggregate short position as of Mar 24th.
Top short increases and decreases were tabulated for one week and four week period. 
We estimate the total short interest to  increase by 1.4% week on week and highlight short changes in Bidu, Baba, Byd Company.


HK Short Interest Weekly: Bidu, Baba, Byd Company

Thematic (Sector/Industry)

<ul><li>Media reported that Huawei may launch self-developed ERP (MetaERP) in Apr.</li><li>This is negative to the China ERP market as competition heats up but the impacts to Yonyou and Inspur will be larger than Kingdee as the formers are more largeenterprises/ SOEs focused.</li><li>Also, Huawei has to consider the potential implications to its Cloud business as Kingdee/ Yonyou/ Inspur may scale down their cloud resources usage with Huawei Cloud given direct competition in ERP.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Media reported that Huawei may launch self-developed ERP (MetaERP) in Apr.This is negative to the China ERP market as competition heats up but the impacts to Yonyou and Inspur will be larger than Kingdee as the formers are more largeenterprises/ SOEs focused.Also, Huawei has to consider the potential implications to its Cloud business as Kingdee/ Yonyou/ Inspur may scale down their cloud resources usage with Huawei Cloud given direct competition in ERP.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

China Software & IT Services – Implications of Huawei MetaERP

China

Kingdee International Software Group Company Limited, through its subsidiaries, develops and sells enterprise management software, e-commerce application software and middleware software.  The Company also provides internet-based services and setting up e-commerce platforms for enterprises. In addition, Kingdee provides solution consulting and technical support services.

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Kingdee International Software (268 HK)

Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

There are 3 changes for the HSIII in March. Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn...

Brian Freitas

Kingdee (268 HK) – Loss reduction on track

Kingdee reported its 1H23 results: revenue was up 16.8% YoY to RMB2.6bn, 1.2% shy of Bloomberg consensus, while the net loss of RMB284mn was 8%...

CMB International

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)

The June rebalance of the Hang Seng family of indices will use todays closing prices for capping. The one-way trade across all stocks across the...

Brian Freitas

HK Short Interest Weekly: Bidu, Baba, Byd Company

We analyzed the latest HK SFC report for aggregate short position as of Mar 24th and highlight short interest changes in Bidu, Baba, Byd Company.

Ke Yan, CFA, FRM

China Software & IT Services – Implications of Huawei MetaERP

This is negative to the China ERP market as competition heats up but the impacts to Yonyou and Inspur will be larger than Kingdee as the formers...

CMB International

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52-week Range

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