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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.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>, there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> while the deletions are <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a> and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>. One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.<a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> was a forecast inclusion 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> but was not expected to be included in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>. Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.<a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) while the deletions are Shimao Property Holdings (813 HK) and Anhui Conch Cement (914 HK). One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, Alibaba Group (9988 HK)'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.Li Ning Co Ltd (2331 HK) was a forecast inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) but was not expected to be included in the Hong Kong Hang Seng Index (HSI INDEX). Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.JD Logistics (2618 HK) is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

Hang Seng China Enterprises Index / Event-Driven

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>After growing at around 7% over 2012-19, China’s GDP growth dipped to 2.3% in 2020 due to COVID-19. The World Bank estimates the GDP growth to bounce back to 8.4% in 2021 but projects a rapid deceleration (5.4% in 2022) thereafter due to multiple economic headwinds.</li>
<li>We think that the Chinese sportswear market is highly influenced by the GDP growth as it declined at an annual average rate of 2% during 2011-13 when the GDP growth decelerated from 9.6% to 7.8%.</li>
</ul>


After growing at around 7% over 2012-19, China’s GDP growth dipped to 2.3% in 2020 due to COVID-19. The World Bank estimates the GDP growth to bounce back to 8.4% in 2021 but projects a rapid deceleration (5.4% in 2022) thereafter due to multiple economic headwinds.
We think that the Chinese sportswear market is highly influenced by the GDP growth as it declined at an annual average rate of 2% during 2011-13 when the GDP growth decelerated from 9.6% to 7.8%.


Chinese Sportswear: Macro Headwinds Pose Significant Downside Risks

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

This insight provides the output, and an overview of our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index. The model is based on 1) a typical quantitative multifactor screening model, enhanced by two Artificial Intelligence Technology-based approaches using 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model. This model, which has been developed and tweaked over the past 24 months (and implemented in its current state for &gt;12 months), has a solid real-world performance track record, which I set out in the detail below. Notable new entrants to the top decile this month include bottom-fishing in Chinese education through <a href="https://www.smartkarma.com/entities/new-oriental-education-tech-grp-adr" target="_blank" data-smartkarma-citation="entities:531:1" rel="noopener">New Oriental Education (EDU US)</a>, Russian internet play <a href="https://www.smartkarma.com/entities/yandex-nv-a" target="_blank" data-smartkarma-citation="entities:414:1" rel="noopener">Yandex (YNDX US)</a>, Brazilian beverages giant <a href="https://www.smartkarma.com/entities/ambev-sa" target="_blank" data-smartkarma-citation="entities:24454:1" rel="noopener">Ambev SA (ABEV3 BZ)</a>, and a rebound call on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>.<table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td style="text-align: center; width: 74.9062px;">rank</td>
<td style="width: 262.578px;">Name</td>
<td style="width: 185.766px;">Sector</td>
<td style="width: 147.797px;">Location</td>
<td style="text-align: center; width: 74.9531px;">prev.</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">1</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/tata-consultancy-svcs-ltd" target="_blank" data-smartkarma-citation="entities:18708:1" rel="noopener">Tata Consultancy Svcs (TCS IN)</a> </td>
<td style="width: 185.766px;">Information Technology</td>
<td style="width: 147.797px;">India</td>
<td style="text-align: center; width: 74.9531px;">19</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">2</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/shenzhou-intl-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10415:1" rel="noopener">Shenzhou Intl Group Holdings (2313 HK)</a> </td>
<td style="width: 185.766px;">Consumer Discretionary</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">12</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">3</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/new-oriental-education-technology-group" target="_blank" data-smartkarma-citation="entities:32210:1" rel="noopener">New Oriental Education &amp; Technology Group (9901 HK)</a> </td>
<td style="width: 185.766px;">Consumer Discretionary</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">92</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">4</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/yandex-nv-a" target="_blank" data-smartkarma-citation="entities:414:1" rel="noopener">Yandex (YNDX US)</a> </td>
<td style="width: 185.766px;">Communication</td>
<td style="width: 147.797px;">Russian Federation</td>
<td style="text-align: center; width: 74.9531px;">88</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">5</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/china-resources-land-ltd" target="_blank" data-smartkarma-citation="entities:418:1" rel="noopener">China Resources Land (1109 HK)</a> </td>
<td style="width: 185.766px;">Real Estate</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">33</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">6</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/ambev-sa" target="_blank" data-smartkarma-citation="entities:24454:1" rel="noopener">Ambev SA (ABEV3 BZ)</a> </td>
<td style="width: 185.766px;">Consumer Staples</td>
<td style="width: 147.797px;">Brazil</td>
<td style="text-align: center; width: 74.9531px;">56</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">7</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a> </td>
<td style="width: 185.766px;">Communication</td>
<td style="width: 147.797px;">Korea (South)</td>
<td style="text-align: center; width: 74.9531px;">18</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">8</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> </td>
<td style="width: 185.766px;">Communication</td>
<td style="width: 147.797px;">China</td>
<td style="text-align: center; width: 74.9531px;">61</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">9</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/hindustan-unilever-ltd" target="_blank" data-smartkarma-citation="entities:13828:1" rel="noopener">Hindustan Unilever (HUVR IN)</a> </td>
<td style="width: 185.766px;">Consumer Staples</td>
<td style="width: 147.797px;">India</td>
<td style="text-align: center; width: 74.9531px;">70</td>
</tr>
<tr>
<td style="text-align: center; width: 74.9062px;">10</td>
<td style="width: 262.578px;">
<a href="https://www.smartkarma.com/entities/maruti-suzuki-india-ltd" target="_blank" data-smartkarma-citation="entities:733:1" rel="noopener">Maruti Suzuki India (MSIL IN)</a> </td>
<td style="width: 185.766px;">Consumer Discretionary</td>
<td style="width: 147.797px;">India</td>
<td style="text-align: center; width: 74.9531px;">89</td>
</tr>
<tr><td colspan="5" style="text-align: left; width: 746px;">Source: FactSet financial data and analytics, my estimates and calculations, Tensorflow, Keras, Google Colaboratory, pandas</td></tr>
</tbody>
</table>As usual, please feel free to reach out for the full output table, any questions, clarifications needed or suggestions.

This insight provides the output, and an overview of our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index. The model is based on 1) a typical quantitative multifactor screening model, enhanced by two Artificial Intelligence Technology-based approaches using 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model. This model, which has been developed and tweaked over the past 24 months (and implemented in its current state for &gt;12 months), has a solid real-world performance track record, which I set out in the detail below. Notable new entrants to the top decile this month include bottom-fishing in Chinese education through New Oriental Education (EDU US), Russian internet play Yandex (YNDX US), Brazilian beverages giant Ambev SA (ABEV3 BZ), and a rebound call on Tencent (700 HK).









rank
Name
Sector
Location
prev.


1

Tata Consultancy Svcs (TCS IN) 
Information Technology
India
19


2

Shenzhou Intl Group Holdings (2313 HK) 
Consumer Discretionary
China
12


3

New Oriental Education &amp; Technology Group (9901 HK) 
Consumer Discretionary
China
92


4

Yandex (YNDX US) 
Communication
Russian Federation
88


5

China Resources Land (1109 HK) 
Real Estate
China
33


6

Ambev SA (ABEV3 BZ) 
Consumer Staples
Brazil
56


7

NCSOFT Corp (036570 KS) 
Communication
Korea (South)
18


8

Tencent (700 HK) 
Communication
China
61


9

Hindustan Unilever (HUVR IN) 
Consumer Staples
India
70


10

Maruti Suzuki India (MSIL IN) 
Consumer Discretionary
India
89

Source: FactSet financial data and analytics, my estimates and calculations, Tensorflow, Keras, Google Colaboratory, pandas

As usual, please feel free to reach out for the full output table, any questions, clarifications needed or suggestions.

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.

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Semiconductor Manufacturing International Corporation (981 HK), Cosco Shipping Holdings Co., Ltd. (1919 HK), Wuxi Biologics (Cayman) Inc. (2269 HK), Geely Automobile Holdings Limited (175 HK), as well as outflows from Tencent Holdings Limited (700 HK), and Meituan (3690 HK).

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively. We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.In this insight, we will highlight inflows into Semiconductor Manufacturing International Corporation (981 HK), Cosco Shipping Holdings Co., Ltd. (1919 HK), Wuxi Biologics (Cayman) Inc. (2269 HK), Geely Automobile Holdings Limited (175 HK), as well as outflows from Tencent Holdings Limited (700 HK), and Meituan (3690 HK).

Hong Kong Connect Flows: Inflows into SMIC & Autos

China

Li Ning Company Limited researches, designs, manufactures, distributes, and retails sports footwear, apparel and accessories for sport and leisure use.

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

Li Ning (2331 HK)

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

Li Ning and JD Logistics have been added to the HSCEI while Anhui Conch and Shimao Prop have been deleted. Alibaba's weight in the index will be...

Brian Freitas

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

We see around 6 points of downside on the HSCEI 2022 dividend futures from the last traded price. There are more negative catalysts for the 2022...

Brian Freitas

Chinese Sportswear: Macro Headwinds Pose Significant Downside Risks

The Chinese sportswear market is highly influenced by the GDP growth as it declined at an annual average rate of 2% during 2011-13 when the GDP...

Oshadhi Kumarasiri

Screening for GEMs: August 2021

This insight provides an overview of our, machine learning-driven, proprietary GEM screening model, based on a Multifactor model, a Deep Neural...

Wium Malan, CFA

Hong Kong Connect Flows: Inflows into SMIC & Autos

We will highlight weekly top inflows into SMIC (981 HK), Cosco Shipping (1919 HK), Wuxi Biologics (2269 HK), Geely Automobile Holdings Limited (175...

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)