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 are 35 adds and 28 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents up to 527.</li>
<li>We expect 29 of the 35 inclusions to the HSCI will be added to Stock Connect, while 20 of the 28 HSCI deletions will be removed from Southbound Stock Connect.</li>
<li>19 stocks could be deleted from Stock Connect only since their average market cap has dropped below HK$5bn- unless the new threshold of HK$4bn is approved in the next week.</li>
</ul>


There are 35 adds and 28 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents up to 527.
We expect 29 of the 35 inclusions to the HSCI will be added to Stock Connect, while 20 of the 28 HSCI deletions will be removed from Southbound Stock Connect.
19 stocks could be deleted from Stock Connect only since their average market cap has dropped below HK$5bn- unless the new threshold of HK$4bn is approved in the next week.


HSCI Index Rebalance: 35 Adds, 28 Deletes & Changes to Southbound Stock Connect

Brilliance China Automotive / Event-Driven

<ul>
<li>We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.</li>
<li>We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. </li>
<li>There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.</li>
</ul>


We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.


HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<a href="https://www.smartkarma.com/entities/tokyo-kikai-seisakusho-ltd" target="_blank" data-smartkarma-citation="entities:15295:1" rel="noopener">Tokyo Kikai Seisakusho (6335 JP)</a> is Japan's largest maker of printing presses. It has a market cap of a whopping $130mm, and that is only after a significant rise in price in the past year or so. 
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<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/999/original/Screenshot+2021-10-23+at+7.11.19+PM.png?1634987494" class="editor-image img-responsive" data-smartkarma-image-id="236999"></figure>

</section>
On 20 July this year, a fund called Asia Investment Fund (along with associate <a href="https://www.smartkarma.com/entities/asia-development-capital-co" target="_blank" data-smartkarma-citation="entities:5545:1" rel="noopener">Asia Development Capital Co (9318 JP)</a> which is an affiliate of Sun Hung Kai) announced they had bought 7.91% of TKS as of 13 July (which required them to file a Large Shareholder Report). Unknown to the public at the time of the 20 July report was that they had purchased 6.81% on 14 July and 6.11% on 15 July and additional 5.35% in the next three trading days which took them to 26.50% by the time they had announced they had purchased their first 5%. The day after they filed the report which said they owned 7.91% - on 21 July - they bought another 6.19% in the market, which meant the day after they filed the first time they owned 32.72% of the company. On 29 July, TKS <a href="https://www.tks-net.co.jp/corporate/wp-content/uploads/2021/07/05aae76ae5d542dcc47469f5462a5975.pdf" target="_blank" rel="noopener">announced</a> that Asia Development Capital held 11.83% as of 29 July (which was a little weird because on the 26th of July the two entities reported holding 21.16%).
Then it got fun. There was a lot of effort by TKS and ADC effectively did not respond until TKS did something which ADC thought they could call out. TKS launched a Poison Pill, and ADC tried to file injunctions rejecting both the poison pill and urging the court to require TKS to count their votes held on margin (which is a question). The Court will decide after the EGM.
A list of all the interaction and announcements thereto is at <a href="https://www.tks-net.co.jp/aif/" target="_blank" rel="noopener">https://www.tks-net.co.jp/aif/</a>. The most recent announcement on Friday is that Shareholders approved the Poison Pill.
More below the fold.

Tokyo Kikai Seisakusho (6335 JP) is Japan's largest maker of printing presses. It has a market cap of a whopping $130mm, and that is only after a significant rise in price in the past year or so. 




On 20 July this year, a fund called Asia Investment Fund (along with associate Asia Development Capital Co (9318 JP) which is an affiliate of Sun Hung Kai) announced they had bought 7.91% of TKS as of 13 July (which required them to file a Large Shareholder Report). Unknown to the public at the time of the 20 July report was that they had purchased 6.81% on 14 July and 6.11% on 15 July and additional 5.35% in the next three trading days which took them to 26.50% by the time they had announced they had purchased their first 5%. The day after they filed the report which said they owned 7.91% - on 21 July - they bought another 6.19% in the market, which meant the day after they filed the first time they owned 32.72% of the company. On 29 July, TKS announced that Asia Development Capital held 11.83% as of 29 July (which was a little weird because on the 26th of July the two entities reported holding 21.16%).
Then it got fun. There was a lot of effort by TKS and ADC effectively did not respond until TKS did something which ADC thought they could call out. TKS launched a Poison Pill, and ADC tried to file injunctions rejecting both the poison pill and urging the court to require TKS to count their votes held on margin (which is a question). The Court will decide after the EGM.
A list of all the interaction and announcements thereto is at https://www.tks-net.co.jp/aif/. The most recent announcement on Friday is that Shareholders approved the Poison Pill.
More below the fold. 

Tokyo Kikai Seisakusho (6335) - Shareholders Approve Poison Pill

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Expecting Poor 1H21 Operating Result: Sun Hung Kai &amp; Co. (86.HK) [SHK] announced that unaudited results for 4M21 approximated HKD 1.1 bn. Like the 2H20 result, 4M21 numbers appear to be driven by low quality and non-core MTM gains from its investment management business, and lower credit-related loss provisions. No discussion was had on both the type of non-cash gains nor if credit risk/quality has actually improved; and      *FOF Focus Not An Historical Winner: SHK does, however, remain focused on investment management, with its newly established funds management platform, called Sun Hung Kai Capital Partners. According to management, SHK has a strong pipeline of potential partnerships and fund launches planned for 2H21.

*Expecting Poor 1H21 Operating Result: Sun Hung Kai &amp; Co. (86.HK) [SHK] announced that unaudited results for 4M21 approximated HKD 1.1 bn. Like the 2H20 result, 4M21 numbers appear to be driven by low quality and non-core MTM gains from its investment management business, and lower credit-related loss provisions. No discussion was had on both the type of non-cash gains nor if credit risk/quality has actually improved; and      *FOF Focus Not An Historical Winner: SHK does, however, remain focused on investment management, with its newly established funds management platform, called Sun Hung Kai Capital Partners. According to management, SHK has a strong pipeline of potential partnerships and fund launches planned for 2H21.

*Wealth Management Connect: Wealth Management (WM) Connect should allow the residents of Hong Kong and the Greater Bay Area (GBA) to purchase WM products in each other's markets. The launch of a GBA financial connection has been the key turning point to convert HKEx from a conduit of capital flows to mainland China to a marketplace for transactions which connect mainland China and global liquidity; and
Consultation Paper Released: On May 6, 2021, mainland China’s financial regulatory authorities released a consultation paper on WM Connect. This should be another avenue to bring additional mainland Chinese liquidity through HKEX. Benefits to HKEX in the beginning will be limited given the initial quotas on residents and limitations on products.

*Wealth Management Connect: Wealth Management (WM) Connect should allow the residents of Hong Kong and the Greater Bay Area (GBA) to purchase WM products in each other's markets. The launch of a GBA financial connection has been the key turning point to convert HKEx from a conduit of capital flows to mainland China to a marketplace for transactions which connect mainland China and global liquidity; and
Consultation Paper Released: On May 6, 2021, mainland China’s financial regulatory authorities released a consultation paper on WM Connect. This should be another avenue to bring additional mainland Chinese liquidity through HKEX. Benefits to HKEX in the beginning will be limited given the initial quotas on residents and limitations on products.

Hong Kong Exchange & Clearing – Making The Connection

Hong Kong

Sun Hung Kai & Company Limited is an investment holding company. The Company, through its subsidiaries, focuses on providing tailor-made financing solutions to corporations, small businesses, and individuals.

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Sun Hung Kai (86 HK)

HSCI Index Rebalance: 35 Adds, 28 Deletes & Changes to Southbound Stock Connect

There are 35 adds & 28 deletes for the HSCI in March leading to 29 adds & 20 deletes for Stock Connect. 19 index constituents could be dropped from...

Brian Freitas

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

We forecast 44 adds/19 deletes for the HSCI in March leading to 37 adds/deletes for Southbound Stock Connect. There could be more Connect changes...

Brian Freitas

Tokyo Kikai Seisakusho (6335) - Shareholders Approve Poison Pill

Tokyo Kikai Seisakusho is a printing press maker supplying Japan's regional newspapers with printing presses. They make some other stuff too. They...

Travis Lundy

Sun Hung Kai & Co. – Blowing Smoke

SUN HUNG KAI & CO: SHK announced unaudited results for 4M21 of HKD 1.1 bn, which appear to be driven by low quality MTM gains from investment...

Thomas J. Monaco

Hong Kong Exchange & Clearing – Making The Connection

HONG KONG EXCHANGES & CLEARING: Mainland China’s financial regulatory authorities released a consultation paper on WM Connect, an avenue to bring...

Thomas J. Monaco

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