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/trip-com-group-ltd-23a341d0-4f63-4175-a8c5-ee990906cacd" target="_blank" data-smartkarma-citation="entities:36424:1" rel="noopener">Trip.com Group (9961 HK)</a> replaces <a href="https://www.smartkarma.com/entities/country-garden-services-holdin" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services (6098 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> at the close on 1 September.</li>
<li>
<a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene (6160 HK)</a> fails the Velocity Test and misses inclusion, while an increase in <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>'s float keeps it in the index.</li>
<li>Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).</li>
</ul>


As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.

BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)'s float keeps it in the index.
Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).


HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.</li>
<li>While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.</li>
<li>We like OTAs including <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel (780 HK)</a> and <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> despite their YTD surge in share prices. Meanwhile, <a href="https://www.smartkarma.com/entities/air-china-ltd-h" target="_blank" data-smartkarma-citation="entities:8239:1" rel="noopener">Air China Ltd (H) (753 HK)</a> stays as the top pick.</li>
</ul>


Various statistics suggested that China's tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.
While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.
We like OTAs including Tongcheng Travel (780 HK) and Trip.com (9961 HK) despite their YTD surge in share prices. Meanwhile, Air China Ltd (H) (753 HK) stays as the top pick.


China Tourism and Hospitality Industry: Roundup of a Solid CNY

<ul>
<li>In a surprise, the Hang Seng index committee has decided not to make any constituent changes to the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> at the March rebalance.</li>
<li>We now see the index reaching its 100-member target in 2025 at the earliest, though we would not be surprised to see it spill into 2026 as well.</li>
<li>Free float and capping changes will result in one-way turnover of 1.2% resulting in a round trip trade of HK$4.54bn. <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> is the biggest sell.</li>
</ul>


In a surprise, the Hang Seng index committee has decided not to make any constituent changes to the Hang Seng Index (HSI INDEX) at the March rebalance.
We now see the index reaching its 100-member target in 2025 at the earliest, though we would not be surprised to see it spill into 2026 as well.
Free float and capping changes will result in one-way turnover of 1.2% resulting in a round trip trade of HK$4.54bn. HSBC Holdings (5 HK) is the biggest sell.


Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest

Equity Bottom-Up

Tongcheng Travel Holdings  / Equity Bottom-Up

<ul>
<li>The upcoming Chinese New Year travel rush is expected to see air passenger volume reach 80m, a 9.8% increase vs. 2019. <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a> is a key beneficiary.</li>
<li>In addition to air ticket booking, Tongcheng can gain from demand for related services and products. The focus on lower-tier cities will make it better satisfy their demand. </li>
<li>Its FY24F PER of 15.2x is lower than sector average of 16.4x, yet 3-year EPS CAGR of 30.7% is higher. Its underperformance against <a href="https://www.smartkarma.com/entities/trip-com-group-ltd" target="_blank" data-smartkarma-citation="entities:180:1" rel="noopener">Trip.com (TCOM US)</a> can be reversed.</li>
</ul>


The upcoming Chinese New Year travel rush is expected to see air passenger volume reach 80m, a 9.8% increase vs. 2019. Tongcheng Travel Holdings (780 HK) is a key beneficiary.
In addition to air ticket booking, Tongcheng can gain from demand for related services and products. The focus on lower-tier cities will make it better satisfy their demand. 
Its FY24F PER of 15.2x is lower than sector average of 16.4x, yet 3-year EPS CAGR of 30.7% is higher. Its underperformance against Trip.com (TCOM US) can be reversed.


<ul>
<li>While adjusted net profit of <a href="https://www.smartkarma.com/entities/tongcheng-elong-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings Ltd (780 HK)</a> plummeted in 4Q22, the positive momentum in 1Q23 as revealed supports a sharp recovery in FY23.</li>
<li>Its huge exposure to lower-tier cities will fuel outlook while increase in monetisation will support profitability rebound. Success at Blackwhale membership program is another growth engine.  </li>
<li>Management is confident that revenue growth and better efficiency will lead the return of FY23 margin to pre-pandemic levels. Net cash position (12% of share price) is an added strength. </li>
</ul>


While adjusted net profit of Tongcheng Travel Holdings Ltd (780 HK) plummeted in 4Q22, the positive momentum in 1Q23 as revealed supports a sharp recovery in FY23.
Its huge exposure to lower-tier cities will fuel outlook while increase in monetisation will support profitability rebound. Success at Blackwhale membership program is another growth engine.  
Management is confident that revenue growth and better efficiency will lead the return of FY23 margin to pre-pandemic levels. Net cash position (12% of share price) is an added strength. 


Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities' Growth

China

China Tourism Group Duty Free Corporation Limited engages in sales of duty free goods and tax goods. The Company sells tobacco, wine and spirits, perfume, cosmetics, fashion and accessories, watches, jewelry, food, luggage products,and other products. China Tourism Group Duty Free also engages in investment and development of tourism destination commercial complexes.

China Tourism Group Duty Free Corp Ltd (601888 CH)

Huazhu Group Limited operates a hotel operator and franchisor. The Company provides hotel leasing, directly hotel operation, and co-development services. Huazhu Group mainly conducts businesses in China.

Haidilao International Holding Ltd. operates Chinese cuisine restaurant brand focusing on hot pot cuisine. The Company provides hot pots, soup bases, dipping sauces, drinks, prepared food, and other products. Haidilao International Holding opens restaurants in Taiwan, Hong Kong, Singapore, South Korea, Japan, and the United States.

Tongcheng Travel Holdings Limited operates as an online travel agency. The Company provides transportation ticketing, accommodation reservation, value added travel products sales, and other services. Tongcheng Travel Holdings provides its services throughout China.

Shenzhen Overseas Chinese Town Co Ltd invests in and manages theme parks in China.  The Company, through its subsidiaries, also provides travel agency service.

Shenzhen Overseas Chinese (A) (000069 CH)

Songcheng Performance Development Co., LTD invests, develops and operates theme parks and tourism cultural performing arts. The Company's major projects include the Sungcheng theme park and the cultural performing arts musical "The Romance of the Song Dynasty".

Songcheng Performance Development (300144 CH)

Giant Network Group Co., Ltd. develops online games. The Company mainly develops, operates, and sells computer terminal network game and mobile terminal network game products. Giant Network Group provides services in China.

Shanghai Jinjiang International Hotels Co.,Ltd. owns and operates hotels.  The Company also provides catering, business, entertainment, and other services. Shanghai Jinjiang International Hotels conducts its business in China.

Shanghai Jinjiang Internationa (600754 CH)

BTG Hotels (Group) Co., Ltd. operates a tourism business.  The Company also invests in hotel and restaurant management, as well as provides advertising and exhibition center management services.

China CYTS Tours Holding Co., Ltd. provides travel information and arrangement services.  Through its subsidiaries, the Company also manufactures medical instrument, provides system integration services for the insurance industry, and develops real estate.

Sands China Ltd. develops, owns, and operates integrated resorts, retail malls, and casinos. The Company also manages convention and exhibition halls in Macau.

Wynn Resorts, Limited owns and operates luxury hotels and destination casino resorts in Las Vegas, Nevada, Macau, and China. The Company offers amenities such as guest rooms and suites, restaurants, golf course, and an on-site luxury automotive dealership.

Galaxy Entertainment Group Limited, through its subsidiary, operates casino, hotel and other entertainment facilities in Macau. The company also manufactures sells and distributes construction materials.

Las Vegas Sands Corp. owns and operates casino resorts and convention centers. The Company operates in the United States, Macau and Singapore. Las Vegas Sand Corp's casinos offer a wide range of gaming activities and entertainment as well as overnight accommodations, while its expo centers host a wide range of entertainment shows, expositions, and other activities.

Yum! Brands, Inc, owns and franchises quick-service restaurants worldwide.  The Company develops, operates, franchises and licenses a worldwide system of restaurants which prepare, package and sell a menu of food items.

Royal Caribbean Cruises Ltd. is a global cruise company operating a fleet of vessels in the cruise vacation industry. The Company operates through brands which primarily serve the contemporary, premium and deluxe segments of the cruise vacation industry, which also includes the budget and luxury segments.

Hyatt Hotels Corp. is a global hospitality company. The Company manages, franchises, owns, and develops branded hotels, resorts and residential and vacation ownership properties around the world.

Norwegian Cruise Line Holdings Ltd. operates a fleet of passenger cruise ships. The Company offers an array of cruise itineraries as well as theme cruises, while markets its services through various distribution channels including retail and travel agents, consumer direct, international sales, as well as incentive sales. Norwegian Cruise extends its services worldwide.

Wingstop Inc. owns and operates restaurants. The Company specializes in cooked-to-order, hand-sauced, and tossed chicken wings. Wingstop serves customers worldwide.

Indian Hotels Company Limited operates The Taj Group of hotels.  The Company owns or maintains long term leases/licenses for hotels in India, in addition to International hotels.  The Group's hotels are divided into three groups: Luxury, Business, and, Leisure.

Trip.com Group Limited provides online travel agency services. The Company offers mobile applications, hotel reservations, flight ticketing, package tours, corporate travel management, and train ticketing services. Trip.com Group provides services worldwide.

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Trip.com Group (9961 HK)

HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)

As expected, Trip.com replaces CG Services in the HSCEI. Beigene fails liquidity and Zhongsheng's float increases. Float and capping changes result...

Brian Freitas

China Tourism and Hospitality Industry: Roundup of a Solid CNY

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest

No changes for the HSI in March. There are free float and capping changes though. HSBC is a passive sell due to capping, ICBC and Trip.com are buys...

Brian Freitas

Tongcheng Travel (780 HK): We Are Back

CNY travel rush is expected to boost air passenger volume by 9.8% vs. 2019, benefiting Tongcheng. Its focus on lower-tier cities and strong EPS...

Osbert Tang, CFA

Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities' Growth

Positive business momentum in 1Q23 supports a sharp recovery in FY23. Huge exposure to lower-tier cities and increase in monetisation will support...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)

As expected, Trip.com replaces CG Services in the HSCEI. Beigene fails liquidity and Zhongsheng's float increases. Float and capping changes result...

Brian Freitas

China Tourism and Hospitality Industry: Roundup of a Solid CNY

​China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...

Osbert Tang, CFA

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest

No changes for the HSI in March. There are free float and capping changes though. HSBC is a passive sell due to capping, ICBC and Trip.com are buys...

Brian Freitas

Tongcheng Travel (780 HK): We Are Back

CNY travel rush is expected to boost air passenger volume by 9.8% vs. 2019, benefiting Tongcheng. Its focus on lower-tier cities and strong EPS...

Osbert Tang, CFA

Tongcheng Travel (780 HK): Best for Capturing Lower-Tier Cities' Growth

Positive business momentum in 1Q23 supports a sharp recovery in FY23. Huge exposure to lower-tier cities and increase in monetisation will support...

Osbert Tang, CFA

China's tourism industry sees a strong recovery during the 2024 CNY holidays, with a high double-digit traffic surge. OTAs like Tongcheng and...