In today’s briefing:
- CSI Medical Service Index Rebalance: Adds Could Outperform Deletes in the Coming Week
- STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability
- SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance
- Quiddity CSI 300/500 Jun 24 Rebalance: 92% Hit Rate; US$3.7 One-Way Flows
- Merger Arb Mondays (03 Jun) – China TCM, Huafa, GA Pack, SciClone, CF Logistics, Great Eastern
- CES China Semiconductor Chips Index Rebalance: Adding to Impact for Some Stocks
- CSI300/CSI500 Index Rebalance: Big Flows and US$5bn Round-Trip Trade
- SHEIN: Several US Customs Broker Suspensions Tied to Tighter ‘de Minimis’ Rules
- Fosun Pharma (2196 HK/600196.CH) To Privatize Henlius (2696.HK) – Things Are Not as Good as Expected
- CSI All Share IB & Brokerage Index Rebalance: Couple of Large Flow & Impact Names
CSI Medical Service Index Rebalance: Adds Could Outperform Deletes in the Coming Week
- CSI announced the changes for the June rebalance after market close on 31 May and the changes will be effective after the close of trading on 14 June.
- There are 5 adds/deletes – we correctly forecasted 3 adds and all 5 deletes. Passives need to trade 0.5-3x ADV on the adds and 0.5-2.1x ADV on the deletes.
- With the index not very widely forecasted, the adds could outperform the deletes over the next week in a repeat of the performance at the December rebalance.
STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability
- There are 3 changes for the SSE STAR50 (STAR50 INDEX) and 9 changes for the STAR100 Index. Implementation will take place at the close on 14 June.
- United Nova Technology (688469 CH) and Biwin Storage Technology (688525 CH) were not added at the March rebalance since they were consistently loss-making. But they have been added this time.
- United Nova Technology (688469 CH) had been trading poorly and then the stock dropped further after non-inclusion in March. That could change now with inclusion confirmed.
SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance
- There are 5 changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 14 June. There is over 1x ADV to trade on most stocks.
- The index committee has focused on sector balance with higher ranked stocks from the Financials sector ignored and lower ranked stocks from other sectors included.
- The adds have outperformed the deletes over the last 6 months and positioning (especially on the surprises) could lead to further upside for a long/short trade.
Quiddity CSI 300/500 Jun 24 Rebalance: 92% Hit Rate; US$3.7 One-Way Flows
- The June 2024 index review results for China’s CSI 300 and CSI 500 indices were announced after market close on Friday 31st May 2024.
- There will be 12 changes in CSI 300 and 50 changes in CSI 500 which could collectively cause one-way index flows of ~US$3.7bn during the June 2024 index rebal event.
- Compared to Quiddity’s final expectations, 114 out of the 124 index changes (both ways) were correct translating to a hit rate of 92%.
Merger Arb Mondays (03 Jun) – China TCM, Huafa, GA Pack, SciClone, CF Logistics, Great Eastern
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Chilled & Frozen Logistics Holdings (9099 JP), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK).
- Lowest spreads: Great Eastern Holdings (GE SP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Mimasu Semiconductor Industry (8155 JP), Kfc Holdings Japan (9873 JP), Alumina Ltd (AWC AU).
CES China Semiconductor Chips Index Rebalance: Adding to Impact for Some Stocks
- There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 14 June.
- Biwin Storage Technology Lt (688525 CH) and Beijing Yandong Microelectroni (688172 CH) are also inclusions to other indices too and the multiple flows will increase the impact on the stocks.
- The adds have underperformed the deletes. If things go the way of the December rebalance, a long adds/ short deletes trade could do well from now to implementation.
CSI300/CSI500 Index Rebalance: Big Flows and US$5bn Round-Trip Trade
- There are 12 changes for the CSI 300 Index (SHSZ300 INDEX) and 50 changes for the CSI Smallcap 500 Index (SH000905 INDEX) in June. Most changes were expected.
- There are a lot of stocks with over 1 day of ADV to trade. The round-trip trade in June is estimated to be US$5bn.
- The adds have outperformed the deletes for both indices but the return profile of a long adds/ short deletes trade for the CSI500 Index is a lot smoother.
SHEIN: Several US Customs Broker Suspensions Tied to Tighter ‘de Minimis’ Rules
- Several US customs brokers have been suspended under new, tighter rules
- The new rules could make ‘de minimis’ imports slightly more difficult
- Whether it lists in London or NYC, additional rule changes could threaten SHEIN
Fosun Pharma (2196 HK/600196.CH) To Privatize Henlius (2696.HK) – Things Are Not as Good as Expected
- It is said that Fosun Pharma plans to privatize Henlius. There’re doubts about how to solve the debt problem/cash flow pressure of Fosun Pharma. A third party could be involved.
- Shareholders may not be willing to accept an Offer Price that is significantly below IPO price. It’s also possible that shareholders vote against the privatization. So, there are many uncertainties.
- Deal talks are still ongoing. It’s difficult to see clearly what’s happening under the table. Valuation logic of Fosun Pharma should be more like PE/VC firms not traditional pharmaceutical company.
CSI All Share IB & Brokerage Index Rebalance: Couple of Large Flow & Impact Names
- The changes to the CSI All Share Investment Banking & Brokerage Index were announced after market close on 31 May and will be implemented at the close on 14 June.
- Guosen Securities (002736 CH) will be added to the index while Northeast Securities (000686 CH) will be deleted from the index.
- There is a lot of flow and impact for both stocks and the stocks could outperform/underperform their peers over the next couple of weeks.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
