In today’s briefing:
- Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises
- HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)
- Hang Seng Index Sep24 Rebal – No Name Changes, Some Capping, 1% One-Way Flow – Total 0️⃣🍔
- HSCEI Sep24 Rebal – Two ADDs, Two DELETEs, Two Surprises, Middling Flows
- Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)
- [Alibaba (BABA US, BUY, TP US$100) TP Change]: On Track for the Great Turnaround…Reiterate BUY
- Sep24 HSTECH Index Rebal – ASMPT (522 HK) ADDed as Expected, After Post-Earnings Fall
- Time To Buy China/Gold
- Wasion (3393): Profit Alert and OBOR Beneficiary
- Merger Arb Mondays (19 Aug) – China TCM, Henlius, Canvest, CPMC, JTower, Fuji Soft PropertyGuru
Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the September rebalance. There are some surprises.
- Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.
- Weimob Inc. (2013 HK) is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.
HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)
- As expected, ASM Pacific Technology (522 HK) will replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 6 September.
- Estimated one-way turnover at the rebalance is 3.2% resulting in a round-trip trade of HK$6.5bn. Passives need to buy over 7x ADV in ASM Pacific Technology (522 HK).
- Positioning appears light in both stocks. Expect ASM Pacific Technology (522 HK) to move up and Ping An Healthcare and Technol (1833 HK) to move lower near-term.
Hang Seng Index Sep24 Rebal – No Name Changes, Some Capping, 1% One-Way Flow – Total 0️⃣🍔
- The Hang Seng Index Committee its slow move (lack of movement) towards 100 names and sector rebalancing to tech and healthcare. This is really disappointing.
- This time? We get nothing. No name changes. Some capping flows. 6 FAF changes.
- Minimal flows on the HSI rebalance to be effective on 9 September.
HSCEI Sep24 Rebal – Two ADDs, Two DELETEs, Two Surprises, Middling Flows
- The HSCEI is famous but has less AUM tracking it passively than you’d think. Nevertheless it is well-known and well-watched.
- J&T Global Express (1519 HK) and New Oriental Education & Techn (9901 HK) were ADDs. JD Logistics (2618 HK) and SenseTime Group (20 HK) are DELETEs.
- PICC Property & Casualty H (2328 HK) was NOT included. This was a surprise. We may see some disappointment this week from pre-positioning getting sold.
Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)
- In a surprise (maybe should not have been!), there are no constituent changes for the Hang Seng Index (HSI INDEX) in September. However, there are float and capping changes.
- Estimated one-way turnover is 1% and estimated round-trip trade is HK$3.73bn (US$478m). There are no stocks with over +/-0.5x ADV to trade but flows could add to/offset other index flows.
- We remain at 82 index constituents and the road to 100 constituents appears to be a long drawn out torturous one. At this glacial pace, could be an eternity away.
[Alibaba (BABA US, BUY, TP US$100) TP Change]: On Track for the Great Turnaround…Reiterate BUY
- BABA reported C1Q24 top line, adjusted EBITA and non-GAAP net profit (2.7%), 5.5% and in-line vs. consensus.
- E-Commerce GMV recovery is the most positive of all. TTG ad-revenues (CMR) trailed GMV growth but we see the two closing the gap in C2H24
- Besides stabilizing e-commerce, BABA is on track of transforming itself from China’s eBay to China’s Microsoft. AI-related cloud revenue grew 100% YoY.
Sep24 HSTECH Index Rebal – ASMPT (522 HK) ADDed as Expected, After Post-Earnings Fall
- HSTECH sees one ADD, one DELETE and several capping and re-capping actions. One of the re-caps is already an un-recap (i.e. a new capping), to be updated.
- The ADD is ASM Pacific Technology (522 HK), as expected, with significant ADV impact to buy. The DELETE is Ping An Healthcare and Technol (1833 HK), also a big sell.
- Across the three major indices, Alibaba Group Holding (9988 HK) is the big dollar sell and HSTECH changes are the biggies in terms of ADV impact.
Time To Buy China/Gold
- Gold breaks above MONTHLY bull flag suggesting possible move to 3000.
- Is China ready to duplicate prior move we witnessed in Nikkei?
- BABA looks technically attractive and could reach par by year-end.
Wasion (3393): Profit Alert and OBOR Beneficiary
- 1H 24 net profit is expected to grow by 54%, a similar amount to FY 23 with a consistent message that revenue growth helps and cost control is in place.
- Wasion Group Holdings (3393 HK) benefits from the One Belt One Road policy as many of the EM countries do not have smart power meters yet.
- Wasion’s holding on Willfar Information Technology (688100 CH) is worth around USD 970 million, double the current market capitalization of Wasion.
Merger Arb Mondays (19 Aug) – China TCM, Henlius, Canvest, CPMC, JTower, Fuji Soft PropertyGuru
- 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), JTower (4485 JP), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Capitol Health (CAJ AU).
- Lowest spreads: Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP), Alps Logistics (9055 JP).
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