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)
- HSCEI Sep24 Rebal – Two ADDs, Two DELETEs, Two Surprises, Middling Flows
- Hang Seng Index Sep24 Rebal – No Name Changes, Some Capping, 1% One-Way Flow – Total 0️⃣🍔
- Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)
- Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation
- Sep24 HSTECH Index Rebal – ASMPT (522 HK) ADDed as Expected, After Post-Earnings Fall
- Merger Arb Mondays (19 Aug) – China TCM, Henlius, Canvest, CPMC, JTower, Fuji Soft PropertyGuru
- Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500
- Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: US$417mn One-Way; Some Changes to Expectations
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.
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 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.
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.
Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation
- Berkshire Hathaway Inc Cl B (BRK/B US) held over 5% of Apple (AAPL US). Nearly half of that was sold in the June quarter to take the holding to 2.63%.
- Berkshire’s selling should result in an increase in Apple (AAPL US)‘s free float in the S&P 500 INDEX (SPX INDEX) and other related indices.
- There will also be large buying in Apple (AAPL US) from the Technology Select Sector SPDR (XLK US) ETF if the proposals in the market consultation are implemented.
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.
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).
Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500
- Free float is forecasted to increase from ~94% to 100% in S&P 500 and other US and Global indices after Berkshire halved its stake in Apple (AAPL US) .
- Forecasted demand from S&P 500 and S&P TMI is 164.2m shares, $37.1bn and 3.0 ADV at the close of 20 September 2024.
- Materialization of the free float increase is uncertain due to debatable strategic shareholder classification. ETF ratios and current free float improve the confidence of the forecast.
Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: US$417mn One-Way; Some Changes to Expectations
- The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
- The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
- In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.
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