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>Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.</li>
<li>There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.</li>
<li>The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.</li>
</ul>


Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.


CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

Shanghai United Imaging Health / Event-Driven

<ul>
<li>Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.</li>
<li>We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.</li>
<li>The potential adds have outperformed the potential deletes and the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> over the last five months, though there is some near-term underperformance.</li>
</ul>


Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.
The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last five months, though there is some near-term underperformance.


CSI300 Index Rebalance Preview: Early Look at Potential Changes in December

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

AviChina Industry & Technology H / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology (2357 HK)</a> remains cheap with 3-year earnings CAGR of 17.4% but only 11x PER. It also trades on 55% discount to value of its A-share subsidiaries.</li>
<li>Aggregate earnings for its four A-share listed subsidiaries grew a solid 26.8% in 1Q23, even faster than AviChina Industry's FY23F earnings growth of 21.5%. </li>
<li>China is expected to increase military spending to narrow the gap against the US going forward. AviChina stays best exposed to such growth in defense demand.</li>
</ul>



AviChina Industry &amp; Technology (2357 HK) remains cheap with 3-year earnings CAGR of 17.4% but only 11x PER. It also trades on 55% discount to value of its A-share subsidiaries.
Aggregate earnings for its four A-share listed subsidiaries grew a solid 26.8% in 1Q23, even faster than AviChina Industry's FY23F earnings growth of 21.5%. 
China is expected to increase military spending to narrow the gap against the US going forward. AviChina stays best exposed to such growth in defense demand.


AviChina Industry (2357 HK): Benefiting from the Geopolitical Turmoil

Thematic (Sector/Industry)

<ul>
<li>China's defense budget will reach Rmb1.55trn in 2023, a 7.2% YoY increase and up from 7.1% in 2022. This also equals to 1.22% of GDP, vs. 1.2% in 2022. </li>
<li>
<a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a> has the most direct exposure to China's aerospace and defense developments given its holdings in A-share defense stocks.</li>
<li>
<a href="https://www.smartkarma.com/entities/avic-shenyang-aircraft-co-ltd" target="_blank" data-smartkarma-citation="entities:12150:1" rel="noopener">Avic Shenyang Aircraft (600760 CH)</a> will benefit from its unique position as the key manufacturer of aircraft, parts and components for China's combat fighter fleet.</li>
</ul>


China's defense budget will reach Rmb1.55trn in 2023, a 7.2% YoY increase and up from 7.1% in 2022. This also equals to 1.22% of GDP, vs. 1.2% in 2022. 

AviChina Industry &amp; Technology H (2357 HK) has the most direct exposure to China's aerospace and defense developments given its holdings in A-share defense stocks.

Avic Shenyang Aircraft (600760 CH) will benefit from its unique position as the key manufacturer of aircraft, parts and components for China's combat fighter fleet.


China Aerospace & Defense Industry: Ways to Play the Rise in Defense Spending

<ul>
<li>
<a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a> offers unique exposure to China's aerospace and defense sector and it will ride on China's ambition to solidify its military strengths. </li>
<li>We think the key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation of helicopters and potential for corporate restructuring.</li>
<li>The stock is undervalued with its holdings in four listed A-shares amounted to Rmb70.6bn, against its own market cap of HK$25bn. Also, earnings multiples are cheap relative to global peers.</li>
</ul>



AviChina Industry &amp; Technology H (2357 HK) offers unique exposure to China's aerospace and defense sector and it will ride on China's ambition to solidify its military strengths. 
We think the key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation of helicopters and potential for corporate restructuring.
The stock is undervalued with its holdings in four listed A-shares amounted to Rmb70.6bn, against its own market cap of HK$25bn. Also, earnings multiples are cheap relative to global peers.


2023 High Conviction: AviChina Industry (2357 HK) - The Sky Is the Limit

China

China Avionics Systems Co Limited manufactures and distributes aero-mechanical a nd electrical products.

China Avionics Systems Co., Ltd. (600372 CH)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Avionics Systems Co., Ltd. (600372 CH)

CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

We see 50 changes a side for the CSI500 in Dec. The Industrials sector could take a lot of index spots from Materials as one-way turnover exceeds...

Brian Freitas

CSI300 Index Rebalance Preview: Early Look at Potential Changes in December

We currently have 14 changes for the CSI300 Index in December. Most changes are high probability and the potential adds have outperformed the...

Brian Freitas

AviChina Industry (2357 HK): Benefiting from the Geopolitical Turmoil

AviChina Industry trades on 55% discount to its A-share subsidiaries' value and overall 1Q23 earnings of these subsidiaries are solid at 26.8%. It...

Osbert Tang, CFA

China Aerospace & Defense Industry: Ways to Play the Rise in Defense Spending

China's 7.2% YoY increase in defense spending budget will filter through to the business prospects of AviChina and AVIC Shenyang, given the rise in...

Osbert Tang, CFA

2023 High Conviction: AviChina Industry (2357 HK) - The Sky Is the Limit

AviChina is cheap against global peers and key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)