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>Three quarters of the way through the review period, we forecast 10 changes for the <a href="https://www.smartkarma.com/entities/chinext-price-index" target="_blank" data-smartkarma-citation="entities:25483:1" rel="noopener">Chinext Price Index (SZ399006 INDEX)</a> and 5 changes for the ChiNext 50 Index in June.</li>
<li>Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. On average, the impact on the potential deletions is higher.</li>
<li>The potential adds have outperformed the potential deletes over the last six months, and there has been a sharp widening of the gap over the last few weeks.</li>
</ul>


Three quarters of the way through the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. On average, the impact on the potential deletions is higher.
The potential adds have outperformed the potential deletes over the last six months, and there has been a sharp widening of the gap over the last few weeks.


ChiNext/​ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

Hunan Zhongke Electric Co,Ltd. / Event-Driven

<ul>
<li>There will be 10 changes for the <a href="https://www.smartkarma.com/entities/chinext-price-index" target="_blank" data-smartkarma-citation="entities:25483:1" rel="noopener">Chinext Price Index</a> and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 December.</li>
<li>One surprise is the inclusion of <a href="https://www.smartkarma.com/entities/hunan-zhongke-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:13009:1" rel="noopener">Hunan Zhongke Electric Co,Ltd. (300035 CH)</a> in both indices. Four stocks are adds to both indices while two stocks are deletes from both indices.</li>
<li>The adds have outperformed the deletes over the last 8 months but have given up some of the gains over the last month. There is a big sector skew.</li>
</ul>


There will be 10 changes for the Chinext Price Index and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 December.
One surprise is the inclusion of Hunan Zhongke Electric Co,Ltd. (300035 CH) in both indices. Four stocks are adds to both indices while two stocks are deletes from both indices.
The adds have outperformed the deletes over the last 8 months but have given up some of the gains over the last month. There is a big sector skew.


ChiNext/​ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care

Hubei Feilihua Quartz Glass  / Event-Driven

<ul>
<li>At the end of the review period, we forecast 10 changes for the <a href="https://www.smartkarma.com/entities/chinext-price-index" target="_blank" data-smartkarma-citation="entities:25483:1" rel="noopener">Chinext Price Index (SZ399006 INDEX)</a> and 5 changes for the ChiNext 50 Index in December.</li>
<li>Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.</li>
<li>The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.</li>
</ul>


At the end of the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.
The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.


ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion

Beijing Huafeng Test & Control / Event-Driven

<div><p>The <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">SSE STAR 50 (STAR50 INDEX)</a> is a free float market cap weighted and is made up of the 50 largest stocks based on full market cap that are listed on the STAR Market.</p></div><div><p>The review period for the September rebalance ends on 31 July, the results of the rebalance will be announced towards the end of August and the changes will be implemented at the close of trading on 10 September.</p></div><div>
<p>With only 2 trading days left in the review period, we see <a href="https://www.smartkarma.com/entities/shanghai-shen-lian-biomedical" target="_blank" data-smartkarma-citation="entities:30339:1" rel="noopener">Shanghai Shen Lian Biomedical (688098 CH)</a>, <a href="https://www.smartkarma.com/entities/piesat-information-technology" target="_blank" data-smartkarma-citation="entities:30328:1" rel="noopener">Piesat Information Technology (688066 CH)</a>, <a href="https://www.smartkarma.com/entities/guangzhou-fang-bang-electr-a" target="_blank" data-smartkarma-citation="entities:30313:1" rel="noopener">Guangzhou Fang Bang Electr-A (688020 CH)</a>, <a href="https://www.smartkarma.com/entities/shenzhen-lifotronic-techno-a" target="_blank" data-smartkarma-citation="entities:30395:1" rel="noopener">Shenzhen Lifotronic Techno-A (688389 CH)</a> and <a href="https://www.smartkarma.com/entities/appotronics-corp-ltd" target="_blank" data-smartkarma-citation="entities:28235:1" rel="noopener">Appotronics Corp Ltd (688007 CH)</a> as high probability deletions from the index.</p>
<p>Coming up with a definitive list of inclusions is tougher given the subjectivity of the index rules for this review. The subjectivity comes from the whether the index committee uses a minimum listing history period of 12 months or 6 months.</p>
<p>Higher probability inclusions (<em>if a 12 month minimum listing history is used</em>) are <a href="https://www.smartkarma.com/entities/eyebright-medical-technology-beijing-co-ltd" target="_blank" data-smartkarma-citation="entities:33455:1" rel="noopener">Eyebright Medical Technology Beijing (688050 CH)</a>, <a href="https://www.smartkarma.com/entities/sinocelltech-group-ltd" target="_blank" data-smartkarma-citation="entities:33456:1" rel="noopener">Sinocelltech Group (688520 CH)</a>, <a href="https://www.smartkarma.com/entities/beijing-huafeng-test-control-technology-a" target="_blank" data-smartkarma-citation="entities:30367:1" rel="noopener">Beijing Huafeng Test &amp; Control Technology-A (688200 CH)</a>, <a href="https://www.smartkarma.com/entities/zhejiang-orient-gene-biotech-a" target="_blank" data-smartkarma-citation="entities:30379:1" rel="noopener">Zhejiang Orient Gene Biotech-A (688298 CH)</a> and <a href="https://www.smartkarma.com/entities/tinavi-medical-technologies-co-ltd" target="_blank" data-smartkarma-citation="entities:33453:1" rel="noopener">Tinavi Medical Technologies (688277 CH)</a>.</p>
<p>Lower probability inclusions (<em>if a 6 month minimum listing history is used</em>) are <a href="https://www.smartkarma.com/entities/zhejiang-supcon-technology-co" target="_blank" data-smartkarma-citation="entities:33457:1" rel="noopener">Zhejiang Supcon Technology (688777 CH)</a>, <a href="https://www.smartkarma.com/entities/tianneng-battery-group-co-ltd" target="_blank" data-smartkarma-citation="entities:33458:1" rel="noopener">Tianneng Battery Group (688819 CH)</a>, <a href="https://www.smartkarma.com/entities/bestechnic-shanghai-co-ltd" target="_blank" data-smartkarma-citation="entities:33459:1" rel="noopener">Bestechnic Shanghai (688608 CH)</a>, <a href="https://www.smartkarma.com/entities/3peak-inc" target="_blank" data-smartkarma-citation="entities:33460:1" rel="noopener">3peak (688536 CH)</a> and <a href="https://www.smartkarma.com/entities/pylon-technologies-co-ltd" target="_blank" data-smartkarma-citation="entities:33153:1" rel="noopener">Pylon Technologies Co Ltd (688063 CH)</a>.</p>
<p>The inclusions, exclusions and capping changes will result in a one-way turnover of 8.45% and result in a one-way trade of CNY3.3bn.</p>
</div>

The SSE STAR 50 (STAR50 INDEX) is a free float market cap weighted and is made up of the 50 largest stocks based on full market cap that are listed on the STAR Market.The review period for the September rebalance ends on 31 July, the results of the rebalance will be announced towards the end of August and the changes will be implemented at the close of trading on 10 September.
With only 2 trading days left in the review period, we see Shanghai Shen Lian Biomedical (688098 CH), Piesat Information Technology (688066 CH), Guangzhou Fang Bang Electr-A (688020 CH), Shenzhen Lifotronic Techno-A (688389 CH) and Appotronics Corp Ltd (688007 CH) as high probability deletions from the index.
Coming up with a definitive list of inclusions is tougher given the subjectivity of the index rules for this review. The subjectivity comes from the whether the index committee uses a minimum listing history period of 12 months or 6 months.
Higher probability inclusions (if a 12 month minimum listing history is used) are Eyebright Medical Technology Beijing (688050 CH), Sinocelltech Group (688520 CH), Beijing Huafeng Test &amp; Control Technology-A (688200 CH), Zhejiang Orient Gene Biotech-A (688298 CH) and Tinavi Medical Technologies (688277 CH).
Lower probability inclusions (if a 6 month minimum listing history is used) are Zhejiang Supcon Technology (688777 CH), Tianneng Battery Group (688819 CH), Bestechnic Shanghai (688608 CH), 3peak (688536 CH) and Pylon Technologies Co Ltd (688063 CH).
The inclusions, exclusions and capping changes will result in a one-way turnover of 8.45% and result in a one-way trade of CNY3.3bn.


STAR50 Index Rebalance Preview: Big Turnover in a Volatile Market

China and US Equity Analyst

Roger Xie

Cross Asset Strategy

<ul>
<li>We become increasing encouraged that China equity (A-share and Hong Kong) market could stage a medium-term rebound after prolonged market correction since beginning of the year. <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX)</a> gained 0.5% and tech-focused <a href="https://www.smartkarma.com/entities/chinext-price-index" target="_blank" data-smartkarma-citation="entities:25483:1" rel="noopener">Chinext Price Index (SZ399006 INDEX)</a> gained 2.6% past week. The daily average traded value rebounded to RMB 800bn. We expect tech will likely lead the rebound since they have declined the biggest in the correction.</li>
<li>On the macro front, China April data on domestic activity is generally weaker than expected. The biggest disappointment came from retail sales, which suddenly lost momentum in April.  Industrial Production (IP) also came in below expectations in April (+0.5% month-over-month). The domestic Treasury bond yields have been moving lower after the release of April macro data. Combined with recent statement from China central bank, we believe this leaves more room for central bank to provide more liquidity to the market.</li>
<li>On the earning front, around 76% of MSCI China constituents have released their 1Q21 earnings. They have reported earnings growth 35.6% in 1Q21 and majority of them beat market consensus. Sectors with the highest growth have recovered quickly from last year. Semiconductor design, electronics with AR/VR, automobile electronics, and consumption would likely outperform in coming months. </li>
</ul>


We become increasing encouraged that China equity (A-share and Hong Kong) market could stage a medium-term rebound after prolonged market correction since beginning of the year. Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) gained 0.5% and tech-focused Chinext Price Index (SZ399006 INDEX) gained 2.6% past week. The daily average traded value rebounded to RMB 800bn. We expect tech will likely lead the rebound since they have declined the biggest in the correction.
On the macro front, China April data on domestic activity is generally weaker than expected. The biggest disappointment came from retail sales, which suddenly lost momentum in April.  Industrial Production (IP) also came in below expectations in April (+0.5% month-over-month). The domestic Treasury bond yields have been moving lower after the release of April macro data. Combined with recent statement from China central bank, we believe this leaves more room for central bank to provide more liquidity to the market.
On the earning front, around 76% of MSCI China constituents have released their 1Q21 earnings. They have reported earnings growth 35.6% in 1Q21 and majority of them beat market consensus. Sectors with the highest growth have recovered quickly from last year. Semiconductor design, electronics with AR/VR, automobile electronics, and consumption would likely outperform in coming months. 


China Equity Strategy: Market Set to Rebound and Rotate Back into Growth-Focused Tech

China

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ChiNext Index (SZ399006 INDEX EQUITY)

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

We forecast 10 changes to the ChiNext & 5 changes to the ChiNext50 in June. There are a few overlapping stocks & the potential adds have...

Brian Freitas

ChiNext/ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care

10 changes for Chinext and 5 for Chinext 50. Most changes were expected and there is a big sector skew. One surprise is the inclusion of Hunan...

Brian Freitas

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion

We forecast 10 changes to the ChiNext & 5 changes to the ChiNext50 in Dec. There are a few overlapping stocks and the potential adds have...

Brian Freitas

STAR50 Index Rebalance Preview: Big Turnover in a Volatile Market

We see 5 changes at the September rebalance and expect CSI/SSE to use a 12 month minimum listing history. One way turnover is around 8.45% and most...

Brian Freitas

China Equity Strategy: Market Set to Rebound and Rotate Back into Growth-Focused Tech

We become increasing encouraged that China equity market could stage a medium-term rebound after prolonged market correction since beginning of the...

Roger Xie

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Dividend (Yield)

ChiNext/​ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

We forecast 10 changes to the ChiNext & 5 changes to the ChiNext50 in June. There are a few overlapping stocks & the potential adds have...

Brian Freitas

ChiNext/​ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care

10 changes for Chinext and 5 for Chinext 50. Most changes were expected and there is a big sector skew. One surprise is the inclusion of Hunan...

Brian Freitas

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion

We forecast 10 changes to the ChiNext & 5 changes to the ChiNext50 in Dec. There are a few overlapping stocks and the potential adds have...

Brian Freitas

STAR50 Index Rebalance Preview: Big Turnover in a Volatile Market

We see 5 changes at the September rebalance and expect CSI/SSE to use a 12 month minimum listing history. One way turnover is around 8.45% and most...

Brian Freitas

China Equity Strategy: Market Set to Rebound and Rotate Back into Growth-Focused Tech

We become increasing encouraged that China equity market could stage a medium-term rebound after prolonged market correction since beginning of the...

Roger Xie

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

ChiNext/ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care