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>The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.</li>
<li>The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.</li>
<li>In Asia, the largest buy flows are expected on <a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a> and the largest sell flows on <a href="https://www.smartkarma.com/entities/posco-holdings-inc" target="_blank" data-smartkarma-citation="entities:208:1" rel="noopener">POSCO Holdings (005490 KS)</a>. </li>
</ul>


The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS). 


WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Equity Bottom-Up

Grupo Financiero Banorte SAB d / Equity Bottom-Up

<ul>
<li>Mexican banks, along with other Mexican assets, have benefitted from the near-shoring theme and more recently, the investor sentiment change in favour of EM assets which also supported bank shares</li>
<li>Yet bank sector headwinds are emerging in the data to May, with rising funding costs eroding credit spreads and worsening credit quality trends implying a worsening in the credit cycle</li>
<li>We believe that Banorte’s 2Q23 results vindicate our caution on the shares, with evidence of spread pressure and rising credit costs; we prefer to gain Mexican bank exposure through BBVA</li>
</ul>


Mexican banks, along with other Mexican assets, have benefitted from the near-shoring theme and more recently, the investor sentiment change in favour of EM assets which also supported bank shares
Yet bank sector headwinds are emerging in the data to May, with rising funding costs eroding credit spreads and worsening credit quality trends implying a worsening in the credit cycle
We believe that Banorte’s 2Q23 results vindicate our caution on the shares, with evidence of spread pressure and rising credit costs; we prefer to gain Mexican bank exposure through BBVA


Banorte & Mexican Banks – Peaking Returns Due to Credit Spread Erosion and Worsening Credit Risk

Thematic (Sector/Industry)

<ul>
<li>We examine key balance sheet ratios of the Latam banks looking into liquidity, credit quality and capital adequacy, at a time of investor nervousness and concern</li>
<li>Based on our screening, our positive value picks are Bradesco and BanColombia, with Banco de Chile, BanBajio and BanRegio composing our positive high quality picks</li>
<li>Our bearish picks are Banorte and BCI; Banorte is strong in terms of capital adequacy and credit quality, but is exposed in terms of its big securities portfolio</li>
</ul>


We examine key balance sheet ratios of the Latam banks looking into liquidity, credit quality and capital adequacy, at a time of investor nervousness and concern
Based on our screening, our positive value picks are Bradesco and BanColombia, with Banco de Chile, BanBajio and BanRegio composing our positive high quality picks
Our bearish picks are Banorte and BCI; Banorte is strong in terms of capital adequacy and credit quality, but is exposed in terms of its big securities portfolio


LatAm Banks – Liquidity, Solvency and Credit Quality in Focus in a Crisis

<ul>
<li>We explore Citibank’s upcoming Banamex disposal, which appears to have become a one horse race and question whether an IPO is completely off the cards</li>
<li>Bank sector data trends to December remain robust, but headwinds are building; rising funding costs threaten credit spreads and worsening cost of credit trends, both set to erode 2023 returns</li>
<li>BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through parent BBVA shares; we remain cautious on Banorte, due to the growing risks to returns and valuation</li>
</ul>


We explore Citibank’s upcoming Banamex disposal, which appears to have become a one horse race and question whether an IPO is completely off the cards
Bank sector data trends to December remain robust, but headwinds are building; rising funding costs threaten credit spreads and worsening cost of credit trends, both set to erode 2023 returns
BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through parent BBVA shares; we remain cautious on Banorte, due to the growing risks to returns and valuation


Banamex Update & Mexican Banks’ December Data; Risks of Credit Spread Erosion & Rising Credit Costs

<ul>
<li>Banorte’s solid 4Q22, and the prospect of a healthy dividend payout, have so far trumped concerns of an earnings downturn from credit spread erosion, higher opex and cost of risk</li>
<li>Bank sector data trends to November accentuate the return headwinds that we see emerging; further tightening credit spreads and a rising cost of credit, credit cards a likely leading indicator</li>
<li>BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, due to the growing risks to returns</li>
</ul>


Banorte’s solid 4Q22, and the prospect of a healthy dividend payout, have so far trumped concerns of an earnings downturn from credit spread erosion, higher opex and cost of risk
Bank sector data trends to November accentuate the return headwinds that we see emerging; further tightening credit spreads and a rising cost of credit, credit cards a likely leading indicator
BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through BBVA equity; we continue to be cautious on Banorte, due to the growing risks to returns


Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening

Mexico

Grupo Financiero Banorte S.A.B. de C.V. is a financial institution in Mexico. The Company offers banking services, premium banking, wholesale banking, leasing and factoring, warehousing, insurance, pensions and retirement savings.

Grupo Financiero Banorte SAB d (GFNORTEO MF)

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Grupo Financiero Banorte SAB d (GFNORTEO MF)

WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week

There are 265 adds/215 deletes for the WisdomTree Emerging Markets High Dividend Index. One-way turnover is 37% resulting in a one-way trade of...

Brian Freitas

Banorte & Mexican Banks – Peaking Returns Due to Credit Spread Erosion and Worsening Credit Risk

Bank sector headwinds appear in the May data and Banorte's 2Q23 results with rising funding costs eroding spreads and worsening NPL trends; we are...

Victor Galliano

LatAm Banks – Liquidity, Solvency and Credit Quality in Focus in a Crisis

Focus on LatAm banks liquidity, solvency and credit quality; we like Bradesco and BanColombia as value plays with Banco de Chile, BanBajio &...

Victor Galliano

Banamex Update & Mexican Banks’ December Data; Risks of Credit Spread Erosion & Rising Credit Costs

The Banamex sale is a one horse race, Mexican bank PBVs are high; is an IPO totally off the cards? December data was solid, but higher funding...

Victor Galliano

Banorte 4Q22 & Mexican Banks’ November Data – Rising Risk of Credit Spread Erosion and NPL Worsening

The market reacted positively to Banorte’s 4Q22 results, yet from the sector data as well as Banorte's report, we see 2023 challenges from rising...

Victor Galliano

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52-week Range

Market Cap (USDm)

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