Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

Earlier this month a note titled <a href="https://www.smartkarma.com/insights/the-pain-and-the-gain-in-equities-and-fx" target="_blank" data-smartkarma-citation="insights:47142" rel="noopener">The Pain and the Gain in Equities and FX</a> was shared on SmartKarma trying to highlight the short term risks in these markets. In that note it was concluded that one should “look out for opportunities to re-engage in equity markets anywhere between 5%-10% below current levels. Similarly expect signals to short the USD again over the weeks ahead.”
As we now appear to be in the middle of this correction down in many equity indices, the following note attempts to highlight key support zones for major indices around the world in preparation for re-engaging in markets for a longer lasting and more underlying bull trend.

Earlier this month a note titled The Pain and the Gain in Equities and FX was shared on SmartKarma trying to highlight the short term risks in these markets. In that note it was concluded that one should “look out for opportunities to re-engage in equity markets anywhere between 5%-10% below current levels. Similarly expect signals to short the USD again over the weeks ahead.”
As we now appear to be in the middle of this correction down in many equity indices, the following note attempts to highlight key support zones for major indices around the world in preparation for re-engaging in markets for a longer lasting and more underlying bull trend. 

Where to Prepare for the 'Gain' in Equities

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the March 2021 review of the Hang Seng Family of Indexes on 19 February. The constituent changes will be effective after the close of trading on 5 March.We expect the March 21 review for the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> to have only 1 deletion, though there is a low probability of another set of changes. Post <a href="https://www.smartkarma.com/entities/jd-health-international" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>'s Fast Entry into the index, there needs to be one deletion at the March review. At the current time, the lowest ranked index constituent is <a href="https://www.smartkarma.com/entities/petrochina-co-ltd-h" target="_blank" data-smartkarma-citation="entities:262:1" rel="noopener">Petrochina Co Ltd H (857 HK)</a> and the stock should be deleted at the March review.There was a medium probability of <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> being included in the index. That has now become a low probability event post <a href="https://www.smartkarma.com/entities/jd-health-international" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>'s inclusion in the index. If <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> is included in the index, then <a href="https://www.smartkarma.com/entities/hengan-intl-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a> could be deleted.The potential changes to the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> over the next 6 months will also have serious implications for the dividend futures expiring in 2021, 2022 and beyond.

The Hang Seng Indexes Company Limited (HSIL) should announce the results of the March 2021 review of the Hang Seng Family of Indexes on 19 February. The constituent changes will be effective after the close of trading on 5 March.We expect the March 21 review for the Hang Seng China Enterprises Index (HSCEI INDEX) to have only 1 deletion, though there is a low probability of another set of changes. Post JD Health (6618 HK)'s Fast Entry into the index, there needs to be one deletion at the March review. At the current time, the lowest ranked index constituent is Petrochina Co Ltd H (857 HK) and the stock should be deleted at the March review.There was a medium probability of Country Garden Services Holdings (6098 HK) being included in the index. That has now become a low probability event post JD Health (6618 HK)'s inclusion in the index. If Country Garden Services Holdings (6098 HK) is included in the index, then Hengan Intl Group (1044 HK) could be deleted.The potential changes to the Hang Seng China Enterprises Index (HSCEI INDEX) over the next 6 months will also have serious implications for the dividend futures expiring in 2021, 2022 and beyond.

HSCEI Index Rebalance Preview: One Deletion For Sure, Could Be One More Change

Qi An Xin Technology Group  / Event-Driven

The SSE Science and Technology Innovation Board 50 Index, also know as 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 made up of 50 stocks with the largest full market cap and good liquidity listed on the SSE Science and Technology Innovation Board (the STAR Market). The index is free float market cap weighted and the weight of each stock is capped at 10%. In addition, the total weight of the top 5 constituents should not exceed 40%.
ETFs benchmarked to 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> raised just over CNY 21bn at launch and assets have since swelled to CNY 28.2bn due to inflows. The large amount of assets benchmarked to stocks with low free float and trading volumes creates an ideal environment for index rebalance trades to work, as we have seen in the upcoming review which will be implemented at the close of trading on 11 December.
With a maximum of 5 changes permitted in a single review, that is what we will get in March. Potential inclusions are <a href="https://www.smartkarma.com/entities/cambricon-technologies-corp" target="_blank" data-smartkarma-citation="entities:31068:1" rel="noopener">Cambricon Technologies Corp (688256 CH)</a>, <a href="https://www.smartkarma.com/entities/qi-an-xin-technology-group-a" target="_blank" data-smartkarma-citation="entities:31069:1" rel="noopener">Qi An Xin Technology Group (688561 CH)</a>, <a href="https://www.smartkarma.com/entities/shanghai-junshi-bioscience-a" target="_blank" data-smartkarma-citation="entities:31070:1" rel="noopener">Shanghai Junshi Bioscience (688180 CH)</a>, <a href="https://www.smartkarma.com/entities/trina-solar-co-ltd" target="_blank" data-smartkarma-citation="entities:30404:1" rel="noopener">Trina Solar Co Ltd (688599 CH)</a> and <a href="https://www.smartkarma.com/entities/farasis-energy-gan-zhou-co-a" target="_blank" data-smartkarma-citation="entities:28385:1" rel="noopener">Farasis Energy Gan Zhou (688567 CH)</a>.
The potential deletions are <a href="https://www.smartkarma.com/entities/longyan-zhuoyue-new-energy-co" target="_blank" data-smartkarma-citation="entities:30364:1" rel="noopener">Longyan Zhuoyue New Energy Co (688196 CH)</a>, <a href="https://www.smartkarma.com/entities/suzhou-tztek-technology-co-a" target="_blank" data-smartkarma-citation="entities:28232:1" rel="noopener">Suzhou Tztek Technology Co-A (688003 CH)</a>, <a href="https://www.smartkarma.com/entities/beijing-seeyon-internet-so-a" target="_blank" data-smartkarma-citation="entities:30393:1" rel="noopener">Beijing Seeyon Internet So-A (688369 CH)</a>, <a href="https://www.smartkarma.com/entities/tianjin-jiuri-new-material-a" target="_blank" data-smartkarma-citation="entities:30366:1" rel="noopener">Tianjin Jiuri New Material-A (688199 CH)</a> and <a href="https://www.smartkarma.com/entities/fujian-forecam-optics-co-ltd" target="_blank" data-smartkarma-citation="entities:30306:1" rel="noopener">Fujian Forecam Optics Co Ltd (688010 CH)</a>.
One-way turnover is around 13% and there is big impact expected on the stocks, especially on the deletes, and a trade of buying the expected inclusions and selling the expected exclusions could perform well.

The SSE Science and Technology Innovation Board 50 Index, also know as the SSE STAR 50 (STAR50 INDEX), is made up of 50 stocks with the largest full market cap and good liquidity listed on the SSE Science and Technology Innovation Board (the STAR Market). The index is free float market cap weighted and the weight of each stock is capped at 10%. In addition, the total weight of the top 5 constituents should not exceed 40%.
ETFs benchmarked to the SSE STAR 50 (STAR50 INDEX) raised just over CNY 21bn at launch and assets have since swelled to CNY 28.2bn due to inflows. The large amount of assets benchmarked to stocks with low free float and trading volumes creates an ideal environment for index rebalance trades to work, as we have seen in the upcoming review which will be implemented at the close of trading on 11 December.
With a maximum of 5 changes permitted in a single review, that is what we will get in March. Potential inclusions are Cambricon Technologies Corp (688256 CH), Qi An Xin Technology Group (688561 CH), Shanghai Junshi Bioscience (688180 CH), Trina Solar Co Ltd (688599 CH) and Farasis Energy Gan Zhou (688567 CH).
The potential deletions are Longyan Zhuoyue New Energy Co (688196 CH), Suzhou Tztek Technology Co-A (688003 CH), Beijing Seeyon Internet So-A (688369 CH), Tianjin Jiuri New Material-A (688199 CH) and Fujian Forecam Optics Co Ltd (688010 CH).
One-way turnover is around 13% and there is big impact expected on the stocks, especially on the deletes, and a trade of buying the expected inclusions and selling the expected exclusions could perform well.

STAR Board: STAR50 Index Rebalance March21: Rising AUM and a New Index Make an Exciting Combination

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

<ul>
<li>Consensus now sees a virtuous new EM &amp; Asia growth cycle centering on China, where outstanding growth prospects are said to coexist with structural CNY appreciation supporting continued strength in commodities and cyclicals</li>
<li>Ironically, Chinese equities sharply underperformed the rest of APAC in November just as these bullish views reached critical mass </li>
<li>Coincidentally, our text-mining finds that financial media coverage of CNY strength has recently taken an increasingly negative tone, while coverage of US-China tensions has turned neutral after a short post-election honeymoon period </li>
<li>If Chinese equities are not resilient to outgoing Trump administration flare-ups, is the CNY immune?  Should we still view the strong CNY as an indisputable positive?</li>
</ul><div class="content-highlight">TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


Consensus now sees a virtuous new EM &amp; Asia growth cycle centering on China, where outstanding growth prospects are said to coexist with structural CNY appreciation supporting continued strength in commodities and cyclicals
Ironically, Chinese equities sharply underperformed the rest of APAC in November just as these bullish views reached critical mass 
Coincidentally, our text-mining finds that financial media coverage of CNY strength has recently taken an increasingly negative tone, while coverage of US-China tensions has turned neutral after a short post-election honeymoon period 
If Chinese equities are not resilient to outgoing Trump administration flare-ups, is the CNY immune?  Should we still view the strong CNY as an indisputable positive?
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary software text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot:  Is a Strong CNY Still Viewed Positively?

<ul>
<li>Our macro sentiment indicators for key East Asian jurisdictions have all turned above &gt;1.5x STDEVs, highlighting widely-perceived notions of an accelerating synchronized recovery led by China</li>
<li>Beneath the surface, concerns linger on Chinese bond defaults and a tighter regulatory environment, but the magnitude of these trends appears insufficient to derail broader macro views as our reading of Chinese credit sentiment only dropped to -0.5x STDEV</li>
<li>Nonetheless, back-testing suggests that Chinese credit sentiment has been a superior predictor of China Lg-Cap (FXI) performance in recent years, and a recent pullback in relative performance (of both A/H-shares vs. MSCI World) appears to be linked to credit</li>
<li>We suspect the bullish backdrop allows Beijing to opportunistically launch its renewed deleveraging push with relatively limited contagion for the time being</li>
</ul>


Our macro sentiment indicators for key East Asian jurisdictions have all turned above &gt;1.5x STDEVs, highlighting widely-perceived notions of an accelerating synchronized recovery led by China
Beneath the surface, concerns linger on Chinese bond defaults and a tighter regulatory environment, but the magnitude of these trends appears insufficient to derail broader macro views as our reading of Chinese credit sentiment only dropped to -0.5x STDEV
Nonetheless, back-testing suggests that Chinese credit sentiment has been a superior predictor of China Lg-Cap (FXI) performance in recent years, and a recent pullback in relative performance (of both A/H-shares vs. MSCI World) appears to be linked to credit
We suspect the bullish backdrop allows Beijing to opportunistically launch its renewed deleveraging push with relatively limited contagion for the time being


TMI Snapshot: Synchronized Asian Macro Upturn Vs. Chinese Credit Jitters, Via Text Mining

China

The Hang Seng China Enterprises Index is a free-float capitalization-weighted index comprised of H-Shares listed on the Hong Kong Stock Exchange and included in the Hang Seng Mainland Composite Index. The base value of this index is 2000 as of Jan 3, 2000. This index replaced the old HSCE index on Oct. 3, 2001.

Hang Seng China Enterprises Index (HSCEI INDEX)

Hang Seng China Enterprises Index (HSCEI INDEX)

Where to Prepare for the 'Gain' in Equities

As we correct down in many equity indices, this note attempts to identify levels where markets are likely to be supported

Shyam Devani

HSCEI Index Rebalance Preview: One Deletion For Sure, Could Be One More Change

Following JD Health's Fast Entry into the HSCEI, PetroChina is a high probability deletion in March. There is a low probability of Country Garden...

Brian Freitas

STAR Board: STAR50 Index Rebalance March21: Rising AUM and a New Index Make an Exciting Combination

Increasing assets benchmarked to the STAR50 index and comparatively low trading volumes on the expected inclusions and exclusions provide an ideal...

Brian Freitas

TMI Snapshot: Is a Strong CNY Still Viewed Positively?

Our text-mining detects recent concerns on the strength of the CNY, and we question whether core drivers of the CNY rally may have been potentially...

Elan Gore

TMI Snapshot: Synchronized Asian Macro Upturn Vs. Chinese Credit Jitters, Via Text Mining

Our macro sentiment indicators have seen a new phase of China-led synchronized upturn in East Asia, despite high-profile SOE credit jitters.

Elan Gore