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>There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a>, HSCI, HSIII and global indices.</li>
<li>The review period for the March rebalance of the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200</a> and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.</li>
<li>There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.</li>
</ul>


There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the HSI, HSCEI, HSTECH, HSCI, HSIII and global indices.
The review period for the March rebalance of the S&amp;P/ASX 200 and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.
There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.


Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY</a> family of indices, <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225</a>, <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">STAR50</a>, the KRX New Deal Index and a global index ends on 31 January.</li>
<li>The January rebalance of the IDX30 and LQ45 indices will be implemented at the close of trading on 31 January.</li>
<li>There have been huge inflows into the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300 Index</a> ETFs for another week. This will increase the impact on the index changes at the next rebalance.</li>
</ul>


The review period for the NIFTY family of indices, Nikkei 225, STAR50, the KRX New Deal Index and a global index ends on 31 January.
The January rebalance of the IDX30 and LQ45 indices will be implemented at the close of trading on 31 January.
There have been huge inflows into the CSI 300 Index ETFs for another week. This will increase the impact on the index changes at the next rebalance.


Index Rebalance & ETF Flow Recap: CSI300, CSI500, SSE50, ChiNext, KOSPI200, Renesas, IDX30/LQ45

<ul>
<li>The China equity markets have continued to slide and the lower market caps and free float market caps will see a lot of stocks deleted from passive portfolios in February.</li>
<li>We currently estimate selling of around US$1.66bn across 74 stocks listed on the mainland, in HK and the U.S., and that number could increase as markets continue to underperform.</li>
<li>The potential deletes have dropped a lot over the last 4 months and there has been a marked underperformance versus the headline indices over the last month.</li>
</ul>


The China equity markets have continued to slide and the lower market caps and free float market caps will see a lot of stocks deleted from passive portfolios in February.
We currently estimate selling of around US$1.66bn across 74 stocks listed on the mainland, in HK and the U.S., and that number could increase as markets continue to underperform.
The potential deletes have dropped a lot over the last 4 months and there has been a marked underperformance versus the headline indices over the last month.


China: Sliding Market Leads to Passive Selling

<ul>
<li>The review cutoff date for the March rebalance of the HSIII was 29 December. The changes will be announced on 16 February and become effective after the close 1 March.</li>
<li>We see a high probability of <a href="https://www.smartkarma.com/entities/zx-inc" target="_blank" data-smartkarma-citation="entities:36624:1" rel="noopener">Zx Inc</a> replacing <a href="https://www.smartkarma.com/entities/flowing-cloud-technology-ltd" target="_blank" data-smartkarma-citation="entities:36461:1" rel="noopener">Flowing Cloud Technology (6610 HK)</a> in the index. There is a lower probability of <a href="https://www.smartkarma.com/entities/4paradigm" target="_blank" data-smartkarma-citation="entities:34465:1" rel="noopener">4Paradigm (6682 HK)</a> replacing <a href="https://www.smartkarma.com/entities/cmge-technology-group-ltd" target="_blank" data-smartkarma-citation="entities:451:1" rel="noopener"> CMGE Tech (302 HK)</a>. </li>
<li>Capping will result in passives buying <a href="https://www.smartkarma.com/entities/meituan" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and selling <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/kuaishou-technology" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (9618 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd-d7b798e2-202d-4e01-9a1e-799e2ae8f0c7" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group Holding (9988 HK)</a>. </li>
</ul>


The review cutoff date for the March rebalance of the HSIII was 29 December. The changes will be announced on 16 February and become effective after the close 1 March.
We see a high probability of Zx Inc replacing Flowing Cloud Technology (6610 HK) in the index. There is a lower probability of 4Paradigm (6682 HK) replacing  CMGE Tech (302 HK). 
Capping will result in passives buying Meituan (3690 HK) and selling Tencent (700 HK), Kuaishou Technology (1024 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK). 


Hang Seng Internet & IT Index Rebalance Preview: ZX Inc Could Replace Flowing Cloud

Tongcheng Travel Holdings  / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a> is expected to replace <a href="https://www.smartkarma.com/entities/gds-holdings-ltd" target="_blank" data-smartkarma-citation="entities:32157:1" rel="noopener">GDS Holdings (9698 HK)</a> in the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng TECH Index (HSTECH INDEX)</a> at the March review.</li>
<li>Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.</li>
<li>Short interest on <a href="https://www.smartkarma.com/entities/tongcheng-travel-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27363:1" rel="noopener">Tongcheng Travel Holdings (780 HK)</a> is near its lows while there has been some recent short covering in <a href="https://www.smartkarma.com/entities/gds-holdings-ltd" target="_blank" data-smartkarma-citation="entities:32157:1" rel="noopener">GDS Holdings (9698 HK)</a>. </li>
</ul>



Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK). 


HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Hong Kong

The Hang Seng TECH Index aims to represent the 30 largest technology companies listed in Hong Kong which have high business exposure to the Innovative Tech Themes.

Hang Seng TECH Index (HSTECH INDEX EQUITY)

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Hang Seng TECH Index (HSTECH INDEX EQUITY)

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