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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Stock Exchange of Thailand (SET) has commenced a market consultation on changing the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a>, SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.

The Stock Exchange of Thailand (SET) has commenced a market consultation on changing the Stock Exchange of Thailand SET 50 Index (SET50 INDEX), SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

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Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

India's bull cycle is maturing per the rising wedge pivot points with near support at 14,400. The top of the rising wedge represents the primary cycle sell zone that sets up a short. Rising wedge formations are also noted in Japan and Taiwan amid deteriorating upside momentum that warns of Q2 weakness ahead.Nifty trendline support pressure test is expected as the defining bull/bear line while the banks reach for pivot support (we have been short banks as the underperform hedge).

India's bull cycle is maturing per the rising wedge pivot points with near support at 14,400. The top of the rising wedge represents the primary cycle sell zone that sets up a short. Rising wedge formations are also noted in Japan and Taiwan amid deteriorating upside momentum that warns of Q2 weakness ahead.Nifty trendline support pressure test is expected as the defining bull/bear line while the banks reach for pivot support (we have been short banks as the underperform hedge).

Nifty lower wedge support is our tactical buy zone with upper wedge resistance coming in near 15,800 with time translation. What is becoming increasingly apparent is that this rally is maturing within the overlapping rise as momentum indicators begin to drift lower (weaker into strength).We are using the banks as a hedge into buy support and will then initiate a bigger short strategy on a new Nifty high with the USD/INR near 72. For now the bet is to buy weakness and then look for warning signals to unfold.

Nifty lower wedge support is our tactical buy zone with upper wedge resistance coming in near 15,800 with time translation. What is becoming increasingly apparent is that this rally is maturing within the overlapping rise as momentum indicators begin to drift lower (weaker into strength).We are using the banks as a hedge into buy support and will then initiate a bigger short strategy on a new Nifty high with the USD/INR near 72. For now the bet is to buy weakness and then look for warning signals to unfold.

India Nifty Buy Support Within Maturing Rising Wedge

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

The price action seen across many Indian markets - Equities, Foreign Exchange, and Government bond yields - suggests that the underlying uptrend on the Nifty Index is likely to now resume after the sharp pullback of last week.

The price action seen across many Indian markets - Equities, Foreign Exchange, and Government bond yields - suggests that the underlying uptrend on the Nifty Index is likely to now resume after the sharp pullback of last week.

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

India's nominal GDP increased 4.3% YoY in Oct-Dec 2020, although real GDP was only reported to have increased 1% YoY (based on production-side estimates). The implicit GDP deflator thus increased 3.3% YoY -- much more than the average WPI inflation rate of 1.66% YoY during the quarter. Using expenditure-side estimates, nominal GDP grew even faster (+5.3% YoY), although the reported real increase in GDE was only 0.4% YoY -- implying an increase in the GDE deflator of 3.9% YoY. While this appears consistent with the higher CPI inflation rate, the GDE deflator also takes account of the GFCF and net export deflators, neither of which were rising much. So it is likely that the GDP estimates for that quarter will be revised up eventually. The most encouraging aspect of the GDE estimates was that fixed investment spending (GFCF) increased 2.6% YoY in the Oct-Dec 2020 quarter, the first such increase in a year. This suggests that the production-linked incentives (PLI) and sharply-lower corporate tax rates are beginning to spur a revival in investment spending, not just in FDI (which was doing well anyway, but remains a small proportion of overall GFCF).  As investment gains momentum, the additional capacity creation will dampen costs and prices. Additionally, CPI inflation was artificially high in April-November 2020 because of supply disruptions and bottlenecks arising from the strict lockdown in April-June, which only eased gradually in subsequent months. CPI inflation has already eased to 4.06% YoY in January 2021. Compared with the high base in Apr-Nov 2020, CPI inflation is likely to ease toward 3% YoY by June 2021, obliging the RBI to cut its policy rate by 50bp (to 3.5%) by September 2021. We continue to expect a powerful economic recovery to occur in FY2021/22, helped by the low base from a year ago, the slew of fiscal incentives, an acceleration in privatization (which will crowd-in private investment, already enthused by low tax rates) and a surge of public investment. The decline in policy rates will be the icing on the cake, helping to deliver real GDP growth of 13.5% YoY in FY2021/22.

India's nominal GDP increased 4.3% YoY in Oct-Dec 2020, although real GDP was only reported to have increased 1% YoY (based on production-side estimates). The implicit GDP deflator thus increased 3.3% YoY -- much more than the average WPI inflation rate of 1.66% YoY during the quarter. Using expenditure-side estimates, nominal GDP grew even faster (+5.3% YoY), although the reported real increase in GDE was only 0.4% YoY -- implying an increase in the GDE deflator of 3.9% YoY. While this appears consistent with the higher CPI inflation rate, the GDE deflator also takes account of the GFCF and net export deflators, neither of which were rising much. So it is likely that the GDP estimates for that quarter will be revised up eventually. The most encouraging aspect of the GDE estimates was that fixed investment spending (GFCF) increased 2.6% YoY in the Oct-Dec 2020 quarter, the first such increase in a year. This suggests that the production-linked incentives (PLI) and sharply-lower corporate tax rates are beginning to spur a revival in investment spending, not just in FDI (which was doing well anyway, but remains a small proportion of overall GFCF).  As investment gains momentum, the additional capacity creation will dampen costs and prices. Additionally, CPI inflation was artificially high in April-November 2020 because of supply disruptions and bottlenecks arising from the strict lockdown in April-June, which only eased gradually in subsequent months. CPI inflation has already eased to 4.06% YoY in January 2021. Compared with the high base in Apr-Nov 2020, CPI inflation is likely to ease toward 3% YoY by June 2021, obliging the RBI to cut its policy rate by 50bp (to 3.5%) by September 2021. We continue to expect a powerful economic recovery to occur in FY2021/22, helped by the low base from a year ago, the slew of fiscal incentives, an acceleration in privatization (which will crowd-in private investment, already enthused by low tax rates) and a surge of public investment. The decline in policy rates will be the icing on the cake, helping to deliver real GDP growth of 13.5% YoY in FY2021/22.   

India: Easing Inflation Will Oblige RBI to Cut Policy Rates in the Next Half Year

India

The NIFTY 50 index is National Stock Exchange of India's benchmark stock market index for Indian equity market. Nifty is owned and managed by India Index Services and Products (IISL), which is a wholly owned subsidiary of the NSE Strategic Investment Corporation Limited.

NIFTY Index (NIFTY INDEX)

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

The SET has commenced a market consultation on the proposed changes to make its indices free float market cap weighted. We look at the impact on...

Brian Freitas

Nifty Maturing Rise and Red Flag Levels

India's bull cycle is maturing per the rising wedge pivot points. The top of the rising wedge represents the primary cycle sell zone that sets up a...

Thomas Schroeder

India Nifty Buy Support Within Maturing Rising Wedge

Nifty lower wedge support is our buy zone with wedge target resistance coming in near 15,800. This rally is maturing within the rising wedge as...

Thomas Schroeder

India's Nifty Support

Price action seen across Indian markets - Equities, FX, and Rates - suggests that the underlying uptrend on the Nifty Index may already be resuming.

Shyam Devani

India: Easing Inflation Will Oblige RBI to Cut Policy Rates in the Next Half Year

Nominal GDP was up 5.3%YoY in Oct-Dec 2020, although real GDP rose only 1%YoY. But CPI inflation will likely be below 3%YoY by June, forcing a 50bp...

Prasenjit K. Basu