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 could be 17 changes at the December rebalance with the Industrials and Materials sectors could gaining 2 spots each and the Information Technology sector losing 3 spots.</li>
<li>Estimated one-way turnover of 3% at the December rebalance leading to a one-way trade of CNY 30.2bn (US$4.3bn). There are 14 stocks with over 2x ADV to trade.</li>
<li>The forecast adds have outperformed the forecast deletes over the last month despite rising markets and a wall of money flowing into <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> ETFs.</li>
</ul>


There could be 17 changes at the December rebalance with the Industrials and Materials sectors could gaining 2 spots each and the Information Technology sector losing 3 spots.
Estimated one-way turnover of 3% at the December rebalance leading to a one-way trade of CNY 30.2bn (US$4.3bn). There are 14 stocks with over 2x ADV to trade.
The forecast adds have outperformed the forecast deletes over the last month despite rising markets and a wall of money flowing into Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) ETFs.


CSI300 Index Rebalance Preview: Rising Markets and ETF Creations Take Round-Trip Trade to US$8.5bn

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Shijiazhuang Yiling Pharmaceutical / Equity Bottom-Up

<ul>
<li>Due to the overvaluation of pharmaceutical companies in the primary market, only foreign markets are able to “digest” such high valuation. So, various promising drugs are acquired by foreign investors.</li>
<li>The field of RDC/RLT has attracted our attention, which could become the next hot area. Since nuclides are the most important bottleneck, domestic related enterprises will usher in opportunities.</li>
<li>
<a href="https://www.smartkarma.com/entities/shijiazhuang-yiling-pharmaceutical-a" target="_blank" data-smartkarma-citation="entities:16040:1" rel="noopener">Shijiazhuang Yiling Pharmaceutical</a>’s performance would continue to be under pressure in 24H1 but would rebound in 24H2 after “destocking”. Valuation/share price have not yet bottomed out. Don’t rush to bottom-fish.</li>
</ul>


Due to the overvaluation of pharmaceutical companies in the primary market, only foreign markets are able to “digest” such high valuation. So, various promising drugs are acquired by foreign investors.
The field of RDC/RLT has attracted our attention, which could become the next hot area. Since nuclides are the most important bottleneck, domestic related enterprises will usher in opportunities.

Shijiazhuang Yiling Pharmaceutical’s performance would continue to be under pressure in 24H1 but would rebound in 24H2 after “destocking”. Valuation/share price have not yet bottomed out. Don’t rush to bottom-fish.


China Healthcare Weekly (May.5) - Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma

<ul>
<li>Now that the pandemic has passed, Yiling’s performance has to face a sharp decline due to the high base before, but in our view, the situation is not so bad.  </li>
<li>According to the management,sales of cardiovascular and cerebrovascular products would gradually increase to make up for the sales decline of Lianhua Qingwen, which would still be higher than pre-pandemic level.</li>
<li>About 15-20% performance growth is still reachable in the future. PE of 20-30 is a reasonable range for Yiling. Being included in CSI 300 Index helps to improve the liquidity.</li>
</ul>


Now that the pandemic has passed, Yiling’s performance has to face a sharp decline due to the high base before, but in our view, the situation is not so bad.  
According to the management,sales of cardiovascular and cerebrovascular products would gradually increase to make up for the sales decline of Lianhua Qingwen, which would still be higher than pre-pandemic level.
About 15-20% performance growth is still reachable in the future. PE of 20-30 is a reasonable range for Yiling. Being included in CSI 300 Index helps to improve the liquidity.


Shijiazhuang Yiling Pharmaceutical (002603.CH) - Valuation Rebound Is Worth Looking Forward To

<ul>
<li>The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.</li>
<li>The changes for 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</a>, <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI 500</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>, <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50</a> and a bunch of other mainland China indices will be announced after market close on Friday.</li>
<li>Relatively quiet week for ETF flows with no major creations or redemptions during the week.</li>
</ul>


The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.
The changes for the CSI 300, CSI 500, STAR50, SSE50 and a bunch of other mainland China indices will be announced after market close on Friday.
Relatively quiet week for ETF flows with no major creations or redemptions during the week.


Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

Thematic (Sector/Industry)

<ul>
<li>The gradual lifting of the lockdown in two major cities means that China's industries are recovering. In healthcare, there are both opportunities and challenges worth discussing.</li>
<li>As China restores normal production and life, we analyzed the impact/logic on nucleic acid testing business, local fiscal expenditure, pharmaceutical/medical device companies, IVD, hospital operations, global supply chain, digital healthcare.</li>
<li>Due to geopolitical conflicts, negative impact of lockdown on economy, resource shortage,inflation, the priority of healthcare may decline.The performance/returns on advanced technology/pharmaceuticals/devices or nonrigid demand could be lower than expected. </li>
</ul>


The gradual lifting of the lockdown in two major cities means that China's industries are recovering. In healthcare, there are both opportunities and challenges worth discussing.
As China restores normal production and life, we analyzed the impact/logic on nucleic acid testing business, local fiscal expenditure, pharmaceutical/medical device companies, IVD, hospital operations, global supply chain, digital healthcare.
Due to geopolitical conflicts, negative impact of lockdown on economy, resource shortage,inflation, the priority of healthcare may decline.The performance/returns on advanced technology/pharmaceuticals/devices or nonrigid demand could be lower than expected. 


China Reopen - Opportunities and Challenges in China Healthcare

China

Shijiangzhuang Yiling Pharmaceutical Co Ltd develops, produces and sells Chinese patent medicine. The Company's major products include Tongxinluo capsules, Shensongyangxin capsules, Lotus Qingwen capsules, Qili Qiangxin capsules and Bazi Bushen capsules.

Shijiazhuang Yiling Pharmaceutical (002603 CH)

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Shijiazhuang Yiling Pharmaceutical (002603 CH)

CSI300 Index Rebalance Preview: Rising Markets and ETF Creations Take Round-Trip Trade to US$8.5bn

There could be 17 changes in Dec. Estimated 1-way turnover is 3%; 1-way trade is US$4.3bn. There are 14 stocks with over 2x ADV to trade. The adds...

Brian Freitas

China Healthcare Weekly (May.5) - Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma

Only foreign markets are able to “digest” high valuation of China's biotech assets in primary market. RDC/RLT will become the next hot area for...

Xinyao (Criss) Wang