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

Contact Energy Limited is a diversified and integrated energy company which focuses on the generation of electricity and the sale of electricity and gas in New Zealand.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a> has outperformed <a href="https://www.smartkarma.com/entities/mighty-river-power" target="_blank" data-smartkarma-citation="entities:9933:1" rel="noopener">Mercury NZ Ltd (MCY NZ)</a> over the last month off the back of expected passive flows in February.</li>
<li>Despite the outperformance, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a> trades at a lower forward PE compared to <a href="https://www.smartkarma.com/entities/mighty-river-power" target="_blank" data-smartkarma-citation="entities:9933:1" rel="noopener">Mercury NZ Ltd (MCY NZ)</a>, though it does trade at a higher Price to Book. </li>
<li>There could be large passive inflows to <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a> and large passive outflows from <a href="https://www.smartkarma.com/entities/mighty-river-power" target="_blank" data-smartkarma-citation="entities:9933:1" rel="noopener">Mercury NZ Ltd (MCY NZ)</a> in February.</li>
</ul>



Contact Energy (CEN NZ) has outperformed Mercury NZ Ltd (MCY NZ) over the last month off the back of expected passive flows in February.
Despite the outperformance, Contact Energy (CEN NZ) trades at a lower forward PE compared to Mercury NZ Ltd (MCY NZ), though it does trade at a higher Price to Book. 
There could be large passive inflows to Contact Energy (CEN NZ) and large passive outflows from Mercury NZ Ltd (MCY NZ) in February.


NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms

ZTO Express (Cayman) Inc. operates as an express delivery company. The Company provides express delivery service through their nationwide network, as well as other value-added logistics services. ZTO Express serves customers globally.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/beigene-ltd" target="_blank" data-smartkarma-citation="entities:27352:1" rel="noopener">BeiGene</a> and <a href="https://www.smartkarma.com/entities/zto-express-cayman-inc" target="_blank" data-smartkarma-citation="entities:33488:1" rel="noopener">ZTO Express Cayman</a> are potential inclusions 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</a> in March while <a href="https://www.smartkarma.com/entities/sino-biopharmaceutical" target="_blank" data-smartkarma-citation="entities:230:1" rel="noopener">Sino Biopharmaceutical</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning</a> are potential deletions.</li>
<li>There is a lower probability of <a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> replacing <a href="https://www.smartkarma.com/entities/sunny-optical-technology-group" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical Technology Group (2382 HK)</a> in the index in March.</li>
<li>There could be a few more index inclusions for <a href="https://www.smartkarma.com/entities/zto-express-cayman-inc" target="_blank" data-smartkarma-citation="entities:33488:1" rel="noopener">ZTO Express Cayman</a> in March and the stock could outperform its peers over the next few months.</li>
</ul>



BeiGene and ZTO Express Cayman are potential inclusions for the Hang Seng China Enterprises Index in March while Sino Biopharmaceutical and Li Ning are potential deletions.
There is a lower probability of Yum China Holdings (9987 HK) replacing Sunny Optical Technology Group (2382 HK) in the index in March.
There could be a few more index inclusions for ZTO Express Cayman in March and the stock could outperform its peers over the next few months.


HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March

Endeavour Group /Australia / Event-Driven

Endeavour Group Limited of Australia retail drinks and hospitality business. The Company offers distilled spirits, including neutral spirits and ethyl alcohol used in blended wines and distilled liquors. Endeavour Group serves customers in Australia.

<ul>
<li>Up to six Aussie stocks could be deleted from global passive portfolios in February. The final list of deletions depends on stock performance over the next 2-3 weeks.</li>
<li>If deleted, passive trackers will need to sell between A$370m-A$500m in the stocks. Impact is high at between 7-24 days of ADV.</li>
<li>The potential deletions have underperformed 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 (AS51 INDEX)</a> over every time period from 1 week to 3 months. Positioning is still low in a few stocks.</li>
</ul>


Up to six Aussie stocks could be deleted from global passive portfolios in February. The final list of deletions depends on stock performance over the next 2-3 weeks.
If deleted, passive trackers will need to sell between A$370m-A$500m in the stocks. Impact is high at between 7-24 days of ADV.
The potential deletions have underperformed the S&amp;P/ASX 200 (AS51 INDEX) over every time period from 1 week to 3 months. Positioning is still low in a few stocks.


Australia: Six Stocks in Passive Selling Crosshairs for February

ITC Limited, a member of BAT Group of UK, is a holding company, which has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri Business, Packaged Foods & Confectionery, Branded Apparel, Greeting Cards and other FMCG products.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/itc-ltd" target="_blank" data-smartkarma-citation="entities:327:1" rel="noopener">ITC Ltd (ITC IN)</a> will demerge its Hotels business with the ex-date set as 6 January and shareholders receiving 1 share of ITC Hotels for 10 shares of ITC Ltd.</li>
<li>
<a href="https://www.smartkarma.com/entities/itc-ltd" target="_blank" data-smartkarma-citation="entities:327:1" rel="noopener">ITC Ltd (ITC IN)</a> shareholders will own 100% of ITC Hotels - 60% will be owned directly and 40% will be owned through their shareholding in <a href="https://www.smartkarma.com/entities/itc-ltd" target="_blank" data-smartkarma-citation="entities:327:1" rel="noopener">ITC Ltd (ITC IN)</a>.</li>
<li>There will be a lot of selling in ITC Hotels within a few days of listing from different passive index trackers and that could provide buying opportunities for those interested.</li>
</ul>



ITC Ltd (ITC IN) will demerge its Hotels business with the ex-date set as 6 January and shareholders receiving 1 share of ITC Hotels for 10 shares of ITC Ltd.

ITC Ltd (ITC IN) shareholders will own 100% of ITC Hotels - 60% will be owned directly and 40% will be owned through their shareholding in ITC Ltd (ITC IN).
There will be a lot of selling in ITC Hotels within a few days of listing from different passive index trackers and that could provide buying opportunities for those interested.


ITC Hotels: Index Implications of Demerger from ITC Ltd (ITC IN)

Adani Green Energy Limited operates as a producer of renewable energy. The Company builds, owns, and operates power plants for solar and wind energy. Adani Green Energy serves customers worldwide.


<ul>
<li>Passive global index trackers sold <a href="https://www.smartkarma.com/entities/adani-green-energy-ltd" target="_blank" data-smartkarma-citation="entities:29012:1" rel="noopener">Adani Green Energy (ADANIGR IN)</a> in November following a big drop in free float for the stock.</li>
<li>There could be more selling in <a href="https://www.smartkarma.com/entities/adani-green-energy-ltd" target="_blank" data-smartkarma-citation="entities:29012:1" rel="noopener">Adani Green Energy</a> in February as the stock is deleted from the same large global index due to failing free float market cap thresholds.</li>
<li>With the company at the center of the U.S indictment focused on bribery charges, active foreign and local investors will be wary of buying the stock.</li>
</ul>


Passive global index trackers sold Adani Green Energy (ADANIGR IN) in November following a big drop in free float for the stock.
There could be more selling in Adani Green Energy in February as the stock is deleted from the same large global index due to failing free float market cap thresholds.
With the company at the center of the U.S indictment focused on bribery charges, active foreign and local investors will be wary of buying the stock.


Adani Green Energy (ADANIGR IN): Facing the Passive Boot; But Who Will Buy?

Highly experienced ex-Delta One trader with 17 years of experience trading arbitrage and related strategies across Asian markets.

Exempt Financial Adviser (EFA) under CrossASEAN Research Pte Ltd.

It is important to note that the information provided by Periscope Analytics is based on publicly available data and own knowledge, which has been gathered and synthesized from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions.

All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include, but are not limited to, company announcements, exchange filings, ETF and other passive investment vehicle holdings, and free float and volume data from third-party data providers. Periscope Analytics does not guarantee the accuracy and completeness of the forecasts, estimates and/or other information.

Brian Freitas
Pan-Asia Index Rebalances/ Events/ Delta One
• Periscope Analytics

NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms

Contact Energy has outperformed Mercury NZ over the last couple of months. A major catalyst is the potential migration of the stocks between size...

Brian Freitas

HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March

There could be up to 3 changes for the HSCEI in March. Estimated one-way turnover is 5.24% resulting in a round-trip trade of HK$5,276m (US$680m)....

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Australia: Six Stocks in Passive Selling Crosshairs for February

6 Aussie stocks appear in the crosshairs of passive selling in Feb. If deleted, passives will need to sell between A$370m-A$500m in the stocks....

Brian Freitas

ITC Hotels: Index Implications of Demerger from ITC Ltd (ITC IN)

ITC Hotels demerges from ITC on 6 Jan. There will be an SPOS on 6 Jan to determine ITC's price post demerger. There will be a LOT of selling in ITC...

Brian Freitas

Adani Green Energy (ADANIGR IN): Facing the Passive Boot; But Who Will Buy?

Passives sold Adani Green in November as float dropped. The stock could be deleted from a global index in Feb and that could take the stock lower...

Brian Freitas