Pan-Asia Tactical Market Calls (Quant-Driven), MRM Research

Nico Rosti

Pan-Asia Tactical Market Calls (Quant-Driven)

MRM Research

Quantitative Research

Quantitative Analysis

<ul>
<li>Numerous studies conducted over the past few decades have researched the “month of the year effect” in global stock markets, and tend to agree that some effects do exist.</li>
<li>Most studies however concur that seasonality, on its own, is a weak predictor of performance. We call these studies “Naïve Seasonality Analysis”, for reasons that we will explain here.</li>
<li>Based on the above premise, in this Smartkarma Original we are going to propose a methodology to improve seasonality research, to identify <em>when</em> specific months can deliver the best returns.</li>
</ul>


Numerous studies conducted over the past few decades have researched the “month of the year effect” in global stock markets, and tend to agree that some effects do exist.
Most studies however concur that seasonality, on its own, is a weak predictor of performance. We call these studies “Naïve Seasonality Analysis”, for reasons that we will explain here.
Based on the above premise, in this Smartkarma Original we are going to propose a methodology to improve seasonality research, to identify when specific months can deliver the best returns.


Influence of Monthly Time Patterns on Seasonal Effects in Asian Stock Markets: NKY and HSI

Equity Derivatives

<ul>
<li>Last week, the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei</a> closed down at 30991.69 (CC=-2). The index's sell-off could end in November, marking a temporary bottom from which a rally could start.</li>
<li>MRM models say that if the Nikkei bounces this week, it could rise for 3 weeks and reach a price area between 31624 (Q3/CC=+1) and 32892 (Q3/Gen.Pattern Boxplot).</li>
<li>The upcoming rally comes as a reaction to quite OVERSOLD conditions, as previously discussed, but could be followed by another pullback. This insight points to where the rally may end.</li>
</ul>


Last week, the Nikkei closed down at 30991.69 (CC=-2). The index's sell-off could end in November, marking a temporary bottom from which a rally could start.
MRM models say that if the Nikkei bounces this week, it could rise for 3 weeks and reach a price area between 31624 (Q3/CC=+1) and 32892 (Q3/Gen.Pattern Boxplot).
The upcoming rally comes as a reaction to quite OVERSOLD conditions, as previously discussed, but could be followed by another pullback. This insight points to where the rally may end.


EQD | If the Nikkei Begins to Rally, Where Will It Encounter Resistance?

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

Index Rebalance

<ul>
<li>The coming week has a lot of review periods ending - <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a>, <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a>, <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/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50</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/chinext-index" target="_blank" data-smartkarma-citation="entities:25483:1" rel="noopener">ChiNext</a> and <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">SENSEX</a>, among others.</li>
<li>The <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TOPIX</a> rebalance will be implemented on Monday while the <a href="https://www.smartkarma.com/entities/global-x-lithium-battery-tech-etf" target="_blank" data-smartkarma-citation="entities:32745:1" rel="noopener">Global X Lithium &amp; Battery Tech ETF (LIT US)</a> and IDX indices will rebalance at the close on Tuesday.</li>
<li>There were outflows from Emerging Market ETFs including <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets" target="_blank" data-smartkarma-citation="entities:438:1" rel="noopener">iShares Emerging Markets (EEM)</a>, <a href="https://www.smartkarma.com/entities/ishares-core-msci-emerging-mar" target="_blank" data-smartkarma-citation="entities:32967:1" rel="noopener">iShares Core Emerging Mar (IEMG),</a> <a href="https://www.smartkarma.com/entities/schwab-emerging-markets-equi" target="_blank" data-smartkarma-citation="entities:32879:1" rel="noopener">Schwab Emerging Markets Equi (SCHE)</a> and <a href="https://www.smartkarma.com/entities/ishares-edge-msci-min-vol-emerging-markets-etf" target="_blank" data-smartkarma-citation="entities:725:1" rel="noopener">IShares Edge Min Vol Emerging Markets ETF (EEMV)</a>.</li>
</ul>


The coming week has a lot of review periods ending - KOSPI 200, KOSDAQ 150, CSI 300, CSI 500, SSE50, STAR50, ChiNext and SENSEX, among others.
The TOPIX rebalance will be implemented on Monday while the Global X Lithium &amp; Battery Tech ETF (LIT US) and IDX indices will rebalance at the close on Tuesday.
There were outflows from Emerging Market ETFs including iShares Emerging Markets (EEM), iShares Core Emerging Mar (IEMG), Schwab Emerging Markets Equi (SCHE) and IShares Edge Min Vol Emerging Markets ETF (EEMV).


Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning

<ul>
<li>The <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY) INDEX</a> closed last week down at 31259.36. It's currently trading between the Q2 and Q3 WEEKLY support levels and down for 4 months, so it's OVERSOLD.</li>
<li>The index could reverse this week, or fall more into the end of October, but if this week closes down, the odds are very good for a rally in November.</li>
<li>Consider going LONG between here and supports in the 30600-30400 price area, a MONTHLY reversal could last at least 2-4 weeks (a month).</li>
</ul>


The Nikkei 225 (NKY) INDEX closed last week down at 31259.36. It's currently trading between the Q2 and Q3 WEEKLY support levels and down for 4 months, so it's OVERSOLD.
The index could reverse this week, or fall more into the end of October, but if this week closes down, the odds are very good for a rally in November.
Consider going LONG between here and supports in the 30600-30400 price area, a MONTHLY reversal could last at least 2-4 weeks (a month).


EQD | Nikkei 225 MONTHLY Rally May Be Finally Coming

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cyberagent-inc" target="_blank" data-smartkarma-citation="entities:8197:1" rel="noopener">CyberAgent</a>, <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil Group</a>, <a href="https://www.smartkarma.com/entities/hakuhodo-dy-holdings-inc" target="_blank" data-smartkarma-citation="entities:8736:1" rel="noopener">Hakuhodo Dy Holdings</a>, <a href="https://www.smartkarma.com/entities/kobayashi-pharmaceutical-co" target="_blank" data-smartkarma-citation="entities:14930:1" rel="noopener">Kobayashi Pharmaceutical</a>, <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings</a>, <a href="https://www.smartkarma.com/entities/temp-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1428:1" rel="noopener">Persol Holdings</a>, <a href="https://www.smartkarma.com/entities/kurita-water-industries-ltd" target="_blank" data-smartkarma-citation="entities:3870:1" rel="noopener">Kurita Water Industries</a>, <a href="https://www.smartkarma.com/entities/gmo-payment-gateway-inc" target="_blank" data-smartkarma-citation="entities:1492:1" rel="noopener">GMO Payment Gateway</a>, <a href="https://www.smartkarma.com/entities/keio-corp" target="_blank" data-smartkarma-citation="entities:1223:1" rel="noopener">Keio Corp</a> and <a href="https://www.smartkarma.com/entities/ngk-insulators-ltd" target="_blank" data-smartkarma-citation="entities:12580:1" rel="noopener">NGK Insulators</a> have underperformed the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei225</a> over the recent past.</li>
<li>The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.</li>
<li>Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.</li>
</ul>



CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, Kurita Water Industries, GMO Payment Gateway, Keio Corp and NGK Insulators have underperformed the Nikkei225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.


Japan - Increase in Shorts on Some Interesting** Stocks

Japan

The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. The Nikkei Stock Average was first published on May 16, 1949, where the average price was ¥176.21 with a divisor of 225. 

Nikkei 225 (NKY INDEX)

Influence of Monthly Time Patterns on Seasonal Effects in Asian Stock Markets: NKY and HSI

Numerous studies conducted over the past few decades have researched the “month of the year effect” in global stock markets, and tend to agree...

Nico Rosti

EQD | If the Nikkei Begins to Rally, Where Will It Encounter Resistance?

The Nikkei's recent sell-off may reach a temporary bottom in November, the following rally could last for 3 weeks, with target price in the 31624...

Nico Rosti

Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

EQD | Nikkei 225 MONTHLY Rally May Be Finally Coming

The Nikkei 225 index is currently OVERSOLD WEEKLY and MONTHLY. A rally in November may finally start, if this week closes down, making it a good...

Nico Rosti

Japan - Increase in Shorts on Some Interesting** Stocks

There are a few stocks in Japan that have underperformed the NKY over the last few months and that could lead to a liquidity event due to the...

Brian Freitas

Influence of Monthly Time Patterns on Seasonal Effects in Asian Stock Markets: NKY and HSI

Numerous studies conducted over the past few decades have researched the “month of the year effect” in global stock markets, and tend to agree...

Nico Rosti

EQD | If the Nikkei Begins to Rally, Where Will It Encounter Resistance?

​The Nikkei's recent sell-off may reach a temporary bottom in November, the following rally could last for 3 weeks, with target price in the 31624...

Nico Rosti

Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

EQD | Nikkei 225 MONTHLY Rally May Be Finally Coming

​The Nikkei 225 index is currently OVERSOLD WEEKLY and MONTHLY. A rally in November may finally start, if this week closes down, making it a good...

Nico Rosti

Japan - Increase in Shorts on Some Interesting** Stocks

There are a few stocks in Japan that have underperformed the NKY over the last few months and that could lead to a liquidity event due to the...

Brian Freitas

The Nikkei's recent sell-off may reach a temporary bottom in November, the following rally could last for 3 weeks, with target price in the 31624...

The Nikkei 225 index is currently OVERSOLD WEEKLY and MONTHLY. A rally in November may finally start, if this week closes down, making it a good...