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>At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.</li>
<li>We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.</li>
<li>The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.</li>
</ul>


At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.


Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>CMS's way of in-licensing products has shifted from CSO model to asset-purchase model so as to enhance control on the assets. But the transformation hasn’t been recognized by the market.     </li>
<li>Despite outstanding fundamentals, <a href="https://www.smartkarma.com/entities/china-medical-system-holdings" target="_blank" data-smartkarma-citation="entities:18736:1" rel="noopener">CMS</a>’s valuation remains low. Doubts about the Company's real R&amp;D capabilities/core competitiveness and the negative image due to past financial fraud could be the reasons.</li>
<li>CMS would encounter performance headwinds in 2023/2024 due to VBP, but revenue/profit growth is expected to pick up in 2025. It’s still a good defensive choice in a bear market.</li>
</ul>


CMS's way of in-licensing products has shifted from CSO model to asset-purchase model so as to enhance control on the assets. But the transformation hasn’t been recognized by the market.     
Despite outstanding fundamentals, CMS’s valuation remains low. Doubts about the Company's real R&amp;D capabilities/core competitiveness and the negative image due to past financial fraud could be the reasons.
CMS would encounter performance headwinds in 2023/2024 due to VBP, but revenue/profit growth is expected to pick up in 2025. It’s still a good defensive choice in a bear market.


China Medical System (867 HK) - A Wise Choice in a Bear Market

Index Rebalance

<ul>
<li>The review period for the next rebalance of a global index kicks off this week and that is where a lot of eyes will be focused.</li>
<li>There were big inflows to ETFs tracking the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX)</a> while there were redemptions from the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index-etf" target="_blank" data-smartkarma-citation="entities:25:1" rel="noopener">Hang Seng H Share Index ETF (2828 HK)</a>. </li>
<li>Inflows continue for <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets-223f5da3-7054-4e4f-bc55-b7f0852c2581" target="_blank" data-smartkarma-citation="entities:31998:1" rel="noopener">iShares Emerging Markets ex China (EMXC US)</a> while there were outflows from <a href="https://www.smartkarma.com/entities/ishares-msci-acwi-etf" target="_blank" data-smartkarma-citation="entities:24402:1" rel="noopener">iShares ACWI ETF (ACWI US)</a>. </li>
</ul>


The review period for the next rebalance of a global index kicks off this week and that is where a lot of eyes will be focused.
There were big inflows to ETFs tracking the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) while there were redemptions from the Hang Seng H Share Index ETF (2828 HK). 
Inflows continue for iShares Emerging Markets ex China (EMXC US) while there were outflows from iShares ACWI ETF (ACWI US). 


Index Rebalance & ETF Flow Recap: HSI, LQ45, FXI, 2823 HK, SENSEX

Intco Medical Technology  Lt / Equity Bottom-Up

<ul>
<li>The 2023 NRDL negotiation has officially begun since Friday. Pharmaceutical enterprises predict the price reduction would be more reasonable. But some company representatives were dissatisfactory with first-day negotiation results. </li>
<li>Although there're many optimistic judgments about the improved financing environment in both China and overseas markets, this may not be the case. Based on the data, we remain cautious instead.</li>
<li>As the disposable glove market gradually shows a warming trend, we are optimistic that <a href="https://www.smartkarma.com/entities/intco-medical-technology-co-lt" target="_blank" data-smartkarma-citation="entities:29782:1" rel="noopener">Intco Medical </a>would achieve a performance reversal in the future. The current valuation has bottomed out.</li>
</ul>


The 2023 NRDL negotiation has officially begun since Friday. Pharmaceutical enterprises predict the price reduction would be more reasonable. But some company representatives were dissatisfactory with first-day negotiation results. 
Although there're many optimistic judgments about the improved financing environment in both China and overseas markets, this may not be the case. Based on the data, we remain cautious instead.
As the disposable glove market gradually shows a warming trend, we are optimistic that Intco Medical would achieve a performance reversal in the future. The current valuation has bottomed out.


China Healthcare Weekly (Nov.17) - 2023 NRDL Negotiation, Financing Data Won't Lie, Intco Medical

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Nov 19 based on HKEx daily reports.</li>
<li>In the past 7 days, top 3 companies that repurchased the most shares from the market were China Medical System (867.HK), Kangji Medical (9997.HK), Nissin Foods (1475.HK).</li>
<li>In the past 30 days, top 3 companies that repurchased the most shares from the market were China Gas (384.HK), Sihuan Pharmaceutical (460.HK), Fosun International (656.HK).</li>
</ul>


We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Nov 19 based on HKEx daily reports.
In the past 7 days, top 3 companies that repurchased the most shares from the market were China Medical System (867.HK), Kangji Medical (9997.HK), Nissin Foods (1475.HK).
In the past 30 days, top 3 companies that repurchased the most shares from the market were China Gas (384.HK), Sihuan Pharmaceutical (460.HK), Fosun International (656.HK).


Hong Kong Buybacks: China Medical System, Kangji, Nissin Foods

China

China Medical System is a specialty pharmaceutical company focused on the research and development, manufacturing, marketing, and sales of pharmaceutical products in China. The company offers a diverse portfolio across therapeutic areas such as cardio-cerebrovascular, gastroenterology, ophthalmology, dermatology, and medical aesthetics. It was founded in 1995 and is headquartered in North Point, Hong Kong.

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China Medical System (867 HK)

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March

The announcement of the inclusions to the HSI at the March rebalance will be made post market close today. Most stocks are trading lower which is...

Brian Freitas