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

Beijing-Shanghai High Speed Ra / Event-Driven

<ul>
<li>On Monday, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.</li>
<li>For Northbound Stock Connect, the eligible universe has been widely expanded to include constituents of the SSE A Share Index and the SZSE Composite Index.</li>
<li>There are 1,112 stocks that join the eligible universe, and 938 stocks currently meet the criteria for Northbound Stock Connect inclusion. There are implications for inclusion in global indices.</li>
</ul>


On Monday, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Northbound Stock Connect, the eligible universe has been widely expanded to include constituents of the SSE A Share Index and the SZSE Composite Index.
There are 1,112 stocks that join the eligible universe, and 938 stocks currently meet the criteria for Northbound Stock Connect inclusion. There are implications for inclusion in global indices.


Northbound Stock Connect Expansion: Potential Changes in 2023

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

AviChina Industry & Technology H / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/avichina-industry-technology-h" target="_blank" data-smartkarma-citation="entities:16315:1" rel="noopener">AviChina Industry &amp; Technology H (2357 HK)</a> offers unique exposure to China's aerospace and defense sector and it will ride on China's ambition to solidify its military strengths. </li>
<li>We think the key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation of helicopters and potential for corporate restructuring.</li>
<li>The stock is undervalued with its holdings in four listed A-shares amounted to Rmb70.6bn, against its own market cap of HK$25bn. Also, earnings multiples are cheap relative to global peers.</li>
</ul>



AviChina Industry &amp; Technology H (2357 HK) offers unique exposure to China's aerospace and defense sector and it will ride on China's ambition to solidify its military strengths. 
We think the key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation of helicopters and potential for corporate restructuring.
The stock is undervalued with its holdings in four listed A-shares amounted to Rmb70.6bn, against its own market cap of HK$25bn. Also, earnings multiples are cheap relative to global peers.


2023 High Conviction: AviChina Industry (2357 HK) - The Sky Is the Limit

Avic Shenyang Aircraft / Equity Bottom-Up

<ul>
<li>As a major player in China's defense sector with established franchise in combat aircraft, <a href="https://www.smartkarma.com/entities/avic-shenyang-aircraft-co-ltd" target="_blank" data-smartkarma-citation="entities:12150:1" rel="noopener">Avic Shenyang Aircraft (600760 CH)</a> will enjoy earnings stability, reflecting positively on its defensiveness.</li>
<li>We believe it will benefit from China's efforts to narrow military gap against the US and the increase in military spending due to rising geopolitical tension globally. </li>
<li>AVIC Shenyang is less affected by pandemic lockdowns and has showed good capability to improve profitability, which are reflected in the solid 61% growth in 1Q22 recurring profit.</li>
</ul>


As a major player in China's defense sector with established franchise in combat aircraft, Avic Shenyang Aircraft (600760 CH) will enjoy earnings stability, reflecting positively on its defensiveness.
We believe it will benefit from China's efforts to narrow military gap against the US and the increase in military spending due to rising geopolitical tension globally. 
AVIC Shenyang is less affected by pandemic lockdowns and has showed good capability to improve profitability, which are reflected in the solid 61% growth in 1Q22 recurring profit.


AVIC Shenyang (600760 CH): Defense Is Defensive

Contemporary Amperex Technology (CATL) / Event-Driven

<ul>
<li>There are 28 changes for the <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> at the upcoming rebalance that will be implemented at the close of trading on 10 December.</li>
<li>The inclusion of ChiNext stocks with 1 year of listing history (down from 3 years) and the inclusion of other large stocks results in a one-way turnover greater than 10%.</li>
<li>There are 10 trading days to implementation and we expect the inclusions to outperform the market. A long inclusion basket can be hedged with CSI300 index futures.</li>
</ul>


There are 28 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 10 December.
The inclusion of ChiNext stocks with 1 year of listing history (down from 3 years) and the inclusion of other large stocks results in a one-way turnover greater than 10%.
There are 10 trading days to implementation and we expect the inclusions to outperform the market. A long inclusion basket can be hedged with CSI300 index futures.


CSI300 Index Rebalance: Methodology Tweak Results in More Changes & Larger Turnover

<p><a href="https://www.smartkarma.com/entities/avic-shenyang-aircraft-co-ltd" target="_blank" data-smartkarma-citation="entities:12150:1" rel="noopener">Avic Shenyang Aircraft (600760 CH)</a> has a very solid 3Q21 with recurring profit up by 61.5% YoY and grew 81.8% for 9M21. The result was underpinned by encouraging revenue growth, steady margin performance, higher interest income and turnaround in investment income. The surge in contract liabilities and prepayment at end-9M21 also suggested good order momentum and production pace in this year.</p><p>We believe AVIC Shenyang will benefit from China's demand for combat aircraft, driven by both upgrade demand and the need to equip the country's increase in aircraft carrier fleet. The sustained tension across the Taiwan Strait and President Xi's recent signing of <a href="https://baijiahao.baidu.com/s?id=1715262162429714903&amp;wfr=spider&amp;for=pc" target="_blank" rel="noopener">"Military equipment ordering regulations"</a> should be positive to sentiment on the stock. Despite a 40.3% rally YTD, its valuation remains not too stretched when compared with a basket of A-share aerospace and defense stocks.</p>

Avic Shenyang Aircraft (600760 CH) has a very solid 3Q21 with recurring profit up by 61.5% YoY and grew 81.8% for 9M21. The result was underpinned by encouraging revenue growth, steady margin performance, higher interest income and turnaround in investment income. The surge in contract liabilities and prepayment at end-9M21 also suggested good order momentum and production pace in this year.We believe AVIC Shenyang will benefit from China's demand for combat aircraft, driven by both upgrade demand and the need to equip the country's increase in aircraft carrier fleet. The sustained tension across the Taiwan Strait and President Xi's recent signing of "Military equipment ordering regulations" should be positive to sentiment on the stock. Despite a 40.3% rally YTD, its valuation remains not too stretched when compared with a basket of A-share aerospace and defense stocks.

AVIC Shenyang (600760 CH): Heating Up on China's Combat Aircraft Demand

China

China Spacesat Co., Ltd. develops and manufactures satellites and related products. The Company also operates retail stores, hotels, and travel properties .

China Spacesat Co Ltd A (600118 CH)

Northbound Stock Connect Expansion: Potential Changes in 2023

The universe for inclusion in Northbound Stock Connect has been expanded to include the SSE A Share Index and the SZSE Composite Index...

Brian Freitas

2023 High Conviction: AviChina Industry (2357 HK) - The Sky Is the Limit

AviChina is cheap against global peers and key drivers are increase in civil and defense demand, commercialisation of C919 aircraft, localisation...

Osbert Tang, CFA

AVIC Shenyang (600760 CH): Defense Is Defensive

AVIC Shenyang is a unique defense play in China with quality earnings outlook. We think it will benefit from the recent geopolitical tension and...

Osbert Tang, CFA

CSI300 Index Rebalance: Methodology Tweak Results in More Changes & Larger Turnover

There are 28 changes to the CSI300 index at the Dec rebalance. A few large inclusions plus the expansion of the index universe pushes one-way...

Brian Freitas

AVIC Shenyang (600760 CH): Heating Up on China's Combat Aircraft Demand

AVIC Shenyang's solid 3Q21 suggests encouraging underlying demand momentum and positive cost management. The company will stay as a prime...

Osbert Tang, CFA