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 review period for 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> March rebalance ends yesterday. There could be three changes at the rebalance with sector balance in focus.</li>
<li>Depending on the changes, passive trackers will need to buy between 1.3-19x ADV (7.1-24% of real float) on the inclusions and sell between 3.5-47x ADV on the deletions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> avoids capping in March, passives will buy <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori Holdings (9843 JP)</a>, and 25 stocks have over 0.5x ADV to sell as part of the funding trade.</li>
</ul>


The review period for the Nikkei 225 (NKY INDEX) March rebalance ends yesterday. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 1.3-19x ADV (7.1-24% of real float) on the inclusions and sell between 3.5-47x ADV on the deletions.

Fast Retailing (9983 JP) avoids capping in March, passives will buy Nitori Holdings (9843 JP), and 25 stocks have over 0.5x ADV to sell as part of the funding trade.


Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Fast Retailing

Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/chugai-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:4489:1" rel="noopener">Chugai Pharmaceutical (4519 JP)</a> reported 5% YoY decline in core revenue in 2023, due to the decrease in the supply of COVID-19 treatment Ronapreve to the government.</li>
<li>For 2024, Chugai expects core revenue to decline mainly due to the absence of Ronapreve revenue and decline in Actemra export. However, operating and net profits are expected to increase.</li>
<li>Hemlibra export and new launches such as Vabysmo, Phesgo, Polivy, and Alecensa are expected to drive long-term growth of the company.</li>
</ul>



Chugai Pharmaceutical (4519 JP) reported 5% YoY decline in core revenue in 2023, due to the decrease in the supply of COVID-19 treatment Ronapreve to the government.
For 2024, Chugai expects core revenue to decline mainly due to the absence of Ronapreve revenue and decline in Actemra export. However, operating and net profits are expected to increase.
Hemlibra export and new launches such as Vabysmo, Phesgo, Polivy, and Alecensa are expected to drive long-term growth of the company.


Chugai Pharmaceutical (4519 JP): Ronapreve Killed Joy in 2023; New Products to Drive Growth Ahead

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares MSCI ACWI ETF / Technical Analysis

<ul>
<li>We see global equities (MSCI ACWI) going through a pause/pullback amid short-term breakouts in the U.S. dollar (DXY) and global sovereign 10-year yields.</li>
<li>A rising DXY and climbing yields is a near-term headwind, and we could continue to see more choppy price action in the weeks ahead.</li>
<li>With that said, as long as the DXY remains below $106, the 10-year Treasury yield remains below 4.35%, and ACWI-US is <em>above</em> $98, we would view pullbacks as buying opportunities.</li>
</ul>


We see global equities (MSCI ACWI) going through a pause/pullback amid short-term breakouts in the U.S. dollar (DXY) and global sovereign 10-year yields.
A rising DXY and climbing yields is a near-term headwind, and we could continue to see more choppy price action in the weeks ahead.
With that said, as long as the DXY remains below $106, the 10-year Treasury yield remains below 4.35%, and ACWI-US is above $98, we would view pullbacks as buying opportunities.


Pause/Pullback Underway; Downgrading Europe and Mexico; Buys in Services, Tech, Comm, Healthcare

Petroleo Brasileiro  / Technical Analysis

<ul>
<li>Global growth stocks that have significantly outperformed since the October 2023 lows are starting to pull back, and we believe a continued pause/pullback is likely in these growth areas.</li>
<li>Meanwhile, we are seeing a clear shift into value and defensives, and we recommend adding exposure to these areas. This type of Sector rotation is common during bull markets.</li>
<li>Major supports continue to hold, including $98-99 on MSCI ACWI (ACWI-US), 4600 on the S&amp;P 500, 4400 on the EURO STOXX 50, and 2300 on the TOPIX</li>
</ul>


Global growth stocks that have significantly outperformed since the October 2023 lows are starting to pull back, and we believe a continued pause/pullback is likely in these growth areas.
Meanwhile, we are seeing a clear shift into value and defensives, and we recommend adding exposure to these areas. This type of Sector rotation is common during bull markets.
Major supports continue to hold, including $98-99 on MSCI ACWI (ACWI-US), 4600 on the S&amp;P 500, 4400 on the EURO STOXX 50, and 2300 on the TOPIX


Buys Within Global Energy, Health Care, and Utilities; Bullish Outlook Intact on Global Equities

<ul>
<li>
<a href="https://www.smartkarma.com/entities/eisai-co-ltd" target="_blank" data-smartkarma-citation="entities:21001:1" rel="noopener">Eisai Co Ltd (4523 JP)</a> shares corrected more than 60% from highs over the disappointment from Alzheimer’s disease drug Leqembi. During H1FY24, Leqembi reported revenue of just ¥400M ($3M).</li>
<li>With approximately 40% revenue contribution, anti-cancer drug Lenvima is the top selling drug of Eisai. In the U.S., Lenvima patent protection will start to expire in US in October 2025.</li>
<li>In December, Eisai has submitted a marketing authorization application in Japan for tasurgratinib for biliary tract cancer. If approved, tasurgratinob will be a late entrant in a crowded market.</li>
</ul>



Eisai Co Ltd (4523 JP) shares corrected more than 60% from highs over the disappointment from Alzheimer’s disease drug Leqembi. During H1FY24, Leqembi reported revenue of just ¥400M ($3M).
With approximately 40% revenue contribution, anti-cancer drug Lenvima is the top selling drug of Eisai. In the U.S., Lenvima patent protection will start to expire in US in October 2025.
In December, Eisai has submitted a marketing authorization application in Japan for tasurgratinib for biliary tract cancer. If approved, tasurgratinob will be a late entrant in a crowded market.


Eisai Co Ltd (4523 JP): Why Performance Reversal Is Not Expected in Near-Term

Japan

Chugai Pharmaceutical Company Ltd., manufactures and sells pharmaceuticals in the domestic and international markets through its subsidiaries. The Company develops drugs in the fields of cancer, infectious diseases, bone, blood, and circulatory systems. Chugai Pharmaceutical also conducts research studies on drugs with private and public medical research institutions.

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Chugai Pharmaceutical (4519 JP)

Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Fast Retailing

The stocks have moved a fair bit in the last couple of weeks. The expected deletes are getting sold while the potential adds have moved higher. The...

Brian Freitas