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>
<a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> becomes dual-primary listed on the <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing-ltd" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">Hong Kong Exchanges and Clearing (388 HK)</a> from the start of trading on 30 June.</li>
<li>There will be small buying from <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> and <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 (HSCEI INDEX)</a> trackers in June.</li>
<li>More importantly, <a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> should be added to Southbound Stock Connect from the open of trading on 8 September and should bring a lot of mainland flows.</li>
</ul>



NetEase (9999 HK) becomes dual-primary listed on the Hong Kong Exchanges and Clearing (388 HK) from the start of trading on 30 June.
There will be small buying from Hang Seng Index (HSI INDEX) and Hang Seng China Enterprises Index (HSCEI INDEX) trackers in June.
More importantly, NetEase (9999 HK) should be added to Southbound Stock Connect from the open of trading on 8 September and should bring a lot of mainland flows.


Netease (9999 HK): Becomes Dual-Primary Listed Next Week; Implications

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<ul>
<li>Allocations in Asian Financials stocks have fallen to all-time lows in Asia Ex-Japan active portfolios this year.</li>
<li>Fund managers move to underweight following $3bn in net outflows.</li>
<li>Managers exit ASEAN banks, weights drop in China banks. </li>
<li>On a stock level, <a href="https://www.smartkarma.com/entities/icici-bank-ltd" target="_blank" data-smartkarma-citation="entities:547:1" rel="noopener">ICICI Bank Ltd (ICICIBC IN)</a> ,  <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> (-7.2%) and <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> are the hardest hit.</li>
</ul>


Allocations in Asian Financials stocks have fallen to all-time lows in Asia Ex-Japan active portfolios this year.
Fund managers move to underweight following $3bn in net outflows.
Managers exit ASEAN banks, weights drop in China banks. 
On a stock level, ICICI Bank Ltd (ICICIBC IN) ,  Bank Rakyat Indonesia Persero (BBRI IJ) (-7.2%) and Indusind Bank (IIB IN) are the hardest hit.


China and US Equity Analyst

Roger Xie

Cross Asset Strategy

<ul>
<li>China securities watchdog revealed the latest reform on QFII/RQFII (Qualified Foreign Institutional Investor) scheme to further open up China domestic capital market. The new rule will become effective on Nov. 1, 2020. This is another milestone for China capital market reform and will boost up foreign fund inflow in the long-run. We have written the reform measures early this year: <a href="https://www.smartkarma.com/insights/china-a-share-strategy-r-qfii-quota-removal-to-offer-more-attractive-channel-to-invest-in-china" target="_blank" rel="noopener">China A-Share Strategy: R/​QFII Quota Removal to Offer More Attractive Channel to Invest In China</a>
</li>
<li>The most significant changes are the additional investment products that foreign fund managers can participate: 1) non-hedging purpose investments in index futures/options, 2) margin financing and securities lending for short-selling purpose, 3) private investment funds, 4) FICC derivatives in commodity exchanges and inter-bank market. We believe these reforms could offer comprehensive investment solutions to sophisticated institutional investors.</li>
<li>Foreign Funds' China A-share positions have accounted about 4% of A-share total market-cap, or 9% of A-share free-float market-cap by the end of 1H 2020. Nowadays, foreign investors have multiple channels to deploy their capital into China A-share market: QFII scheme, RMB-QFII scheme, or stock connect program via Hong Kong exchange (<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>).  Given the increasing weight of China A-share in global benchmark indices, we believe foreign funds' China A-share positions will continue to rise and will reach 10% of A-share total market-cap in next 10 years.</li>
</ul>


China securities watchdog revealed the latest reform on QFII/RQFII (Qualified Foreign Institutional Investor) scheme to further open up China domestic capital market. The new rule will become effective on Nov. 1, 2020. This is another milestone for China capital market reform and will boost up foreign fund inflow in the long-run. We have written the reform measures early this year: China A-Share Strategy: R/​QFII Quota Removal to Offer More Attractive Channel to Invest In China

The most significant changes are the additional investment products that foreign fund managers can participate: 1) non-hedging purpose investments in index futures/options, 2) margin financing and securities lending for short-selling purpose, 3) private investment funds, 4) FICC derivatives in commodity exchanges and inter-bank market. We believe these reforms could offer comprehensive investment solutions to sophisticated institutional investors.
Foreign Funds' China A-share positions have accounted about 4% of A-share total market-cap, or 9% of A-share free-float market-cap by the end of 1H 2020. Nowadays, foreign investors have multiple channels to deploy their capital into China A-share market: QFII scheme, RMB-QFII scheme, or stock connect program via Hong Kong exchange (HKEX (388 HK)).  Given the increasing weight of China A-share in global benchmark indices, we believe foreign funds' China A-share positions will continue to rise and will reach 10% of A-share total market-cap in next 10 years.


China A-Share Strategy: Deregulation in QFII/RQFII Scheme to Boost up Foreign Fund Inflow

Alpha-Centric ESG Research

Kyle Rudden

Sometimes, the "ESG stuff" can really alter the outcome of an IPO. The <a href="https://www.smartkarma.com/entities/saudi-aramco" target="_blank" data-smartkarma-citation="entities:27317:1" rel="noopener">Saudi Aramco (ARAMCO AB)</a> debut was curbed by Environmental concerns. WeWork's failed IPO is a case study in founder-led Governance risk. Palantir quashed its "adjustable voting power for founders" after an uproar.
ESG impacts IPOs. But not Ant's IPO.
Ant's ESG profile is strong. There a few skeletons in the closet if you look hard enough, but they are bygone and irrelevant . Current ESG blemishes are minor. There isn't much dirt for ESG idealists to wallow in. If they are even looking at all; as a "China deal," ESG has a different relevance for Ant.
Ant's IPO is a momentous ESG event, but not in the traditional and obvious way.
This is not about ESG impacting Ant's IPO. This is about Ant's IPO impacting ESG.
Looking at Ant through a typical ESG lens will make one's head spin. But step back and look again, and it becomes clear that Ant is a strategically-integrated masterpiece at the vanguard of a critical crossroads – the intersection of Fintech, financial inclusion, green finance, and sustainability.
It is all a matter of perspective.
Seeing the forest for the trees.

Sometimes, the "ESG stuff" can really alter the outcome of an IPO. The Saudi Aramco (ARAMCO AB) debut was curbed by Environmental concerns. WeWork's failed IPO is a case study in founder-led Governance risk. Palantir quashed its "adjustable voting power for founders" after an uproar.
ESG impacts IPOs. But not Ant's IPO.
Ant's ESG profile is strong. There a few skeletons in the closet if you look hard enough, but they are bygone and irrelevant . Current ESG blemishes are minor. There isn't much dirt for ESG idealists to wallow in. If they are even looking at all; as a "China deal," ESG has a different relevance for Ant.
Ant's IPO is a momentous ESG event, but not in the traditional and obvious way.
This is not about ESG impacting Ant's IPO. This is about Ant's IPO impacting ESG.
Looking at Ant through a typical ESG lens will make one's head spin. But step back and look again, and it becomes clear that Ant is a strategically-integrated masterpiece at the vanguard of a critical crossroads – the intersection of Fintech, financial inclusion, green finance, and sustainability.
It is all a matter of perspective.
Seeing the forest for the trees.

Ant Group Pre-IPO ESG Assessment: Seeing the Forest for the Trees

In our Macro Overview of Global fund positioning, we cover the following: <ul>
<li>Managers raise EMEA Overweight, hit max underweight in US.</li>
<li>Taiwan key beneficiary of COVID rebalance, India sees outflows.</li>
<li>Cross country exodus seen in Financials/Energy.  Materials reverse long-term decline.</li>
<li>Active managers move towards defensive and secular growth sectors and out of cyclicals.</li>
<li>UK Energy stocks see decline, Dutch Tech stocks continue to attract new investment.</li>
</ul>Taken from our Global fund analysis, covering 391 active global funds with combined AUM of $800bn.

In our Macro Overview of Global fund positioning, we cover the following: 
Managers raise EMEA Overweight, hit max underweight in US.
Taiwan key beneficiary of COVID rebalance, India sees outflows.
Cross country exodus seen in Financials/Energy.  Materials reverse long-term decline.
Active managers move towards defensive and secular growth sectors and out of cyclicals.
UK Energy stocks see decline, Dutch Tech stocks continue to attract new investment.
Taken from our Global fund analysis, covering 391 active global funds with combined AUM of $800bn.

Global Equity Positioning:  Macro Overview.  Raising EU Overweights, Taiwan Vs India, UK Decouples

Hong Kong

Hong Kong Exchanges and Clearing Limited (HKEX) operates a range of equity, commodity, fixed income, and currency markets, providing listing, trading, clearing, and settlement services for securities and derivatives. It also functions as a frontline regulator for companies listed in Hong Kong. HKEX was formally established on March 6, 2000, and is headquartered in Exchange Square, Central, Hong Kong.

Hong Kong Exchanges and Clearing (388 HK)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hong Kong Exchanges and Clearing (388 HK)

Netease (9999 HK): Becomes Dual-Primary Listed Next Week; Implications

As expected, Netease will be added to Southbound Stock Connect from the open of trading on 30 June. The stock is up 10% over the last 2 trading...

Brian Freitas

Asia Ex-Japan Financials: Long Drop

Allocations in Financial stocks drop to all-time lows in Asia Ex-Japan active funds. Financials now key underweight holding, led by selling in the...

Steven Holden

Ant Group Pre-IPO ESG Assessment: Seeing the Forest for the Trees

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Kyle Rudden

Global Equity Positioning: Macro Overview. Raising EU Overweights, Taiwan Vs India, UK Decouples

In our Macro Overview of Global fund positioning, we cover the following: Managers raise EMEA Overweight, hit max underweight in US. Taiwan key...

Steven Holden

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Netease (9999 HK): Becomes Dual-Primary Listed Next Week; Implications

As expected, Netease will be added to Southbound Stock Connect from the open of trading on 30 June. The stock is up 10% over the last 2 trading...

Brian Freitas

Asia Ex-Japan Financials: Long Drop

Allocations in Financial stocks drop to all-time lows in Asia Ex-Japan active funds. Financials now key underweight holding, led by selling in the...

Steven Holden

China A-Share Strategy: Deregulation in QFII/RQFII Scheme to Boost up Foreign Fund Inflow

We believe foreign funds' China A-share positions will continue to rise and will reach 10% of A-share total market-cap in next 10 years.

Roger Xie

Ant Group Pre-IPO ESG Assessment: Seeing the Forest for the Trees

xxxx Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim...

Kyle Rudden

Global Equity Positioning: Macro Overview. Raising EU Overweights, Taiwan Vs India, UK Decouples

In our Macro Overview of Global fund positioning, we cover the following: Managers raise EMEA Overweight, hit max underweight in US. Taiwan key...

Steven Holden