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>The U.S. Department of Defense has designated <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> as a Chinese Military Company. <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd-69366efb-cf6b-404d-a0e4-c6b9b2e128dc" target="_blank" data-smartkarma-citation="entities:17:1" rel="noopener">Tencent Holdings (ADR) (TCEHY US)</a> shares were down nearly 8% overnight.</li>
<li>There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.</li>
<li>If added to the NS-CMIC list, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> will be deleted from global indexes and there will be HUGE passive selling from these trackers.</li>
</ul>


The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.


Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>With a range of 34.5-68.1%, our five best calls in 2024 generated an average return of 54.1% YTD, outperforming the Hang Seng Index by 26.2pp. </li>
<li>
<a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> and <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a> are expected to sustain strengths into 2025 on market value management and pick-up in new orders.</li>
<li>
<a href="https://www.smartkarma.com/entities/xinhua-winshare-publishing-media-co-ltd" target="_blank" data-smartkarma-citation="entities:15072:1" rel="noopener">Xinhua Winshare (811 HK)</a>, <a href="https://www.smartkarma.com/entities/china-everbright-environment-group-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a>, and <a href="https://www.smartkarma.com/entities/sitc-international-holdings" target="_blank" data-smartkarma-citation="entities:15301:1" rel="noopener">SITC International (1308 HK)</a> may hold their share price, but gains are unlikely to be as much as 2024.</li>
</ul>


With a range of 34.5-68.1%, our five best calls in 2024 generated an average return of 54.1% YTD, outperforming the Hang Seng Index by 26.2pp. 

China Communications Construction (1800 HK) and Dongfang Electric (1072 HK) are expected to sustain strengths into 2025 on market value management and pick-up in new orders.

Xinhua Winshare (811 HK), China Everbright Environment (257 HK), and SITC International (1308 HK) may hold their share price, but gains are unlikely to be as much as 2024.


Our Best Calls in 2024: Review and Outlook for 2025

Index Rebalance

<ul>
<li>It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.</li>
<li>Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.</li>
<li>As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.</li>
</ul>


It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.
Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.
As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.


How Has the Index Rebalance Strategy Performed in 2024?

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>Cross-Market volatility snapshot highlighting option opportunities. Today's opportunities are in the Nifty 50 and in Bitcoin</li>
<li>Nifty 50: The index crossed the 50-day moving average, signaling a bullish trend. Hedging gains is recommended due to expected macroeconomic uncertainty in Q1 2025.</li>
<li>Bitcoin: Surpassed $100,000, driven by positive sentiment towards the incoming US President's crypto-friendly stance. Options strategies are suggested, plus how a synthetic Bitcoin bond compares to a corporate bond.</li>
</ul>


Cross-Market volatility snapshot highlighting option opportunities. Today's opportunities are in the Nifty 50 and in Bitcoin
Nifty 50: The index crossed the 50-day moving average, signaling a bullish trend. Hedging gains is recommended due to expected macroeconomic uncertainty in Q1 2025.
Bitcoin: Surpassed $100,000, driven by positive sentiment towards the incoming US President's crypto-friendly stance. Options strategies are suggested, plus how a synthetic Bitcoin bond compares to a corporate bond.


EQD | Global Option Implied Volatility - From Nifty 50 to Bitcoin, Plus BTC-Bond Special

Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

<ul>
<li>The US election is the ultimate of known unknowns. The markets have endured both Trump and Biden/Harris so impactful policy surprises should be limited. </li>
<li>Hedging cost are running high for Asian equities post August unwind and September stimulus combined with election. </li>
<li>Markets have some momentum and in some cases mean reversion to the price move on the day after the election. </li>
</ul>


The US election is the ultimate of known unknowns. The markets have endured both Trump and Biden/Harris so impactful policy surprises should be limited. 
Hedging cost are running high for Asian equities post August unwind and September stimulus combined with election. 
Markets have some momentum and in some cases mean reversion to the price move on the day after the election. 


EQD | US Election -  Hedge Considerations

Hong Kong

The Hang Seng Index is a free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindices: Commerce and Industry, Finance, Utilities, and Properties. The index was developed with a base level of 100 as of July 31, 1964.

Hang Seng Index (HSI INDEX)

Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

The U.S. DoD has designated Tencent as a Chinese Military Company. The stock is not on the NS-CMIC list yet and could be added later. Addition to...

Brian Freitas

Our Best Calls in 2024: Review and Outlook for 2025

Our best calls for 2024 outperformed HSI, with CCCC and Dongfang Electric expected to sustain into 2025. Xinhua Winshare, China Everbright Env,...

Osbert Tang, CFA

How Has the Index Rebalance Strategy Performed in 2024?

The index rebalance strategy has performed reasonably well this year. Accurate forecasting of index changes and optimal hedge selection have played...

Brian Freitas

EQD | Global Option Implied Volatility - From Nifty 50 to Bitcoin, Plus BTC-Bond Special

Opportunities in Nifty 50 and Bitcoin options due to bullish trends and positive sentiment. Global volatility overview of 15+ markets and...

Gaudenz Schneider

EQD | US Election - Hedge Considerations

The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...

John Ley

Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

The U.S. DoD has designated Tencent as a Chinese Military Company. The stock is not on the NS-CMIC list yet and could be added later. Addition to...

Brian Freitas

Our Best Calls in 2024: Review and Outlook for 2025

​Our best calls for 2024 outperformed HSI, with CCCC and Dongfang Electric expected to sustain into 2025. Xinhua Winshare, China Everbright Env,...

Osbert Tang, CFA

How Has the Index Rebalance Strategy Performed in 2024?

The index rebalance strategy has performed reasonably well this year. Accurate forecasting of index changes and optimal hedge selection have played...

Brian Freitas

EQD | Global Option Implied Volatility - From Nifty 50 to Bitcoin, Plus BTC-Bond Special

​Opportunities in Nifty 50 and Bitcoin options due to bullish trends and positive sentiment. Global volatility overview of 15+ markets and...

Gaudenz Schneider

EQD | US Election - Hedge Considerations

​The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...

John Ley

Our best calls for 2024 outperformed HSI, with CCCC and Dongfang Electric expected to sustain into 2025. Xinhua Winshare, China Everbright Env,...

Opportunities in Nifty 50 and Bitcoin options due to bullish trends and positive sentiment. Global volatility overview of 15+ markets and...

The US election brings uncertainty, but market impact should be limited due to enduring Trump and Biden/Harris policies. Asian equities face high...