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>We look at the performance of the index rebalance strategy over the year using weekly forecasts. In short, it has been a mixed bag for Asia.</li>
<li>India and China have been among the worst performing markets in the region while Australia and Korea have been among the better performers.</li>
<li>A lot of the outperformance appears to be front loaded, so getting the forecasts right early in the review period is of paramount importance.</li>
</ul>


We look at the performance of the index rebalance strategy over the year using weekly forecasts. In short, it has been a mixed bag for Asia.
India and China have been among the worst performing markets in the region while Australia and Korea have been among the better performers.
A lot of the outperformance appears to be front loaded, so getting the forecasts right early in the review period is of paramount importance.


Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia

99 Speed Mart Retail Holdings / Index Rebalance

99 Speed Mart Retail Holdings (99SMART MK)

<ul>
<li>There is a high probability of <a href="https://www.smartkarma.com/entities/gamuda-bhd" target="_blank" data-smartkarma-citation="entities:14363:1" rel="noopener">Gamuda Bhd (GAM MK)</a> replacing <a href="https://www.smartkarma.com/entities/genting-malaysia-bhd" target="_blank" data-smartkarma-citation="entities:3141:1" rel="noopener">Genting Malaysia (GENM MK)</a> in the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)</a> in December.</li>
<li>
<a href="https://www.smartkarma.com/entities/99-speed-mart-retail-holdings" target="_blank" data-smartkarma-citation="entities:40977:1" rel="noopener">99 Speed Mart Retail Holdings (99SPD MK)</a> is a close add and needs small outperformance over the next week to be added. That could see <a href="https://www.smartkarma.com/entities/genting-bhd" target="_blank" data-smartkarma-citation="entities:14210:1" rel="noopener">Genting Bhd (GENT MK)</a> deleted.</li>
<li>Passive funds benchmarked to the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)</a> will need to buy 0.3-0.75x ADV on the potential adds and sell 0.9-1.3x ADV on the potential deletes.</li>
</ul>


There is a high probability of Gamuda Bhd (GAM MK) replacing Genting Malaysia (GENM MK) in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) in December.

99 Speed Mart Retail Holdings (99SPD MK) is a close add and needs small outperformance over the next week to be added. That could see Genting Bhd (GENT MK) deleted.
Passive funds benchmarked to the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) will need to buy 0.3-0.75x ADV on the potential adds and sell 0.9-1.3x ADV on the potential deletes.


KLCI Index Rebalance Preview: One High Probability Change; One at the Cusp

Event-Driven

<ul>
<li>The China equity markets have continued to trade lower with the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300 Index</a> outperforming other mainland indices as the National Team continues to pump money into ETFs tracking the index.</li>
<li>We currently estimate selling of around US$1.39bn across 74 stocks listed on the mainland and in Hong Kong. There could be fewer deletions depending on the review date chosen.</li>
<li>The potential deletes have dropped a lot since the start of the calendar year with big underperformance versus the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI Index</a>, <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300 Index</a> and <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI Smallcap 500 Index</a>.</li>
</ul>


The China equity markets have continued to trade lower with the CSI 300 Index outperforming other mainland indices as the National Team continues to pump money into ETFs tracking the index.
We currently estimate selling of around US$1.39bn across 74 stocks listed on the mainland and in Hong Kong. There could be fewer deletions depending on the review date chosen.
The potential deletes have dropped a lot since the start of the calendar year with big underperformance versus the HSCEI Index, CSI 300 Index and CSI Smallcap 500 Index.


China: Passive Selling Expected Later This Month

<ul>
<li>There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.</li>
<li>There are a lot of implementations this week, with <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> on Thursday and then others across a bunch of countries on Friday.</li>
<li>There were big inflows to <a href="https://www.smartkarma.com/entities/tracker-fund-of-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:29257:1" rel="noopener">Tracker Fund of Hong Kong (2800 HK)</a> during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.</li>
</ul>


There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.
There are a lot of implementations this week, with KOSPI 200 and KOSDAQ 150 on Thursday and then others across a bunch of countries on Friday.
There were big inflows to Tracker Fund of Hong Kong (2800 HK) during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.


Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ql-resources-bhd" target="_blank" data-smartkarma-citation="entities:11221:1" rel="noopener">Ql Resources (QLG MK)</a> and <a href="https://www.smartkarma.com/entities/ammb-holdings-bhd" target="_blank" data-smartkarma-citation="entities:137:1" rel="noopener">AMMB Holdings (AMM MK)</a> could replace <a href="https://www.smartkarma.com/entities/hartalega-holdings-bhd" target="_blank" data-smartkarma-citation="entities:10230:1" rel="noopener">Hartalega Holdings (HART MK)</a> and <a href="https://www.smartkarma.com/entities/top-glove-corp-bhd" target="_blank" data-smartkarma-citation="entities:20759:1" rel="noopener">Top Glove Corp (TOPG MK)</a> in the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)</a>.</li>
<li>If the changes go through, glove makers will have no representation in the index. At one point in 2020, glove makers made up nearly 20% of the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">FBMKLCI INDEX</a>.</li>
<li>One-Way turnover at the rebalance will be around 3% and the impact of passive trading will be higher on the inclusions as compared to the deletions.</li>
</ul>



Ql Resources (QLG MK) and AMMB Holdings (AMM MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX).
If the changes go through, glove makers will have no representation in the index. At one point in 2020, glove makers made up nearly 20% of the FBMKLCI INDEX.
One-Way turnover at the rebalance will be around 3% and the impact of passive trading will be higher on the inclusions as compared to the deletions.


KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)

Malaysia

The FTSE Bursa Malaysia KLCI Index comprises of the largest 30 companies by full market capitalization on Bursa Malaysia's Main Board. When launched, on July 6, 2009 it replaced the Bursa Malaysia KLCI Index starting at the closing value of the KLCI Index on July 3 2009, also inheriting the full history of the KLCI Index.

Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)

Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)

Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia

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Brian Freitas

KLCI Index Rebalance Preview: One High Probability Change; One at the Cusp

There is one high probability change for the KLCI in December. Depending on price movements over the next week, there could be a second change....

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China: Passive Selling Expected Later This Month

We currently estimate passive selling of around US$1.39bn across 74 stocks listed in China and HK. The potential deletes have underperformed...

Brian Freitas

Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

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KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)

QL Resources and AMMB could replace Top Glove and Hartalega in the KLCI. That would mean no glove makers in the index, down from a near 20% index...

Brian Freitas