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

Shanghai United Imaging Health / Index Rebalance

Shanghai United Imaging Health (688271 CH)

<ul>
<li>The index committee has continued to use a 6-month minimum listing history leading to five changes to the <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">SSE STAR50 (STAR50 INDEX)</a> in December.</li>
<li>All changes are in line with our forecasts and there appears to be some pre-positioning over the last week as the deletes have sold off hard.</li>
<li>One-Way turnover is estimated at 5.34% and will result in a one-way trade of CNY 3,766m. The estimated impact on the deletes is higher than that on the adds.</li>
</ul>


The index committee has continued to use a 6-month minimum listing history leading to five changes to the SSE STAR50 (STAR50 INDEX) in December.
All changes are in line with our forecasts and there appears to be some pre-positioning over the last week as the deletes have sold off hard.
One-Way turnover is estimated at 5.34% and will result in a one-way trade of CNY 3,766m. The estimated impact on the deletes is higher than that on the adds.


STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/micro-tech-nanjing-co-ltd" target="_blank" data-smartkarma-citation="entities:30320:1" rel="noopener">Micro-Tech Nanjing Co Ltd (688029 CH)</a> would face lower-than-expected performance growth in 2022, but the logic of import substitution and increasing demand for endoscopy consumables would help drive future growth.</li>
<li>Centralized procurement is a problem, but Micro-Tech’s leading position of endoscopy consumables in China is stable, which wouldn’t be easily affected by centralized procurement when compared with other domestic companies.</li>
<li>The valuation of Micro-Tech should be lower than Mindray and <a href="https://www.smartkarma.com/entities/sonoscape-medical-corp" target="_blank" data-smartkarma-citation="entities:29742:1" rel="noopener">Sonoscape</a>, since these two companies have much better performance (both growth and profitability), product competitiveness, business layout and outlook.</li>
</ul>



Micro-Tech Nanjing Co Ltd (688029 CH) would face lower-than-expected performance growth in 2022, but the logic of import substitution and increasing demand for endoscopy consumables would help drive future growth.
Centralized procurement is a problem, but Micro-Tech’s leading position of endoscopy consumables in China is stable, which wouldn’t be easily affected by centralized procurement when compared with other domestic companies.
The valuation of Micro-Tech should be lower than Mindray and Sonoscape, since these two companies have much better performance (both growth and profitability), product competitiveness, business layout and outlook.


Micro-Tech Nanjing (688029.CH)-Worth a Spot on the Watch List Due to Possibility of Dilemma Reversal

<ul>
<li>With the review period nearly complete, there could be 4 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.</li>
<li>The market cap of potential adds using a 6-month minimum listing history is higher and there is a higher probability of a 6-month minimum listing history being used.</li>
<li>The potential adds have outperformed the potential deletes and the index. Similar to the last few rebalances, we could see the adds outperform post the end of the review period.</li>
</ul>


With the review period nearly complete, there could be 4 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
The market cap of potential adds using a 6-month minimum listing history is higher and there is a higher probability of a 6-month minimum listing history being used.
The potential adds have outperformed the potential deletes and the index. Similar to the last few rebalances, we could see the adds outperform post the end of the review period.


STAR50 Index Rebalance Preview: Stable Long/Short Performance in a Volatile Market

<ul>
<li>Nearly 90% of the way through the review period, we see 4 changes using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.</li>
<li>There are overlaps in the inclusions using 6/12 month minimum listing history, so there is less risk if the index committee switches from 6 to 12 months at the review.</li>
<li>Using a 6 month minimum listing history, one-way turnover is estimated at 5.07% and will result in a one-way trade of CNY 2,795m.</li>
</ul>


Nearly 90% of the way through the review period, we see 4 changes using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
There are overlaps in the inclusions using 6/12 month minimum listing history, so there is less risk if the index committee switches from 6 to 12 months at the review.
Using a 6 month minimum listing history, one-way turnover is estimated at 5.07% and will result in a one-way trade of CNY 2,795m.


STAR50 Index Rebalance Preview: Four or Five Changes in December

<ul>
<li>The main logic of Micro-Tech’s performance growth is import substitution, but the Company is facing some challenges in the short term, such as centralized procurement, pandemic, inflation, etc.</li>
<li>Micro-Tech will face lower-than-expected performance growth in 2022. Since the whole series of products would be covered by centralized procurement, the valuation of Micro-Tech should be lower than Mindray.</li>
<li>However, there are possibilities for Micro-Tech to achieve a turnaround (with bottom-fishing opportunity) if it could make a breakthrough in internationalization and product innovation. We recommend investors follow Micro-Tech closely.</li>
</ul>


The main logic of Micro-Tech’s performance growth is import substitution, but the Company is facing some challenges in the short term, such as centralized procurement, pandemic, inflation, etc.
Micro-Tech will face lower-than-expected performance growth in 2022. Since the whole series of products would be covered by centralized procurement, the valuation of Micro-Tech should be lower than Mindray.
However, there are possibilities for Micro-Tech to achieve a turnaround (with bottom-fishing opportunity) if it could make a breakthrough in internationalization and product innovation. We recommend investors follow Micro-Tech closely.


Micro-Tech Nanjing (688029.CH) - Potential for Reversals Despite Short-Term Pressure on Performance

China

Micro-Tech (Nanjing) Co., Ltd. manufactures and distributes medical equipment. The Company produces gastrointestinal equipment, biliary equipment, pulmonary equipment, and other related equipment. Micro-Tech (Nanjing) also operates import and export businesses.

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Micro-Tech Nanjing (688029 CH)

STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week

There are 5 changes for the STAR50 in Dec. The changes were forecast; the adds have outperformed the deletes in the last week. Historically, a long...

Brian Freitas