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>Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.</li>
<li>Most of the inflows have been focused on large cap indices including <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300</a>, <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">STAR50</a>, <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI 500</a>, <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50</a>, <a href="https://www.smartkarma.com/entities/chinext-index" target="_blank" data-smartkarma-citation="entities:25483:1" rel="noopener">ChiNext</a> and other sectoral and thematic ETFs.</li>
<li>The largest impact has been on 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> constituents, but that has not stopped the slide in the stocks.</li>
</ul>


Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.


China: Huge ETF Inflows & Impact on Stocks

Equity Derivatives Trader and Strategist

Leon Gross

Equity Derivatives

<ul>
<li>
<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> Implieds are at Records Low, Cheap to Historic, Buy Options.</li>
<li>Many Asian Indices have Tight Ranges, Flat Returns YTD,  Options Expensive to the Range.</li>
<li>
<a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a> and  <a href="https://www.smartkarma.com/entities/citic-ltd" target="_blank" data-smartkarma-citation="entities:20590:1" rel="noopener">Citic Ltd (267 HK)</a>  are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options</li>
</ul>



Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
Many Asian Indices have Tight Ranges, Flat Returns YTD,  Options Expensive to the Range.

HSBC Holdings (5 HK) and  Citic Ltd (267 HK)  are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options


EQD | Asian Derivative YTD Range Trade Ideas

Index Rebalance

<ul>
<li>Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.</li>
<li>We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.</li>
<li>The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.</li>
</ul>


Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.


SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

Dawning Information Industry C / Index Rebalance

<ul>
<li>There are 4 constituent changes for the <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50 Index (SSE50 INDEX)</a> that will be implemented at the close on 12 December.</li>
<li>
<a href="https://www.smartkarma.com/entities/dawning-information-industry-c" target="_blank" data-smartkarma-citation="entities:25380:1" rel="noopener">Dawning Information Industry C (603019 CH)</a> is a surprise add given the upcoming merger with <a href="https://www.smartkarma.com/entities/hygon-information-technology-c" target="_blank" data-smartkarma-citation="entities:36366:1" rel="noopener">Hygon Information Technology C (688041 CH)</a>. </li>
<li>The <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50 Index</a> adds have underperformed the deletes over the last couple of months and there could be outperformance from here as positioning builds ahead of the implementation of the changes.</li>
</ul>


There are 4 constituent changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 12 December.

Dawning Information Industry C (603019 CH) is a surprise add given the upcoming merger with Hygon Information Technology C (688041 CH). 
The SSE50 Index adds have underperformed the deletes over the last couple of months and there could be outperformance from here as positioning builds ahead of the implementation of the changes.


SSE50 Index Rebalance: 4 Changes a Side & US$2.2bn Trade

China Northern Rare Earth Group High-Tech / Index Rebalance

China Northern Rare Earth Group High-Tech

<ul>
<li>With the review period complete, there are 6 non-constituents in direct inclusion zone and 4 current constituents in direct deletion zone. However, as usual, there will be discretion used.</li>
<li>4 changes result in a one-way turnover of 4%, leading to a round-trip trade of CNY 17bn (US$2.4bn). Index arb balances will increase the impact on the stocks.</li>
<li>The index committee has used discretion in selecting the index adds and deletes and that could continue to be the case at this review too.</li>
</ul>


With the review period complete, there are 6 non-constituents in direct inclusion zone and 4 current constituents in direct deletion zone. However, as usual, there will be discretion used.
4 changes result in a one-way turnover of 4%, leading to a round-trip trade of CNY 17bn (US$2.4bn). Index arb balances will increase the impact on the stocks.
The index committee has used discretion in selecting the index adds and deletes and that could continue to be the case at this review too.


SSE50 Index Rebalance Preview: 4 Potential Changes in December

China

SSE 50 Index consists of 50 most representative stocks from Shanghai security market by scientific and objective method. The objective is to reflect the complete picture of those good quality large enterprises, which are most influential in Shanghai security market.

SSE50 Index (SSE50 INDEX)

China: Huge ETF Inflows & Impact on Stocks

Nearly US$20bn has flowed into mainland China ETFs and could be driven by National Team supporting the market. There are many stocks where the ETFs...

Brian Freitas

EQD | Asian Derivative YTD Range Trade Ideas

Asian Equity markets and volatility markets YTD with long and short ideas for indices and individual options, focus on China.

Leon Gross

SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

There could be 5 changes for the SSE50 in June. Estimate one-way turnover is 5.07% and the one-way trade is CNY 3.97bn. The potential adds have...

Brian Freitas

SSE50 Index Rebalance: 4 Changes a Side & US$2.2bn Trade

There are 4 changes for the SSE50 Index in Dec. Dawning is the surprise addition and could move closer to the merger ratio implied price. Estimated...

Brian Freitas

SSE50 Index Rebalance Preview: 4 Potential Changes in December

There could be 4 changes for the index in Dec. The index committee has used discretion in the past and that is likely to continue. One-way turnover...

Brian Freitas