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 largest ETF inflows in the region have been in Taiwan as investors rush into indices that have higher dividend yields.</li>
<li>China had large inflows last year as markets floundered. With markets trading in a range over the last 6 months, those flows have reversed in Q1 this year.</li>
<li>Australia has seen net inflows this year, while there have been net outflows from Hong Kong, India and Japan focused ETFs.</li>
</ul>


The largest ETF inflows in the region have been in Taiwan as investors rush into indices that have higher dividend yields.
China had large inflows last year as markets floundered. With markets trading in a range over the last 6 months, those flows have reversed in Q1 this year.
Australia has seen net inflows this year, while there have been net outflows from Hong Kong, India and Japan focused ETFs.


ETF Flows in Q1: Inflows for Taiwan, Outflows for China

Index Rebalance

<ul>
<li>With nearly 90% of the review period complete, 2 non-constituents are in inclusion zone and 3 constituents are in deletion zone.</li>
<li>We estimate one-way turnover of 4.7% at the June rebalance leading to a round-trip trade of CNY 16.4bn (US$2.27bn). Index arb balances will increase the impact on the stocks.</li>
<li>The forecast adds have outperformed the forecast deletes over the last 6 months but there has been a retracement in returns over the last month.</li>
</ul>


With nearly 90% of the review period complete, 2 non-constituents are in inclusion zone and 3 constituents are in deletion zone.
We estimate one-way turnover of 4.7% at the June rebalance leading to a round-trip trade of CNY 16.4bn (US$2.27bn). Index arb balances will increase the impact on the stocks.
The forecast adds have outperformed the forecast deletes over the last 6 months but there has been a retracement in returns over the last month.


SSE50 Index Rebalance Preview: Three Changes; Some Misses

<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

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>Global option markets present a diverse picture, offering a broad opportunity set.</li>
<li>Several markets make for good hedging-candidates after a strong January and amid cheap options.</li>
<li>Although several Indian indices show high implied volatility, contextual analysis indicates volatility may be fairly priced relative to their bear trends.</li>
</ul>


Global option markets present a diverse picture, offering a broad opportunity set.
Several markets make for good hedging-candidates after a strong January and amid cheap options.
Although several Indian indices show high implied volatility, contextual analysis indicates volatility may be fairly priced relative to their bear trends.


EQD | Global Option Implied Volatility - Option Opportunities Across the Regions

<ul>
<li>There are 5 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> and 18 changes for the SSE180 Index that will be implemented at the close on 13 December.</li>
<li>
<a href="https://www.smartkarma.com/entities/seres-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29951:1" rel="noopener">Seres Group (601127 CH)</a> is an add to both indices, plus the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-index" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300 Index</a>, and passive trackers will need to buy over US$900m of the stock.</li>
<li>The adds have outperformed the deletes with a lot of the outperformance coming in the last couple of months. Trim positions in the expected adds/deletes and build positions in surprises.</li>
</ul>


There are 5 changes for the SSE50 Index (SSE50 INDEX) and 18 changes for the SSE180 Index that will be implemented at the close on 13 December.

Seres Group (601127 CH) is an add to both indices, plus the CSI 300 Index, and passive trackers will need to buy over US$900m of the stock.
The adds have outperformed the deletes with a lot of the outperformance coming in the last couple of months. Trim positions in the expected adds/deletes and build positions in surprises.


SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group's Multiple Inclusions; US$3.2bn Trade

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)

ETF Flows in Q1: Inflows for Taiwan, Outflows for China

Taiwan has taken in the largest inflows in Q1 while the largest outflows are in China. The switch from EEM to IEMG continues. Redemptions from EMXC...

Brian Freitas

SSE50 Index Rebalance Preview: Three Changes; Some Misses

There could be 3 changes in June. Estimated one-way turnover is 4.7% leading to a round-trip trade of CNY 16.4bn. The adds have outperformed the...

Brian Freitas

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

A positive start to the year for Asia index rebals has turned negative as the momentum/ value unwind began a few weeks ago. Higher volatility and a...

Brian Freitas

EQD | Global Option Implied Volatility - Option Opportunities Across the Regions

Global option markets offer a wide range of opportunities for hedging, while some indices show high implied volatility but potentially fair...

Gaudenz Schneider

SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group's Multiple Inclusions; US$3.2bn Trade

5/18 changes for the SSE50/180 in Dec. Seres Group is an add to both indices and the CSI300, so plenty to buy there. Couple of other surprises. The...

Brian Freitas

ETF Flows in Q1: Inflows for Taiwan, Outflows for China

Taiwan has taken in the largest inflows in Q1 while the largest outflows are in China. The switch from EEM to IEMG continues. Redemptions from EMXC...

Brian Freitas

SSE50 Index Rebalance Preview: Three Changes; Some Misses

There could be 3 changes in June. Estimated one-way turnover is 4.7% leading to a round-trip trade of CNY 16.4bn. The adds have outperformed the...

Brian Freitas

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

A positive start to the year for Asia index rebals has turned negative as the momentum/ value unwind began a few weeks ago. Higher volatility and a...

Brian Freitas

EQD | Global Option Implied Volatility - Option Opportunities Across the Regions

​Global option markets offer a wide range of opportunities for hedging, while some indices show high implied volatility but potentially fair...

Gaudenz Schneider

SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group's Multiple Inclusions; US$3.2bn Trade

5/18 changes for the SSE50/180 in Dec. Seres Group is an add to both indices and the CSI300, so plenty to buy there. Couple of other surprises. The...

Brian Freitas

Global option markets offer a wide range of opportunities for hedging, while some indices show high implied volatility but potentially fair...