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

Shanghai Shenzhen CSI 300 Index / Event-Driven

Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY)

<ul>
<li>Nearly US$22bn has flowed into mainland China listed ETFs over the last 3 trading days, reversing outflows that started in mid February.</li>
<li>Central Huijin has announced that it will be increasing its ETF holdings to maintain smooth operation of China's capital markets. The rest of the National Team will be buying too.</li>
<li>There are multiple implications of the huge ETF creations in a short time frame and a reversal of flows will lead to a reversion in a bunch of trades.</li>
</ul>


Nearly US$22bn has flowed into mainland China listed ETFs over the last 3 trading days, reversing outflows that started in mid February.
Central Huijin has announced that it will be increasing its ETF holdings to maintain smooth operation of China's capital markets. The rest of the National Team will be buying too.
There are multiple implications of the huge ETF creations in a short time frame and a reversal of flows will lead to a reversion in a bunch of trades.


China ETF Inflows & Implications: Central Huijin's Huge Buying

Index Rebalance

<ul>
<li>Nearing the end of the review period, we forecast 1 change for 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> and 4 changes for the STAR100 Index in June.</li>
<li>We estimate turnover of 1.9% for 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> and 4.5% for the STAR100 Index. The estimated round-trip trade is CNY 7.5bn (US$1.02bn).</li>
<li>Large ETF inflows could have led to the recent underperformance of a long add/ short delete trade. That could reverse once markets stabilize or when the passives trade the rebalance.</li>
</ul>


Nearing the end of the review period, we forecast 1 change for the SSE STAR50 (STAR50 INDEX) and 4 changes for the STAR100 Index in June.
We estimate turnover of 1.9% for the SSE STAR50 (STAR50 INDEX) and 4.5% for the STAR100 Index. The estimated round-trip trade is CNY 7.5bn (US$1.02bn).
Large ETF inflows could have led to the recent underperformance of a long add/ short delete trade. That could reverse once markets stabilize or when the passives trade the rebalance.


STAR50/STAR100 Index Rebalance Preview: Central Huijin's ETF Creations Skew Performance

<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

<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

Xiamen Amoytop Biotech Co Ltd / Index Rebalance

Xiamen Amoytop Biotech Co Ltd (688278 CH)

<ul>
<li>There are 3 constituent changes for 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">STAR50 INDEX</a> and 6 changes for the STAR100 Index at the March rebalance that will be implemented at the close on 14 March.</li>
<li>The last-minute methodology change could lead to under/over positioning on some names and those stocks could move the most over the next few days.</li>
<li>Performance has been mixed in the 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">STAR50 INDEX</a> but the outright adds have continued to outperform the outright deletes for the STAR100 Index.</li>
</ul>


There are 3 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the March rebalance that will be implemented at the close on 14 March.
The last-minute methodology change could lead to under/over positioning on some names and those stocks could move the most over the next few days.
Performance has been mixed in the changes to the STAR50 INDEX but the outright adds have continued to outperform the outright deletes for the STAR100 Index.


STAR50/STAR100 Index Rebalance: Methodology Changes & Some Surprises

China

SSE Science and Technology Innovation Board 50 Index consists of 50 securities with largest market capitalization and good liquidity listed on SSE Science and Technology Innovation Board. The index aims to reflect the overall performance of leading technological innovation-based enterprises’ securities.

SSE STAR50 (STAR50 INDEX)

China ETF Inflows & Implications: Central Huijin's Huge Buying

Nearly US$22bn has flowed into mainland China listed ETFs over the last 3 trading days, reversing outflows that started in mid-February. Flows are...

Brian Freitas

STAR50/STAR100 Index Rebalance Preview: Central Huijin's ETF Creations Skew Performance

There could be 1/4 changes for the STAR50/STAR100 indices. Round-trip trade is over US$1bn. The deletes have outperformed the adds as Central...

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

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

STAR50/STAR100 Index Rebalance: Methodology Changes & Some Surprises

There are 3/6 changes for the STAR50/100 indices. Methodology changes result in a few surprises. The STAR50 adds/deletes have performed in line,...

Brian Freitas