IHS Markit announced in
March 2019 an ongoing consultation of the iTraxx Asia ex-Japan index rules. Looking to the September 2019 CDS index roll, IHS Markit intends to conclude the consultation and implement rule changes leading to further issuer country and sector alignment of the iTraxx Asia ex-Japan index with the Asian USD cash bond market.
Market participants wanting to provide feedback or inquire on the changes being considered are invited to join the iTraxx Asia ex-Japan Index Advisory Committee or can contact the index team directly by email
itraxxadvisory@ihsmarkit.com.
The consultation period will complete on the 25
th of July with the publication of a revised Index rule set end of July.
Current Index Rules are published under Documentation, iTraxx Product Rules on the following page
https://www.markit.com/Documentation/Product/ITraxx.
Summary of proposed rule changes:
1.Primary target of the index remains the inclusion of eligible entities that are liquid in the CDS market therefore the Liquidity List Rule will be maintained.
2.Intention is to introduce a Market-Sector Profile based on the iBoxx USD Asia ex-Japan Investment Grade Index, which is set ahead of each index roll and from which underweight sectors and countries in iTraxx Asia ex-Japan index are determined versus the cash bond market.
Current iBoxx USD Asia Investment Grade Market-Sector Profile mapped to 40 constituents: | Market | Financials | Non-Financials | Real Estate | Sovereigns(incl. Sub-sovs.) |
| China | 7 | 11 | 3 | 1 |
| Hong Kong | 1 | 2 | 1 | |
| India | 1 | 2 | | |
| Indonesia | | 2 | | 1 |
| Malaysia | | 1 | | |
| Philippines | | | | 1 |
| Singapore | 1 | | | |
| South Korea | 1 | 2 | | 1 |
| Thailand | 1 | | | |
Current iTraxx Asia ex-Japan Series 31 Market-Sector Profile: | Market | Financials | Non-Financials | Real Estate | Sovereigns(incl. Sub-sovs.) |
| CHINA | 2 | 4 | | 3 |
| HONG KONG | | 2 | 2 | |
| INDIA | 3 | 1 | | |
| INDONESIA | | | | 1 |
| MACAO | | | | |
| MALAYSIA | | 2 | | 1 |
| PHILIPPINES | | | | 1 |
| SINGAPORE | 3 | 1 | 1 | |
| SOUTH KOREA | 4 | 5 | | 3 |
| TAIWAN | | | | |
| THAILAND | | | | 1 |
3
.Names will then be added to the iTraxx Asia ex Japan Index from the most underweight sectors and markets identified using the Market-Sector Profile, replacing the least liquid CDS names of the most overweight markets and sectors .
a.Selection of replacement names within a sector and market determined to be underweight will based on largest debt amount outstanding and bonds issued.
b.A maximum of seven replacements can be made per Roll, with no more than two replacements per market-sector combination.