Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<p>Earlier today, S&amp;P Dow Jones announced that all the proposals of the latest market consultation would be implemented at the close of trading on 16 April to reduce constituent concentration, ease liquidity limitations, and improve index replication further than would have been achieved from the result of the prior market consultation.</p><p>We expect there will be 37 additions to the index taking the number of index constituents up to 67. This number will increase over the next few rebalances as the target is to get up to at least 100 constituent stocks.</p><p>With index weight dependent on free float market cap and turnover, plus capping of index weight dependent on exposure scores, this is going to be a large rebalance. We expect a one-way turnover of 48.1% with our expected changes.</p><p>Stocks that could see passive buying (sorted in terms of days of ADV) are <a href="https://www.smartkarma.com/entities/drax-group-plc" target="_blank" data-smartkarma-citation="entities:21911:1" rel="noopener">Drax Group PLC (DRX LN)</a>, <a href="https://www.smartkarma.com/entities/enel-americas-sa-c3a67f8a-ad13-45ff-a676-cbc513b8c458" target="_blank" data-smartkarma-citation="entities:25965:1" rel="noopener">Enel Americas Sa (ENIA US)</a>, <a href="https://www.smartkarma.com/entities/fortum-oyj" target="_blank" data-smartkarma-citation="entities:21762:1" rel="noopener">Fortum OYJ (FUM1V FH)</a>, <a href="https://www.smartkarma.com/entities/erg-spa" target="_blank" data-smartkarma-citation="entities:21186:1" rel="noopener">ERG SpA (ERG IM)</a>, <a href="https://www.smartkarma.com/entities/terna-rete-elettrica-nazionale" target="_blank" data-smartkarma-citation="entities:21232:1" rel="noopener">Terna Rete Elettrica Nazionale (TRN IM)</a>, <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a>, <a href="https://www.smartkarma.com/entities/nordex-se" target="_blank" data-smartkarma-citation="entities:21682:1" rel="noopener">Nordex SE (NDX1 GR)</a>, <a href="https://www.smartkarma.com/entities/acciona-sa" target="_blank" data-smartkarma-citation="entities:21248:1" rel="noopener">Acciona SA (ANA SM)</a>, <a href="https://www.smartkarma.com/entities/avista-corp" target="_blank" data-smartkarma-citation="entities:17178:1" rel="noopener">Avista Corp (AVA US)</a> and <a href="https://www.smartkarma.com/entities/idacorp-inc" target="_blank" data-smartkarma-citation="entities:15190:1" rel="noopener">Idacorp Inc (IDA US)</a>.</p><p>Stocks that could see passive selling (sorted in terms of days of ADV) are <a href="https://www.smartkarma.com/entities/meridian-ener-partly-paid-sh" target="_blank" data-smartkarma-citation="entities:4327:1" rel="noopener">Meridian Energy (MEL NZ)</a>, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a>, <a href="https://www.smartkarma.com/entities/verbund-ag" target="_blank" data-smartkarma-citation="entities:22563:1" rel="noopener">Verbund AG (VER AV)</a>, <a href="https://www.smartkarma.com/entities/edp-renovaveis-sa" target="_blank" data-smartkarma-citation="entities:21363:1" rel="noopener">EDP Renovaveis SA (EDPR PL)</a>, <a href="https://www.smartkarma.com/entities/scatec-solar-asa" target="_blank" data-smartkarma-citation="entities:25120:1" rel="noopener">Scatec Solar ASA (SSO NO)</a>, <a href="https://www.smartkarma.com/entities/innergex-renewable-energy-inc" target="_blank" data-smartkarma-citation="entities:25479:1" rel="noopener">Innergex Renewable Energy (INE CN)</a>, <a href="https://www.smartkarma.com/entities/boralex-inc" target="_blank" data-smartkarma-citation="entities:25478:1" rel="noopener">Boralex Inc (BLX CN)</a> and <a href="https://www.smartkarma.com/entities/siemens-gamesa-renewable-energy-s-a" target="_blank" data-smartkarma-citation="entities:21270:1" rel="noopener">Siemens Gamesa Renewable Energy, S.A. (SGRE SM)</a>.</p><p>Among existing constituents, there will be passive inflows on <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a>, <a href="https://www.smartkarma.com/entities/vestas-wind-systems-a-s" target="_blank" data-smartkarma-citation="entities:22524:1" rel="noopener">Vestas Wind Systems A/S (VWS DC)</a>, <a href="https://www.smartkarma.com/entities/solaredge-technologies-inc" target="_blank" data-smartkarma-citation="entities:27981:1" rel="noopener">SolarEdge Technologies Inc (SEDG US)</a>, <a href="https://www.smartkarma.com/entities/sunrun-inc" target="_blank" data-smartkarma-citation="entities:19726:1" rel="noopener">Sunrun Inc (RUN US)</a> and <a href="https://www.smartkarma.com/entities/enphase-energy-inc" target="_blank" data-smartkarma-citation="entities:8872:1" rel="noopener">Enphase Energy (ENPH US)</a>. </p>

Earlier today, S&amp;P Dow Jones announced that all the proposals of the latest market consultation would be implemented at the close of trading on 16 April to reduce constituent concentration, ease liquidity limitations, and improve index replication further than would have been achieved from the result of the prior market consultation.We expect there will be 37 additions to the index taking the number of index constituents up to 67. This number will increase over the next few rebalances as the target is to get up to at least 100 constituent stocks.With index weight dependent on free float market cap and turnover, plus capping of index weight dependent on exposure scores, this is going to be a large rebalance. We expect a one-way turnover of 48.1% with our expected changes.Stocks that could see passive buying (sorted in terms of days of ADV) are Drax Group PLC (DRX LN), Enel Americas Sa (ENIA US), Fortum OYJ (FUM1V FH), ERG SpA (ERG IM), Terna Rete Elettrica Nazionale (TRN IM), China Longyuan Power Group Corp (916 HK), Nordex SE (NDX1 GR), Acciona SA (ANA SM), Avista Corp (AVA US) and Idacorp Inc (IDA US).Stocks that could see passive selling (sorted in terms of days of ADV) are Meridian Energy (MEL NZ), Contact Energy (CEN NZ), Verbund AG (VER AV), EDP Renovaveis SA (EDPR PL), Scatec Solar ASA (SSO NO), Innergex Renewable Energy (INE CN), Boralex Inc (BLX CN) and Siemens Gamesa Renewable Energy, S.A. (SGRE SM).Among existing constituents, there will be passive inflows on Orsted A/S (ORSTED DC), Vestas Wind Systems A/S (VWS DC), SolarEdge Technologies Inc (SEDG US), Sunrun Inc (RUN US) and Enphase Energy (ENPH US). 

Global Clean Energy Index: All Proposals to Be Implemented; 48% One-Way Turnover

<p>The S&amp;P Global Clean Energy Index is designed to measure the performance of 30 companies from around the world that are involved in clean energy-related businesses, comprising a diversified mix of clean energy production and clean energy equipment and technology companies.</p><p>There are two ETFs that are benchmarked to the index and these ETFs have seen massive inflows over the last year. This has caused liquidity issues in the underlying stocks and has led to S&amp;P having multiple market consultations to reduce constituent concentration, easy liquidity limitations and improve index replication.</p><p>The changes due to these market consultations will cause large passive flows on the stocks. A few stocks have moved substantially over the last couple of months but there could be more in store for a few of them.</p><p>Depending on the which proposals are implemented, one-way turnover for the review could be in the range of 30-50% and there are a lot of stocks that will have more than 10 days of ADV to trade.</p><p>In this Insight we look at the index, the inflows on the ETFs, the various market consultations and the impact on the stocks that constitute the index and those that could be added to the index in the April rebalance.</p>

The S&amp;P Global Clean Energy Index is designed to measure the performance of 30 companies from around the world that are involved in clean energy-related businesses, comprising a diversified mix of clean energy production and clean energy equipment and technology companies.There are two ETFs that are benchmarked to the index and these ETFs have seen massive inflows over the last year. This has caused liquidity issues in the underlying stocks and has led to S&amp;P having multiple market consultations to reduce constituent concentration, easy liquidity limitations and improve index replication.The changes due to these market consultations will cause large passive flows on the stocks. A few stocks have moved substantially over the last couple of months but there could be more in store for a few of them.Depending on the which proposals are implemented, one-way turnover for the review could be in the range of 30-50% and there are a lot of stocks that will have more than 10 days of ADV to trade.In this Insight we look at the index, the inflows on the ETFs, the various market consultations and the impact on the stocks that constitute the index and those that could be added to the index in the April rebalance.

Global Clean Energy Index: MASSIVE Changes Coming Up; 30-50% One-Way Turnover

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

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<p>In the next Smartkarma Webinar, we will be joined by Buyside Portfolio Manager <a href="https://www.linkedin.com/in/susanta-mazumdar-b61a8a85/?originalSubdomain=sg" target="_blank" rel="noopener">Susanta Mazumdar</a> who will discuss 5 key themes and 7 high-conviction ideas in Asian Infrastruture stocks post the COVID-selloff. The webinar will be held on Wednesday 6 May 2020 at 1700hrs Singapore/Hong Kong time.</p><hr><div><div><div class="content-highlight"><h2>
<a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=88073112792" target="_blank" rel="noopener">Register for the Webinar here</a>.</h2></div></div></div><hr><div><p>Susanta Mazumdar has a career spanning 27 years focussing on infrastructure and infrastructure related sectors.</p></div><p>He has worked across global investment houses such as T Rowe Price and Invesco, and more recently as the founder of JN Asian Infrastructure Fund.<br><br>Having covered this space for nearly three decades, Sustanta knows how to spot a good opportunity!</p>

In the next Smartkarma Webinar, we will be joined by Buyside Portfolio Manager Susanta Mazumdar who will discuss 5 key themes and 7 high-conviction ideas in Asian Infrastruture stocks post the COVID-selloff. The webinar will be held on Wednesday 6 May 2020 at 1700hrs Singapore/Hong Kong time.
Register for the Webinar here.Susanta Mazumdar has a career spanning 27 years focussing on infrastructure and infrastructure related sectors.He has worked across global investment houses such as T Rowe Price and Invesco, and more recently as the founder of JN Asian Infrastructure Fund.  Having covered this space for nearly three decades, Sustanta knows how to spot a good opportunity!

Smartkarma Webinar | High-Conviction Ideas in Asian Infrastructure Stocks

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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<p>Narrow moat-rated Contact Energy delivered a respectable performance during May, notwithstanding earnings pressure on a couple of fronts. First, hydroelectric generation is down because of low South Island rainfall, forcing the firm to run its more expensive gas-fired power stations. Second, electricity oversupply is depressing futures prices, which hurts commercial and industrial pricing as contracts roll over. But the financial impact of these two items appears to be less than we feared, and we lift our fiscal 2017 EBITDA forecast 4% to NZD 506 million, which implies a fall of 3% from last year. We lift our fiscal 2018 earnings forecast by a similar amount, but longer-term forecasts are broadly unchanged.</p><p>We make no change to our NZD 6 fair value estimate and continue to believe the stock is attractive. At the current price of NZD 5.15, Contact trades 14% below our valuation, offering a 5% mostly imputed dividend yield with strong growth in dividends likely. We expect dividends to grow strongly on a higher payout ratio once financial leverage returns to comfortable levels in coming years. Earnings growth over the medium term on favourable transmission price changes, operating cost efficiencies, and an improving electricity demand/supply balance should also propel dividends higher.</p><p><em>Analyst: Adrian Atkins</em></p>

Narrow moat-rated Contact Energy delivered a respectable performance during May, notwithstanding earnings pressure on a couple of fronts. First, hydroelectric generation is down because of low South Island rainfall, forcing the firm to run its more expensive gas-fired power stations. Second, electricity oversupply is depressing futures prices, which hurts commercial and industrial pricing as contracts roll over. But the financial impact of these two items appears to be less than we feared, and we lift our fiscal 2017 EBITDA forecast 4% to NZD 506 million, which implies a fall of 3% from last year. We lift our fiscal 2018 earnings forecast by a similar amount, but longer-term forecasts are broadly unchanged.We make no change to our NZD 6 fair value estimate and continue to believe the stock is attractive. At the current price of NZD 5.15, Contact trades 14% below our valuation, offering a 5% mostly imputed dividend yield with strong growth in dividends likely. We expect dividends to grow strongly on a higher payout ratio once financial leverage returns to comfortable levels in coming years. Earnings growth over the medium term on favourable transmission price changes, operating cost efficiencies, and an improving electricity demand/supply balance should also propel dividends higher.Analyst: Adrian Atkins

May Performance Wasn't Too Bad; Contact Looks Attractive

Thematic (Sector/Industry)

<p>New Zealand's vertically integrated electricity generator/retailers, or "gentailers", are high-quality businesses. The most attractive at present is <a href="https://www.smartkarma.com/entities/13136" target="_blank" data-smartkarma-citation="entities:13136:1">Contact Energy Ltd (CEN NZ)</a>, which is cheaper than <a href="https://www.smartkarma.com/entities/4327" target="_blank" data-smartkarma-citation="entities:4327:1">Meridian Energy Ltd (MEL NZ)</a> and <a href="https://www.smartkarma.com/entities/9933" target="_blank" data-smartkarma-citation="entities:9933:1">Mercury NZ Ltd (MCY NZ)</a>, lower-risk than <a href="https://www.smartkarma.com/entities/4227" target="_blank" data-smartkarma-citation="entities:4227:1">Genesis Energy Ltd (GNE NZ)</a>, and better-quality than <a href="https://www.smartkarma.com/entities/11489" target="_blank" data-smartkarma-citation="entities:11489:1">Trustpower Ltd (TPW NZ)</a>, in our opinion. While the near-term outlook is depressed by generation oversupply and intense retail competition, Contact should increase earnings on cost reductions, changes to transmission pricing, and the eventual recovery of the wholesale price. It trades on a low EBITDA multiple, and one that's based on current depressed earnings. We expect the discount to our fair value estimate to close as earnings improve, potentially aided by an expansion of the firm's EBITDA multiple towards peers. In the meantime, investors receive a relatively attractive dividend yield of around 5%, with material upside in coming years, predominantly from a higher dividend payout ratio. We believe the market is too focused on soft near-term fundamentals, providing a good opportunity for patient investors.</p><p><em>Analysts: Adrian Atkins and Angus Hewitt</em></p>

New Zealand's vertically integrated electricity generator/retailers, or "gentailers", are high-quality businesses. The most attractive at present is Contact Energy Ltd (CEN NZ), which is cheaper than Meridian Energy Ltd (MEL NZ) and Mercury NZ Ltd (MCY NZ), lower-risk than Genesis Energy Ltd (GNE NZ), and better-quality than Trustpower Ltd (TPW NZ), in our opinion. While the near-term outlook is depressed by generation oversupply and intense retail competition, Contact should increase earnings on cost reductions, changes to transmission pricing, and the eventual recovery of the wholesale price. It trades on a low EBITDA multiple, and one that's based on current depressed earnings. We expect the discount to our fair value estimate to close as earnings improve, potentially aided by an expansion of the firm's EBITDA multiple towards peers. In the meantime, investors receive a relatively attractive dividend yield of around 5%, with material upside in coming years, predominantly from a higher dividend payout ratio. We believe the market is too focused on soft near-term fundamentals, providing a good opportunity for patient investors.Analysts: Adrian Atkins and Angus Hewitt

Don't Be Shortsighted on New Zealand's Oversupplied Energy Market

New Zealand

Contact Energy Limited is a diversified and integrated energy company which focuses on the generation of electricity and the sale of electricity and gas in New Zealand.

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Contact Energy (CEN NZ)

Global Clean Energy Index: All Proposals to Be Implemented; 48% One-Way Turnover

S&P will implement all proposals of the market consultation at the close on 16 April. This will create trading opportunities. One-way turnover is...

Brian Freitas

Global Clean Energy Index: MASSIVE Changes Coming Up; 30-50% One-Way Turnover

The huge inflows into ETFs tracking the S&P Global Clean Energy Index have led to many market consultations and there will be massive flows in/out...

Brian Freitas

Smartkarma Webinar | High-Conviction Ideas in Asian Infrastructure Stocks

In the next Smartkarma Webinar, we will be joined by Buyside Portfolio Manager Susanta Mazumdar who will discuss 5 key themes and 7 high-conviction...

Smartkarma Research

May Performance Wasn't Too Bad; Contact Looks Attractive

Narrow moat-rated Contact Energy delivered a respectable performance during May, notwithstanding earnings pressure on a couple of fronts. First,...

Morningstar, Inc.

Don't Be Shortsighted on New Zealand's Oversupplied Energy Market

New Zealand's vertically integrated electricity generator/retailers, or "gentailers", are high-quality businesses. The most attractive at present...

Morningstar, Inc.

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