In today’s briefing:
- HSI Index Rebalance: Yippee! Finally at 80!
- Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔
- ECM Weekly (14th May 2023) – Mankind, Nexus REIT, SCG Chemicals, Guoquan, Shiyue, Medanta, Bikaji
- Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation
HSI Index Rebalance: Yippee! Finally at 80!
- The Hang Seng index committee has added four stocks to take the number of Hong Kong Hang Seng Index (HSI INDEX) constituents to 80. A year late, but we’re there!
- The next leg of the increase in the number of index constituents will take us up to 100. There is no timeline, so this should take a couple of years.
- Estimated one-way turnover is 2.93% leading to a one-way trade of HK$5.7bn (US$730m). All adds will have over 2x ADV to buy from passive trackers.
Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔
- The Nikkei Index team has been quite conscious of market impact since the April 2000 debacle. For a few years after, things were quieter. In 2005, Fast Retailing spurred introspection.
- Float was low and became lower. Selection behaviour changed. Now there is a new consultation where “technical listings” would stay in, and phased “stepwise” inclusion would reduce inclusion impact.
- The proposal increases subjectivity, reduces the attractiveness of bets, but otherwise increases the likelihood they will follow the other selection rules. It STILL does not solve the high weight problem.
ECM Weekly (14th May 2023) – Mankind, Nexus REIT, SCG Chemicals, Guoquan, Shiyue, Medanta, Bikaji
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- Mankind Pharma delivered some joy to the Indian equity markets over the past week.
- There were no major placements over the past week but there were some lockup expiries.
Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation
- Many companies have low valuations due to the fact that not few managers are concerned about maintaining public listing with the idea of prioritizing it over growth in shareholder interests.
- Many companies only minimally respond to formally aligning board practices with the criteria of the Corporate Governance Code, and very few are creating value through advancing their corporate governance initiatives.
- TSE data shows that OP Margin is neutral and Asset Turnover and Financial Leverage are both negative for ROE, so immediate share repurchases are the effective way in raising ROE.
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