In today’s briefing:
- KOSPI Size Indices – Changes in September & Implications
- CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew
- Shin-Etsu Polymer (7970) | Pipe Dreams or Parent-Child Break-Up
KOSPI Size Indices – Changes in September & Implications
- There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
- The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
- Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.
CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew
- Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
- With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.
Shin-Etsu Polymer (7970) | Pipe Dreams or Parent-Child Break-Up
- Shin-Etsu Polymer Co., Ltd. has entered into a contract to transfer its PVC pipe manufacturing business to Sekisui Chemical Co
- Asset Value, a vocal activist shareholder, has likely had some strong words about better capital allocation.
- The unwinding of the parent-child relationship (one way or the other) is where the real value creation lies
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