In today’s briefing:
- India – Positioning on Some Interesting* Names
- J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines
- Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
- WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS
- Quiddity A/H Premium Tracker (To Oct13): Volatility Up Bigly, Wide Spreads Wider
- Attractive Yield of Kumho Petrochem Pref Shares Amid 100 Billion Won of Common Shares Cancellation
- Golden Eagle Energy: Last Day To Buy Cum-Divvie
- Schaeffler/Vitesco: A Three-Step Merger Process
- EQD | NIFTY WEEKLY Weak Bounce, Ready to Fall Next Week?
India – Positioning on Some Interesting* Names
- Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
- The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
- We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.
J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines
- J&T Global Express (1936374D CH) is looking to raise HK$3.92bn (US$501m) in its IPO by selling 326.55m shares at HK$12/share, valuing the company at HK$105.75bn (US$13.52bn).
- J&T Global Express (1936374D CH) will not get Fast Entry to any indices but should be added to the HSCI in March. Inclusion to Southbound Stock Connect will take longer.
- Inclusion in other indices will take longer with the highest probability of index inclusion in September 2024.
Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
- Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
- Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.
WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS
- HDFC Bank (HDFCB IN) is the largest buy (XSOE) – estimated flow $44m. Grupo Financiero Banorte SAB d (GFNORTEO MF) is the 2nd largest buy – estimated flow $40m.
- Wistron Corp (3231 TT) is the largest sell – estimated flow $68m. POSCO Holdings (005490 KS) is the 2nd largest sell – estimated flow $59m.
- Our estimate for the total value of new constituent buys is $1.38bn. We expect deletions to the value of $1.41bn to be sold down across the 3 funds.
Quiddity A/H Premium Tracker (To Oct13): Volatility Up Bigly, Wide Spreads Wider
- The Brand-Spanking New (9 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
- We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
- The last 9 weeks (since the start of the new Trcker and Portfolio 8 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%.
Attractive Yield of Kumho Petrochem Pref Shares Amid 100 Billion Won of Common Shares Cancellation
- On 16 October, Kumho Petrochem (011780 KS) announced that it will cancel 0.77 million shares on 23 October, representing 2.6% of its outstanding shares or about 100 billion won.
- We particularly like Kumho Petrochem preferred shares which provide a dividend yield of nearly 6.7% which is 2x the dividend yield of the common shares.
- Foreigners have been net buyers of Kumho Petrochem preferred shares this year while they have been net sellers of its common shares this year.
Golden Eagle Energy: Last Day To Buy Cum-Divvie
- Back on the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
- GEO shareholders have now approved the purchase of a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group, triggering an MTO at IDR1,255/share, which is subject to Indonesia’s OJK.
- In addition, GEE announced a special/additional dividend, with a cum-entitlement today, the 17th of October.
Schaeffler/Vitesco: A Three-Step Merger Process
- Schaeffler (SHA GR) offers €91.00/share for Vitesco Technologies Group (VTSC GR), in cash, 20% premium to 3-month VWAP, 3.3x EV/Fwd EBITDA. There is no minimum acceptance rate.
- Later Schaeffler will unify its share classes (current voting ratio 3.01) to use them as currency for Vitesco shareholders not accepting the cash offer (essentially the parent company of Schaeffler).
- Vitesco shareholders are being generously rewarded (my fair value estimate is #€74/share), I believe most will tender. Spread is 1.04%/3.70% (gross/annualised, assuming settlement by 31 January). I’d buy below €90/share.
EQD | NIFTY WEEKLY Weak Bounce, Ready to Fall Next Week?
- The NIFTY 50 Index closed last week up at 19751.05, 2nd week up, in synch with the S&P 500 INDEX WEEKLY bounce.
- The index has not moved up much from a price perspective, weak bounce. Resistance levels must be monitored: if the index rallies this week it could pull back next week.
- The trade orientation is to go SHORT once the NIFTY reaches Q2/Q3 OVERBOUGHT resistance levels in the 20167-20230 price area, this week. SHORT Trade at Close is also valid.
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