In today’s briefing:
- JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation
- S&P 500/400/600 Index Rebal – It’s Not The Trade You Think
- S&P/ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning
- HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)
- A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide
- Quiddity TDIV/50/100 Mar 24 Rebal: Disappointing Result but Trade Successful So Far; Bail Out Now!
- Mainland Connect NORTHBOUND Flows (To 1 Mar 2024): Foreigners Buy a New Set of Names
- STTF Index Rebalance: The Widening Emperador Spread
- What We Need to Know About Speeding Up Delisting in Korea
JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
- The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to One (relatively) Simple Indicator.
- Foreigners have a lot of ammunition left. But cross-holding unwinds are picking up, and buybacks are too, and dividend reinvestments are smaller than public pension selling. Which way next?
Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation
- Media reports indicate that the National Pension Service (NPS) could invest up to KRW 11tn (US$8.2bn) in a new index tracking stocks with low Price to Book ratios.
- Filtering stocks with market cap higher than US$500m, ADTV of atleast US$1m, div yield of atleast 1.5% and Price to Book less than 1 throws up 94 potential index candidates.
- Choosing an index of 50 stocks will require managers to buy between 1.7-3.4% of the float on the stocks. Increasing the number of constituents will reduce the impact.
S&P 500/400/600 Index Rebal – It’s Not The Trade You Think
- On Friday after the close, the S&P DJI Index Committee announced changes to the S&P 100, S&P500, S&P MidCap400, and S&P SmallCap600. Changes happen at the close 15 March 2024.
- Super Micro Computer (SMCI US) and Deckers Outdoor (DECK US) replace Zions Bancorporation (ZION US) and Whirlpool Corp (WHR US) in the S&P500. 2 changes to 400, 6 to 600.
- The immediate reaction was to send SMCI up 12.5%. That’s shortsighted. It pays to count the pennies involved. There are a LOT of pennies.
S&P/ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning
- There is 1 change for the S&P/ASX20 Index, 2 changes for the S&P/ASX100 Index, 4 changes for the S&P/ASX200 INDEX and 14 adds/10 deletes for the S&P/ASX300 Index in March.
- The largest impact is expected on the changes to the S&P/ASX 200 (AS51 INDEX) while flows are large among changes to the S&P/ASX 20 Index and S&P/ASX 100 Index too.
- There has been a steady increase in cumulative excess volume for most stocks but there are a few where there has been a spike recently.
HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)
- A share indices were up on the week. HK stock indices were down except for HS Tech. H-shares with A-share pairs were up.
- Net SOUTHBOUND buying was HK$9.1bn in the second post-holiday week after being +HK$20bn in the first week. LOTS of SOEs on the net buying side. Still.
- SOUTHBOUND continues to buy high-div SOEs. ex-div is still three months away, and given the new KPIs discussed late January by SASAC official, these still seem to be appropriate targets.
A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows net positive. NB 5 weeks in a row. AH premia rebounded slightly. AH Premia are still wide on average. Premia curves should still shift flatter.
- Two Sessions seems like a good place to make positive public statements but recent speeches from the very top seem more oriented towards “The People Must Endure.”
Quiddity TDIV/50/100 Mar 24 Rebal: Disappointing Result but Trade Successful So Far; Bail Out Now!
- The index changes for the March 2024 index rebal event for the T50/100 index family and the TDIV index were confirmed after market close on Friday 1st March 2024.
- The confirmed changes for T50 and T100 were captured in our expectations but an additional change we expected did not materialize which adversely affected our flow expectations for March 2024.
- In this insight, we take a close look at the breakdown of our final flow expectations for the upcoming Inclusion/Exclusion and Capping events.
Mainland Connect NORTHBOUND Flows (To 1 Mar 2024): Foreigners Buy a New Set of Names
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
- Last week saw NORTHBOUND net BUY RMB 23.5bn of A-shares on strong average activity after RMB +49bn the previous four trading weeks. More efforts by authorities to eliminate selling.
- No finance names of any kind in the top ten this week after 5/10 the week before. Slight tendencies to trade on reversion.
STTF Index Rebalance: The Widening Emperador Spread
- The SPDR Straits Times Index ETF (STTF SP) will need to sell Emperador (EMI SP) at the close of trading on 15 March.
- Other global index trackers will need to sell Emperador (EMP PM) at the close on 15 March.
- There will be around US$55m to sell across both lines and varying liquidity has opened up a huge spread between the listings.
What We Need to Know About Speeding Up Delisting in Korea
- Korea’s authorities aim to streamline delisting and tighten rules for smooth market funds. 71 companies (17 in KOSPI, 54 in KOSDAQ) under review, about 8 trillion won tied up.
- It’s unclear if this ties directly to the FSS chief’s mention of kicking non-compliant firms of the Value-up Program. Rumors hint at FSS-FSC differences. Impact on Value-up trading seems minimal.
- Nonetheless, we must explore stocks that may gain from expediting delisting for the 71 companies under review.
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