In today’s briefing:
- KRX Value-Up Index Rebalance Results and Estimated Passive Impact
- Select Sector Indices and S&P Equal Weight Rebalance: US$17.7bn Round-Trip Trade Post Capping Cutoff
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March 2025
- PCOMP Index Rebalance Preview: Two Changes Likely in February
- EQD | Hong Kong Single Stock Options Weekly December 09 – 13
- EQD | Nikkei Index Options Weekly – December 09 – 13
- EQD | Hong Kong Index Options Weekly – HSI and HSCEI December 09-13
- EQD | ASX 200 Presents a High-Probability Buy-The-Dip Opportunity
- EQD | Kospi Index Options Weekly – December 09 – 13
KRX Value-Up Index Rebalance Results and Estimated Passive Impact
- KRX updated the Value-Up Index with five new names: KB Financial, Hana Financial, KT Corp, SK Telecom, and Hyundai Mobis, with Mobis replacing JB Financial, surprising the market.
- This is the first rebalancing, packed into one day, so expect notable price action. Reverse moves could also follow Thursday as pre-positioned trades unwind, so monitor price action closely.
- Even after Thursday’s rebalancing, half of the funds, especially from the National Pension Service, will flow into high-yield stocks, likely driving significant price moves through early next year.
Select Sector Indices and S&P Equal Weight Rebalance: US$17.7bn Round-Trip Trade Post Capping Cutoff
- Constituent changes to the S&P 500 INDEX and capping changes will result in a round-trip trade of US$17.7bn across the Select Sector indices and the S&P500 Equal Weight Index.
- There is over US$500m to trade in Broadcom (AVGO US), Tesla (TSLA US), Apollo Global Management (APO US), Amazon.com Inc (AMZN US) and Workday Inc Class A (WDAY US).
- Broadcom (AVGO US) swings from a small net buy to a large net sell following the rally in the stock last week.
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March 2025
- We see 32 potential and close adds and 44 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
- We expect 29 stocks to be added to Southbound Stock Connect following the rebalance while 31 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
PCOMP Index Rebalance Preview: Two Changes Likely in February
- The review period for the February rebalance of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) ends in two weeks.
- There could be two changes for the index with passive trackers needing to trade between 23-64x ADV in the stocks.
- The passive buying is a lot larger than the passive selling, there will be funding outflows for the other index constituents; some stocks will have over 1x ADV to trade.
EQD | Hong Kong Single Stock Options Weekly December 09 – 13
- Top Ten most active contracts for the week all traded on Monday. Most of the active contracts were Calls with December expiries.
- Xiaomi Corp (1810 HK) makes the Top Ten non-Tencent most active contracts with both Puts and Call active – likely stock replacement and hedges following torrid run higher.
- Tencent implied vols trading at their lowest levels of the past year.
EQD | Nikkei Index Options Weekly – December 09 – 13
- A bid for out-of-the-money puts combined with positive change in Put open interest and Put volume totals argues that Puts and being bought.
- 70% of NKY open interest is below 38,000 with only 20% of the open interest above 40,000.
- NKY nearing top of range while registering quiet historic volatility levels 4-5 points below implied vols.
EQD | Hong Kong Index Options Weekly – HSI and HSCEI December 09-13
- Both HSI and HSCEI show characteristics of being short gamma at higher strikes highlighted by Mondays pop in spot and vol in both markets.
- Implied vol did a complete round-trip closing virtually unchanged from last week despite spot holding on to modest gains on the week and large high – low range.
- Up-Strike Calls look to have been added in both markets which will help maintain the positive spot vol correlation.
EQD | ASX 200 Presents a High-Probability Buy-The-Dip Opportunity
- The S&P/ASX 200 INDEX it’s currently trending up quite well, since October 2023. The current rally picked up some steam from July 2024 and is quite steady.
- The index started to pull back 2 weeks ago and has closed 2 consecutive weeks down and this week started with a Monday down Close.
- Our models show a clear opportunity to buy this dip and ride the index uptrend back to >3% profit target, roughly a 3-weeks movement according to our forecast.
EQD | Kospi Index Options Weekly – December 09 – 13
- Risk reward for owning implied vol has shifted to the long side here given spot/vol dynamics and limited vol upside since market peaked 17% higher.
- Strong price action after a soggy start to the week sees a significant portion of open interest cleared out.
- Largest open interest is at the 300 strike with ~ 42k Put contracts outstanding.
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