In today’s briefing:
- Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning
- MUFG Partial Offer by MUFG to Buy ~50% of Small Cap Zenhoren (5845) – Watch the Back End
- Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- FSS Officially Rolls Out New Ex-Div Rule for Quarterly Divs; Sammy May Finally Join the Change
- Weekly Deals Digest (16 Feb) – Trend Micro, Zenhoren, HKBN, Fosun Tourism, Paragon REIT, CATL
- [Quiddity Index Feb25] Nikkei 225 Mar Rebal: 2 or 3 IN, 2 or 3 OUT, ~$3bn 1-Way, 1 Squeeze.
- EQD| HSI: 99th Percentile 2-Week Move on Low Volatility. What’s Next?
- EQD| HSCEI Index Options Weekly (Feb 10-14): Tactical Hedges for an Extended Rally
- EQD| HSI Index Options Weekly (Feb 10-14): Reduce Positions with Short Volatility Edge
- SENSEX Index Rebalance Preview: Two Changes for Now; Third Change at the Cusp
Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning
- The changes to the Nikkei 225 (NKY INDEX) as part of the March rebalance should be announced in just over 2 weeks. We expect 2-3 changes at the review.
- The forecast adds have massively outperformed the forecast deletes and the Nikkei225 Index over every time period going back 3 months with the largest outperformance in the last month.
- Positioning appears to be stretched in one forecast add while there appears to be under positioning in a couple of the forecast deletes.
MUFG Partial Offer by MUFG to Buy ~50% of Small Cap Zenhoren (5845) – Watch the Back End
- Friday after the close, Mitsubishi UFJ Financial (MUFG) (8306 JP) announced a partial offer to buy up to 13.026385mm shares (minimum 11.661185mm shs) of rent guarantor Zenhoren (5845 JP).
- That is 49.6% but an MUFJ sub already owns 1.46%. The offer comes at a 32% premium to last. Two holders with 33.59% of the register have agreed to tender.
- This will turn the company into a consolidated subsidiary of MUFG under MUFJ Nicos, the group’s consumer credit subsidiary. Shareholder structure matters. Watch the back end.
Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- Alibaba Group Holding (9988 HK) stock has rallied bigly over the last month and has gained 55% over that period.
- That has led to Alibaba‘s weight in the HSI INDEX, HSCEI INDEX, HSTECH INDEX and HSIII Index rising above the cap of 8%/12% and passives will sell on 7 March.
- We estimate passive trackers will need to sell US$1.2bn of stock due to capping. Shorts have been increasing, and quarterly results will be announced on 20 February.
FSS Officially Rolls Out New Ex-Div Rule for Quarterly Divs; Sammy May Finally Join the Change
- Starting this year, both year-end and interim divvies follow the new rule, with ex-div dates set after the payout is confirmed.
- Quarterly dividend arbitrage will heat up, especially for high-yield bank stocks, attracting traders to cash in on the spread.
- Samsung Electronics is likely to update bylaws at the March AGM, with Q1 payout ex-div dates set after the dividend is confirmed.
Weekly Deals Digest (16 Feb) – Trend Micro, Zenhoren, HKBN, Fosun Tourism, Paragon REIT, CATL
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Contemporary Amperex Technology (CATL) (300750 CH) filed for an H Share listing to raise US$5 billion, and Hexaware Technologies (HEXW IN) seeks to raise US$1 billion.
- Event-Driven developments: Trend Micro Inc (4704 JP), Kaonavi Inc (4435 JP), Zenhoren (5845 JP), HKBN Ltd (1310 HK), Fosun Tourism (1992 HK), Paragon REIT (PGNREIT SP).
[Quiddity Index Feb25] Nikkei 225 Mar Rebal: 2 or 3 IN, 2 or 3 OUT, ~$3bn 1-Way, 1 Squeeze.
- The data observation period is done. No rank changes in the top candidates since mid-Jan. Capping for Fast Retailing (9983 JP) is confirmed.
- For me, it is 2 or 3 ADDs, depending. Kokusai Electric (6525 JP) is still tops. BayCurrent Consulting (6532 JP) second. Shift Inc (3697 JP) third.
- Kokusai is +26.7% in 5 weeks since I wrote bullishly, despite news/confirmation of getting the boot from a global index at end-Feb. Baycurrent is +39.7% (link). Now we count flows.
EQD| HSI: 99th Percentile 2-Week Move on Low Volatility. What’s Next?
- HSI’s 10-day return of 11.84% ranks it just below the 99th percentile of all 10-day moves since 2000.
- This move has been unusual given the low level of historic volatility, ranking it as one of the lowest vol moves of this magnitude.
- The current move is abnormal for its return relative to volatility – we dig deeper into how returns and volatility are likely to evolve.
EQD| HSCEI Index Options Weekly (Feb 10-14): Tactical Hedges for an Extended Rally
- HSCEI sets new 52-week high by a hair. Rally over the last 10 days ranks in the 97th percentile since 2000.
- Spot and implied maintain a positive correlation which will see implieds come off should this rally reverse course.
- We recommend two trades for those looking to tactically lighten positions into the rally.
EQD| HSI Index Options Weekly (Feb 10-14): Reduce Positions with Short Volatility Edge
- Rally over the past 2 weeks has landed it in the 99th percentile since 2000 and has also been accompanied by low volatility.
- The up-trend has a number of characteristics similar to the 21% rally in May 2024 and is in line with levels from which market has failed to advance.
- Given how price and vol are likely to evolve over the next month we suggest tactical positions to reduce position size
SENSEX Index Rebalance Preview: Two Changes for Now; Third Change at the Cusp
- Nearing the completion of 60% of the review period, there could be two changes for the BSE SENSEX Index (SENSEX INDEX) at the June rebalance.
- With one stock right at the cusp of deletion from the index, there could be a third change too. Sector balance will be used to decide the list of inclusions.
- The forecast adds outperformed the forecast deletes in the back end of 2024 but there has been huge underperformance this calendar year as stocks with nosebleed valuations have sold off.
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