In today’s briefing:
- S&P500/400/600 Index Rebalance: Dell, Palantir Make It (Finally!); Apple Upweight
- S&P/ASX Index Rebalance (Sep 2024): Two Big Surprises; Positioning Is Mixed
- KRX Sector Rebalance Shocker: Massive Flow Impact on Hankook & Company
- Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)
- Merger Arb Mondays (09 Sep) – Shinko, Fuji Soft, Pasco, GA Pack, CPMC, Latin Res, Capitol, PSC, Rex
- Quiddity TDIV/50/100 Sep 24 Rebal: 100% Hit Rate; Perfectly Positioned for Our Trade
- HK Connect SOUTHBOUND Flows (To 6 Sep 2024); Weak Data
- Taiwan Top 50 ETF Rebalance: Rallying PharmaEssentia To Replace Sliding Nanya Tech
- A/H Premium Tracker (To 6 Sep 2024): SB Buying of H Underperformance, AH Premia Up
S&P500/400/600 Index Rebalance: Dell, Palantir Make It (Finally!); Apple Upweight
- There are 3 changes for the S&P 500 INDEX, 8 changes for the S&P Midcap400 Index and 15 changes for the S&P SmallCap600 Index at the September rebalance.
- Dell Technologies (DELL US) and Palantir Technologies (PLTR US) were finally added to the S&P 500 INDEX (SPX INDEX) and there is huge size to trade in the stocks.
- There will also be big buying in Apple (AAPL US) following a float increase driven by Berkshire Hathaway Inc Cl A (BRK/A US) selling last quarter.
S&P/ASX Index Rebalance (Sep 2024): Two Big Surprises; Positioning Is Mixed
- There are 2 changes for the S&P/ASX100 Index, 3 changes for the S&P/ASX 200 (AS51 INDEX) and 16 adds/ 8 deletes for the S&P/ASX300 Index.
- The two big surprises are the inclusion of Guzman Y Gomez (GYG AU) and Yancoal Australia (YAL AU) in the S&P/ASX 200 (AS51 INDEX) and S&P/ASX300 Index.
- The adds to the indices have outperformed the deletes over the last few months and there could be profit-taking in the next few days.
KRX Sector Rebalance Shocker: Massive Flow Impact on Hankook & Company
- Hankook & Company is unexpectedly entering Autos, the only large-cap inclusion, likely getting a significant weight and facing a massive flow impact.
- Like BBIG, this single-day flow event driven by one or two ETFs means smaller front-running impact, but names like Hankook & Company could see early positioning due to massive flows.
- I’ll position in big impact names two days before the ETF rebalance trading. I’ll then go long on a basket of those with over 0.5x ADTV at Wednesday’s close.
Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
- Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
- Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.
Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)
- On 6 September, Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) entered a legally binding agreement to merge through absorption and share exchange.
- The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.
- In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.
Merger Arb Mondays (09 Sep) – Shinko, Fuji Soft, Pasco, GA Pack, CPMC, Latin Res, Capitol, PSC, Rex
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Canvest Environmental Protection Group (1381 HK), Shinko Electric Industries (6967 JP), Malaysia Airports Holdings (MAHB MK), Greatview Aseptic Packaging (468 HK).
- Lowest spreads: Fuji Soft Inc (9749 JP), Tohokushinsha Film (2329 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP).
Quiddity TDIV/50/100 Sep 24 Rebal: 100% Hit Rate; Perfectly Positioned for Our Trade
- The ADDs/DELs for the TDIV, T50, and T100 indices for the September 2024 index rebal event was confirmed after market close on Friday 6th September 2024.
- There will be one change for the T50 index and four separate changes for the T100 index. One of the T100 changes will also trigger a TDIV index deletion.
- In this insight, we have presented our final estimates for the index flows for ADDs/DELs and capping flows for the TDIV index.
HK Connect SOUTHBOUND Flows (To 6 Sep 2024); Weak Data
- SOUTHBOUND was a net buyer this week, again, after a small net sell week broke the 28-week buying streak. This week, over four days, it was +HK$9.3bn.
- ETFs were a net buy this week; CCB, ICBC, Meituan, China Mobile, as well as BYD, Nonfu Spring, and ANTA Sports stand out among net buys. Sells were small.
- This week sees Alibaba Group Holding (9988 HK) eligible for SOUTHBOUND buying. And what was supposed to be the HSI/HSCEI/HSTECH rebals Friday are pushed to Monday (link here).
Taiwan Top 50 ETF Rebalance: Rallying PharmaEssentia To Replace Sliding Nanya Tech
- Pharmaessentia Corp (6446 TT) will replace Nanya Technology (2408 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the close of trading on 20 September.
- Shorts have been covering positions in Pharmaessentia Corp (6446 TT) while there has been a surge in new short positions in Nanya Technology (2408 TT).
- Cumulative excess volume in Pharmaessentia Corp (6446 TT) has flattened out as momentum has stalled while there has been a surge in cumulative excess volume for Nanya Technology (2408 TT).
A/H Premium Tracker (To 6 Sep 2024): SB Buying of H Underperformance, AH Premia Up
- Repeat of last week: Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes and net back up, but not high.
- AH Premia rose slightly as HK-listed shares underperformed mainland share indices. Hs underperform their As consistently compared to relative index performance.
- It is not clear what impetus there might be for better H performance.
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