Daily Brief Financials: HKEX, Haitong International Securities Group, AIA Group Ltd, NIFTY Index, KB Financial, Coinshares International, Bakkt and more

• The FRTIB has decided to switch its benchmark for the International Stock Index Investment Fund from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index.
• With around US$68bn invested in the I Fund, this will set off churn among the constituent stocks in 2024. One-way trade is around US$28bn with DM outflows and EM inflows.
• The benchmark shift could be done over a 4 month period with higher trading during periods where liquidity opportunities arise.

• The pre-condition relating to Haitong International Securities Group (665 HK)’s privatisation offer from Haitong Securities Co Ltd (A) (600837 CH) is satisfied. The offer is at HK$1.52 per share. 
• The key conditions are approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and the headcount test. The high takeover premium facilitates approval. 
• This is a done deal. At the last close and for an estimated early February 2024 payment, the gross and annualised spread is 5.6% and 26.4%, respectively.

• The Federal Retirement Thrift Investment Board which manages the four major funds in the Thrift Savings Plan for US federal government employees will change benchmark for its International Fund
• This was announced on 14 November. The transition will take place “in 2024.” It entails moving from MSCI EAFE to MSCI All Country World ex-USA ex-China ex-HongKong Investable Market Index.
• The explanation: double the countries, lots more stocks, BUT CHINA! This means selling ~US$1.6bn of HK stocks but US$20bn of one-way flow in total (lots of Japan/UK/Europe to sell)

• The NIFTY Index closed the last 2 weeks up (CC=+2), reversing from an oversold condition. This week the index started going up again, but it’s not going anywhere…
• The index barely crossed the Q1 resistance at 19334, but if closes this week up, the WEEKLY CC=+3 condition will be an “OVERBOUGHT” signal, a pullback could start.
• Going SHORT is probably not worth it, we don’t see a large pullback coming, it’s probably better to simply hedge your positions.

• In our latest South Korean banks screener; we switch from Hana Financial to KB Financial as our preferred Korean banks pick
• NPLs and precautionary quality credits continue on a rising trend, whilst KB has controlled its NPL ratio and precautionary ratio better than most to 3Q23
• KB has a low PBV ratio relative to its ROE, rising post-provision returns, a healthy CET1 ratio and a healthy LDR; Kakaobank is one for the watchlist

CoinShares International (CS) maintains its stable development in 2023, posting an adjusted EBITDA of £9.9m in Q323 (£6.4m in Q322). This is despite the £3.0m loss on principal investments, arising primarily from provisions recognised by FlowBank (in which CS holds a 28.3% stake). Both the asset management business and capital markets activities were solid contributors to the Q323 results, with the former posting £10.7m in fees and the latter £9.3m in gains and income. In September 2023, CS officially launched its Hedge Fund Solutions (active asset management business), with its initial strategies active since the end of Q323 and discussions with potential investors across the globe ongoing.

• Bakkt reported a 3Q23 loss of $0.19/share on net revenue of $14.6 million, slightly below our estimates of a loss of $0.18/share loss on net revenue of $15.5 million (consensus was for a loss of $0.17/share on $16.1 million).
• The crypto environment continues to be challenging. President and CEO Gavin Michael said the quarter “clearly demonstrated our ability to execute” in a tough market.
• Michael also highlighted the company’s push and significant progress in expanding outside the US, which is in need of clarifying legislation.