Daily Brief Financials: KB Financial, Apollo Global Management , K Bank, China International Capital Corporation, Lippo Karawaci, Resona Holdings, Henderson International Income, Chesnara PLC and more

• KRX faces challenges balancing the Value-Up Index as a benchmark while ensuring real disclosures, but passive inflows remain steady with local pension funds still interested.
• KRX’s potential December mini rebalancing increases uncertainty but may just lead to minor tweaks, adding KB and Hana while removing a few stocks from Communication Services.
• The Value-Up Index resembles the KOSPI 200, using 30-40% GICS stocks and KOSDAQ 150, which may spark trading strategies focused on performance gaps within sectors.

• On 26 September, the Korea Exchange announced that it is considering a “special rebalancing” of the Korea Value-Up Index in December 2024.
• In our view, the probability of this special rebalancing occurring by the end of this year is high at about 85%+.
• If there is a special rebalancing, KB Financial, Hana Financial, Samsung Life Insurance, SK Telecom, and KT could be considered the top candidates for inclusion. 

• The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
• In this insight, we take a look at the upcoming constituent changes in the run up to the December 2024 index rebal event.
• We expect two regular changes in December 2024. There are also several live spin-off and M&A events which could trigger intra-review index changes in the late-2024/early-2025.

• K Bank (279570 KS) is looking to raise up to KRW 984bn (US$738m), valuing the company at KRW 5tn (US$3.75bn) at the top end of the IPO price range.
• Close peer KakaoBank (323410 KS) and regional peer SBI Sumishin Net Bank (7163 JP) have been trading lower recently and the IPO could price lower than the top end.
• The change in KOSPI2 INDEX Fast Entry rules will leave the stock out of the index till June 2025. Inclusion in global indices will have to wait a while too.

• China’s securities industry is under a wave of consolidation. China International Capital Corporation (3908 HK) is interesting given its leadership in the investment banking business.
• A combination with China Galaxy Securities (H) (6881 HK) may bring synergy, given their different focuses. This will create the 3rd largest securities house in China. 
• Even without a merger, CICC also looks attractive with the US interest rate trending down. It is best set to gain upon the revival of the Hong Kong IPO market. 

• Lippo Karawaci’s results made for interesting reading with underlying profitability improving in its real estate and lifestyle segments as it reduced its Siloam stake and reduced its debt.
• Real estate marketing sales in 1H2024 made up 58% of FY2024 guidance, with affordable landed housing driving growth across multiple projects targeting first-time buyers utilising readily available mortgages.
• LPKR further reduced its holding in Siloam International Hospitals in September through the tender offer and will further reduce its debt with proceeds. LPKR is back on the investor radar.

• JGB 10Y bond yields have slipped from their July high, but are well above historic lows; the outlook, in our view, is still for BoJ monetary tightening before year-end 2024
• We see a constructive outlook with recovering domestic loan growth, available funding as well as sector evidence of higher lending rates; also, largely well controlled unrealized losses on bond portfolios
• We keep Resona and Mizuho as our top picks for their strong gearing to higher interest rates and attractive valuations in this Japanese bank group, along with Chiba and Concordia

Henderson International Income Trust (HINT) seeks out companies with potential for growth from exposure to structural themes that is not priced into their valuations. The trust’s manager, Ben Lofthouse, believes the market’s current narrow focus on a few AI-related stocks means now is an especially good time to find such undervalued businesses. He has taken this opportunity to acquire companies with exposure to the rapid spread of technology and related themes, including several Asian businesses. Recent performance has improved thanks to these acquisitions, ensuring the trust continues to meet its long-term capital appreciation objective. HINT is also meeting its other aim, to provide shareholders with a rising income: its dividend has risen every year since inception and its dividend yield is the highest among its peers. Lofthouse believes the portfolio’s holdings are well-positioned to continue benefiting from their exposure to technology and other long-term structural trends. And with earnings set to rise steadily over coming years in his view, and the board wiling to use reserves to support dividends, if necessary, he is confident of HINT’s ability to continue fulfilling its objectives to grow both capital and income.

• Chesnara has announced its 1H’24 results.
• The main features were positive equity market returns, offset to some extent by further adverse lapse experience.
• Economic Value profit of £20.2m was behind the 1H’23 result of £32.6m (excl. acquisitions).