In today’s briefing:
- Russia: Index Deletion & Impacts
- Russia Gets the Boot from Major Indices – Minimal Impact But World’s Largest Small Sidepocket?
- TSMC (TSM/2330 TT): Position for ADR Premium Expansion
- StubWorld: Prosus’ Move On Russian Exposure Overdone
- FTSE UK Index Series: March 2022 Index Changes and Trading Strategy
- Hokuhoku Financial (8377 JP) – Buyback Dynamics For March… 👀
- China Infrastructure & Logistics Group (1719 HK): Unconditional MGO Now Open
Russia: Index Deletion & Impacts
- MSCI will move Russia to Standalone market status at the close on 9 March while FTSE will delete Russian securities from its indices at the close on 4 March.
- There will be zero inflows to other markets in conjunction with Russia’s reclassification/ deletion since the fund managers cannot sell the Russian stock to raise cash.
- Some delta one desks/ swap providers could make money on the deletion, while there are trades linked to the deletion from the indices.
Russia Gets the Boot from Major Indices – Minimal Impact But World’s Largest Small Sidepocket?
- Major global indices have decided to relegate Russia to the “standalone” and “unclassified” market status due to sanctions and restrictions on transfer/payment/clearing.
- Talk of significant flows into major non-Russia EM markets such as China, Taiwan, Korea, etc is misguided.
- Russia was a non-negligible weight in global EM a few months ago, but GDRs have fallen dramatically and Russia-listed are effectively now portfolio pocket lint.
TSMC (TSM/2330 TT): Position for ADR Premium Expansion
- The premium of Taiwan Semiconductor Sp Adr (TSM US) to TSMC (2330 TT) has dropped from 10% to nearly parity in slightly less than a month.
- There is still no headroom available on the ADR and we expect the premium to move higher once the selling on the ADR is complete.
- The SGX has recently launched single stock futures on Taiwan Semiconductor Sp Adr (TSM US). There could be market makers willing to provide liquidity which would make trade entry easier.
StubWorld: Prosus’ Move On Russian Exposure Overdone
- Prosus (PRX NA) shares have nose-dived in light of its exposure to Russia via its classified ads business Avito, and social media operator, VK Group. This move appears overdone.
- Preceding my comments on Prosus, are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
FTSE UK Index Series: March 2022 Index Changes and Trading Strategy
- The FTSE UK Index Series is a widely-tracked family of sub-indices representing the performance of the public equity markets in the UK.
- These indices are reviewed on a quarterly basis in March, June, September, and December. The quarterly index changes for March 2022 were announced yesterday.
- Below is a discussion of the official results and potential trading strategies to generate market-neutral returns in the run up to the Inclusion Event.
Hokuhoku Financial (8377 JP) – Buyback Dynamics For March… 👀
- Hokuhoku made a somewhat startling buyback announcement in late December and the shares jumped.
- Then they bought back almost nothing in January, and bought back 17.4% of traded volume in February.
- There is a lot left over and Hokuhoku remains one of the cheapest regional banks out there.
China Infrastructure & Logistics Group (1719 HK): Unconditional MGO Now Open
- On the 10 January, China Infrastructure & Logistics Group (1719 HK) (“CILG”) has announced a possible MGO from Hubei Ports. The Composite Doc is now out. The Offer is open.
- This transaction is an unconditional mandatory cash offer at HK$1.45/share.
- The first – and likely, last close – is the 25 March. The Offeror intends to maintain CILG’s listing.
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