In today’s briefing:
- HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- Lasertec (6920) – The State of Things May Be Different Than You Think
- Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
- Japan Post Bank (7182) – The October TOPIX FFW Adjustment
- Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨
- Interglobe Aviation (Indigo) Lockup – Time for Another Selldown, This Time Could Touch US$900m
- Brilliance China (1114 HK): Driving Back Into Passive Portfolios
- [Update] Tax-Loss Selling In Australia – Closing the Circle on the Rebound Trade
- KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic
- Tokyo Electron (8035 JP): Saved from Disaster by China
HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
- The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
- With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.
Lasertec (6920) – The State of Things May Be Different Than You Think
- Lasertec (6920) is a shoo-in for Nikkei 225 inclusion in September according to the quantitative analysis. The amount to buy is a small multiple of ADV, making the inclusion “unimpressive.”
- It is probably worth looking at the details of ownership, of volume, and of relationship to other stocks in the same general sector.
- It is also worth thinking about flow channels (stock up or down changes flows) and forward fundamental calculations.
Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
- In March 2023, Japan Post Holdings (6178 JP) sold ¥1.1trln of shares in Japan Post Bank (7182 JP), lowering its stake considerably, raising float. There will be a TOPIX upweight.
- In May, with earnings, they announced their intention to buy back ¥300bn of shares or up to 10% of shares out. Today, they announced the details. ¥300bn through March end.
- In a ¥300bn ToSTNeT-3 tomorrow, the govt will sell back ¥105.7bn. That leaves a residual worth examining. So we examine.
Japan Post Bank (7182) – The October TOPIX FFW Adjustment
- Japan Post Bank (7182 JP) was effectively re-IPOed in March when Japan Post Holdings (6178 JP) offered more than a BILLION shares against the 400mm shares then in float.
- It was a huge offering. A huge increase in float. Lots of immediate liquidity. A PERFECT opportunity for the TSE to do an ad hoc FFW change. But they didn’t.
- Then in June they lowered the FFW (on a technicality). That leaves a big upweight in October. In this insight we measure the opportunity.
Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨
- The data for the Nikkei 225 Rebalance is cemented as of 31 July 2023. Lasertec Corp (6920 JP) looks like a shoo-in. The DELETEs are obvious too.
- Fast Retailing (9983 JP) doesn’t get a cap (yet). But the other ADDs are a real question. It is a matter of interpreting the methodology and qualitative aspects. And FLOAT.
- One way, Socionext (6526) and Mercari (4385) are ADDs. Another way, it looks like Nitori Holdings (9843) and ZOZO Inc (3092) or Ryohin Keikaku (7453). FLOAT IS A PROBLEM ANYWAY.
Interglobe Aviation (Indigo) Lockup – Time for Another Selldown, This Time Could Touch US$900m
- InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 29%+ stake was released from lock-up today.
- He had earlier stated his intention to pare down his stake after a long drawn, and very public battle, with his co-founder Rahul Bhatia.
- In this note, we will talk about the lockup dynamics and possible placement.
Brilliance China (1114 HK): Driving Back Into Passive Portfolios
- Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
- Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
- The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.
[Update] Tax-Loss Selling In Australia – Closing the Circle on the Rebound Trade
- Originally, this was an analysis of tax-loss selling baskets over the years, and seasonal performance of baskets of stocks with certain attributes. On average, they fell vs index.
- Of course, on average, they also rose vs index after the selling was done.
- This insight puts a cap on the 2023 edition with results across the four baskets. The sell made 4.2% vs ASX200 in May, then is up
KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic
- Following the two tender offers, Han & Co now holds more than 90% of the common shares in Lutronic Corp (085370 KS) and is looking to buy the remaining shares.
- Lutronic Corp (085370 KS) is a member of the KOSDAQ 150 Index and delisting would mean an index replacement. Value Added Technologies (043150 KS) is a potential inclusion.
- Value Added Technologies (043150 KS) has underperformed its peers and trades cheaper on nearly all valuation parameters.
Tokyo Electron (8035 JP): Saved from Disaster by China
- Thanks to strong demand from China, 1Q results at Tokyo Electron (TEL) were just bad, not horrible. Operating profit was down 30% YoY on a 17% decline in sales.
- 1H guidance implies that 2Q will also be weak. Full-year FY Mar-24 guidance implies an unlikely 50% sequential increase in net profit, putting the shares on 32x projected EPS.
- A return to peak EPS next fiscal year would drop the P/E ratio to 21x, which used to be the top of TEL’s P/E range. Sell.
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