In today’s briefing:
- NIFTY50 Index Rebalance Preview: Two’s Company; Three’s A Crowd
- Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
- WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
- HSCEI Index Rebalance Preview: One Change; Capping Impact Increases
- ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues
- Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
- Liontown Resources (LTR AU): State of Play
- Asian Dividend Gems: Giordano International
- Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank
NIFTY50 Index Rebalance Preview: Two’s Company; Three’s A Crowd
- There should be two changes for the NIFTY Index (NIFTY INDEX) in March. That could increase to three, but that would take some big price moves from now to January.
- Impact on the potential changes is pretty large at over 6 days of ADV to trade from passive trackers. The impact is over 11 days of delivery volume.
- Inclusion of Avenue Supermarts Ltd (DMART IN) in the F&O segment before January could lead to another change.
Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics
- The Philippines Stock Exchange PSEi Index (PCOMP INDEX) rebalance was implemented last week and there were interesting moves at the close on implementation day.
- The focus this week will be on pre-positioning for a global index rebalance where the review period commences next week.
- Units outstanding on iShares Emerging Markets (EMXC US) are at a new high while there continue to be redemptions in iShares Emerging Markets (EEM US).
HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
- With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
- Capping changes will result in a one-way turnover of 2.16% and that will result in a round-trip trade of US$556m.
- The impact of capping changes has doubled over the last month and there will be more changes from now till the official capping is done on 28 November.
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
- The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
- The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
- In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS).
HSCEI Index Rebalance Preview: One Change; Capping Impact Increases
- Zhongsheng Group (881 HK) is in deletion zone and could be deleted. China Unicom Hong Kong (762 HK) could be added to the index as the highest ranked non-index constituent.
- Estimated one-way turnover at the rebalance is 2.14% resulting in a one-way trade of HK$1.38bn. Meituan (3690 HK), Alibaba Group (9988 HK) and Tencent (700 HK) will be capped higher.
- China Unicom Hong Kong (762 HK) is supported on its 50/100 day moving averages and could move higher. Zhongsheng Group (881 HK) has been trading below its moving averages.
ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues
- Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
- Given stock selection uses liquidity as a major input, the impact of passive trading will be much larger on the deletions as compared to the additions.
- The potential adds have outperformed the potential deletes, but relative performance has been drifting lower over the last few months. There are stocks that will have flows from other indices.
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
- An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
- The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
- There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.
Liontown Resources (LTR AU): State of Play
- Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
- The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
- The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.
Asian Dividend Gems: Giordano International
- Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits.
- Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%.
- We like the company’s high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x.
Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank
- Light & Wonder (LNW US)/ Light & Wonder (LNW AU) replaced United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) last week.
- Newcrest Mining (NCM AU) stops trading this week and should be replaced by Newmont Mining (NEM US) CDIs in the ASX indices.
- Another week of ETF outflows for China with the largest outflows from trackers benchmarked to the CSI 1000 Index.
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