In today’s briefing:
- CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
- CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
- ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues
- Eoflow: Financing Requirements, Changing Shareholding Structure, and the Next Steps
- (Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
- HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
- Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
- The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX).
- We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
- The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
- Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
- Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
- If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
- We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.
CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
- With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
- We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
- The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.
CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
- The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
- We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
- At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues
- With the review period now complete, we forecast 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- There are 4 stocks that could be added to both indices while some stocks will also have same way flows from CSI Smallcap 500 Index (SH000905 INDEX) trackers.
- The potential adds have outperformed the potential deletes over the last 6 months. There has been a big move higher in the potential adds over the last few weeks.
Eoflow: Financing Requirements, Changing Shareholding Structure, and the Next Steps
- In this insight, we discuss the additional financing requirements, changed shareholding structure, and the next steps for Eoflow.
- Eoflow is one of the best performing stocks in the Korean stock market in the past one month as its shares have soared 249% in this period.
- The details of the oral argument (Insulet vs Eoflow) at the U.S. Appellate Court suggest that the U.S. Appellate Court may rule in favor of Eoflow.
(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
- Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs.
- Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
- The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
- This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
- Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.
Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
- A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
- The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
- These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.
💡 Before it’s here, it’s on Smartkarma
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