In today’s briefing:
- HSCEI Index Rebalance Preview: Two Changes Likely in September
- HSTECH Index Rebalance Preview (Sep): One Change or Two?
- 5 Stocks in Korea Drop Limit Down – Caused by CFD Derivatives Related Margin Call Again?
- CPSE / CNXBANK Index Rebalance Preview: Capping Changes in June
- STAR50 Index Rebalance Preview: One High Probability Change; One ‘It Depends’
- A Pair Trade Between Hanmi Science and Hanmi Pharm
- Abacus Offers ASK – The Back End Trade Is Still Better
- Forced Participation
- JS Global (1691 HK)’s SharkNinja Spin-Off
- Gap Trades of Small Cap Korean Pref Vs Common Shares
HSCEI Index Rebalance Preview: Two Changes Likely in September
- Trip.com (9961 HK) and Chow Tai Fook Jewellery (1929 HK) could replace Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) at the upcoming rebalance in September.
- Estimated one-way turnover at the rebalance is 1.2% resulting in a one-way trade of HK$744m. The official capping will be done based on closing prices from 29 August.
- Short interest has been rising on the potential adds and short covering could take the stocks higher, especially Chow Tai Fook Jewellery (1929 HK).
HSTECH Index Rebalance Preview (Sep): One Change or Two?
- We expect one change to the Hang Seng Tech Index (HSTECH INDEX) in September – though there could be a second change as well.
- Estimated one-way turnover is 2.13% resulting in a one-way trade of HK$2.01bn in case there are two index changes. Turnover will be lower if there is only one change.
- Short interest on some of the potential changes is over 15% of float and there could be big moves on the stocks post announcement of the changes.
5 Stocks in Korea Drop Limit Down – Caused by CFD Derivatives Related Margin Call Again?
- There were five stocks in Korea that dropped limit down (30%) today. They included Pang Rim, Dongil Industries, Manho Rope & Wire, Taihan Textile, and Dongil Metal.
- The share price decline of these five stocks are similar to the crash in eight stocks in Korea in April which were related to CFD derivatives related margin call selling.
- Domestic securities firms in Korea have been trying to significantly reduce their exposure to CFD related trading and in this process, these sharp drops could be caused by this selling.
CPSE / CNXBANK Index Rebalance Preview: Capping Changes in June
- The CPSE ETF (CPSEBE IN) and Nifty Bank Index (NSEBANK INDEX) will have its quarterly rebalancing at the close on 29 June.
- There are no constituent changes for the indices in June but there will be capping and float changes for the stocks and there is a reasonable impact on many stocks.
- Both indices have performed well over the recent past and active investors can take advantage of the passive flows to increase or decrease existing positions.
STAR50 Index Rebalance Preview: One High Probability Change; One ‘It Depends’
- The review period for the September rebalance ends 31 July. We expect the changes to be announced 25 August with the implementation taking place after the close on 8 September.
- We expect the index committee to continue using a 6-month minimum listing history resulting in two changes to the index.
- One way turnover is estimated at 3.45% resulting in a one-way trade of CNY 3,675m. The impact on the deletions will be larger than that on the inclusions.
A Pair Trade Between Hanmi Science and Hanmi Pharm
- There has been a big divergence in the share prices of Hanmi Science and Hanmi Pharm in the past two months.
- This divergence in share price appears to be a bit too excessive and we believe this gap is likely to narrow in the coming weeks.
- We like a pair trade between going long Hanmi Science and going short on Hanmi Pharm.
Abacus Offers ASK – The Back End Trade Is Still Better
- This morning, Abacus Property (ABP AU) units were halted for trading and the Institutional Offer for Abacus Storage King (future ASK AU) units were launched.
- The Offer is underwritten by Barrenjoey and Morgan Stanley. The Institutional Offer will be completed by Friday, and results announced Monday 19 June, with trading halt lifted.
- Then the Retail portion of the Offer will be conducted til 27 July. EGM the same day. Delayed settlement trading of ASK and New ABP (ABG AU) will start 1Aug.
Forced Participation
- Explosive SPX upside is a result of funds having to chase as most have not participated in the rise above 4,200.
- Our 4,500 target may need to be upgraded with a fresh projection at 4,547. Bull energy slated to extend into late June and like buying dips.
- Will A and H shares be the next rotation flavor? HSCEI 6,600 bull pivot. A50 13,200 resistance.
JS Global (1691 HK)’s SharkNinja Spin-Off
- Back on the 23 February, household appliance maker JS Global Lifestyle (1691 HK) proposed spinning off SharkNinja’s ex-Asia Pac ops in the U.S.
- This spin-off would be undertaken as a distribution in-specie, creating a parallel listing structure for SharkNinja and the remaining operations.
- Shareholders of JSG will vote on the separate listing at the EGM on the 26 June, with the last day cum-entitlement on the 27 June.
Gap Trades of Small Cap Korean Pref Vs Common Shares
- In this insight, we provide gap trade opportunities among 30 small cap Korean preferred stocks with market cap of less than 100 billion won and more than 20 billion won.
- Among these 30 companies, there are some in interesting gap trade opportunities, especially among those with relatively high dividend yields (more than 5%).
- We have ranked these 30 stocks in terms of three criteria including market cap, pref/common share price ratio, and dividend yields.
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