In today’s briefing:
- Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement
- Shinsei Bank (8303 JP) – Reading Between The Lines
- OZ Minerals – Circumstances Apparently Do NOT Merit a Revised Tilt
- Meituan – What to Look for in 3Q22 Result?
- Kotak Mahindra Bank (KMB IN): Foreign Room >20% Should See Staggered FTSE Inclusion Starting March
- Après Moi Le Deluge: What 20th CPC National Congress Says About China’s Future
- Japan Excellent (8987) Has Been Most Excellent. It Should Still Be.
- Global Fallout from Strong Dollar Spreads, but the Fed Does Not Care
- Index Rebalance & ETF Flow Recap: SZSE1000, NIFTY, HDFC/HDFCB, Ming Yuan, Blibli, KMB IN
- Last Week in Event SPACE: Toshiba, United Tractor, Recruit, Tyro Payments, DTAC/True, Bank Of Kyoto
Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement
- LG Chem’s deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&F.
- Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.
- SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.
Shinsei Bank (8303 JP) – Reading Between The Lines
- Yesterday, a Kyodo News article suggested SBI was “planning to take Shinsei private.”
- This morning, near-identically-worded replies were proffered, belatedly, and SBI appears to have moved its earnings release date to match Shinsei’s.
- It helps to remember Communications mandated by Exchange Rules are worded so that they are not technically or legally incorrect. Shareholder transparency and good governance is not the goal.
OZ Minerals – Circumstances Apparently Do NOT Merit a Revised Tilt
- Talk about timing… Friday before the close I wrote that I thought circumstances might merit a revised tilt at OZ Minerals Ltd (OZL AU) by BHP Group Ltd (BHP AU).
- Earnings are Monday, copper is up in AUD terms, time is moving us forward into a supply squeeze. It all looks good to me.
- But an article this morning in the AFR says BHP CEO Mike Henry called OZ Minerals “nice to have” not a “must have” and talked “discipline.” Oops.
Meituan – What to Look for in 3Q22 Result?
- Key areas to pay attention in 3Q22: 1) Meituan Instashopping’s growth rate, 2) Meituan Select’s unit economics,
- 3) 4Q guidance for food delivery and in-store, hotel and travel recovery.
- Valuation is entering an attractive territory with recent stock price correction.
Kotak Mahindra Bank (KMB IN): Foreign Room >20% Should See Staggered FTSE Inclusion Starting March
- Foreign investor selling has taken the foreign headroom on Kotak Mahindra Bank (KMB) to 22%. That should result in the stock being added to the FTSE All-World Index in March.
- The stock will initially be added to the index at an investability weight of 5%. Subject to >20% foreign headroom, the investability weight will increase by 5% at subsequent rebalances.
- Continued foreign selling could result in an MSCI weight increase if the headroom increases above 25%. That could still be some time away though.
Après Moi Le Deluge: What 20th CPC National Congress Says About China’s Future
- “Common prosperity “ to replace GDP growth as development target. Development of the private economy to be guided by the government.
- Localization & substitution with Chinese software, hardware, chips, semiconductor & consumer companies, promote manufacturing along with autonomous control and real economy. Focus on domestic demand rather than being world factory.
- Energy independence through new energy facility, VPP, EV to increase, along with Chinese medicine and other Chinese consumer brands. A possible move to fortify Chinese economy against potential Western sanctions.
Japan Excellent (8987) Has Been Most Excellent. It Should Still Be.
- Two months ago I wrote about a possible “Sustained Flow Event” on Japan Excellent (8987 JP). Since then, the stock has outperformed every other Office REIT. It’s up since then.
- Outperformance within Office REITs has been a minimum of 5.9%, and a maximum of ~17% vs the biggest peer, with an average and median outperformance of 10.8% and 9.2% respectively.
- There is no reason to think it won’t continue, but the Japan Excellent story is idiosyncratic.
Global Fallout from Strong Dollar Spreads, but the Fed Does Not Care
- Strong safe-haven demand for dollars is contributing to currency strength, as well as the Fed’s domestically-focused policy stance. Previous dollar bull markets have enjoyed considerable longevity, thereby suggesting further appreciation.
- Further interest rate increases by the Fed will accelerate capital outflows from the Asia Pacific region. While large-scale devaluations are unlikely, Asian corporations with dollar-denominated debt face higher financial stress.
- High imported energy and food prices have boosted European inflation. The weak euro has tightened European financial conditions due to the rise in dollar-denominated liabilities at banks and corporations.
Index Rebalance & ETF Flow Recap: SZSE1000, NIFTY, HDFC/HDFCB, Ming Yuan, Blibli, KMB IN
- The review period for the MSCI November SAIR started during the week and will run till 31 October. The TPX INDEX October rebalance will be implemented close on 28 October.
- The HDFC/ HDFCB merger is progressing faster than expected. NSE Indices has started a market consultation on treatment of mergers and demergers in their indices.
- There have been big redemptions in iShares MSCI Emerging Markets (EEM US) and iShares Core MSCI Emerging Markets ETF (IEMG US) during the week. Tracker Fund had big inflows.
Last Week in Event SPACE: Toshiba, United Tractor, Recruit, Tyro Payments, DTAC/True, Bank Of Kyoto
- Toshiba (6502 JP) investors should look at process and understand the difference between this one and others. Some news is not news, other than telling you the dance has started.
- United Tractors (UNTR IJ) is cheap. It appears to be running at 6x 2022 earnings. This is not abnormal for a cyclical at the end of the cycle.
- Westpac Banking (WBC AU) confirms its interest in Tyro Payments (TYR AU), but still nothing firm.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
