In today’s briefing:
- Index Rebalance & ETF Flow Recap: SET50, Stock Connect, Kanzhun, Futu, AMFI
- Toyo Construction (1890) Investors/Traders Beware
- China & HK: Underowned?
- Estimating Fund Size Tracking KOSPI MID Cap Index
- Another Skyworth (751 HK) Partial Buyback
- S&P/ASX All Technology Index: GICS Changes, Market Consultation & Potential Index Changes
- Launching KRX CSI Joint EV & Semiconductor ETFs
- An Update to the Long-Short Pair Trade on Hyundai Motor & Tesla
- Hotel Shilla: A Key Beneficiary of End of Zero COVID Policy in China & End of Mask Mandate in Korea
- Asia Casino Sector: Our Model Portfolio Guidance for 2023 Divides Macau and ASEAN Weightings
Index Rebalance & ETF Flow Recap: SET50, Stock Connect, Kanzhun, Futu, AMFI
- The announcement of the changes to the Stock Exchange of Thailand SET 50 Index was made on 20 December and will be implemented at the close on 30 December.
- There are a lot of review cutoffs for different indices in the coming week with announcements in January and February.
- There were big inflows to Vanguard FTSE Emerging Markets ETF (VWO US) and big outflows from IShares Core MSCI Asia Ex Japan ETF (3010 HK) during the week.
Toyo Construction (1890) Investors/Traders Beware
- On 13 December, Toyo Construction (1890 JP) suitor YFO issued a press release which was not to the liking of Toyo Construction. A day later, Toyo Construction offered its own.
- YFO responded on the 21st, saying ToyoKen’s PR was inaccurate. Not quite a week after that, ToyoKen announced one tiny subsidiary(Tecos) would absorb another (portable toilet rental co Orient Ecology).
- Synergies? None. Growth? None. Scale? Nope. Was this for some other reason investors need to worry about? Maybe.
China & HK: Underowned?
- Over three quarters of Global equity managers are underweight China. Average weights sit at the bottom of the 10 year range, with 18% of funds holding no exposure at all.
- Continued rotation over the last 6-months. Within Asia, Japan has taken the lead as the key exposure, whilst Global funds prefer European countries as their main overweight positions.
- Tencent owned by 22% of funds, Alibaba by just 18%. China re-opening/COVID relaxation places Global funds vulnerable to outperformance.
Estimating Fund Size Tracking KOSPI MID Cap Index
- About ₩3T trillion is presumed to flow from NPS to KOSPI MID. Then, ₩0.8T from local publicly raised funds should be sitting in KOSPI MID. Adding these two alone amounts ₩4T.
- Of course, this is ACTIVE. In other words, they do not need to proceed with universe changes due to rebalancing at the same pace as ETFs.
- Nevertheless, we should note that the domestic fund industry does not allow a large gap with BM. Hence, at least ₩4T of funds follow KOSPI MID quite tightly.
Another Skyworth (751 HK) Partial Buyback
- Skyworth Group Limited (751 HK) has announced another partial buyback – this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.
- On 17 June 2020, Skyworth announced a partial buyback – 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close.
- Upon successfully completing this partial offer, Stephen Wong & concert parties would hold >50%, prior to the excise of any outstanding options.
S&P/ASX All Technology Index: GICS Changes, Market Consultation & Potential Index Changes
- Global Industry Classification Standard (GICS) structure updates will lead to changes to the S&P/ASX All Technology Index at the March rebalance.
- To better reflect the GICS changes and reduce constituent turnover, S&P DJI has proposed changes to the index universe for constituent selection.
- We expect there will be 4 deletions from the index in March, but that could increase to 10 if the changes are not adopted.
Launching KRX CSI Joint EV & Semiconductor ETFs
- KRX listed ETFs tracking the KRX-CSI joint indexes: KODEX Korea China EV (450180), KODEX Korea China Semiconductor (450190), TIGER Synth Korea-China EV (449680), and TIGER Synth Korea-China Semiconductor (449690)
- From a trading perspective, whether these newly introduced ETFs will replace the existing EV ETFs would be a key thinking point.
- This means a shift in the fund size of more than 5 trillion won and will cause a significant price impact in terms of flow trading.
An Update to the Long-Short Pair Trade on Hyundai Motor & Tesla
- In this insight, we provide an update to our long-short pair trade of Hyundai Motor (long) and Tesla Motors (short), which we presented back in June 2022.
- Since 9 June 2022, Hyundai Motor’s share price is down 13.4% and Tesla’s share price is down 48.6% in the same period, resulting in net gains of 35.2%.
- We discuss five major factors impacting Tesla’s share price this year including market share losses, Musk’s acquisition of Twitter, valuation multiples decline, China operations, and global recessionary fears in 2023.
Hotel Shilla: A Key Beneficiary of End of Zero COVID Policy in China & End of Mask Mandate in Korea
- Hotel Shilla is a key beneficiary of the end of the zero COVID policy in China and the end of the mask mandate in Korea.
- In the past several weeks, there has been a major shift on the highly stringent zero COVID policies in China which should have a positive impact on Hotel Shilla.
- In the next several quarters, we believe that there is a good chance that the company’s results exceed the consensus expectations, driven by millions of tourists from China to Korea.
Asia Casino Sector: Our Model Portfolio Guidance for 2023 Divides Macau and ASEAN Weightings
- Our macro analysis concludes a 60%.40% weighting of stocks in favor of ASEAN picks.
- Central reason: Lingering mixed signals on China covid policies remaining unclear.
- Pent up demand will eventually break through as travel bans ease,but timing is key to make choices on Macau centric stocks.
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