In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
- Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
- Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank
- KOSPI200 Index Rebalance Preview: The Tail End
- KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades
- HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running
- Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
- KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection
- IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday
- Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap
Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
- Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
- Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.
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.
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.
KOSPI200 Index Rebalance Preview: The Tail End
- With the review period nearly complete, we expect 7 changes to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December. Couple of changes are low probability though.
- The Materials sector could be the biggest gainer at the rebalance while nearly all deletions could come from the Consumer Discretionary sector.
- The impact on the potential inclusion ranges from 0.15-15 days of ADV while the impact on the potential deletions varies from 1.7-8.1 days of ADV.
KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades
- With the review period nearly complete, we see 15 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
- There could be index changes even before the December rebalance if there are prolonged trading suspensions and stocks migrate from the KOSDAQ Market to the KOSPI Market.
- The potential adds have sold off hard over the last six weeks, similar to the performance at the June rebalance.
HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running
- There were only 14 new listing on the Main Board of the HKEX (388 HK) in the third quarter. Half of the listings were in the last week of September.
- Of those stocks, only Tuhu Car (9690 HK) and Keep (3650 HK) have a chance of being added to the HSCI in December and then into Southbound Stock Connect.
- Keep Inc (3650 HK) could be added to Stock Connect in early December while Tuhu Car (9690 HK) will have to wait till April for inclusion to the link.
Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
- Japan Post Bank (7182 JP) gets a dramatic upweight in TOPIX on Monday 30 October. There is a LOT of stock to buy. Call it US$2.2bn.
- Shares have to come from someplace. Basically it will all come from retail or from those who pre-positioned themselves in the stock (buying from retail). Some could come from short-sellers.
- The stock WAS not cheap vs regional banks (what I see as their best set of comps) and the Q2 Unrealised Loss on Securities has ballooned. But care is needed.
KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection
- KRX has amended the stock selection methodology for the KOSPI2 INDEX and KOSDQ150 INDEX and added ‘Expert Judgement’ as a criteria.
- The qualitative and quantitative criteria and the detailed filtering standards will be described in the manual but will NOT be publicly disclosed.
- There is no change from using full market cap to free float market cap in stock selection, so the stocks that could be added/deleted will be broadly same as forecasts.
IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday
- Float and capping changes will require passive trackers to sell Bank Central Asia (BBCA) and Adaro Energy (ADRO) while buying Bank Rakyat Indonesia (BBRI) and GoTo Gojek Tokopedia (GOTO).
- There will be passive trading to other stocks too, though the impact and flow is not material on most of the stocks.
- Passive trackers will trade at the close on 31 October, so there are only 3 days to implementation of the changes.
Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap
- Stellantis, a merger between France’s PSA with Fiat Chrysler Automobiles NV (FCAM BQ), is buying a 17% stake (14.53% fully diluted) in Zhejiang Leapmotor Technologie (9863 HK).
- Leapmotor will issue 194mn H shares at HK$43.8/share, a 19% premium to last close, in a HK$8.51bn transaction. Stellantis will also hold a 51% stake in newly formed JV.
- Stellantis is paying a chunky 3.64x market cap-trailing-revenue; but ~2.25x forward revs, which compares to the average for key peers of 1.9x.
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