In today’s briefing:
- HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
- HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
- Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI
- KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
- Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI
- China Is Adding to World Liquidity, But At A Cost…
- MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover
- Doosan Robotics IPO: Valuation Insights
- Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
- Last Week In Event SPACE: Vingroup/VinFast, Prosus/Naspers, STAR CM
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
- As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
- Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
- Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.
HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
- As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
- BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
- Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).
Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI
- Friday was the review cutoff for the September rebalance of the ASX family of indices. The September changes for the Hang Seng family of indices were also announced.
- The September changes for the SSE STAR50 (STAR50 INDEX) will be announced after the close of trading on 25 August.
- For a second week running, there were big inflows to mainland China ETFs and were spread across multiple index trackers. There were outflows from iShares Emerging Markets (EEM US).
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
- Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
- The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
- The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.
Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI
- The JPX Nikkei 400 index rebalance will take place on Wednesday, MSIC on Thursday and HSI, HSCEI, HSTECH and HSCI on Friday.
- There are review cutoffs for the MVIS family of indices, and multiple announcements of changes to various indices during the week.
- There were inflows to mainland China ETFs, iShares India ETF (INDA), Ishares India Small-Cap (SMIN) and iShares EmergingMarkets ex China (EMXC) while there were outflows for iShares Emerging Markets (EEM).
China Is Adding to World Liquidity, But At A Cost…
- China’s economy is not anything like as ‘bad’ as being reported by the popular media. Yet, there are deep structural challenges which will hinder future economic growth
- Monetary policy makers have recently been constrained by the weak Yuan (CNY)
- Liquidity is now being re-injected aggressively. More liquidity boosts economic activity. The cost could be a CNY of RMB8/ US$
MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover
- JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) could be deleted as the lowest ranked current index constituents.
- There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
- Short interest has been increasing on JB Hi-Fi Ltd (JBH AU), Charter Hall (CHC AU) and Lendlease Group (LLC AU) and could be partially driven by potential index deletions.
Doosan Robotics IPO: Valuation Insights
- Doosan Robotics (454910 KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
- We previously discussed the IPO in Doosan Robotics IPO: The Bull Case and Doosan Robotics IPO: The Bear Case.
- In this note, we look at the syndicate’s valuation methodology. Our valuation analysis suggests that the IPO price range is unattractive, and we would pass on the IPO.
Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
- The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
- There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
- Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.
Last Week In Event SPACE: Vingroup/VinFast, Prosus/Naspers, STAR CM
- Marginal float helped fuel the VinFast (VFS US) bubble. Then it popped.
- The Prosus (PRX NA)/Naspers (NPN SJ) Circularity Detour and subsequent unwind created the B-Share construct which means they can maintain the voting control in South Africa without maintaining economic control.
- The backlash against Star CM Holdings (6698 HK) calls into question the broader Chinese entertainment industry, and how it strikes a balance between viewership/profitability and ethical boundaries.
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