In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Fast Retailing
- FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)
- Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
- GMR Airports Infra (GMRI IN): Flying High
- MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete
- Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
- FEB 2024 REBALANCE Index Changes Announced, SA Constituents to Remain the Same
- MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?
- IKang Healthcare (KANG US): Another Setback For Dissenters
- Ansarada Enters Scheme With Datasite
Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Fast Retailing
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends yesterday. There could be three changes at the rebalance with sector balance in focus.
- Depending on the changes, passive trackers will need to buy between 1.3-19x ADV (7.1-24% of real float) on the inclusions and sell between 3.5-47x ADV on the deletions.
- Fast Retailing (9983 JP) avoids capping in March, passives will buy Nitori Holdings (9843 JP), and 25 stocks have over 0.5x ADV to sell as part of the funding trade.
FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)
- The Nikkei 225 data for the March 2024 rebalance is a wrap. The names are the same as before but there is likely less DISCO Corp (6146 JP) to buy.
- It’s still big, but smaller than before because of the difference between performance and the change in PAF required to be below 1%. A 4:1 share split would be optimal.
- I recommend a few positioning changes from before, and the Fast Retailing trade loses one short-term option but the longer-term one stays in place.
Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
- We believe that Arm is now valued as a “growth at any price” stock; with nearly half of SoftBank group’s equity value reliant on Arm, NAV downside risk is rising
- The risk of JPY appreciation is real, whilst SVF2 remains very exposed to financing costs, with 85% of its equity value in private companies
- Softbank shares trade at a 55%+ discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with the potential JPY appreciation, should keep the discount wide
GMR Airports Infra (GMRI IN): Flying High
- At the last close, GMR Airports Infrastructure (GMRI IN) has a market cap of US$6.23bn and a free float market cap of US$2.48bn.
- Passive global trackers are estimated to need to buy 223.33m shares (US$230m; 4.4x ADV) of GMR Airports Infrastructure (GMRI IN) at the close on 29 February.
- GQG Partners (GQG AU) has been a big buyer since December and holds 4.98% of the company. The stock could run up for a few more weeks.
MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete
- The review period for the March rebalance ends in a couple of weeks. There could be one deletion from the index and a bunch of capping changes.
- The index changes will lead to a one-way turnover of 2.2% resulting in a one-way trade of A$13m. There are two stocks with over A$3m to trade.
- With market participants expecting lower interest rates, there has been short covering on a lot of the REITs in the last few months.
Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
- The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
- The index changes for HSTECH index for the March 2024 index rebal event will be announced on 16th February 2024.
- In this insight, we take a final look at the expected index changes and our latest flow expectations.
FEB 2024 REBALANCE Index Changes Announced, SA Constituents to Remain the Same
- Indices will be rebalanced at the end of the month on Thursday the 29th of February.
- The three largest additions to the World Index measured by full company market capitalization will be Samsara A (USA), Corebridge Financial (USA) and Applovin Corp A (USA)
- The three largest additions to the Emerging Markets Index measured by full company market capitalization will be Midea Group Co A (HK-C) (China), Punjab National Bank (India) and Union Bank Of India (India)
MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?
- The review period for the March rebalance of the MVIS Australia Equal Weight Index ends on 29 February with results announced on 8 March and implemented on 15 March.
- Lendlease Group (LLC AU), IDP Education (IEL AU) and IGO Ltd (IGO AU) are very close to deletion zone and price moves over the next couple of weeks are important.
- IGO Ltd (IGO AU) is also a deletion from a global index in February and a lower stock price could lead to deletion from this index too.
IKang Healthcare (KANG US): Another Setback For Dissenters
- In officially decided cases concerning dissentient shareholders in privatised US-listed China plays, the uplift to the merger price versus time value of money and legal costs, is less than ideal.
- The outcome for each case will turn on the underlying facts. But it would appear iKang Healthcare Group (ADR) (KANG US) is following a similar trend.
- Reportedly the uplift to the iKang merger price is just 10%. Dissenters can still lodge an appeal.
Ansarada Enters Scheme With Datasite
- Virtual room provider Ansarada Group Ltd (AND AU) has entered into a Scheme with Datasite, a leading global SaaS provider acquired by UK-based PE outfit CapVest Partners in 2020.
- Datasite is offering A$2.50/share, in cash, a 19% premium to undisturbed and a lifetime high.
- Apart from requiring Ansarada shareholder approval, the Scheme is conditional on FIRB and the carving out of certain assets to Ansarada’s CEO. This transaction should complete in early June.
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