In today’s briefing:
- March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
- S&P500 Index Rebalance: Calling an UBER
- Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
- Benefit One (2412) – Pro-Ration Expectations Update
- S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
- S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
- NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
- Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion
- A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold
March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
- Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
- The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
- There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.
S&P500 Index Rebalance: Calling an UBER
- Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
- There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
- We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
- Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
- Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
- The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.
Benefit One (2412) – Pro-Ration Expectations Update
- Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
- Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
- Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
- There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
- There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
- Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
- There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
- The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
- There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.
S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
- Gentrack (GTK NZ) and Turners Automotive (TRA NZ) will be added to the S&P/NZX 50 Index while Synlait Milk (SML NZ) and Pacific Edge (PEB NZ) will be deleted.
- There is a lot to trade on the stocks. The impact in terms of days of ADV appears high but historically there has been volume on implementation date.
- The adds have jumped recently and there will be pre-positioning on the stocks. Not so much on the deletes.
NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
- There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
- If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
- Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.
Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion
- On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
- The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
- The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).
A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold
- The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- Hs with H/A pairs under-perform their As on average by 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.
- SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.
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