In today’s briefing:
- Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
- KOSPI200 Index Rebalance Preview: The Tail End
- Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
- HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running
- Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
- SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
- Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
- Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
- SoftBank Group (9984 JP): Results Preview, Key Topics
- Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?
Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
- Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
- Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
- The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.
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.
Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
- The coming week has a lot of review periods ending – KOSPI 200, KOSDAQ 150, CSI 300, CSI 500, SSE50, STAR50, ChiNext and SENSEX, among others.
- The TOPIX rebalance will be implemented on Monday while the Global X Lithium & Battery Tech ETF (LIT US) and IDX indices will rebalance at the close on Tuesday.
- There were outflows from Emerging Market ETFs including iShares Emerging Markets (EEM), iShares Core Emerging Mar (IEMG), Schwab Emerging Markets Equi (SCHE) and IShares Edge Min Vol Emerging Markets ETF (EEMV).
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.
Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
- Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI shares (after an AGM disaster).
- The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago.
- The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
- Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
- There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
- Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.
Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
- We should consider the complete prohibition of short selling for the next six months as practically finalized.
- Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
- We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.
Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
- KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
- We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
- If we observe a somewhat unusual downward trend in SK Square’s price from the 15th, this could be seen as a hint foretelling the announcement of SK Square’s exclusion.
SoftBank Group (9984 JP): Results Preview, Key Topics
- WeWork appears to be approaching bankruptcy; we expect SoftBank’s exposure to be at least USD1.4bn including credit lines
- Arm Holdings post-IPO performance has been lacklustre, but we continue to believe that it remains dangerously over-valued against peers – and Arm provides 30% of the group’s equity value
- We believe that JPY depreciation has supported SoftBank Group’s share price (given the high share of USD-denominated portfolio assets); in addition, we still see risks to current private company valuations
Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?
- On 3 November, numerous local media outlets reported that the Korean government is likely to temporarily suspend short selling in the Korean stock market.
- According to a high level ruling party official, the Korean government plans to announce temporary ban on short selling stocks no later than on 15 November for about six months.
- There is a major legislative election in Korea in April 2024. If there is a temporary ban on short selling stocks, this could be viewed negatively by many foreign investors.
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