In today’s briefing:
- How Has the Index Rebalance Strategy Performed in 2024?
- TIP Customized Taiwan Select High Dividend Index Rebalance: US$3.2bn Trade with BIG Impact
- 7&I (3382JP) – Spanners in the Works: FTC Blocks Another US Retail Merger and 7-11 Japan Sales Slump
- PCOMP Index Rebalance Preview: Two Changes Likely in February
- 7&I (3382 JP) – Share Price Dipping Deeper Means Dipping Toes Deeper
- SET50 Index Rebalance: Four Changes; Cal Comp🚀
- MV US Listed Semiconductor 25 Index Rebalance: Round-Trip Trade Over US$2.2bn
- Bloks Group IPO Valuation Analysis: Is The Offering Worth Buying?
- Helixtap China Report: 2025 A Challenging Year For China
- CHA Biotech Announces A Capital Raise of 41% of Outstanding Shares
How Has the Index Rebalance Strategy Performed in 2024?
- It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.
- Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.
- As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.
TIP Customized Taiwan Select High Dividend Index Rebalance: US$3.2bn Trade with BIG Impact
- There are 8 changes a side for the TIP Customized Taiwan Select High Dividend Index in December. The TIP Taiwan Select High Dividend ETF (00919TW) has an AUM of US$9.3bn.
- Estimated one-way turnover is 17.2% and that will result in a round-trip trade of US$3.2bn. All adds and deletes have over 5x ADV to trade from passive trackers.
- The rebalance will be implemented over 8 trading days and the ETF started trading some stocks late last week and the rest from 17 December.
7&I (3382JP) – Spanners in the Works: FTC Blocks Another US Retail Merger and 7-11 Japan Sales Slump
- Recent reports suggest an MBO if firming up, with partial sale of US to ACT and even the Japan CVS business so a big value solution for all concerned.
- Not so fast: an ACT purchase of 7-11 US looks more likely to be blocked given yesterday’s ruling on the merger of grocery giants Kroger and Albertsons.
- The valuation of the Japan business may need a correction too if the last six months of poor numbers continue – given this is because of price perception, they may.
PCOMP Index Rebalance Preview: Two Changes Likely in February
- The review period for the February rebalance of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) ends in two weeks.
- There could be two changes for the index with passive trackers needing to trade between 23-64x ADV in the stocks.
- The passive buying is a lot larger than the passive selling, there will be funding outflows for the other index constituents; some stocks will have over 1x ADV to trade.
7&I (3382 JP) – Share Price Dipping Deeper Means Dipping Toes Deeper
- Seven & I Holdings (3382 JP) shares are in a lull here. Winter doldrums without news as the Ito consortium gets its ducks in a row and 7&i sells York.
- Alimentation Couche-Tard (ATD CN) is waiting patiently. They have the ability to wait, and to fund, and pay up.
- An article/show is causing a dip today on top of last week’s weakness. This is a dip to buy.
SET50 Index Rebalance: Four Changes; Cal Comp🚀
- There will be 4 changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 30 December.
- All changes are in line with our forecasts and there appears to be positioning in all the stocks.
- Cal Comp Electronics Thailand (CCET TB) will have the largest passive buying a percentage of free float and could be the stock to watch.
MV US Listed Semiconductor 25 Index Rebalance: Round-Trip Trade Over US$2.2bn
- There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) ETF in December but there are a lot of float and capping changes.
- Estimated one-way turnover is 4.5% resulting in a one-way trade of US$1.1bn. Impact on the stocks is not big given they trade like water.
- The selling in Broadcom and NVIDIA will be amplified by selling from the Technology Select Sector SPDR (XLK US) and Invesco S&P 500 Equal Weight E (RSP US) ETFs.
Bloks Group IPO Valuation Analysis: Is The Offering Worth Buying?
- Bloks Group, a fast-growing toy company in China, will disclose the proposed size and the initial price range for the share sale soon.
- In my insight, I discuss IPO valuation, update relative valuation table and set a target valuation for Bloks Group ahead of an IPO.
- Bloks Group enjoys higher relative growth profile and superior gross profit margins. The company has over RMB600M in cash and equivalents and no debt.
Helixtap China Report: 2025 A Challenging Year For China
- Widespread caution around Chinese buying sentiment
- Weakness in Yuan can pose significant challenge
- Trade data not very optimistic
CHA Biotech Announces A Capital Raise of 41% of Outstanding Shares
- On 20 December, Chabiotech (085660 KS) announced that it plans to conduct a rights offering capital raise of 250 billion won.
- The expected rights offering price is 10,800 won (27.3% lower than current price of 14,860 won). A total of 23.148 million new shares (41% of outstanding shares) will be issued.
- This capital raise by CHA Biotech is likely to further negatively impact the company’s share price in the next several weeks as many investors are concerned about excessive shares dilution.
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