In today’s briefing:
- Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings
- Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia
- S&P/NZX 10 Index Rebalance: A2 Milk (ATM NZ) Replaces Ryman Healthcare (RYM NZ)
- S&P/ASX Index Rebalance (Mar 2025): SIG Is the BIG One; Changes Galore Across Indices
- Quiddity ASX Mar25 Results: Multiple Surprises; High Short Buildup for DELs; Rare Successful Trade
- Got the BBIG Rebalancing Results: SK Innovation Is the Trade This Week
- The USTR’s New “Proposed Actions” For Section 301 Investigation on China’s Maritime/Shipping Sectors
- Daihatsu Diesel (6023) Buyback Tender Results Signal Overhang and Opportunity
- S&P500/400/600 Index Rebalance: DASH In as Stability Trumps Volatility
- A/H Premium Tracker (To 7 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings
- The Offering of Japan Post Bank (7182 JP) is not taking place the way “the right pattern” would suggest, but last time was kind of special. This time is different.
- Last time was a “second IPO” and coincided with a US regional bank crisis. This time the offering is smaller outright, and much smaller as a portion of float.
- Pricing is Monday. It hasn’t moved much vs JPH. It needs to move more to be attractive. And there is still a bit of overhang to come.
Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia
- We look at the performance of the index rebalance strategy over the year using weekly forecasts. In short, it has been a mixed bag for Asia.
- India and China have been among the worst performing markets in the region while Australia and Korea have been among the better performers.
- A lot of the outperformance appears to be front loaded, so getting the forecasts right early in the review period is of paramount importance.
S&P/NZX 10 Index Rebalance: A2 Milk (ATM NZ) Replaces Ryman Healthcare (RYM NZ)
- A2 Milk Co Ltd (ATM NZ) will replace Ryman Healthcare (RYM NZ) in the S&P/NZX 10 Index at the close of trading on 21 March.
- Passive trackers will need to buy 0.8x ADV in A2 Milk Co Ltd (ATM NZ) and will need to sell 1.2x ADV in Ryman Healthcare (RYM NZ).
- Importantly, A2 Milk Co Ltd (ATM NZ) is a deletion from a global index at the close on 21 March and the selling from those passive trackers is far larger.
S&P/ASX Index Rebalance (Mar 2025): SIG Is the BIG One; Changes Galore Across Indices
- There are 2 changes for the S&P/ASX50 Index, 2 changes for the S&P/ASX100 Index, 7 changes for the S&P/ASX200 Index and 11 adds/ 7 deletes for the S&P/ASX300 Index.
- There is a huge increase in the number of index shares for Sigma Healthcare (SIG AU), triggering passive buying of nearly A$1.4bn at the close on 21 March.
- The adds have outperformed the deletes across all indices. Positioning varies across stocks and there could be some big movers over the next few days.
Quiddity ASX Mar25 Results: Multiple Surprises; High Short Buildup for DELs; Rare Successful Trade
- The ADDs/DELs for the ASX index family for the March 2025 index rebal event were announced after market close on Friday 7th March 2025.
- There are 22 ADDs and 18 DELs collectively for ASX 50, ASX 100, ASX 200, and ASX 300.
- In this insight, we take a final look at the flow expectations for each of these index changes.
Got the BBIG Rebalancing Results: SK Innovation Is the Trade This Week
- Real alpha? Tight basket means outsized passive flows. The play? SK Innovation, no contest.
- Samsung SDI faces -0.54x ADTV outflows. Other movers: Netmarble 0.68x, Wemade Max 0.54x, NHN -0.46x ADTV.
- Net-Net? SK Innovation is the trade. Long here, hedge short on Samsung SDI or the broader Battery space.
The USTR’s New “Proposed Actions” For Section 301 Investigation on China’s Maritime/Shipping Sectors
- The USTR issued a Section 301 report in January 2025. The report suggests China has tried to achieve dominance in global shipping, to the detriment of US commerce.
- The report is flawed, in data (it somehow manages to make up data which is otherwise available from MARAD), analytics, and conclusions, but the Trump administration has run with it.
- In February, the USTR announced “Proposed Actions” – fees for Chinese liners and international liners with Chinese ships, and restrictions on future exports. US users lose. And there are loopholes.
Daihatsu Diesel (6023) Buyback Tender Results Signal Overhang and Opportunity
- In late January, Daihatsu Diesel Mfg (6023 JP) announced its once/former parent would sell all its shares; in part to a private company in the industry and a 20% buyback.
- The buyback – a below-market own-share tender offer – was priced low enough to be a big win. Accretion added to that.
- Buyback Tender Results and External Changes signal overhang and opportunity. Either way, it’s cheap, but good governance could make it even cheaper.
S&P500/400/600 Index Rebalance: DASH In as Stability Trumps Volatility
- There are 4 changes for the S&P 500 INDEX, 6 changes for the S&P Midcap400 Index and 14 changes for the S&P SmallCap600 Index at the March rebalance.
- DoorDash (DASH US) was newly eligible after meeting the profitability criterion, while AppLovin (APP US), Coinbase Global (COIN US) and Interactive Brokers Group, Inc (IBKR US) were overlooked again.
- There will be more same-way flow for the S&P 500 INDEX (SPX INDEX) adds and deletes from the Select Sector index trackers.
A/H Premium Tracker (To 7 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia continue to fall. Spread curve torsion reverses again with wide premia trades seeing Hs perform the best vs their As.
- To me, warning signs are flashing on spreads. They are at their narrowest in 5yrs and they are volatile. Last week I recommended a HUGE trimming (30%) of the book.
- Hindsight is 20:20. I should have kept them, but the book still produced 51bp of alpha for the week on top of the 35bp of H/A beta.
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