In today’s briefing:
- Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, KOSPI200, China A50, JD.com, Mapletree
- KT Corp (030200 KS): Potential MSCI Inclusion in May
- Daiho Corp (1822) A GIANT Transaction Which Is Not What It Looks Like. Smells Bad.
- Noodling MNACT Vs MCT Deal Risk… Even the Complications Have Complications.
- KOSPI 200 Index Rebalancing: Constituents Subject to Float Rate Increase
Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, KOSPI200, China A50, JD.com, Mapletree
- The coming week has the implementation of the NIFTY indices at the close on 30 March and the Nikkei 225 (NKY INDEX) implementation at the close on 1 April.
- 31 March is the review cut-off date for the June rebalance of the Hang Seng indices. We expect one change to the HSCEI/HSTECH and few adds to the HSI.
- There were large inflows to the Ishares Core Msci Emerging (IEMG US), iShares MSCI Emerging Markets (EEM US) and KraneShares CSI China Internet ETF (KWEB US) ETFs during the week.
KT Corp (030200 KS): Potential MSCI Inclusion in May
- NTT Docomo Inc (9437 JP) sold its entire holding of 14.26m shares in KT Corp (030200 KS) to Shinhan Group in January as part of a strategic alliance.
- That increased the foreign room in KT Corp (030200 KS) to above 15% which can result in the stock being included in the MSCI Korea Index at the May SAIR.
- SK Telecom (017670 KS), on the other hand, will see passive selling from FTSE All-World/All-Cap trackers in June due to its foreign room remaining below 10%.
Daiho Corp (1822) A GIANT Transaction Which Is Not What It Looks Like. Smells Bad.
- Daiho Corp (1822 JP) has announced a deal which is not quite what it looks like.
- And despite a buyback of more than 50% of shares outstanding, and an “accretive” sale to another party at a higher price, it is a governance disaster.
- And existing shareholders have an out, but it is complicated. If you own the stock, or you look at risk arb, or activism, this may be worth a read.
Noodling MNACT Vs MCT Deal Risk… Even the Complications Have Complications.
- The MNACT/MCT deal has weird parameters which make it complicated as a risk arb situation, and as a way to think about relative value of MCT and MNACT vs Peers
- Relative buying and selling pressure changes between the two names and their peer baskets depending on a) the May vote, b) index provider discretion, and c) MCT’s price in July.
- Then it may depend on relative price movement before then too. It’s complicated.
KOSPI 200 Index Rebalancing: Constituents Subject to Float Rate Increase
- Nine constituents will likely face an increase in the float rate: five stocks for the sale of the majority shareholder’s shares and four names for the IPO lockup release.
- Kakao Bank (6.35x), LG Corp (003550 KS) (2.62x), Krafton (2.09x), and Woori Financial Group (316140 KS) (1.74x) are expected to have the most significant impact.
- In general, float rate changes show price movement by passive flow similar to new changes (adds/deletes). So, we need to consider gradually building up positions two months before the rebalancing.
Before it’s here, it’s on Smartkarma
