In today’s briefing:
- HSTECH Index Rebalance Preview (Sep): One Change or Two?
- HSCEI Index Rebalance Preview: Two Changes Likely in September
- CPSE / CNXBANK Index Rebalance Preview: Capping Changes in June
- STAR50 Index Rebalance Preview: One High Probability Change; One ‘It Depends’
- Market Talk on the Five Stocks Hitting the Lower Limit Yesterday
- Abacus Offers ASK – The Back End Trade Is Still Better
- Great Eagle Holdings (41 HK): Copy That!
- Ohayo Japan |SPX Continues to Defy Gravity; NUGGET: SON-San Rebirth Like a Phoenix- A Helping ARM
- Austal (ASB AU): Attracting Takeover Interest
- A Pair Trade Between Hanmi Science and Hanmi Pharm
HSTECH Index Rebalance Preview (Sep): One Change or Two?
- We expect one change to the Hang Seng Tech Index (HSTECH INDEX) in September – though there could be a second change as well.
- Estimated one-way turnover is 2.13% resulting in a one-way trade of HK$2.01bn in case there are two index changes. Turnover will be lower if there is only one change.
- Short interest on some of the potential changes is over 15% of float and there could be big moves on the stocks post announcement of the changes.
HSCEI Index Rebalance Preview: Two Changes Likely in September
- Trip.com (9961 HK) and Chow Tai Fook Jewellery (1929 HK) could replace Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) at the upcoming rebalance in September.
- Estimated one-way turnover at the rebalance is 1.2% resulting in a one-way trade of HK$744m. The official capping will be done based on closing prices from 29 August.
- Short interest has been rising on the potential adds and short covering could take the stocks higher, especially Chow Tai Fook Jewellery (1929 HK).
CPSE / CNXBANK Index Rebalance Preview: Capping Changes in June
- The CPSE ETF (CPSEBE IN) and Nifty Bank Index (NSEBANK INDEX) will have its quarterly rebalancing at the close on 29 June.
- There are no constituent changes for the indices in June but there will be capping and float changes for the stocks and there is a reasonable impact on many stocks.
- Both indices have performed well over the recent past and active investors can take advantage of the passive flows to increase or decrease existing positions.
STAR50 Index Rebalance Preview: One High Probability Change; One ‘It Depends’
- The review period for the September rebalance ends 31 July. We expect the changes to be announced 25 August with the implementation taking place after the close on 8 September.
- We expect the index committee to continue using a 6-month minimum listing history resulting in two changes to the index.
- One way turnover is estimated at 3.45% resulting in a one-way trade of CNY 3,675m. The impact on the deletions will be larger than that on the inclusions.
Market Talk on the Five Stocks Hitting the Lower Limit Yesterday
- The trigger for yesterday’s sell-off was the sudden collective decision of the brokerages that had been allowing credit trading for these stocks to halt credit trading simultaneously.
- There is a possibility that the identities of the stocks under investigation were leaked, and these brokerages took preemptive actions.
- There have also been observations of large-cap stocks that may become the next targets. Some notable examples include Cosmo Chemical, Kum Yang, Posco International, and Ecopro Co.
Abacus Offers ASK – The Back End Trade Is Still Better
- This morning, Abacus Property (ABP AU) units were halted for trading and the Institutional Offer for Abacus Storage King (future ASK AU) units were launched.
- The Offer is underwritten by Barrenjoey and Morgan Stanley. The Institutional Offer will be completed by Friday, and results announced Monday 19 June, with trading halt lifted.
- Then the Retail portion of the Offer will be conducted til 27 July. EGM the same day. Delayed settlement trading of ASK and New ABP (ABG AU) will start 1Aug.
Great Eagle Holdings (41 HK): Copy That!
- Ever since Lo Ying-shek, the founder of Great Eagle (41 HK) passed away in 2006, as invariably happens, family relations deteriorated as the children sought to assert control over GE.
- Matters reached a crescendo when Lo’s wife brought legal action against HSBC International Trustee in 2016 as executor of a large % of shares into GE.
- That plaintiff action failed, as did subsequent appeals. The latest battle centers on a judge’s ruling which extensively incorporated (read copied) the defendant’s submission in his final decision.
Ohayo Japan |SPX Continues to Defy Gravity; NUGGET: SON-San Rebirth Like a Phoenix- A Helping ARM
- OVERSEAS. US Equity Rally Continues in spite of Recession fears/profit slowdown; SPX 1.2% as all sectors positive as Defensives led overnight; Rally broading out out beyond Tech..it would seem
- JAPAN. NKY Futs -0.1% disc vs Cash; BOJ Decision Day- No change expected in policy stance; Kishida says no Snap elections
- NUGGET. Son-san/Softbank poised for a rebirth like a Phoenix from the ashes thanks to ARM IPO.
Austal (ASB AU): Attracting Takeover Interest
- Austal Ltd (ASB AU) is drawing takeover interest from Cerberus Capital, according to AFR. Cerebus joins Arlington Capital Partners and Bondi Partners as rumoured suitors, increasing the bid odds.
- Takeover interest in Austal is driven by the desire to capitalise on the opportunities presented by the AUKUS defence pact between Australia, the US and the UK.
- Andrew Forrest’s 19.34% stake can make or break a deal. Peer multiples point to an offer of at least A$2.80, a 22% premium to the last close.
A Pair Trade Between Hanmi Science and Hanmi Pharm
- There has been a big divergence in the share prices of Hanmi Science and Hanmi Pharm in the past two months.
- This divergence in share price appears to be a bit too excessive and we believe this gap is likely to narrow in the coming weeks.
- We like a pair trade between going long Hanmi Science and going short on Hanmi Pharm.
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