In today’s briefing:
- Korea: Short Selling Is Back in March; Trade Ideas
- The Japan March-End Rebal and Dividend Trade
- SSE50 Index Rebalance Preview: Three Changes; Some Misses
- Schedule Info for Front-Running Korea Sector ETF Rebalancing Trades
- Hanwha Aerospace’s Monster Raise: Checking Key Angles
- Rio Tinto Dual-Listed Company (DLC) Unification Analysis
- Hanwha Aerospace: Rights Offering of 3.6 Trillion Won (Negative on Entire Korean Defense Sector)
- Quiddity Leaderboard STAR 50/100 Jun25: ~US$1bn+ One-Way; Multiple Changes and Conviction Levels
- Hankyu Hanshin REIT (8977) – Good Fundamental News, a Bigly Buyback, and Cascading Flows to Come
- Short Selling Resumes in Korea Just as the KOSPI 200 Braces for Pullback (Perfect Timing!)
Korea: Short Selling Is Back in March; Trade Ideas
- Since short selling was banned in November 2023, short interest has plunged in Korea as shorts were covered. Markets have not done much over the last 16 months though.
- Foreign investor holdings have dropped from 32.05% in July to 28.57%. The top 25 stocks bought by foreign investors outperformed the top 25 stocks sold by 128% in 16 months.
- There will be trade opportunities across indices, pref/ords, index migrations and deletions, potential market upgrades and overvalued stocks being sold.
The Japan March-End Rebal and Dividend Trade
- Every year it’s the same trade. But sometimes it is not. This year it is Thursday and Friday. Or not.
- The month-end and quarter-end bring big flows, or not, depending on how things have gone.
- Over the past 10 years or so, the two-day return on the March trade is pretty good. This year? Well read on!
SSE50 Index Rebalance Preview: Three Changes; Some Misses
- With nearly 90% of the review period complete, 2 non-constituents are in inclusion zone and 3 constituents are in deletion zone.
- We estimate one-way turnover of 4.7% at the June rebalance leading to a round-trip trade of CNY 16.4bn (US$2.27bn). Index arb balances will increase the impact on the stocks.
- The forecast adds have outperformed the forecast deletes over the last 6 months but there has been a retracement in returns over the last month.
Schedule Info for Front-Running Korea Sector ETF Rebalancing Trades
- Demand for less crowded rebalancing plays is rising, making off-the-radar flows more critical. A structured timeline is key to tracking and managing these setups efficiently.
- Key ETFs to watch are local sector names with solid AUM—about 20 names. But the trading approach isn’t one-size-fits-all.
- Stick to the schedule, track potential flow setups, and front-run by securing rebalance details early and positioning ahead of the crowd.
Hanwha Aerospace’s Monster Raise: Checking Key Angles
- Market sees this as an M&A play, not just de-leveraging. Sentiment’s split, and despite a tight discount, uncertainty on take-up could spark major dislocations in stock and rights.
- Hanwha’s ₩3.6T raise drops just a week after Samsung SDI’s ₩2T—₩5.5T back-to-back. Absorption looks brutal, setting up serious volatility and prime trading opps if liquidity tightens.
- The FSC fast-tracked this, flagging it instantly but also hinting approval. With regulator risk off, any cash market snapback tomorrow should stay in check.
Rio Tinto Dual-Listed Company (DLC) Unification Analysis
- Unification could unlock $27-32B in value, driven by cost synergies, franking credit release, and index upweighting, enhancing Rio Tinto’s market positioning and shareholder returns.
- $2.88B in franking credits are lost annually due to the DLC structure; unification enables full utilization via higher franked dividends and strategic off-market buybacks.
- Increased ASX200 and FTSE100 weighting post-unification could drive $5-7B in passive fund inflows, improving liquidity, stock valuation, and institutional investor appeal.
Hanwha Aerospace: Rights Offering of 3.6 Trillion Won (Negative on Entire Korean Defense Sector)
- Hanwha Aerospace (012450 KS) announced a rights offering capital raise of 3.6 trillion won (US$2.5 billion), which is the largest ever rights offering capital raise in Korea.
- We believe this capital raise is likely to result in higher concerns about shares dilution at Hanwha Aerospace and negatively impact its share price.
- It is also likely to have a significant negative impact on the entire Korean defense stocks, as it signals a top on this sector.
Quiddity Leaderboard STAR 50/100 Jun25: ~US$1bn+ One-Way; Multiple Changes and Conviction Levels
- STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
- STAR 100 index tracks the next 100 names (51st-150th ranks) and it represents the mid-cap segment of the STAR market.
- In this insight, we take a look at the potential ADDs/DELs for the STAR 50 and STAR 100 indices for the June 2025 index rebal event.
Hankyu Hanshin REIT (8977) – Good Fundamental News, a Bigly Buyback, and Cascading Flows to Come
- 3D Investment Partners launched a Partial Tender Offer to buy a 10+% stake in Hankyu Hanshin REIT, Inc. (8977 JP). The REIT finally responded with a “Neutral” stance.
- But they also upgraded earnings forecasts, bought a building, and announced the Sponsor would buy units in the market over the next year. It’s big.
- And that creates flows, which then engender other reactive flows, and cascading flows, and because the sector isn’t rich, there may be a tailwind.
Short Selling Resumes in Korea Just as the KOSPI 200 Braces for Pullback (Perfect Timing!)
- Short selling in all stocks in South Korea will resume from 31 March 2025. The KOSPI 200 (KOSPI2 INDEX EQUITY) is approaching the overboughtarea according to our models.
- If the KOSPI 200 can rise for another week, it would be perfectly ripe for a large, high probability SHORT trade.
- The probability of WEEKLY reversal in the range between the last Close (355) and the 363 resistance limit is between 50% and 75%, pretty high.
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