In today’s briefing:
- Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
- LQ45 Index Rebalance Preview (July): Identifying Potential Changes
- NIFTY100 Index Rebalance Preview: Double/Triple Whammy for Some Stocks
- AAG Energy (2686 HK): AGM Results Suggest a Scheme Fail Was Inevitable
- SET50 Index Rebalance Preview: Two Changes – One High Probability; One Has Possibilities
- KRX Plans to List Single-Stock Futures of All KS200 & KQ150 Constituents
- Sell AAG (2686 HK). A Revised Scheme Will Fail
- Asian Defence Contractors: Up In Arms
- JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin
- KRX New Deal Index Rebalance Preview: Potential & Close Changes in September
Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
- Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
- There are no major index events coming up this week as a lot of markets are shut on different days.
- There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US).
LQ45 Index Rebalance Preview (July): Identifying Potential Changes
- The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
- Potential adds are Adaro Minerals (ADMR IJ), Bumi Resources Minerals (BRMS IJ), Panin Financial (PNLF IJ), Energi Mega Persada (ENRG IJ), Transcoal Pacific (TCPI IJ) and Pertamina Geothermal Energy (PGEO).
- Potential deletions are Japfa Comfeed Indonesia (JPFA IJ), Indocement Tunggal Prakarsa (INTP IJ), Timah Persero (TINS IJ), Bank Tabungan Negara Persero (BBTN IJ) and Chandra Asri Petrochemical (TPIA IJ).
NIFTY100 Index Rebalance Preview: Double/Triple Whammy for Some Stocks
- Halfway through the review period, we see 5 potential changes for the Nifty Next 50 Index (NIFTYJR INDEX)/ Nifty 100 Index (NSE100 INDEX) at the September rebalance.
- All the potential adds are expected to migrate from MidCap to LargeCap at the AMFI June reclassification, while we expect two of the potential deletes to move the other way.
- Of the potential deletes, one is a high probability deletion from the MSCI India Index at the May QCIR while there is another that is a lower probability deletion.
AAG Energy (2686 HK): AGM Results Suggest a Scheme Fail Was Inevitable
- Aag Energy Holdings (2686 HK)’s latest AGM results show a strong dissent from minorities. The number of NO votes per resolution varied from 590.9-652.5 million or 17.40%-19.22% of outstanding shares.
- The AGM voting shows that Xinjiang Xintai Natural Gas (603393 CH) will struggle to pass the scheme even if the record date is changed and some NO votes are invalidated.
- The risk-reward profile remains unfavourable as the downside to a scheme fail (12.1% to 17.0% downside) is greater than the upside to a scheme pass (+12.1% to HK$1.85 offer).
SET50 Index Rebalance Preview: Two Changes – One High Probability; One Has Possibilities
- Two thirds of the way through the review period, we forecast two changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the June rebalance.
- Thai Life Insurance (TLI TB) and WHA Corp Pcl (WHA TB) could replace Jaymart PCL (JMART TB) and Ngern Tid Lor (TIDLOR TB).
- JMT Network Services (JMT TB) is a very close delete on market cap, while Intouch Holdings (INTUCH TB) is a close delete on liquidity. Multiple possibilities here.
KRX Plans to List Single-Stock Futures of All KS200 & KQ150 Constituents
- According to Chosun, KRX plans to list the single-stock futures of all constituents of KOSPI 200 and KOSDAQ 150 within 2-3 years.
- This information comes from a KRX official, who directly confirmed it. As Chosun is the most well-established news outlet in Korea, the credibility of this article is quite high.
- We should consider screening those with a high proportion of short-selling positions and devising a positioning strategy in conjunction with the new listing event of single stock futures in July.
Sell AAG (2686 HK). A Revised Scheme Will Fail
- In unprecedented fashion, AAG Energy Holdings (2686 HK)‘s board adjourned the Court Meeting on the 27 April due to some voting instructions not being duly processed.
- That reasoning had a whiff of nonsense. And just under a week later, there has been no update. Perhaps this is moot though.
- At yesterday’s AGM, disinterested shareholders turned up in record numbers to vote against stock-standard resolutions. If a similar turnout were present at the Court Meeting, the Scheme would have failed.
Asian Defence Contractors: Up In Arms
- According to the Stockholm International Peace Research Institute (SIPRI), total global military expenditure increased by 3.7% in real terms in 2022, to reach a new high of $2,240bn.
- A number of European states significantly increased their military spending following Russia’s invasion of Ukraine. Elsewhere, Japan’s 2022 military spending accounts for 1.1% of GDP, the highest level since 1960.
- South Korea had four companies inside the world’s top 100 arms manufacturers in 2021. These conglomerates are expected to move up the ranking in 2022.
JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin
- We believe JD’s growth rate will continue to slow down and its margin will continue to improve in 1Q23.
- However, we also believe revenue growth will recover from 2Q23.
- We set a price target of HK$256, implying an upside of 85%. Buy.
KRX New Deal Index Rebalance Preview: Potential & Close Changes in September
- The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
- There are potential changes to some of the indices and then there are close changes that will result in big flows if they eventuate.
- The March rebalance saw some funky moves on the stocks that had big flows and we could see more of that at the September rebalance.
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