In today’s briefing:
- Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
- CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going
- Update on the S-REIT Re-Allocation Trade
- Appier Group (4180 JP): Now TOPIX-Ready!
- KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)
- Meituan Bear Pressure Accelerating
- NEC (6701) | Significantly Undervalued with Upcoming Catalyst
- MSCI Korea Flow Trading for August 31st
- Net Marketing Japan (6175) “MBO” Tender Offer – Done Deal
- SSE50 Index Rebalance Preview: Sector Rotation To Continue
Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
- Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
- There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others.
- A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.
CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going
- Past the midway mark in the review period, we see 18 potential changes to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the December rebalance.
- We estimate a one-way turnover of 3.32% at the December rebalance leading to a one-way trade of CNY 8.55bn.
- The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index over the last few months, with the outperformance widening over the last few weeks.
Update on the S-REIT Re-Allocation Trade
- In June-July I warned of a reinvestment trade into S-REITs due to the S$2.0-3.0bn cash-out by investors in Mapletree North Asia Commercial Trust and sellers into the SPHREIT Chain Offer.
- Many investors who would need to re-allocate. The trade was to buy major S-REITs. From my last insight, a basket is up 5.3%. MCT has already topped out vs peers.
- The question is…. is there still a trade left to run?
Appier Group (4180 JP): Now TOPIX-Ready!
- In February 2022, I discussed why Appier Group (4180 JP) could be an interesting TOPIX Inclusion Candidate in TOPIX Inclusion Pre-Event: Appier Group (4180 JP)
- Earlier this month, I reiterated my view in TOPIX Inclusions: Who Is Ready (Aug 2022) identifying Appier Group as the best pick among all current TOPIX Inclusion candidates.
- Since my last insight, the share price has risen sharply and that has important implications for the company’s Prime market ambitions.
KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)
- Vidente (121800 KS) has not submitted its semiannual reports and has been labeled as an ‘Administrative Issue’. This means deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) on 19 August.
- Hancom Inc (030520 KS) was the highest ranked stock to not be included in the index at the June rebalance. It will now be included in the index.
- Passive funds will need to buy KRW 8.8bn of Hancom Inc (030520 KS) while selling KRW 11.2bn of Vidente (121800 KS).
Meituan Bear Pressure Accelerating
- June 27 call to sell strength in line and showing increasing downside pressure below the 185 support (now resistance).
- Dual top at 210 induced a turn well under trendline resistance. Break of bear wedge support confirmed the macro sell signal.
- Below 166 targets 140 where a stall in the decline/bounce is due (resistance near 160-66) but expected to give way for a test on the 110 low zone.
NEC (6701) | Significantly Undervalued with Upcoming Catalyst
- NEC is geared into two mega-trends that will drive 9% CAGR in EBITDA through 2025
- NEC is a beneficiary of DX (digital transformation) in Japan and global 5G, which are both just starting to take off
- NEC Investment Day may be short-term catalyst, but it is the undervaluation relative to the long-term opportunity that is mispriced
MSCI Korea Flow Trading for August 31st
- MSCI Korea’s August QIR features one deletion: SK Telecom. But Woori Financial, HYBE, and LG Energy will also present a notable impact as they face float rate changes.
- We should consider executing flow trading on these names, even SKT, towards the effective date as much as possible, as the flow magnitude wouldn’t be enough to act proactively.
- It’s been witnessed that SK Telecom’s recall and liquidation of short positions have been made preemptively this time, minimizing the risk of price distortion on the effective date.
Net Marketing Japan (6175) “MBO” Tender Offer – Done Deal
- Bain Capital Private Equity launched a deal for Net Marketing (6175 JP) at a 63% premium.
- That should be enough to get it done on its own, despite coming below the IPO price of 5yrs ago.
- In any case, Shareholder Structure makes this a completely done deal.
SSE50 Index Rebalance Preview: Sector Rotation To Continue
- Over 80% of the way through the review period for the December rebalance, we see 7 stocks in inclusion/exclusion zone. However, there can be a maximum of 5 changes.
- We estimate a one-way turnover of 3.9% at the December rebalance leading to a one-way trade of CNY 2.85bn.
- The potential adds have outperformed the potential deletes and the SSE50 Index (SSE50 INDEX) by a wide margin over the last few months.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
