In today’s briefing:
- Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
- HDFC/HDFC Bank Mega Merger: Index Implications as We Near Completion
- KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)
- Tokyo Gas (9531 JP) Mega Buyback Announced
- HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea
- CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion
- ZJLD Group IPO Trading – Subscription Rates Better than Recent Large HK Deals
- ZJLD Group IPO: Trading Debut
- STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History
Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
- The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
- Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
- The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.
HDFC/HDFC Bank Mega Merger: Index Implications as We Near Completion
- Foreign shareholding has dropped in HDFC Limited and increased in HDFC Bank – the net effect is an increase in foreign room to just north of 18%.
- The merger is expected to complete in Q2/Q3 when there will be buying from MSCI trackers. There will be adhoc inclusions to the NIFTY, Nifty Next 50 and SENSEX indices.
- HDFC Limited (HDFC IN) trades 1.39% below the merger ratio with HDFC Bank (HDFCB IN) and also at a lower price to book.
KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)
- With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX).
- There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
- Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.
Tokyo Gas (9531 JP) Mega Buyback Announced
- Five days ago, Tokyo Gas (9531 JP) announced a revision to earnings for the year to 31 March 2023. Today they reported results, and announced March 2024 guidance.
- The company also announced a buyback programme to spend up to ¥113 billion to repurchase up to 53mm shares (12.2% of TSO). ¥113 billion is a very specific number.
- With the price where it is, ¥113bn is “only” 9.6% of shares out but this is very interesting indeed.
HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
- We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
- There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.
A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea
- The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
- As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
- They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market.
CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion
- With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
- The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.
ZJLD Group IPO Trading – Subscription Rates Better than Recent Large HK Deals
- ZJLD Group (ZJLD HK) raised around US$676m in its Hong Kong IPO.
- ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
- In this note, we will talk about the trading dynamics and valuation.
ZJLD Group IPO: Trading Debut
- ZJLD Group (ZJLD HK) priced its IPO at HK$10.82 per share to raise net proceeds of HK$5.0 billion (US$636 million). The shares will start trading tomorrow.
- We previously discussed the IPO in ZJLD Group IPO: The Bull Case, ZJLD Group IPO: The Bear Case and ZJLD Group IPO: Valuation Insights.
- We expect a muted debut as A Share baijiu peers have derated since the release of the prospectus. The shares remain attractive at the IPO price.
STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History
- The review period for the June rebalance ends 28 April. We expect the changes to be announced 26 May with the implementation taking place after the close on 9 June.
- Using a 12-month minimum listing history results in no index changes. Using a 6-month minimum listing history results in two changes – we think this is what will be used.
- The potential adds have outperformed the potential deletes but both sets of stocks have underperformed the SSE STAR50 (STAR50 INDEX) and the CSI Smallcap 500 Index – Shanghai (SH000905 INDEX).
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