In today’s briefing:
- Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
- ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained
- STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History
- PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- SSE50 Index Rebalance Preview: Five Changes Coming Up in June
- What Did Global Liquidity Do Last Week?
- Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
- Memory Monitor: SK Hynix & Samsung Losses & Conservative Guidance Indicate Two-Track Chip Recovery
- A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
- Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
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.
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained
- With 1 trading day left in the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
- The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the last month. We’d be inclined to trim positions.
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).
PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
- However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
- At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.
SSE50 Index Rebalance Preview: Five Changes Coming Up in June
- With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
- We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
- The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.
What Did Global Liquidity Do Last Week?
- We exlore a new weekly time series on Global Liquidity. The data start in 2010 and reveal a strong leading relationship to World asset markets. This is confirmed statistically
- Latest data show a US$5 trillion rise since the end-2022 and a US$10 trillion increase since the cycle low in late-October 2022. Further gains are bullish for asset prices
- Behind expanding Global Liquidity is a strengthening World Shadow Monetary Base. This measures the collateral pool than can be levered up by credit providers. It is leading the way
Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
- Today after the close, Kansai Paint (4613 JP) announced it would sell 3 investment securities in the current quarter and would book a gain of “around ¥30bn.”
- As discussed in Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows, Toyota’s sale of KP shares meant KP could sell Toyota shares. Now they will.
- This is a set-up to another buyback, eventually to unwind more in-bound cross-holdings and to raise ROE.
Memory Monitor: SK Hynix & Samsung Losses & Conservative Guidance Indicate Two-Track Chip Recovery
- SK Hynix and Samsung reported results in the last week, showing major losses for their memory businesses. More evidence of a ‘two-track recovery’ for different parts of the chip industry.
- SK Hynix’s inventory situation worsened based on our analysis; Micron appears to be managing inventory moderately better than peers based on recent results.
- Long Micron vs. Short Nanya Technology: Micron has continued to outperform Nanya Tech, as well as SK Hynix and Samsung.
A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
- Currently, the market cap of Ecopro BM surpassed Posco Future M. As a result, Ecopro BM is in a position to replace Posco Future M in the K-New Deal rebalancing.
- They are direct peers with a high price cointegration. We should consider using the rebalancing event of this index as an inflection point from a Long Short pair trading perspective.
- The likelihood of Ecopro BM being included in the Solactive Lithium Index in October could potentially increase the expected return of taking this Long Short position more preemptively.
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).
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