In today’s briefing:
- S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year
- Stock Connect Changes and MSCI/FTSE Deletes on Friday
- HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)
- PCOMP Index Rebalance Preview Feb 23: Higher Free Float Means Fewer Changes
- Country Garden Placement – Hot on the Heels of the Last Deal, Momentum Has Shifted
- Toshiba (6502 JP): JIP’s Privatisation Bid Is Floundering
- Fujitsu (6702) Buyback Just Getting Started
- JAFCO (8595) Sells NRI Shares But VWAP Falling Short – Comes Down To Murakami-San
- Negative EVs: JOYY & Sohu’s Steep Discount To Net Cash
- FTSE China A50 Index Rebalance: Stock Connect Deletion to Drive Change
S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year
- Pilbara Minerals (PLS AU) will replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) will replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
- The largest impact from passive trading will be on Monadelphous (MND AU) while the largest flow will be on Pilbara Minerals (PLS AU).
- There appears to be significant short positioning on Lendlease Group (LLC AU) as cumulative excess volume and short interest continue to rise.
Stock Connect Changes and MSCI/FTSE Deletes on Friday
- The SSE180, SSE380 and SZSE1000 indices rebalance at the close on Friday and that will lead to changes to the list of stocks eligible for Northbound Stock Connect.
- Deletion from the Northbound Stock Connect Buy and Sell list will result in MSCI and FTSE deleting stocks from their indices. That selling will take place at the close Friday.
- We expect 37 stocks to be deleted from the MSCI and FTSE indices at the close on 9 December – the announcements should be made later today or tomorrow.
HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)
- Nearing the end of the review period for the March rebalance, we see China Shenhua Energy Co H (1088 HK) replacing China Feihe (6186 HK) in the HSCEI INDEX.
- Estimated one-way turnover is 1.64% resulting in a one-way trade of HK$1.02bn with passives needing to buy 1x ADV on China Shenhua Energy and selling 1.7x ADV on China Feihe.
- The change will lead to an increase in the fair value of the HSCEI 2023 dividend futures by over 3 DIPS. Could be more if China Shenhua pays a special.
PCOMP Index Rebalance Preview Feb 23: Higher Free Float Means Fewer Changes
- From December 2022, the minimum free float requirement to be a part of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) increases from 15% to 20%.
- We see a high probability of DMCI Holdings (DMC PM) replacing Emperador (EMP PM) in the index at the upcoming rebalance.
- There are a few other potential changes to the index and the passive flow on the stocks will be material.
Country Garden Placement – Hot on the Heels of the Last Deal, Momentum Has Shifted
- Country Garden Holdings Co (2007 HK) aims to raise around US$500m via a primary placement
- This will be the third placement by the company this year and the second one within a month’s time.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
Toshiba (6502 JP): JIP’s Privatisation Bid Is Floundering
- JIP, Toshiba Corp (6502 JP)‘s preferred bidder, is reported to be under pressure from co-investors to cut its offer price. Securing financing continues to be troublesome.
- An offer valuing Toshiba less than JPY2.2 trillion would face pushback from the special committee, let alone shareholders. There are no signs of a JIC/Bain coming to the rescue.
- While the Toshiba/peers price ratio remains undemanding compared to historical ratios, Toshiba looks expensive vs peers on multiples. With short-term newsflow likely to be incrementally negative, remain on the sidelines.
Fujitsu (6702) Buyback Just Getting Started
- On 28 April 2022, with full-year earnings, Fujitsu Ltd (6702 JP) announced a buyback programme to buy back up to 12mm shares (6.11% of shares out) for up to ¥150bn
- That was when the shares were ¥18,540. The shares popped 10% in 2 days. Then fell 25% into end-September. Yesterday, they announced they’d bought back 1.9mm shares in November.
- Those were the first shares bought back under the Programme. And that leaves 4 months and a lot of stock to buy.
JAFCO (8595) Sells NRI Shares But VWAP Falling Short – Comes Down To Murakami-San
- Late last month, JAFCO (8595) Yields to Murakami Greenmail – Big Asset Sale, Big Buyback and set the large buyback from Murakami-san to occur through a Tender Offer.
- The TOB price would be set at a 1% discount to the average 30 Nov – 7 Dec VWAP if VWAP was between ¥2,525 and ¥2,828/share. That’s not happening.
- So now we read the fine print, look at waive-ability of conditions, and look at contingencies.
Negative EVs: JOYY & Sohu’s Steep Discount To Net Cash
- Screening US-listed China plays with negative EV and positive tailing EBITDA generates eight names.
- Of these companies, only two are expected to be EBITDA positive in FY22.
- They are JOYY (YY US) and Sohu.com (SOHU US). This insight looks at both names.
FTSE China A50 Index Rebalance: Stock Connect Deletion to Drive Change
- Beijing-Shanghai High Speed Railway-A (601816 CH) will be deleted from the Northbound Stock Connect Buy and Sell list from the close on 9 December.
- Beijing-Shanghai High Speed Railway will be deleted from the SSE180, MSCI and FTSE indices. Plus a deletion from the FTSE China A50 Index (XIN9I INDEX).
- The replacement for Beijing-Shanghai High Speed Railway-A (601816 CH) will be determined at the close of trading today and the announcement will be made post market close.
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