In today’s briefing:
- Nippon Express (9147) Secondary Offering – Banks, Sompo, Others Sell – “2024 Problem” Looms
- JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation
- Index Rebalance & ETF Flow Recap: STAR50/100, FXI, NIFTY/NEXT50, S&P500, KOSPI, Goodman, Ecopro BM
- S&P 500/400/600 Index Rebal – It’s Not The Trade You Think
- S&P/ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning
- HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)
- Nippon Express (9147 JP): A US$260 Million Secondary Offering
- A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide
- Quiddity TDIV/50/100 Mar 24 Rebal: Disappointing Result but Trade Successful So Far; Bail Out Now!
Nippon Express (9147) Secondary Offering – Banks, Sompo, Others Sell – “2024 Problem” Looms
- Today post-close, Nippon Express Holdings (9147 JP) announced a secondary offering. Total size is ~¥30bn before considering where it will price; 11-12 days of ADV, 4.6% of shares out.
- Various banks, Toyota-related auto cos, and Sompo Japan will sell. This is a start to the unwind, but it is a very small portion of the total cross-holding position.
- NX also announced an on-market buyback of up to ¥10bn to run from 11April -31July 2024. This, and index demand, mitigate some heaviness. But The 2024 Problem looms large.
JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
- The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to One (relatively) Simple Indicator.
- Foreigners have a lot of ammunition left. But cross-holding unwinds are picking up, and buybacks are too, and dividend reinvestments are smaller than public pension selling. Which way next?
Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation
- Media reports indicate that the National Pension Service (NPS) could invest up to KRW 11tn (US$8.2bn) in a new index tracking stocks with low Price to Book ratios.
- Filtering stocks with market cap higher than US$500m, ADTV of atleast US$1m, div yield of atleast 1.5% and Price to Book less than 1 throws up 94 potential index candidates.
- Choosing an index of 50 stocks will require managers to buy between 1.7-3.4% of the float on the stocks. Increasing the number of constituents will reduce the impact.
Index Rebalance & ETF Flow Recap: STAR50/100, FXI, NIFTY/NEXT50, S&P500, KOSPI, Goodman, Ecopro BM
- The last week was a very busy one. The coming week has some announcements and implementations but is a relatively quieter one.
- The SSE STAR50 (STAR50 INDEX) and STAR100 Index changes for March will be implemented at the close on Friday, the 8th.
- Another week of inflows for the iShares Emerging Markets ex-China (EMXC US) ETF as creations cross US$2bn for 2024. ETF AUM has gone from US$420m in 2021 to US$11bn now!
S&P 500/400/600 Index Rebal – It’s Not The Trade You Think
- On Friday after the close, the S&P DJI Index Committee announced changes to the S&P 100, S&P500, S&P MidCap400, and S&P SmallCap600. Changes happen at the close 15 March 2024.
- Super Micro Computer (SMCI US) and Deckers Outdoor (DECK US) replace Zions Bancorporation (ZION US) and Whirlpool Corp (WHR US) in the S&P500. 2 changes to 400, 6 to 600.
- The immediate reaction was to send SMCI up 12.5%. That’s shortsighted. It pays to count the pennies involved. There are a LOT of pennies.
S&P/ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning
- There is 1 change for the S&P/ASX20 Index, 2 changes for the S&P/ASX100 Index, 4 changes for the S&P/ASX200 INDEX and 14 adds/10 deletes for the S&P/ASX300 Index in March.
- The largest impact is expected on the changes to the S&P/ASX 200 (AS51 INDEX) while flows are large among changes to the S&P/ASX 20 Index and S&P/ASX 100 Index too.
- There has been a steady increase in cumulative excess volume for most stocks but there are a few where there has been a spike recently.
HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)
- A share indices were up on the week. HK stock indices were down except for HS Tech. H-shares with A-share pairs were up.
- Net SOUTHBOUND buying was HK$9.1bn in the second post-holiday week after being +HK$20bn in the first week. LOTS of SOEs on the net buying side. Still.
- SOUTHBOUND continues to buy high-div SOEs. ex-div is still three months away, and given the new KPIs discussed late January by SASAC official, these still seem to be appropriate targets.
Nippon Express (9147 JP): A US$260 Million Secondary Offering
- Nippon Express Holdings (9147 JP) has announced a secondary offering of up to 4.8 million shares (including overallotment). There are seven selling shareholders.
- The secondary offering comes ahead of the implementation of regulatory restrictions on truck drivers’ overtime in April 2024, which is widely known as the ‘2024 Problem’.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will likely fall between 11 and 13 March (likely 11 March).
A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows net positive. NB 5 weeks in a row. AH premia rebounded slightly. AH Premia are still wide on average. Premia curves should still shift flatter.
- Two Sessions seems like a good place to make positive public statements but recent speeches from the very top seem more oriented towards “The People Must Endure.”
Quiddity TDIV/50/100 Mar 24 Rebal: Disappointing Result but Trade Successful So Far; Bail Out Now!
- The index changes for the March 2024 index rebal event for the T50/100 index family and the TDIV index were confirmed after market close on Friday 1st March 2024.
- The confirmed changes for T50 and T100 were captured in our expectations but an additional change we expected did not materialize which adversely affected our flow expectations for March 2024.
- In this insight, we take a close look at the breakdown of our final flow expectations for the upcoming Inclusion/Exclusion and Capping events.
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