In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- Nikkei 225 Index Rebalance: Passives Trade on Friday
- Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
- KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)
- KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)
- Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
- DB Hitek: KCGI Goes Activist & A Potential Inclusion in MSCI Korea Standard Index in 2023
- Rakuten Bank IPO: Valuation Insights
- Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
- Last Week in Event SPACE: Meituan, S.M.Entertainment, Toyo, Mincor, JD.com, AAG
Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
- There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
- Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.
Nikkei 225 Index Rebalance: Passives Trade on Friday
- Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
- Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
- There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.
Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
- There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
- There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
- Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.
KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)
- As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
- We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.
- DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.
KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)
- Following Cellivery Therapeutics (268600 KS) designation as an Administrative Issue and an Investment Attention Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Humasis (205470 KS).
- The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 17 April.
- Humasis (205470 KS) was limit up on Friday following the ex-date of a 1:3 scrip issue. The stock could continue to move higher over the next week.
Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
- Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
- Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
- Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.
DB Hitek: KCGI Goes Activist & A Potential Inclusion in MSCI Korea Standard Index in 2023
- It was announced on 30 March that a local activist firm called KCGI has invested 7.05% stake in DB Hitek, spending 196.4 billion won on buying this amount.
- KCGI mentioned that DB Hitek’s corporate value is extremely undervalued that the company should cancel its treasury shares and establish independent Board of Directors.
- The probability of DB Hitek being included in MSCI Korea Standard could rise materially if its market cap climbs to more than 4 trillion won in the coming weeks.
Rakuten Bank IPO: Valuation Insights
- Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise up to $878m. Pricing is on 5 April and the listing is on 21 April.
- We previously discussed the IPO in Rakuten Bank IPO: The Investment Case and Rakuten Bank Vs SBI Sumishin Net Bank.
- In this note, we discuss valuation. Our analysis suggests that Rakuten Bank is fairly valued at the IPO price range of JPY1,630-1,960 per share. We would participate in the IPO.
Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
- The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
- A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
- There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.
Last Week in Event SPACE: Meituan, S.M.Entertainment, Toyo, Mincor, JD.com, AAG
- One may presume that Prosus (PRX NA) moved their Meituan (3690 HK) shares received from their non-CCASS holdings of Tencent (700 HK). It does not tell us much else.
- Allocation in the S.M.Entertainment Co (041510 KS) partial Offer was 44.14%. With shares trading ~₩95k, that was a pretty good outcome.
- Toyo Construction (1890 JP) has asked the Japanese government to investigate YFO’s alleged breaches of FEFTA. Expect YFO to say they did no wrong. Expect Toyo to complain about it.
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