In today’s briefing:
- Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped
- Mar25 Nikkei 225 Rebal Predictions: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor
- Bajaj Housing Finance IPO: Offering Details & Index Inclusion
- Australia/NZ Real Estate: Stocks With (Large) Passive Flows
- China A50 ETF Rebalance: Two Adds, Two Deletes, as Expected
- Key Flow Trading Opportunities After KRX Suddenly Added POSCO Holdings to the BBIG Battery Mix
- Weekly Deals Digest (08 Sep) – Midea, Fuji Soft, Pasco, Seven & I, Xingda, CPMC, PSC, Rex, Latin Res
- The Born Korea IPO Valuation Analysis
- EQD | KOSPI 200 OVERSOLD, It Could Bounce This Week
- Japan Weekly | Assets Under Pressure; Kao Out Performs
Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped
- Nomura Research Institute (4307 JP) and Ryohin Keikaku (7453 JP) will replace Nippon Paper Industries Co L (3863 JP) and Dic Corp (4631 JP) in the Nikkei 225 (NKY INDEX).
- Fast Retailing (9983 JP)‘s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!)
- Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.
Mar25 Nikkei 225 Rebal Predictions: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor
- The Sep24 Nikkei 225 Review Results are out, discussed in Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT.
- That lets us move to Mar25 Nikkei 225 Rebal predictions. For the moment, I see 2 IN and 2 OUT, again.
- And at the moment, another Fast Retailing capping exercise looks likely, for roughly US$3bn a side to trade.
Bajaj Housing Finance IPO: Offering Details & Index Inclusion
- Bajaj Housing Finance (BHF IN) is looking to list on the exchanges by selling INR 65.6bn of stock at a valuation rumoured to be between INR 560-590bn.
- The anchor allocations will be completed later this week, and the stock is expected to start trading on 16 September.
- Bajaj Housing Finance (BHF IN)‘s maximum float will be around 10% and that will limit inclusion to just one global index in the following 6 months.
Australia/NZ Real Estate: Stocks With (Large) Passive Flows
- There will be passive buying in Nextdc Ltd (NXT AU) and Charter Hall (CHC AU) and selling in Vital Healthcare Property Trust (VHP NZ) at the close on 20 September.
- Charter Hall (CHC AU)‘s stock price jumped following announcement of results and that was accompanied by big short covering. There should still be more positioning here.
- Nextdc Ltd (NXT AU)‘s increase in cumulative excess volume came on a drop in the stock price. There could be some covering here as positioning builds up.
China A50 ETF Rebalance: Two Adds, Two Deletes, as Expected
- The iShares A50 China (2823 HK) and CSOP China A50 (2822 HK) ETFs will rebalance their holdings at the close on 20 September.
- China National Nuclear Power (601985 CH) and Huaneng Lancang River Hydropow (600025) will replace China Tourism Group Duty Free (601888 CH) and Yihai Kerry Arawana (300999 CH) in the ETFs.
- Passive trackers are estimated to buy between 0.3-0.5 days of ADV in the adds and sell between 0.4-1.1 days of ADV in the deletes.
Key Flow Trading Opportunities After KRX Suddenly Added POSCO Holdings to the BBIG Battery Mix
- Got surprised by KRX adding POSCO Holdings to the Battery Index. Normally predictable rebalancing went off-script with this unexpected move.
- POSCO Holdings, not Posco Future M, replaced Ecopro BM. Plus, Alteogen Inc is replacing SK Biopharmaceuticals in the BBIG, driving notable flow.
- Consider a day trading long POSCO Holdings and short Ecopro BM. Also, a long-short futures basket could be worth exploring for names with big passive flows.
Weekly Deals Digest (08 Sep) – Midea, Fuji Soft, Pasco, Seven & I, Xingda, CPMC, PSC, Rex, Latin Res
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) IPO.
- Event-Driven developments: Fuji Soft Inc (9749 JP), Pasco Corp (9232 JP), Seven & I Holdings (3382 JP), Xingda International (1899 HK), CPMC Holdings (906 HK), Psc Insurance (PSI AU).
The Born Korea IPO Valuation Analysis
- According to our valuation analysis, it suggests an implied price of 34,365 won, which is 27% higher than the high end of the IPO price range.
- We estimate The Born Korea to generate sales of 467.7 billion won (up 13.1% YoY) and operating profit of 31.4 billion won (up 22.8% YoY) in 2024.
- We believe a premium to comps’ valuation is appropriate for The Born Korea mainly due to its higher sales growth, higher ROE, stronger balance sheet, and higher profit margins.
EQD | KOSPI 200 OVERSOLD, It Could Bounce This Week
- The KOSPI 200 has corrected for 3 weeks in a row, reaching a low at 340.08 last week. It is WEEKLY OVERSOLD, according to our models.
- In a previous insight we theorized the index could go higher (but only for 1 week), however the rally never materialized. From there it went downhill, now it can bounce.
- The support area between the last Close and 320 offers strong support, according to our WEEKLY pattern models.
Japan Weekly | Assets Under Pressure; Kao Out Performs
- Assets remained under pressure across the board: SPX (-4.2%), Nasdaq (-5.8%), Oil (-7.5%) and 10 year bonds (-20bps).
- Japanese stocks were also under pressure: Nikkei (-5.8%), Topix (-4.2%), while the yen strengthened almost 4 yen.
- Kao’s stock rose by 9% this week due to improved earnings estimates and favorable conditions for raising prices of everyday necessities in Japan
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
