In today’s briefing:
- S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
- HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)
- SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out
- Merger Arb Mondays (26 Dec) – Nippon Steel Trading, Conexio, Origin Energy, Warrego, OZ Minerals
- Futu (FUTU US / 3588 HK): Dual Primary Listing, Stock Connect & Potential HSCI/HSTECH Inclusion
- Index Rebalance & ETF Flow Recap: SET50, Stock Connect, Kanzhun, Futu, AMFI
- Estimating Fund Size Tracking KOSPI MID Cap Index
- Toyo Construction (1890) Investors/Traders Beware
- S&P/ASX All Technology Index: GICS Changes, Market Consultation & Potential Index Changes
- Takashimaya and H2O Cancel Tie-Up
S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
- We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
- There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
- PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)
- Tongcheng-Elong Holdings Ltd (780 HK) could replace Ming Yuan Cloud Group (909 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
- One way turnover is estimated at 2.1% resulting in a one-way trade of HK$1.7bn. Passive trackers will need to buy nearly 10x ADV on Tongcheng-Elong Holdings Ltd (780 HK).
- After being deleted from the MSCI China Index at the November SAIR, this could be the next major index deletion for Ming Yuan Cloud Group (909 HK).
SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out
- Central Plaza Hotel, Com7 PCL, Delta Electronics Thai and Ratch Group will replace Bangkok Life Assurance, IRPC PCL, KCE Electronics PCL and Srisawad Power in the SET 50 Index.
- Passive trackers will need to buy between 2-4 days of ADV on the adds while selling between 0.6-3 days of ADV on the deletes.
- The adds have significantly outperformed the deletes over the last few months. We’d use any big moves over the next couple of days to trim positions.
Merger Arb Mondays (26 Dec) – Nippon Steel Trading, Conexio, Origin Energy, Warrego, OZ Minerals
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Genex Power Ltd (GNX AU), Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Nippon Steel Trading Corporation (9810 JP), Conexio Corp (9422 JP), Golden Energy.
- Lowest spreads – Nitro Software Ltd (NTO AU), Shandong Fengxiang (9977 HK), Chip Eng Seng Corp (CHIP SP), Elmo Software (ELO AU), OZ Minerals Ltd (OZL AU), Norwest Energy.
Futu (FUTU US / 3588 HK): Dual Primary Listing, Stock Connect & Potential HSCI/HSTECH Inclusion
- Futu Holdings Ltd (FUTU US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 30 December.
- Following the changes to the handling of Dual-Primary-listed companies, Futu Holdings Ltd (FUTU US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
- Futu Holdings Ltd (FUTU US) should also be added to the HSCI at the March rebalance and should be added to Southbound Stock Connect late July/ early August.
Index Rebalance & ETF Flow Recap: SET50, Stock Connect, Kanzhun, Futu, AMFI
- The announcement of the changes to the Stock Exchange of Thailand SET 50 Index was made on 20 December and will be implemented at the close on 30 December.
- There are a lot of review cutoffs for different indices in the coming week with announcements in January and February.
- There were big inflows to Vanguard FTSE Emerging Markets ETF (VWO US) and big outflows from IShares Core MSCI Asia Ex Japan ETF (3010 HK) during the week.
Estimating Fund Size Tracking KOSPI MID Cap Index
- About ₩3T trillion is presumed to flow from NPS to KOSPI MID. Then, ₩0.8T from local publicly raised funds should be sitting in KOSPI MID. Adding these two alone amounts ₩4T.
- Of course, this is ACTIVE. In other words, they do not need to proceed with universe changes due to rebalancing at the same pace as ETFs.
- Nevertheless, we should note that the domestic fund industry does not allow a large gap with BM. Hence, at least ₩4T of funds follow KOSPI MID quite tightly.
Toyo Construction (1890) Investors/Traders Beware
- On 13 December, Toyo Construction (1890 JP) suitor YFO issued a press release which was not to the liking of Toyo Construction. A day later, Toyo Construction offered its own.
- YFO responded on the 21st, saying ToyoKen’s PR was inaccurate. Not quite a week after that, ToyoKen announced one tiny subsidiary(Tecos) would absorb another (portable toilet rental co Orient Ecology).
- Synergies? None. Growth? None. Scale? Nope. Was this for some other reason investors need to worry about? Maybe.
S&P/ASX All Technology Index: GICS Changes, Market Consultation & Potential Index Changes
- Global Industry Classification Standard (GICS) structure updates will lead to changes to the S&P/ASX All Technology Index at the March rebalance.
- To better reflect the GICS changes and reduce constituent turnover, S&P DJI has proposed changes to the index universe for constituent selection.
- We expect there will be 4 deletions from the index in March, but that could increase to 10 if the changes are not adopted.
Takashimaya and H2O Cancel Tie-Up
- Takashimaya and H2O Retailing entered what felt like a forced engagement of convenience in 2008 when all their other competitors were busy merging.
- Although discussions for a full merger were held, in truth, thea agreement was more about practical collaboration to create more efficiencies.
- With both firms now more secure and cross-shareholdings more problematic, they will sell off their equity in each other but continue to work on joint projects.
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