In today’s briefing:
- MSCI May 2022 Index Rebalance: Flows at the Close Today & Performance So Far
- Mercari (4385 JP): Section Transfer Means TOPIX & FTSE Inclusion
- Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks
- Nikkei 225 Index Rebalance Preview: Market Consultation & Potential Changes
- Short LG Corp on the Unsustainable Price Spike
MSCI May 2022 Index Rebalance: Flows at the Close Today & Performance So Far
- For Asia Pacific, there are 48 adds/76 deletes for the Standard Indices and 166 adds/147 deletes for the Small Cap Index that will be implemented at the close today.
- The adds have outperformed the deletes on average over the last few weeks/months. A long adds/short deletes trade performed better for Small Caps as compared to the Standard index.
- There are a lot of stocks that will have same-way flow from other index trackers over the next few weeks and there could be a higher impact on these names.
Mercari (4385 JP): Section Transfer Means TOPIX & FTSE Inclusion
- Mercari Inc (4385 JP) was deleted from the MSCI Japan at the close today. Then the company announced that it would move to the Prime Market on 7 June.
- Transfer to Prime Market will require passive TPX INDEX trackers to buy stock end July and FTSE All-World trackers to buy in September – around 19% of free float together.
- Short interest is over 13% of free float. Some of the shorts would have covered against the passive MSCI selling today but the remaining shorts could look to cover.
Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks
- 4.5 months ago I wrote Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months and today it was announced Mercari would move from TSE Growth to Prime.
- The move happens on 7 June, which means that the actual TOPIX inclusion will be at the close of 28 July.
- This will change things near-term, and going forward. As always, we dig deeper below.
Nikkei 225 Index Rebalance Preview: Market Consultation & Potential Changes
- The Nikkei 225 (NKY INDEX) market consultation released last week could lead to some tweaks to the index methodology and the stock selection process. Nothing really material enough though.
- Potential index inclusions in September are Renesas Electronics, Oriental Land and Pan Pacific International Holdings, while Toyobo Co Ltd, Nippon Light Metal and Oki Electric Industry are potential index deletions.
- Passive Nikkei 225 trackers will need to buy between 4-9% of the real float on the high/ medium probability names, while they need to buy between 2.5-14 days of ADV.
Short LG Corp on the Unsustainable Price Spike
- The question now is whether this event can lead to a structural uptrend in LG Corp. I am skeptical about this.
- LG Corp took a preemptive action to increase its attractiveness as a dividend stock to prevent a share price decline ahead of the listing of LG CNS.
- However, this measure does not address the root cause of LG Corp’s massive NAV discount. So, I would consider a short position setup for LG Corp.
Before it’s here, it’s on Smartkarma
