In today’s briefing:
- HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
- Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
- KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)
- LX Semicon (108320 KS) – Section Change, Index Flow and KOSDAQ150 Replacement
- LX Semicon KOSDAQ→KOSPI Migration Event: Index Rebalance Trading
- Giordano (709 HK): Interim Divy – But Perhaps Not If You Tender
- Ping An A/H Premium: Near The High End
- Japan Excellent REIT (8987) – Possible Sustained Flow Event
- ANZ Renounceable Entitlement Offer – Retail Shortfall Size Within Expectations at A$688m (US$475m)
- Giordano’s Improving Outlook and Surprising Dividend Provide Deal-Break Support
HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
- Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK).
- SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
- There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.
Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
- Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
- There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others.
- A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.
KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)
- Vidente (121800 KS) has not submitted its semiannual reports and has been labeled as an ‘Administrative Issue’. This means deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) on 19 August.
- Hancom Inc (030520 KS) was the highest ranked stock to not be included in the index at the June rebalance. It will now be included in the index.
- Passive funds will need to buy KRW 8.8bn of Hancom Inc (030520 KS) while selling KRW 11.2bn of Vidente (121800 KS).
LX Semicon (108320 KS) – Section Change, Index Flow and KOSDAQ150 Replacement
- LX Semicon (108320 KS) is looking to transfer from the KOSDAQ market to the KOSPI market. Shareholder meeting is 23 September and the transfer will happen soon after if approved.
- LX Semicon (108320 KS) will be deleted from the KOSDAQ 150 Index on the suspension date. There is zero chance of the stock being included in the Kospi 200 Index.
- Nextin (348210 KS) is a high probability inclusion to the KOSDAQ 150 Index in December but could be an early inclusion in September to replace LX Semicon (108320 KS).
LX Semicon KOSDAQ→KOSPI Migration Event: Index Rebalance Trading
- LX Semicon announced that its board approved KOSPI migration on August 17. This migration requires shareholder approval, and a shareholder meeting will be scheduled for September 23.
- The outflow of KOSDAQ 150 is estimated to be -1.37x ADTV. A passive impact of this magnitude should cause a price movement of at least 3%p.
- But LX Semicon’s GICS sector won’t change after the KOSPI migration. We should refrain from trading with expectations for the possibility of KOSPI 200 inclusion at this point.
Giordano (709 HK): Interim Divy – But Perhaps Not If You Tender
- Giordano International (709 HK) has announced 1H22 net profit of HK$97mn compared to HK$60mn in 1H21.
- Of interest is the declaration of an interim dividend of HK$0.085/share.
- The ex-dividend date is the 20 September. Whether you get the dividend plus the Offer Price depends when the Offer closes (or is extended), and/or whether the Offer turns Unconditional.
Ping An A/H Premium: Near The High End
- The Ping An AH premium has moved from 1-2% to near 10% over the last month while the HSAHP Index has stayed around the same level.
- The Ping AH premium is now nearing the level from where reversals take place. Interim results on 23 August could be a trigger for a reversal.
- Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last month.
Japan Excellent REIT (8987) – Possible Sustained Flow Event
- Japan Excellent (8987 JP) has been the worst-performing Office J-REIT amongst the existing crop since the end of 2019.
- Today, we got news of a possible flow event – a buyer.
- There is room here for Japan Excellent to outperform over the next several months.
ANZ Renounceable Entitlement Offer – Retail Shortfall Size Within Expectations at A$688m (US$475m)
- ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
- The institutional part of the entitlement offer saw a strong take up and the retail take up was within our expectations as well.
- In this note, we will talk about the retail shortfall bookbuild and other updates since our last note.
Giordano’s Improving Outlook and Surprising Dividend Provide Deal-Break Support
- Giordano International (709 HK)’s 1H22 net profit of HK$97 million was within the HK$91-101 million positive profit range. The IFA noted that interims do not change its advice.
- The Board surprisingly declared an interim dividend of HK$0.085 per share. As the ex-div falls after the final closing date, shareholders who accept the offer will not receive the dividend.
- The incrementally positive outlook and dividend highlight Giordano’s value. The results have pushed our deal break/intrinsic value to align with the VGO price.
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