In today’s briefing:
- Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA
- TOPIX Rebalance: End-July Rebal Is $3.5bn One-Way – Some Big Sell Names
- KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone
- TOPIX July Rebalance: Mercari Inclusion, FFW Changes, US$6.5bn To Trade
- Mercari (4385) – End-July TOPIX Inclusion Update
- Hong Kong CEO & Director Dealings – 11th July 2022
- China’s Crackdown on Big Tech: Not Over by Any Means
- Link’s Board Shows Its Hand
- Local Pensions’ Spot/Futures Arb on Samsung Electronics & 1P Discount Distortion
- SOCAR IPO Likely to Be Delayed
Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA
- Most changes expected at the MSCI August QIR are in China. This will be the last QIR using the current methodology. The Feb 2023 QIR will use the comprehensive methodology.
- There are a lot of changes expected to the FTSE All-World and All-Cap indices at the September SAIR and we list out potential inclusions and exclusions.
- Inflows to the KraneShares CSI China Internet ETF (KWEB US) continue as sentiment around China stocks, especially tech, improves.
TOPIX Rebalance: End-July Rebal Is $3.5bn One-Way – Some Big Sell Names
- The July-end TOPIX FFW Rebalance is larger than most expected, I believe.
- There should be US$3.5bn one-way, with only a couple of major buy names.
- Chugai Pharmaceutical (4519 JP), Canon Inc (7751 JP), Unicharm Corp (8113 JP), Kubota Corp (6326 JP), Asahi Group Holdings (2502 JP), and Shiseido (4911) are each US$170mm+ to sell.
KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone
- A third of the way through the review period, we see one potential change. There are four stocks that are close to inclusion zone and could lead to more changes.
- Currently, Miwon Specialty Chemical Co (268280 KS) is an add while Hyundai Home Shopping Network (057050 KS) is a delete.
- Samyang Foods (003230 KS), Lotte Confectionery (280360 KS), Unid Co Ltd (014830 KS) and Miwon Commercial (002840 KS) are close adds currently.
TOPIX July Rebalance: Mercari Inclusion, FFW Changes, US$6.5bn To Trade
- Mercari Inc (4385 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 28 July.
- There are a lot of FFW changes, mainly reductions. This leads to large funding inflows on the large index stocks.
- We estimate the inclusion of Mercari and the FFW changes will lead to a one-way turnover of 0.56% leading to a one-way trade of JPY 442.23bn (US$3.25bn).
Mercari (4385) – End-July TOPIX Inclusion Update
- In mid-January, I wrote about Mercari’s likely TOPIX inclusion 4-5 months later. 4.5mos later, it had been included (Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks) .
- The publicly-visible announcement data often does not show TOPIX inclusion parameters. A little sleuthing gets you there.
- It’s still bigger than it looks, but some large holders have recently been selling.
Hong Kong CEO & Director Dealings – 11th July 2022
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
- This insight also flags those companies where shares have been pledged, both recently and ongoing.
China’s Crackdown on Big Tech: Not Over by Any Means
- Just as investors were starting to get comfortable investing in Chinese big tech, the Government has imposed new fines on a range of tech companies.
- Meanwhile, the June ending quarter could yet again be a disspointment with growth curtailed through lack of funding for loss making businesses.
- Having gained around 50% in June 2022 through signs of easing the tech crackdown, these new fines and a weak June-ending quarter could resend tech valuations to March-2022 lows.
Link’s Board Shows Its Hand
- The Link Administration (LNK AU) Board will not recommend Dye&Durham/DND’s revised lower offer of A$4.57 per share due to shareholder feedback, the underlying value and alternative options.
- The slightly above guidance is designed to show that Link’s contribution to DND’s build a billion objective remains on track and there is little chance of triggering the MAC clause.
- DND needs to secure a deal this week to use its attractive deal financing, according to AFR. This could be the cue for DND to give a little more.
Local Pensions’ Spot/Futures Arb on Samsung Electronics & 1P Discount Distortion
- The Samsung Electronics single-stock futures trading volume has increased significantly. In the most recent F 202207, the futures/cash TV ratio soared to 80%, considerably higher than the usual 40% level.
- Local pension funds are doing spot/futures arbitrage quite aggressively on Samsung Electronics, resulting in unintended consequences, including the 1P discount distortion we witnessed on June 16.
- This 1P discount distortion provides a higher spread than futures/spot arbitrage. So, we need to preemptively set up pref arbitrage while closely monitoring Samsung Electronics’ basis.
SOCAR IPO Likely to Be Delayed
- After the market close today, Seoul Economic Daily reported that Socar is likely to delay its IPO to later on.
- Although Socar has not formally announced that it will delay the IPO, we believe that there is a high probability that the IPO will be postponed.
- The overall sentiment on the Socar IPO appears to be negative by many institutional investors, unless the company reduces the IPO price range substantially.
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