In today’s briefing:
- Sembcorp Marine & Keppel O&M: STI Inclusion Possibility & Other Index Flow
- STAR50 Index Rebalance Preview: 5 Changes Forecast as Review Period Ends
- S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete
- Adways (2489 JP) – Really, Really Big News for a SmallCap
- Adani Group – MSCI’s Special Treatment Gets More Special, and Partially Delayed, and Possibly Worse
- Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Index Corporate Actions for Hanwha Solutions Split: Passive Flow Size & Schedule
- Jiangnan Group (1366 HK): Powering Up
- Top Asia Shorts
- Mori Trust Sogo REIT (8961) Small Index Upweight on 27 Feb
Sembcorp Marine & Keppel O&M: STI Inclusion Possibility & Other Index Flow
- The Sembcorp Marine (SMM) EGM is scheduled for 16 February. If approved by shareholders, the Asset Co transaction and completion of the KOM restructuring will be done by 28 February.
- We expect no market trade from FTSE trackers, buying from MSCI trackers, while there is a question mark over treatment in the FTSE Straits Times Index (STI) (STI INDEX).
- There could be selling in Sembcorp Marine (SMM SP) from active Keppel Corp (KEP SP) shareholders and that could have a bigger impact on the stock.
STAR50 Index Rebalance Preview: 5 Changes Forecast as Review Period Ends
- The review period for the March rebalance ends today. We forecast 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
- We expect the index committee to continue using a 6-month minimum listing history. The impact on the potential deletes is a lot higher than the impact on the potential adds.
- With 5 changes to the index, estimated one-way turnover is 5.1% resulting in a one-way trade of CNY 4,549m. There is a reasonably large reverse funding trade.
S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete
- We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
- On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
- Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.
Adways (2489 JP) – Really, Really Big News for a SmallCap
- Adways Inc (2489 JP) is an ad agency, ad platform, marketing platform, and a variety of sub-platforms serving certain mobile, PC, marketing, and app development niches.
- They released earnings last Friday, but today released other – follow-on information.
- Included was a buyback – up to 5.7mm shares (13.57% of shares out) for up to ¥2bn (9% of mktcap) – over the next 5.5 months. Seems big. Look closer.
Adani Group – MSCI’s Special Treatment Gets More Special, and Partially Delayed, and Possibly Worse
- On 8 February, MSCI announced special treatment for the Adani names in its indices, discussed in Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case.
- Late on 15 February they came out with a revision of their implementation – which was problematic because some stocks had gone limit down many days in a row.
- The stocks responded. But it clearly isn’t an easy implementation, and it clearly isn’t over.
Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it.
- Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position.
- What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter.
Index Corporate Actions for Hanwha Solutions Split: Passive Flow Size & Schedule
- Hanwha Solutions received shareholder approval for its proposed demerger on February 13. The demerger will split Hanwha Solutions into two separate entities: Hanwha Galleria and Hanwha Solutions.
- Hanwha Solutions will experience a passive outflow of 0.92x ADTV at the closing price on February 24 for KOSPI 200. A similar passive inflow will occur on March 31.
- MSCI Standard will deliver an outflow of 0.43x ADTV at the close on March 31 as the weight of Hanwha Solutions, an existing constituent, will be reduced.
Jiangnan Group (1366 HK): Powering Up
- Jiangnan (1366 HK), a manufacturer of wires and cables for power transmission and distribution systems, was suspended yesterday at lunchtime pursuant to Hong Kong’s Code on Takeovers and Mergers.
- But not before the share price gained 63% on clear news leakage.
- Chu Hui, the chairman, CEO, and major shareholder, mulled taking the private six years ago.
Top Asia Shorts
- After Asian indexes met targets we have now turned negative in a domino sequence.
- Our table pounding inflationary higher USD and higher yield thesis is seeing the dollar on the move with yield in hot pursuit.
- Bull divergence in yield and the USD warn or a multi month rise. This is just the beginning of the pain trade to unwind peak inflation and peak rate positioning.
Mori Trust Sogo REIT (8961) Small Index Upweight on 27 Feb
- Mori Trust Sogo Reit (8961 JP) and Mori Trust Hotel Reit (3478 JP) will merge at the end of this month.
- They pay divs, there is a unit split, then NEWCO.
- If you are in the biz and you care, there is a small index thing to do.
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