In today’s briefing:
- Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning
- Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)
- India: March Rebalance Announcement Tomorrow; Round-Trip Trade Over US$2.5bn
- S&P/ASX Index Rebalance Preview: Changes Stable as Adds Outperform Deletes Bigly
- Alibaba – How to Position Post Earnings Amid Sticky Volatility
- Nifty IT Index Rebalance: Oracle Financial Services Takes a Beating but Replaces L&T Tech
- Hang Seng Internet & IT Index Rebalance: Five Changes with First De-SPAC Listing In
- Mayne Pharma (MYX AU): Cosette Pharma’s Binding Offer at A$7.40
- #107 India Insight: PhonePe Plans IPO, Adani Sees Growth, Gujarat Budget Boosts Economy
Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning
- The changes to the Nikkei 225 (NKY INDEX) as part of the March rebalance should be announced in just over 2 weeks. We expect 2-3 changes at the review.
- The forecast adds have massively outperformed the forecast deletes and the Nikkei225 Index over every time period going back 3 months with the largest outperformance in the last month.
- Positioning appears to be stretched in one forecast add while there appears to be under positioning in a couple of the forecast deletes.
Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- Alibaba Group Holding (9988 HK) stock has rallied bigly over the last month and has gained 55% over that period.
- That has led to Alibaba‘s weight in the HSI INDEX, HSCEI INDEX, HSTECH INDEX and HSIII Index rising above the cap of 8%/12% and passives will sell on 7 March.
- We estimate passive trackers will need to sell US$1.2bn of stock due to capping. Shorts have been increasing, and quarterly results will be announced on 20 February.
Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)
- Hang Seng Indexes announces changes to the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index, HSIII Index and HSCI Index (among others) post market close today.
- The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.
- Capping will lead to most inflows to Meituan (3690 HK) while the largest outflows will be from Alibaba Group Holding (9988 HK) and Xiaomi Corp (1810 HK).
India: March Rebalance Announcement Tomorrow; Round-Trip Trade Over US$2.5bn
- The Index Maintenance Sub-Committee of NSE Indices will meet on 21 February to conduct a semi-annual and quarterly review of stocks in various Nifty equity indices.
- The changes will be announced after market close tomorrow and will be implemented at the close of trading on 28 March.
- Based on the forecast index changes and capping changes for a few indices, the round-trip trade will be over US$2.5bn and many stocks will have over 0.5x ADV to trade.
S&P/ASX Index Rebalance Preview: Changes Stable as Adds Outperform Deletes Bigly
- Nearing a few days left in the review period, there could be 39 adds/deletes across the S&P/ASX family of indices in March.
- Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
- Except for the S&P/ASX 200 (AS51 INDEX) that is heavily tracked, the performance of the forecast changes to the other indices has been very stable with adds outperforming deletes bigly.
Alibaba – How to Position Post Earnings Amid Sticky Volatility
- Alibaba had a super charged move this week, risking 14.56% on its earnings release.
- We look at how price movement and volatility evolve in the month after earnings releases.
- Recommendations are made on how to position through options in this environment of enhanced volatility.
Nifty IT Index Rebalance: Oracle Financial Services Takes a Beating but Replaces L&T Tech
- In line with our forecast, Oracle Financial Services (OFSS IN) replaces L&T Technology Services Limited (LTTS IN) in the Nifty IT Index (NSEIT INDEX) at the March rebalance.
- L&T Technology Services (LTTS IN) is also being excluded from the F&O segment at the close on 27 March. Open interest is ~900k shares and there will be unwinding.
- Passive trackers will need to trade between 0.5-0.6x ADV in the stocks. Impact increases to 1-2 days of delivery volume.
Hang Seng Internet & IT Index Rebalance: Five Changes with First De-SPAC Listing In
- There will be 5 changes for the Hang Seng Internet & Information Technology Index (HSIII Index) at the March rebalance. There is one surprise for us with Synagistics being added.
- Estimated one-way turnover at the rebalance is 6.5% resulting in a round-trip trade of HK$3.74bn (US$482m). 4 stocks will have over 1x ADV to trade.
- Horizon Robotics (9660 HK) is an add to the HSIII, Hang Seng TECH Index and HSCI. Inclusion in Southbound Stock Connect will take place in May.
Mayne Pharma (MYX AU): Cosette Pharma’s Binding Offer at A$7.40
- Mayne Pharma (MYX AU) entered a scheme implementation deed with Cosette Pharma at A$7.40 per share, a 36.8% premium to the undisturbed price.
- The offer is conditional on shareholder and FIRB approval. The vote is low-risk as the two largest shareholders are supportive.
- The offer is reasonable but not a knockout bid. At the last close and for an end-of-May payment, the gross/annualised spread was 2.8%/11.0%.
#107 India Insight: PhonePe Plans IPO, Adani Sees Growth, Gujarat Budget Boosts Economy
- PhonePe, India’s largest digital payments player, begins IPO preparations after redomiciling to India in December 2022. With impressive growth and profitability.
- Adani Group reassures investors and creditors with strong cash reserves and double-digit EBITDA growth.
- Gujarat’s Rs 3.70 trillion budget for 2025-26 includes no new taxes. Focus is on infrastructure, green growth, human development, and economic activities, with new projects.
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