In today’s briefing:
- CSI500 Index Rebalance Preview: 50 Adds/Deletes in December
- ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
- MSCI India November SAIR: Potential Changes & Higher Foreign Holding
- FTT/FTX- Another Inflection Point in the Crypto Market Waiting to Happen?
- Assessing LG Energy Solution’s Flow Imbalance Situation
- Toshiba – Worse Than Even We Thought
- EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
- Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
- Brilliance China: Parent Restructuring Overhang May Continue, but Dividends Itself Provide Upside
- ECM Weekly (13th Nov 2022) – I-Tail, Blibli, Nykaa, PB Fin, Five Star, Archean, GDRs, Axis Bank
CSI500 Index Rebalance Preview: 50 Adds/Deletes in December
- With a day left in the review period, we forecast 50 changes (the maximum permitted) for the CSI500 Index at the close on 9 December.
- We estimate a one-way turnover of 13.53% at the December rebalance leading to a one-way trade of CNY 8.01bn. The Materials, Consumer Discretionary and Information Technology sectors are net gainers.
- The potential adds and potential deletes have performed in line over the last few weeks, and we’d look to position for outperformance post the end of the review period.
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
- At the end of the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
- Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.
- The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.
MSCI India November SAIR: Potential Changes & Higher Foreign Holding
- Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
- Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
- Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.
FTT/FTX- Another Inflection Point in the Crypto Market Waiting to Happen?
- On Nov 3, it was leaked that Alameda seemed to have a weaker than expected balance sheet with $7.6 bn of loans and a relatively illiquid portfolio of assets.
- Alameda, a large proprietary crypto trading firm, did not officially comment but its CEO Caroline stated on Twitter that most of the loans were repaid.
- The potential linkages between Alameda and FTX, a large crytpo exchange, both controlled by Sam Bankman-Fried, are of utmost concern and has riled the crytpo market.
Assessing LG Energy Solution’s Flow Imbalance Situation
- LG Energy’s virtually locked-up shares rise to nearly 95%. This should at least partially explain why its price has substantially outperformed the KOSPI in recent months, showing strong downward rigidity.
- Additional long-term money equivalent to 2-3% of SO can come in for 5% float shares. There is no precedent for a float crunch of this magnitude among top-cap local stocks.
- It seems necessary to reconsider taking a shorting position for LG Energy even after the 9th of next month when the short-term passives inflow situation is completed.
Toshiba – Worse Than Even We Thought
- Toshiba’s 2Q results were not pretty with OP of just ¥7.5bn despite strong revenues of ¥855bn, weak orders and a downward revision to guidance as we predicted.
- While we expected weakness, every downside risk we flagged came through and in greater force than we had predicted.
- It is almost as if some divine force completely unrelated to management is hinting that you should go for the JIP bid if and when it comes through.
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
- Weekly summary of vol changes and moves across Global Markets
- Analysing ATM volatility and skew changes over the last 5 days
- We suggest a few trades to take advantage of the implied vol surfaces
Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
- On Friday, MSCI announced the changes to its indices as part of the November SAIR. Most changes were expected, but there were a few surprises.
- Friday was also the review cutoff for the FTSE Dec QIR. Next Friday has announcement of changes to the Hang Seng, Sensex and FTSE indices.
- Big inflow to iShares Core MSCI Emerging Markets ETF (IEMG US) during the week as inflows to IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continue.
Brilliance China: Parent Restructuring Overhang May Continue, but Dividends Itself Provide Upside
- No substantive progress is achieved on Brilliance Group’s bankruptcy restructuring so far.
- Besides estimated max Rmb6 per share, or HKD6.5 per share special dividend 2022E, shareholders may get more cash dividends in the next few years
- Our enterprise value analysis shows Brilliance China’s fair value could be as high as HHD21.9 per share, including estimated HKD6.5 per share special dividend 2022E.
ECM Weekly (13th Nov 2022) – I-Tail, Blibli, Nykaa, PB Fin, Five Star, Archean, GDRs, Axis Bank
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Indian IPOs continue to trickle in, while other regions appear to be waking up from their slumber.
- There were a few GDR issuances this week, along with another placement in Axis Bank Ltd (AXSB IN) and a number of lock-up expiries.
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