In today’s briefing:
- China: Huge ETF Inflows & Impact on Stocks
- Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
- Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
- KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
- Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
- HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)
- VNG Pre-IPO – The Positives – Vietnam’s Mini-Tencent
- Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts
- Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional
- Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion
China: Huge ETF Inflows & Impact on Stocks
- Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
- Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
- The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.
Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
- Jio Financial Services (JIOFIN IN) started trading on 21 August following its demerger from Reliance Industries (RIL IN). The stock was locked limit down on its first four trading days.
- Passive NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers hold Jio Financial Services (JIOFIN IN) stock and will need to sell over the next few days.
- We estimate passive trackers will need to sell around 188m shares (US$487m) of Jio Financial Services (JIOFIN IN) next week and the stock could head lower in the short term.
Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
- Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
- What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
- Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail.
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
- Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
- The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
- The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.
Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
- The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
- There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
- Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)
- The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
- The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
- The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).
VNG Pre-IPO – The Positives – Vietnam’s Mini-Tencent
- Vng (VNG US), Vietnam’s leading internet platform, aims to raise up to US$300m in its US IPO.
- VNG is Vietnam’s leading homegrown digital ecosystem, as per the company, with diverse product offerings across games, communications and media, fintech and other opportunities
- In this note, we talk about the positive aspects of the deal.
Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts
- KB Asset Management has announced the release of an inverse ETF, containing the top 10 core stocks in the secondary battery sector.
- Given the substantial fluctuations in SSF trading volume in Korea, the flow increase of this ETF might temporarily lead to an unusually high level of backwardation.
- Also, we may observe a phenomenon known as ‘wag-the-dog’ as the flow of this inverse ETF could act as a triggering factor for a temporary spark.
Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional
- Shougang Fushan Resources (639 HK) shareholders approved the partial offer to acquire a maximum of 125.0 million shares (2.47% of outstanding shares) at HK$2.40 per share and the whitewash waiver.
- The partial offer is now unconditional and will close on 12 September. Considering the irrevocables not to tender, a 100% minority participation rate implies a minimum proration of 2.98%.
- If the partial offer’s acceptance rate mirrors today’s general meeting minorities participation rate of 63.6%, it would imply a minimum proration of 4.69%.
Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion
- Last week I wrote about another situation, noting Equity Offering Into TOPIX Inclusion is a standard construct. Here we have another.
- DX and HR Support company Core Concept Technologies Inc (4371 JP) today announced a large (it ups Real World Float by 64%, and is 33 days of ADV) secondary offering.
- The “reason” for the offering mentions a desire to move to TSE Prime in future.
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