In today’s briefing:
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in June & September
- MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Identifying Potential Changes
- HDFC/HDFCB Merger: Impact on Bank Nifty
- HSI Index Rebalance: Yippee! Finally at 80!
- HSTECH Index Rebalance: Float & Capping Changes Lead to US$768m Two-Way Trade
- HUUUGE Ushio (6925) Buyback
- JAPAN BUYBACKS: A Very Big Week
- SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer
- A Crash in 2 More Korean Stocks Related to CFD Derivatives: Margin Calls Again
- EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- China Cooling?
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in June & September
- There is only one new listing as a potential inclusion to the HSCI in June. If added to the HSCI, it will also be added to Southbound Stock Connect.
- There are 18 potential inclusions and 19 potential deletions for the HSCI in September. There are a few close adds and there could be another 5 deletions on Prolonged Suspension.
- A lot of the potential deletions have large Southbound holdings. With all the stocks becoming sell-only, there could be unwinding of some positions over the next couple of months.
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Identifying Potential Changes
- The review period for the June rebalance ends on 31 May. Announcement of the changes will be made on 9 June with implementation at the close on 16 June.
- There could be 4 or 5 A-share additions due to their inclusion in Northbound Stock Connect. That in turn expands the universe and could result in up to 3 deletions.
- If all changes go through as expected, estimated one-way turnover at the rebalance will be 15.1% resulting in a one-way trade of US$99m.
HDFC/HDFCB Merger: Impact on Bank Nifty
- The HDFC Bank (HDFCB IN) / HDFC Limited (HDFC IN) merger will result in capping and funding changes on the Nifty Bank Index (NSEBANK INDEX) constituents.
- We estimate one-way turnover of around 8.4% resulting in a one-way trade of INR 21,865m (US$266m) at the time of merger implementation.
- The impact in terms of ADV is less than 1x on all stocks, but the impact in terms of delivery volume is higher than 1x on a few stocks.
HSI Index Rebalance: Yippee! Finally at 80!
- The Hang Seng index committee has added four stocks to take the number of Hong Kong Hang Seng Index (HSI INDEX) constituents to 80. A year late, but we’re there!
- The next leg of the increase in the number of index constituents will take us up to 100. There is no timeline, so this should take a couple of years.
- Estimated one-way turnover is 2.93% leading to a one-way trade of HK$5.7bn (US$730m). All adds will have over 2x ADV to buy from passive trackers.
HSTECH Index Rebalance: Float & Capping Changes Lead to US$768m Two-Way Trade
- There are no constituent changes for the Hang Seng Tech Index (HSTECH INDEX) in June but there are some free float changes and a bunch of capping changes.
- Estimated one-way turnover is 3.2% leading to a one-way trade of HK$3bn (US$384m). There are 3 stocks with over 1 day of ADV to trade.
- Trip.com (9961 HK) has over 1x ADV to buy from Hang Seng Tech Index (HSTECH) trackers. The stock is also an add to the Hong Kong Hang Seng Index (HSI).
HUUUGE Ushio (6925) Buyback
- Ushio Inc (6925 JP) reported earnings on 11 May, with revenue +17.6% on the year, OP +21.4%, and NP +8.7% on the year. Div was unchanged at ¥50/share.
- Forecasts are for revenue +7.4%, OP -21.2%, and NP -27% (¥90.6/EPS). But importantly, the company also announced a HUUUUUGE Buyback.
- Buying ≦20mm shares (17.0%) spending ≦¥30bn from 29May2023 to 10May2024. That’s 13.3% at the 12 May close. How this will work is unknown. There’s less detail than one would want.
JAPAN BUYBACKS: A Very Big Week
- This past week, nearly 150 companies in Japan announced buyback programmes totalling ¥2.1trln. 3 Tenders, 26 ToSTNeT-3 buybacks (including at least 5 delayed starts).
- The median on-market buyback was 2.40% of shares, the average 2.9% (both measured as practical maxima at announcement. Median/Average % of ADV was 7.6/9.2%.
- My prediction that this will be a record year for stock buybacks still stands.
SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer
- SBI Shinsei Bank (8303 JP) has recommended SBI Holdings (8473 JP)’s tender offer of JPY2,800 per share, a 12.6% premium to the undisturbed price (11 May).
- There is no minimum acceptance condition. SBI and irrevocables from government entities represent 73.02% of voting rights, ensuring the implementation of tender squeeze-out procedures.
- The special committee failed to unanimously recommend the offer. Minorities will feel short-changed as the outcome is predetermined and the offer tends to favour the government shareholders.
A Crash in 2 More Korean Stocks Related to CFD Derivatives: Margin Calls Again
- In this insight, we discuss two stocks in Korea, Dong Yang P&F and Shindaeyang Paper, whose share prices declined sharply on 12 May.
- It appears that the main culprit behind their collapse in share price appears to be unwinding of the excessive leverage (especially CFD derivatives trading).
- Post the sharp decline in their share price for DYPNF and Shindeyang Paper on 12 May, further downside is likely on these stocks in the coming weeks.
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- China Cooling?
- 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
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