In today’s briefing:
- IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
- Index Rebalance & ETF Flow Recap: MSCI, ASX, STAR50, China 50, NIFTY100, SMM SP, Pertamina Geo IPO
- CSI500 Index Rebalance Preview: Potential Adds Continuing to Outperform
- HYBE to Acquire a 39.8% Stake in SM Entertainment
- Big Link REIT (823 HK) Rights Offering
- Sabana Industrial REIT – Offer Goes Live, Worth A Look
- MSCI Korea Index Rebalance: Kakao Pay Included
- KOSPI Size Index Migration: Names to Trade as We Are 30D Towards Effective
- Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.
IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
- There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
- Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ).
- With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.
Index Rebalance & ETF Flow Recap: MSCI, ASX, STAR50, China 50, NIFTY100, SMM SP, Pertamina Geo IPO
- There were some review cutoffs last week as well as the implementation of the PCOMP INDEX, IDX 30 Index, LQ 45 Index and IDX 80 Index.
- The big event in the coming week is the announcement of the MSCI February QCIR on Friday morning Asia time with implementation at the close of trading on 28 February.
- Inflows to iShares Core MSCI Emerging Markets ETF (IEMG US) continue while IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continues to see redemptions.
CSI500 Index Rebalance Preview: Potential Adds Continuing to Outperform
- Three quarters of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 June.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 11.47% at the June rebalance resulting in a one-way trade of CNY 10.11bn.
- The potential adds have outperformed the potential deletes and the CSI500 Index over the last few weeks. There could be more outperformance till nearer the end of the review period.
HYBE to Acquire a 39.8% Stake in SM Entertainment
- On 10 February (prior to market open), Seoul Economic Daily reported that HYBE will conduct a tender offer of SM Entertainment shares taking over the controlling ownership of the company.
- HYBE agreed to acquire a 14.8% stake from SM Entertainment’s founder Lee Soo-Man at 120,000 won per share, which represents a 21.8% premium to the closing price on 9 February.
- HYBE is also conducting a tender offer to minority shareholders and it plans to acquire up to 25% additional shares at 120,000 won per share, representing 717 billion won.
Big Link REIT (823 HK) Rights Offering
- After being halted this morning before the start of trade, post-close, Link REIT (823 HK) announced a fully-underwritten Rights Offering.
- The Rights Offering intends to raise HK$18.8bn issuing 1 Right for every 5 Shares held, at a subscription price of HK$44.20, a 26% discount to TERP.
- This will take an already under-levered REIT and add more capital to it. And there is going to be selling pressure at some point.
Sabana Industrial REIT – Offer Goes Live, Worth A Look
- The Sabana Industrial REIT (SSREIT SP) 2022H2 dividend went ex- on 6 February 2023, setting the Offer to be lowered. The Offer by Volare was lowered. Docs out Friday night.
- The S$0.465 Offer, adjusted for dividends (to be paid 27 March (cash or DRP units)), is now S$0.4504 per unit. The first close is 10 March 2023.
- Sabana has underperformed a basket of slightly higher beta peers by 1+% since the day before the announcement. Watch pro-ration risk.
MSCI Korea Index Rebalance: Kakao Pay Included
- MSCI announced its MSCI Korea index rebalance on 10 February. Kakao Pay (377300 KS) was the only company to be included in the MSCI Korea index.
- There were also nine Korean companies included in MSCI Small Cap index including Osstem Implant, DearU, and ISC Co.
- Hanwha Aerospace (012450 KS) and Ecopro Co Ltd (086520 KS) are higher probability potential candidates for inclusion in MSCI Korea Index rebalance in May.
KOSPI Size Index Migration: Names to Trade as We Are 30D Towards Effective
- Amorepacific Group is more likely to remain in LargeCap due to its share price surge earlier this year. Instead, Hyundai Autoever will likely face a large→mid migration.
- Of Small→Mid migrants. Sebang and Kum Yang deserve attention, as they will rank high in the Mid due to the rapid market cap growth over the past six months.
- YTD performance seems to have a higher correlation with individual sector performance than causality with this event. So, there is still a circumstantial probability that justifies the trade.
Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
- FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
- Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.
JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.
- Engineering & Construction firm Jgc Corp (1963 JP) on Friday announced 9M results. Full-Year forecasts were revised, with revenue lowered, but OP, RP, and NP unchanged.
- The company then also announced a ToSTNeT-3 buyback of up to 4.77% of shares out for ¥20bn to be executed Monday 13 February pre-open. But details matter.
- Four Important Takeaways: 1) sometimes a ToSTNeT-3 buyback is not a ToSTNeT-3 buyback, 2) that can be a good sign, and 3) sometimes Adjusted EV vs Adjusted EBITDA is OK.
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