In today’s briefing:
- FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive
- FTSE EPRA Nareit Index Rebalance: Now One Add for Korea
- S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year
- NRI (4307) Likely Prices Today – Expect Weakness Then Strength
- Monadelphous (MND AU) Is The S&P ASX 200 ADD – There’s a Trade Here
- Taiwan Div+ Index Dec22 Rebal Trade – +7.1% Now; Amend and HODL
- Daiei Kankyo (9336): TSE Prime IPO and Index Demand
- Nikkei the First to Crack
- Where Does Melco’s Discount To NAV Go From Here?
- HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)
FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive
- There are 26 inclusions and 5 deletions for the index resulting in a one-way turnover of 46.3% and a one-way trade of TWD 79.52bn (US$2.6bn). That is HUGE!
- There at 14 stocks that have over 5 days of ADV to buy from passive funds while there are 20 stocks with more that 5 days of ADV to sell.
- Over the last 2 weeks and 4 weeks, short interest has decreased on most of the adds while increasing on all the deletes and most of the stocks with outflows.
FTSE EPRA Nareit Index Rebalance: Now One Add for Korea
- SK REITs (395400 KS) will now be added to the FTSE EPRA Nareit Global Real Estate Index Series after market close on 16 December.
- Based on the passive assets estimated to track the FTSE EPRA Nareit Index, there could be around 3.11m shares (US$11.3m; 19.2x ADV) to buy on SK REITs (395400 KS).
- SK REITs (395400 KS) trades expensive as compared to ESR Kendall Square REIT (365550 KS) and we’d use an index inclusion driven rally to pare positions in the stock.
S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year
- Pilbara Minerals (PLS AU) will replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) will replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
- The largest impact from passive trading will be on Monadelphous (MND AU) while the largest flow will be on Pilbara Minerals (PLS AU).
- There appears to be significant short positioning on Lendlease Group (LLC AU) as cumulative excess volume and short interest continue to rise.
NRI (4307) Likely Prices Today – Expect Weakness Then Strength
- On 25 November Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would conduct a Secondary Offering of NRI Shares.
- The sale is 36.97mm shares plus a greenshoe. It’s a big deal ($1bn) including greenshoe after JPY has just strengthened, but underperformance both before and after announcement sets up well.
- Expect weakness today, but the stock is now at a two-year low, and the PER multiple premium is now at the lowest 3mo average premium in 5yrs. Expect retail buying.
Monadelphous (MND AU) Is The S&P ASX 200 ADD – There’s a Trade Here
- Monadelphous (MND AU) will be added to the S&P ASX 200 Index on 16 December 2022.
- This is not a surprise. It has been the lead contender for a December ADD slot since the day after the September rebalance was completed (see here).
- There is a fair bit of volume to buy, and there are pair trades to do.
Taiwan Div+ Index Dec22 Rebal Trade – +7.1% Now; Amend and HODL
- This trade is based on historical patterns described in the FTSE TWSE Taiwan Dividend+ Index: A Rare Gem for Index Rebal Trades AND additional considerations.
- Those additional considerations were discussed in Taiwan Dividend+ Index Rebal Trades – Offsets Other Index Risk and subsequent insights. So far, the trade is +7.1% since 26 October.
- The announcement of FTSE TWSE Dividend+ names described in FTSE TWSE Dividend+ Dec 22: Confirmed Index Changes and Revised Capping Flow Expectations changes the basket slightly for the home stretch.
Daiei Kankyo (9336): TSE Prime IPO and Index Demand
- Daiei Kankyo (9336 JP) – designer, builder, operator/maintainer of waste management/recycling, soil purification, waste-to-energy, and similar infrastructure – will IPO on the TSE Prime market on 14 December.
- The business is somewhat unexciting, but likely a non-growing, non-shrinking business which could roll up others.
- The TSE Prime listing will mean it will have a TOPIX Inclusion at the end of January.
Nikkei the First to Crack
- Japan has been a top long in Asia, the rising wedge had us reducing our long. Friday saw a pronounced RSI bear wedge break and price crack.
- Japan faces rotation pressure into core Asia and will shift Japan into the bear camp on a muted recovery attempt.
- Japan’s macro cycle remains trapped in a sideways range. Buy support near 26,000 and sell resistance near 29,000.
Where Does Melco’s Discount To NAV Go From Here?
- On the 26 November, Macau’s government renewed the concession periods of the city’s six incumbent gambling concessionaires for another 10 years.
- Genting Malaysia (GENM MK), a last-minute interloper, failed in its bid to secure a license. It scored lowest under the government’s bidding review. MGM China (2282 HK) topped the scoresheets.
- As with all incumbents, Melco International (200 HK) and Melco Resorts & Entertainment (MLCO US) eked out strong gains following the renewal. Melco’s current discount to NAV is currently 20%.
HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)
- Nearing the end of the review period for the March rebalance, we see China Shenhua Energy Co H (1088 HK) replacing China Feihe (6186 HK) in the HSCEI INDEX.
- Estimated one-way turnover is 1.64% resulting in a one-way trade of HK$1.02bn with passives needing to buy 1x ADV on China Shenhua Energy and selling 1.7x ADV on China Feihe.
- The change will lead to an increase in the fair value of the HSCEI 2023 dividend futures by over 3 DIPS. Could be more if China Shenhua pays a special.
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