In today’s briefing:
- MSCI Japan Index Rebalance Preview: Only Deletions for Now
- The TOPIX Liquidity Factor Adjustment – Still a Trade To Do
- MSCI Korea May SAIR Screening Status: 2 Certain Adds, 3 Delete Candidates, & 1 Tricky
- Activist Murakami-San Goes Substantial on Cosmo Oil (5021)
- MSCI May Index Rebalance Preview: Potential Listing Switches & Implications
MSCI Japan Index Rebalance Preview: Only Deletions for Now
- As of the close on 1 April, we see 13 potential deletions from the MSCI Japan Index. There could be changes in the next couple of weeks as prices change.
- The potential deletions are Tokyo Century, Pola Orbis, Miura, Lion Corp, Tsuruha Holdings, Hino Motors, Benefit One, Stanley Electric, Ryohin Keikaku, Sohgo Security Services, Orix JREIT, Rinnai Corp and Lawson.
- Most of the stocks will have over 5 days of ADV to sell from passive funds and there has been an increase in short interest over the last month.
The TOPIX Liquidity Factor Adjustment – Still a Trade To Do
- Every year in April there are two TOPIX rebalance changes – the FFW review for July-September FY-end companies, and the annual liquidity factor adjustments.
- This year, the former is replaced by the TOPIX FFW Methodology Change for the new Market Structure. This is a big change, but it will not necessarily overwhelm the latter.
- Janaghan Jeyakumar, CFA‘s piece of 5 weeks ago discussing the Liquidity Factor basket has seen generally good performance. There are two days to go.
MSCI Korea May SAIR Screening Status: 2 Certain Adds, 3 Delete Candidates, & 1 Tricky
- Although this is a semi-annual IR, the number of additions won’t be large. At this point, only Hyundai Heavy Industries (329180 KS) and KT Corp (030200 KS) are screened.
- None of the exclusion candidates are below the lower buffer at this point. So, those with the lowest market caps during the review period will be excluded from the Index.
- Based on the current share prices, the following three existing constituents have the smallest market cap: Green Cross (006280 KS), Alteogen Inc (196170 KS), and SK Chemicals Co (285130 KS).
Activist Murakami-San Goes Substantial on Cosmo Oil (5021)
- Four weeks ago, the sovereign wealth fund of the UAE sold out of a 15% position in Cosmo Energy Holdings (5021 JP) they’d held for 15yrs.
- Today we see noted Japanese activist Murakami Yoshiaki and affiliates have purchased 5+% of the company, including a large chunk the day after the block trade.
- Oftentimes he buys stakes in industries where consolidation is overdue and/or natural. Construction has been one such sector. Refiners probably need consolidation too, but it’s not clear it’s easy here.
MSCI May Index Rebalance Preview: Potential Listing Switches & Implications
- We expect Baidu (9888 HK), Bilibili (9626 HK), GDS Holdings Ltd (9698 HK) and New Oriental Education & Technology Group (9901 HK) to replace their ADRs in the MSCI indices.
- The subsequent increase in CCASS shares and/or shares held outside the ADR depositary will result in an increase in the weights of the stock in the HSCEI INDEX and HSTECH INDEX.
- The higher index weight for Baidu (9888 HK) in the HSCEI and potential inclusion of Bilibili (9626 HK) will add downward pressure on the HSCEI 2022/23 dividend steepener.
Before it’s here, it’s on Smartkarma
