In today’s briefing:
- Toshiba – As Bad As It Gets?
- Adani Group: Upcoming & Potential Index Impacts
- The MatsuKiyoCocokara (3088) February Flow Show
- Adaro Energy (ADRO IJ) Buyback – A Decent Chunk of 1 Year ADV
- Three Major Reasons Why Foreigner Are Pouring In So Much Capital into Korean Equities in 2023
- HK Electric Investments (2638 HK): MSCI Deletion Could Mark a Bottom
- Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023
- S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete
- Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
- Good Morning Japan |GOLDILOCKS?: Higher Rates, Strong USD=Higher Equities; In JP, Mr Yen Says 120
Toshiba – As Bad As It Gets?
- Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP.
- Despite that, we see some small positive signs across the various industrial segments.
- On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.
Adani Group: Upcoming & Potential Index Impacts
- A decrease in FIF on Adani Enterprises (ADE IN), Adani Transmission (ADANIT IN) and Adani Total Gas (ATGL IN) will result in selling from passive MSCI trackers on 28 February.
- At the last close, Adani Power (ADANI IN), Adani Total Gas (ATGL IN) and Adani Transmission (ADANIT IN) are at risk of being deleted from the MSCI India in May.
- We believe it is unlikely that MSCI will add the Additional Surveillance Measures companies to the list of Ineligible Boards for India, though we cannot rule it out completely.
The MatsuKiyoCocokara (3088) February Flow Show
- MatsukiyoCocokara (3088 JP) has run up quite well in the past year, rising strongly and outperforming Peers significantly. It has been the avatar of Inbound Rebound hopes and dreams.
- Over that time, forward EPS expectations have also improved, but not as much as price. MatsukiyoCocokara used to be cheap to peers on forward PER. Now it is not.
- 28 Feb sees an MSCI inclusion trade to swing 7% of shares from active to passive. Understanding where those come from is key.
Adaro Energy (ADRO IJ) Buyback – A Decent Chunk of 1 Year ADV
- Yesterday, Indonesia’s second largest coal mining business Adaro Energy (ADRO IJ) announced a buyback. This follows another buyback which ended in December 2022.
- The Sep21-Dec22 buyback bought back 1bn shares, but did not spend all the money allocated to the buyback. This new one might buy back a similar quantity.
- Looking at Real World Float is the right frame of reference. And the stock was at a recent low vs a Peer Basket.
Three Major Reasons Why Foreigner Are Pouring In So Much Capital into Korean Equities in 2023
- In this insight, we discuss three major reasons why foreigners are pouring so much capital into the Korean stock market this year.
- In the first two months of 2023 (as of 13 February), foreigners net purchased 8.2 trillion won in KOSPI included stocks.
- These three major reasons include meaningful corporate governance improvements, increasing probability of South Korea being included in the MSCI developed country status, and overall turnaround in the global equity markets.
HK Electric Investments (2638 HK): MSCI Deletion Could Mark a Bottom
- HK Electric Investments (2638 HK) will be deleted from the MSCI Hong Kong Index at the close on 28 February. This was largely expected.
- We estimate passive MSCI trackers will need to sell 172.3m shares (US$111m; 19.1 days of ADV to trade). That is a lot. But there are pre-positions on the stock.
- HK Electric Investments (2638 HK) has underperformed its peers and now trades at a lower price to book. There could be outperformance post the MSCI deletion.
Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023
- We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. With regards to the upcoming KOSPI 200 rebalance, we like the following long-short trading strategy.
- We would short a basket of potential exclusions from KOSPI 200 rebalance which would include the bottom 5% of KOSPI 200 index (10 stocks).
- We would go long a basket of potential inclusions in KOSPI 200 rebalance which include four stocks including Dentium, Jeju Air, Samyang Foods, and DGB Financial.
S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete
- We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
- On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
- Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.
Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
- It has been reported that Kakao has hired local brokerage firms to discuss the details of another tender offer of SM Entertainment shares (at more than 130,000 won).
- We believe that this has been the key reason why SM Entertainment’s shares rose an additional 5% on 15 February.
- We believe that eventually Kakao Group will win the M&A fight for SM Entertainment and shares of SM could rise further in the coming weeks.
Good Morning Japan |GOLDILOCKS?: Higher Rates, Strong USD=Higher Equities; In JP, Mr Yen Says 120
- OVERSEAS. SPX Rise as Cycicals/Tech bid; Higher Rates; Strong USD, No problem ! Market seems to have concluded that higher rates+strong economy is a workable outcome.
- JAPAN. NKY Futs +0.4% vs Cash; USDJPY weakens to 134.1; Weak Yen Narrative to dominate; Do not say to “Mr Yen” who sees 120 ; BULLISH Inbound but priced in
- DAILY NUGGET. BayCurrent Consulting (6532) – Still lot of tailwinds..still BULLISH.
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