In today’s briefing:
- FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Impact Changes
- HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
- United Tractors (UNTR IJ) Buyback – Sure to Be Impactful
- HDFC/HDFC Bank Mega Merger: Foreign Selling Leads to Higher Foreign Room
- WISE Theme Indexes Rebalancing Today: Names in Basket Trade Setup
- StubWorld: Astra Trading Cheap. So Is United Tractor
- Alibaba: Freshippo Seeks Funding at a Lowered $6.0bn Valuation, An Indication of Financial Troubles
- Bear Market Plays – Crypto Exchange Tokens
- Sungeel HiTech IPO – The Highest Ever Bookbuilding Demand Ratio for a Korean IPO
- Euro Stoxx 50 Quiddity Leaderboard for Sep 22: Eurozone’s Annual Big Impact Rebal Trades
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Impact Changes
- The FTSE TWSE Taiwan Dividend+ Index is a funky one that weights stocks by dividend yield. Given dependency on dividends and stock prices, the potential adds/deletes can change often.
- We currently see three changes to the index in December, with another stock very close to deletion zone. Given the difference in market cap and dividend yield, impacts are big.
- There will be large flows on the current index names at the September rebalance due to capping.
HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
- The Holding Foreign Companies Accountable Act (HFCAA) could result in China ADRs being delisted in 2024. The Accelerated HFCAA, if passed, will bring that date ahead to 2023.
- FTSE has announced its implementation plan to migrate the China ADRs in its indices to the local listings using an accelerated schedule.
- Expect a lot more secondary listings/ dual primary listing in Hong Kong over the next few months. The increase free float market cap could keep a lid on prices.
United Tractors (UNTR IJ) Buyback – Sure to Be Impactful
- Yesterday, United Tractors (UNTR IJ) announced a large share buyback. It’s a big buyback but perhaps not as big as the headlines (which say “up to 20%”).
- The buyback is for 5 trillion rupiah which is about 5% of market cap, and will be conducted on-market over the next three months.
- Looking at the early market reaction, my opinion is that the market does not seem to understand the consequences.
HDFC/HDFC Bank Mega Merger: Foreign Selling Leads to Higher Foreign Room
- Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
- Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
- If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.
WISE Theme Indexes Rebalancing Today: Names in Basket Trade Setup
- Today is the rebalancing trading day of WISE’s three major theme indexes. The ETF operator (TIGER) is expected to start rebalancing trading after 2 pm.
- The prediction accuracy of the top market cap stocks is relatively high. So, we should target these big boys with a flow at 0.2x or higher relative to ADTV.
- Names in a basket trade setup: Ecopro BM (247540 KS), SK IE Technology (361610 KS), Solus Advanced Materials (336370 KS), Hana Tour Service (039130 KS), & CJ ENM (035760 KS)
StubWorld: Astra Trading Cheap. So Is United Tractor
- Astra International (ASII IJ) is coming up cheap after United Tractors (UNTR IJ) positively responded to its large share buyback announcement. Yet both companies are looking attractive here.
- Preceding my comments on Astra and United Tractor are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Alibaba: Freshippo Seeks Funding at a Lowered $6.0bn Valuation, An Indication of Financial Troubles
- According to Reuters, Alibaba Group (9988 HK)’s supermarket chain Freshippo is seeking to raise around $400-500m from a fresh funding round which values the loss making company at $6.0bn.
- The fact that Alibaba is willing to dilute ownership at a significant discount to its expected valuation is an additional sign that Alibaba could be running into some financial difficulties.
- Having slashed spending budgets of its smaller investments and more down rounds expected in ventures that are considered too big to fail, we anticipate a challenging time ahead.
Bear Market Plays – Crypto Exchange Tokens
- We use a simple framework to analyse 3 exchange tokens’ value and we find FTT and LEO tokens are decent bear market plays.
- For crypto exchanges, buying the token is the only way for non-VC investors to gain exposure to the growth. Private valuations could differ greatly from the publicly traded valuations.
- While exchange tokens are the easiest to understand and most equity-like in the traditional finance sense, we can also further apply the framework to tokens on other protocols.
Sungeel HiTech IPO – The Highest Ever Bookbuilding Demand Ratio for a Korean IPO
- Sungeel Hitech announced its IPO book building results. The IPO price has been determined at 50,000 won, higher than the high end of IPO price of 47,500 won.
- The demand ratio for Sungeel Hitech IPO was 2,269.7 to 1 which broke all time records in terms of highest ever demand ratio for a Korean IPO.
- Our base case valuation is implied price per won of 70,992 won per share, which represents 42% higher than the IPO price of 50,000 won.
Euro Stoxx 50 Quiddity Leaderboard for Sep 22: Eurozone’s Annual Big Impact Rebal Trades
- The EURO STOXX 50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
- Historically, these Rebalance events have had significant volume impact and they generally involve large cap names.
- In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2022.
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