In today’s briefing:
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March
- Index Rebalance & ETF Flow Recap: STAR50, SET50, AMFI, KOSDAQ150
- Index Rebalance & ETF Flow Recap: HSCEI, HSCI, KRX New Deal, NIFTY50, NEXT50, CNXBANK
- HSCEI Index Rebalance Preview: Zhongsheng (881 HK) Should Go This Time
- SENSEX Index Rebalance Preview: Likely Wipro Deletion Opens an Index Spot
- Fujitsu (6702 JP): Horizon Scandal Blows Up
- Fuji Soft (9749 JP): A Potential Privatisation Faces Challenges
- TSMC Finishes 2023 With A Flourish
- Genting Singapore: A Surprising Value Buy at $1.0l Sgd Driven by Post Covid Catalysts Ahead Die 2024
- Index Rebalance & ETF Flow Recap: HSI, LQ45, FXI, 2823 HK, SENSEX
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March
- We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
- We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
Index Rebalance & ETF Flow Recap: STAR50, SET50, AMFI, KOSDAQ150
- The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
- The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
- There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US).
Index Rebalance & ETF Flow Recap: HSCEI, HSCI, KRX New Deal, NIFTY50, NEXT50, CNXBANK
- Posco DX (022100 KS) continues to drop following its section transfer from the KOSDAQ market to the KOSPI market. Short interest in the stock nearly halved in December.
- There were big net inflows to China ETFs with creations in CSI 300 Index ETFs and redemptions in ETFs tracking the CSI 500 Index and CSI 1000 Index.
- Creations continued in the iShares Emerging Markets ex China (EMXC US) ETF with units outstanding reaching a new high.
HSCEI Index Rebalance Preview: Zhongsheng (881 HK) Should Go This Time
- Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
- With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion.
- Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.
SENSEX Index Rebalance Preview: Likely Wipro Deletion Opens an Index Spot
- Over a third of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
- There are a bunch of stocks that could be added to the index as a replacement and price changes over the rest of the review period are important.
- Passive trackers will need to trade over 1x ADV and over 7x of delivery volume on the index changes, so there will be decent impact on the stocks.
Fujitsu (6702 JP): Horizon Scandal Blows Up
- The UK Post Office “Horizon Scandal” has blown up, putting Fujitsu’s computer system failure on the front pages and on the agenda of Parliament and Prime Minister Sunak.
- Fujitsu UK has been awarded £6.8bn in public contracts since 2012. The Justice Secretary is now talking about compensation for the enormous financial and personal damage caused.
- Fujitsu’s share price is coming off a new all-time high reached in December. The amount of compensation and loss of potential future contracts is substantial but uncertain.
Fuji Soft (9749 JP): A Potential Privatisation Faces Challenges
- Fuji Soft Inc (9749 JP) has disclosed that in response to a request from 3D Investment Partners, it has received non-binding privatisation proposals from several private equity funds.
- A privatisation proposal would facilitate the exit of 3D, the largest shareholder representing 21.45% of outstanding shares, which has waged an activist campaign since 2022.
- A binding privatisation proposal is challenging as the shares have hit a ten-year high, lofty multiple, and the Board seems to prefer its corporate value enhancement measures.
TSMC Finishes 2023 With A Flourish
- Q423 revenues amounted to NT$625,529. In US$ terms, using TSMC’s projected exchange rate of 32, this translates to $19.55 billion, a ~13% increase QoQ, and a 2% decrease YoY.
- FY 2023 revenues amounted to NT$2,161.74 billion, down 4.5% YoY. In US$ terms, this amounted to $69.1 billion, an 8.8% decrease YoY and the first such YoY decrease since 2009
- While we foresee Q124 revenues being down 5-10% QoQ, we expect full year 2024 revenues to grow in the range of 5-10% YoY.
Genting Singapore: A Surprising Value Buy at $1.0l Sgd Driven by Post Covid Catalysts Ahead Die 2024
- Parent Genting Berhad Malaysia flagship properties doing well but many of its global holdings spur questions about asset allocation strategy.
- Genting Singapore, its integrated resort property Sentosa presents a strong buy story not only because it is undervalued here but because its prospects post covid are strong.
- GB’s US footprint by contrast poses questions about the hurdle rate of those huge investments to date given the intense competitive pressures in mature gaming markets.
Index Rebalance & ETF Flow Recap: HSI, LQ45, FXI, 2823 HK, SENSEX
- The review period for the next rebalance of a global index kicks off this week and that is where a lot of eyes will be focused.
- There were big inflows to ETFs tracking the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) while there were redemptions from the Hang Seng H Share Index ETF (2828 HK).
- Inflows continue for iShares Emerging Markets ex China (EMXC US) while there were outflows from iShares ACWI ETF (ACWI US).
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