In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2023): Ranking, Capping, Funding & Other Changes
- Index Rebalance & ETF Flow Recap: NKY, KOSPI2, New Deal, SET50, MOG Digitech, Syngenta IPO
- KOSDAQ150 Index Rebalance Preview: A Dozen Potential Changes from Now to December
- LQ45 Index Rebalance Preview (July): Review Period Nearly Complete
- HDFC/HDFC Bank Mega Merger: Are We There Yet?
- PCOMP Index Rebalance Preview: Just the Ad Hoc Change
- End of Mandatory Lock-Up Periods for 41 Companies in Korea in July 2023
- HDFC Bank – Ranks 2nd After Merger Compared With Asia Pacific Banks
- Last Week in Event SPACE: Naspers/Prosus, Swire Pacific, NTT, Aussie Tax-Loss Selling
- Index Rebalance & ETF Flow Recap: KQ150, LQ45, PCOMP, HDFC/HDFCB, Delta Electronics, Redox IPO, AMFI
Nikkei 225 Index Rebalance Preview (Sep 2023): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We take another stab at identifying potential inclusions and exclusions.
- There will be a big impact on the potential index changes. Fast Retailing (9983 JP)‘s index weight could be capped and there will be a big funding trade.
- There are many things to watch out for that could affect the impact on the inclusions, including stock splits among potential adds and stepwise inclusion of stocks in the index.
Index Rebalance & ETF Flow Recap: NKY, KOSPI2, New Deal, SET50, MOG Digitech, Syngenta IPO
- There were a couple of ad hoc rebalances in Korea last week for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) and KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY).
- Coming Friday will mark the end of the review period for the next rebalance of the HSI, HSCEI, HSTECH, HSCI, LQ45, PCOMP as well as the SET50 June implementation.
- With Japan indices moving higher, the largest inflows went into ETFs tracking the Nikkei 225 (NKY INDEX) and other local/global indices.
KOSDAQ150 Index Rebalance Preview: A Dozen Potential Changes from Now to December
- Nearly a third of the way through the review period, we see 12 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the December rebalance.
- There could be one change to the index in July/August following Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Market to the KOSPI Market.
- The potential adds have outperformed the potential deletes over the last few months and there could be further outperformance as we go through the review period.
LQ45 Index Rebalance Preview (July): Review Period Nearly Complete
- The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
- Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
- The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.
HDFC/HDFC Bank Mega Merger: Are We There Yet?
- An interview with Deepak Parekh set a bunch of stocks on fire. Then came the HDFC Bank (HDFCB IN) exchange announcement that said the dates were still tentative.
- Indications are that the merger could be effective 1 July and HDFC Limited (HDFC IN)‘s last trading day would be 13 July.
- The merger will have an impact on both HDFC stocks and on other stocks that could be added to the NIFTY Index, NIFTYJR INDEX and SENSEX Index.
PCOMP Index Rebalance Preview: Just the Ad Hoc Change
- With a couple of trading days to the end of the review period, we do not forecast any changes for the Philippines Stock Exchange PSEi Index (PCOMP INDEX) in August.
- However, there could be an ad hoc change if Metro Pacific Investments Co (MPI PM) is delisted. The stock now trades above the tender offer price.
- Bloomberry Resorts (BLOOM PM) is the highest ranked non-constituent and the stock has started to move higher again, likely driven in part by potential index inclusion.
End of Mandatory Lock-Up Periods for 41 Companies in Korea in July 2023
- We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in July 2023, among which 6 are in KOSPI and 35 are in KOSDAQ.
- These 41 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
- Among these 41 stocks, the top five market cap stocks include Lunit, Sungeel Hitech, KG Mobility, Enchem, and E&D Co.
HDFC Bank – Ranks 2nd After Merger Compared With Asia Pacific Banks
- New HDFC Bank appears to have far better returns and credit metrics that large Asian peers
- Pro-Forma amalgamation puts HDFC Bank as 2nd largest bank in Asia Pacific in market cap
- Comparably large banks in Asia are concentrated in China, where credit metrics are opaque
Last Week in Event SPACE: Naspers/Prosus, Swire Pacific, NTT, Aussie Tax-Loss Selling
- The Naspers (NPN SJ) / Prosus (PRX NA) circularity was too complex. Lots of people hated it. It was actually easier than most thought, but optically was difficult to reconcile.
- Swire Pacific (19 HK) was a clear buy: there is no justification for assigning a similar discount for cash from the US Coke ops as you would to unlisted ops
- A residual NTT (9432 JP) individual small-holder shareholding tenure reward does not get split 25:1 when the stock gets split 25:1. It doesn’t mean much, but it’s an interesting artefact.
Index Rebalance & ETF Flow Recap: KQ150, LQ45, PCOMP, HDFC/HDFCB, Delta Electronics, Redox IPO, AMFI
- The review period for a bunch of indices ended last week though the announcement of the changes will take 4-6 weeks.
- There are no rebalance implementations in the coming week though focus will move to the implementation of the HDFC Limited/ HDFC Bank merger and index changes the following week.
- There were big inflows to China focused ETF with a lot of money going into Semiconductor and Chip focused ETFs.
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