In today’s briefing:
- HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March
- Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet
- 7&I (3382 JP) – Dippity Doo Dah – Irrational Fears, Earnings Vol, But Restructuring Proceeding Apace
- S&P/ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger
- HSCI Index Rebalance Preview and Stock Connect: Updated Potential Changes in March 2025
- Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Up to 5 Changes in March
- LQ45 Index Rebalance Preview (Jan 2025): Identifying Potential Index Changes
- Bloks (325 HK): Global Index Inclusion Following IPO Lock-Up Expiry
- [Quiddity Index Jan25] Nikkei 225 Mar Rebal: 3 IN, 3 OUT, $3bn One Way
- Open House Finally Takes Out Pressance (3254) – Done Deal Done Cheap
HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March
- BeiGene and ZTO Express Cayman are potential inclusions for the Hang Seng China Enterprises Index in March while Sino Biopharmaceutical and Li Ning are potential deletions.
- There is a lower probability of Yum China Holdings (9987 HK) replacing Sunny Optical Technology Group (2382 HK) in the index in March.
- There could be a few more index inclusions for ZTO Express Cayman in March and the stock could outperform its peers over the next few months.
Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet
- The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
- There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
- If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.
7&I (3382 JP) – Dippity Doo Dah – Irrational Fears, Earnings Vol, But Restructuring Proceeding Apace
- Recent news on the Seven & I Holdings (3382 JP) situation includes better-than-expected possible sale of the SST business, a little headline fear-mongering on national security, and earnings.
- Earnings this year will be volatile vs expectations. Timing (and magnitude) of kitchen-sinking matters. But neither ACT nor you should be buying it based on trough earnings expectations.
- The call transcript is worth listening to. The math on the takeover maths well. This is a buy on dip. Again.
S&P/ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger
- Nearing the end of the review period, there could be 36 adds/deletes across the S&P/ASX family of indices in March.
- Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
- Completion of the merger with Chemist Warehouse in February will set off huge passive buying in Sigma Healthcare (SIG AU) over the February to June period.
HSCI Index Rebalance Preview and Stock Connect: Updated Potential Changes in March 2025
- We see 38 potential and close adds and 51 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
- There have been many new listings in the last weeks of December. Some of them are fairly large and will be added and that increases the number of potential deletions.
- 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.
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Up to 5 Changes in March
- The review cutoff date for the March rebalance of the HSIII was 31 December. The changes will be announced on 21 February and become effective after the close 7 March.
- There could be 5 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
- Horizon Robotics (9660 HK) is a potential inclusion to the HSCI and the Hang Seng TECH Index (HSTECH INDEX) in March.
LQ45 Index Rebalance Preview (Jan 2025): Identifying Potential Index Changes
- The review period for the LQ45 Index January rebalance ended 31 December. The changes should be announced the last week of January, becoming effective after the close on 31 January.
- We highlight 4 potential inclusions and 4 potential exclusions for the index at the rebalance. The actual number of changes could be lower at 2-3 a side.
- Nearly all stocks will have over 1x ADV to trade from passive trackers if they are added to or deleted from the index.
Bloks (325 HK): Global Index Inclusion Following IPO Lock-Up Expiry
- Bloks (325 HK) is expected to be assigned an index nationality of Hong Kong instead of China due to its incorporation in the Cayman Islands.
- The security is expected to be added at the September 2025 review following the 6-month IPO lock-up expiry which increases the fcap above the APAC threshold.
- The security is ineligible for the other global index until January 2026 because of the free float being below the minimum threshold of 15%.
[Quiddity Index Jan25] Nikkei 225 Mar Rebal: 3 IN, 3 OUT, $3bn One Way
- In December, I thought the March 2025 Nikkei 225 Rebalance was going to be 2 ADDs 2 DELETEs and a double-capping for Fast Retailing.
- Fast Retailing has fallen sharply vs Nikkei 225, and another stock has announced a large-multiple share split, making it a strong candidate for Nikkei 225 ADDITION in March 2025.
- There is short-term path risk on all three ADDs, but they are definitely worth watching. Keep an eye out for separate insights on two of these names.
Open House Finally Takes Out Pressance (3254) – Done Deal Done Cheap
- Four-Plus years ago, Open House (3288 JP) bought the stake in Pressance Corp (3254 JP) owned by its embattled CEO (who had been arrested for a scandal).
- Four years ago, Open House launched a partial tender and capital injection to go to ~65%. A takeout was a matter of time.
- That time has come. Today Open House announced a Tender Offer to take Pressance fully-private. This is an easy deal. A done deal. Done too cheap.
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