This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. S&P/ASX Index Rebalance Preview: Lots of Changes; A$1bn to Sell in Newmont
- With over 80% of the review period complete, there could be 26 adds/deletes across the S&P/ASX family of indices in March.
- The largest flow will be on Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
- There will be 1.2-38 days of ADV to buy in the inclusions while the impact on the deletions will range between 1-21 days of ADV.
2. Benefit One (2412): The Plot Thickens
- Today, the day before the previously extended M3 Inc (2413 JP) Partial Tender Offer for Benefit One Inc (2412 JP) was due to expire, M3 extended it another 20 days.
- Dai Ichi Life Insurance (8750 JP) several days ago extended their expected start date by weeks – from mid-January to early February.
- The wording in the new document from M3 is curious. It bears examination. As does the strategy positioning and choice of each of the participants.
3. KOSPI200 Index Rebalance Preview: Four Potential Changes in June
- Less than halfway through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
- The impact on the potential inclusion ranges from 0.14-6 days of ADV while the impact on the potential deletions varies from 3.6-12 days of ADV.
- There are small shorts on the potential inclusions while short interest on the potential deletions varies from 5-10 days of ADV and 1.7-8.2% of free float.
4. Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang
- Budweiser Brewing APAC (1876 HK) has seen investors run for the hills over the last year. The halving of the stock price could mean deletion from passive portfolios.
- Other Hong Kong listed brewers, China Resources Beer Holdings (291 HK) and Tsingtao Brewery Co Ltd H (168 HK) have been beaten down too and have underperformed their Asian peers.
- The deletion from passive portfolios could provide a buying opportunity in Budweiser Brewing APAC (1876 HK) at the end of February (or earlier if the stock drops due to positioning).
5. KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping
- With over 40% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
- There could be two changes before that if L&F Co Ltd (066970 KS) and HLB Inc (028300 KS) complete their transfer from the KOSDAQ market to the KOSPI market.
- The adds have outperformed the deletes and the KOSDAQ 150 Index since the start of the review period. The ban on short selling could lead to another leg up.
6. Hang Seng Internet & IT Index Rebalance Preview: ZX Inc Could Replace Flowing Cloud
- The review cutoff date for the March rebalance of the HSIII was 29 December. The changes will be announced on 16 February and become effective after the close 1 March.
- We see a high probability of Zx Inc replacing Flowing Cloud Technology (6610 HK) in the index. There is a lower probability of 4Paradigm (6682 HK) replacing CMGE Tech (302 HK).
- Capping will result in passives buying Meituan (3690 HK) and selling Tencent (700 HK), Kuaishou Technology (1024 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK).
7. Japan – Increasing Shorts on Some Interesting* Stocks; Positioning Appears Light
- Some stocks have continued to underperform the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios next month.
- Stocks that were expected to be deleted (but could now be safe) have outperformed the Nikkei 225 (NKY INDEX) over the last couple of weeks.
- There has been two-way flow in a lot of stocks with market participants increasing and covering short positions as the stock prices have moved around.
8. Merger Arb Mondays (15 Jan) – Shinko Electric, Benefit One, T&K Toka, Taisho, IJTT, IRC, Weiqiao
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Probiotec Ltd (PBP AU), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU).
- Lowest spreads – Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Benesse Holdings (9783 JP), Taisho Pharmaceutical Holdin (4581 JP).
9. Fuji Soft (9749) – Much Better Governance Process But The Stock Has Run Too Far
- After 3D Investment Partners bought a large slug of Fuji Soft Inc (9749 JP) in early 2022, the company started a review of governance and capital allocation.
- The company updated investors in August, and bought in 4 listed subs in November-December 2023. The August update suggested a Q1 2024 decision on use/ownership of real estate.
- The Final Report is due in a month. In the meantime, the stock rallied Friday off a news article suggesting the Board was reviewing take-private proposals. Yes, but…
10. Quiddity Leaderboard STAR 50 Mar 24: Three Changes; ~US$1bn One-Way; Some Trade Ideas
- STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
- In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the March 2024 index rebal event.
- I currently expect three changes for the STAR 50 index in March 2024.
