Smartkarma Daily Briefs

• Allkem Ltd (AKE AU) saw its last day of trading on 21 December. There was large volume at the close as one major index provider gave it the boot. 
• Another delayed their treatment at the last minute, and eliminated a cross-flow.
• But there is still a lot of net buy flow tomorrow (3 Jan) and the next day in the US. Perhaps more than I expected. 

• The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
• There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS). 

• Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
• Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea’s platform, necessitating a complex legal framework.
• Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.

• Nearing the end of the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
• Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 26.9bn. There will be more than 1.5x ADV to sell on nearly all deletes.
• The potential adds have outperformed the potential deletes by 35% over the last two months and some stocks are looking extremely frothy.

• The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
• The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
• If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That’s MUCH tougher.

• In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2024. 
• We highlight 38 pair trades that involve Korean holdcos and opcos.
• Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months and 12 of them involved opcos outperforming holdcos in the same period.

• In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2024. 
• The excessive gaps in the preferred and common shares of Kumho Petro Chemical, Amorepacific Corp, and Samsung Electronics could reverse in the next several months.
• We see some attractive longer-term opportunities for Amorepacific, Doosan Fuel Cell, LG Electronics, and CJ Cheiljedang which have especially high discounts for the preferred shares versus their counterpart common shares.

• Back in October, I wrote in PICC’s (1339 HK) Lifetime Low Implied Stub that People’s Insurance (1339 HK) was trading at an all-time low implied stub. It’s widened further since. 
• Over the past 12-months, excluding PICC’s 68.98% stake in PICC Property & Casualty (2328 HK), the market has assigned HK$42.6bn less for PICC’s steady and profitable life/health insurance stub ops.
• What gives? Falling interest rates is one. EV insurance in another. Yet this bifurcation is extreme.

• Ola Electric (1700674D IN), the largest Indian electric two-wheel vehicles (E2W) player, is seeking US$660 million from a primary raise along with a secondary raise at a US$7-8 billion valuation. 
• Ola is the best-selling E2W brand in India in terms of monthly E2W registrations on the VAHAN Portal of the Ministry of Road Transport and Highways.
• The bull case rests on rising market share in a growing market, a rapid growth phase, increasing gross margin and a favourable cash conversion cycle.   

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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