Smartkarma Daily Briefs

• Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
• The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.

• Hang Seng has announced the conclusions of the market consultation. Primary-listed foreign stocks will be eligible for inclusion in the HSI INDEX and HSTECH INDEX from the December rebalance.
• The coming week has the rebalances for the NIFTY Index, Nifty Next 50 Index, Nifty Bank Index and SENSEX Index as a result of the HDFC Limited/ HDFC Bank merger.
• There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and outflows from Hang Seng H Share Index ETF (2828 HK) during the week.

• Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
• There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
• There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.

• We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
• Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
• Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.

• One third of the way through the review period, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
• Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
• The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the 5 months. We’d wait for a pullback to re-enter positions.

RL Commercial REIT (1888938D PM)/RLC REIT is the REIT platform of Robinsons Land Co (RLC PM), one of the leading property developers in the Philippines. RLC REIT has opened its books for an IPO in the Philippines to raise PHP24.4 billion ($483 million) through a secondary offering of 3.3 billion units (33.6% of outstanding units) at a maximum price of PHP7.31 per unit. The bookbuilding period will end on 20 August with pricing is set for 20 August. The official subscription period will run from 25 August to 3 September. 

RLC REIT’s portfolio consists of 14 commercial real estate assets across the Philippines with an aggregate Portfolio GLA of 425,315 sqm and an appraised value of PHP73,884 million ($1,522 million).

RLC REIT’s IPO will the third REIT listing on the PSE after Areit (AyalaLand REIT) (AREIT PM), DDMP REIT (DDMPR PM) and Filinvest REIT (FILRT PM). RLC REIT’s listing will be quickly followed by the IPO of Megaworld Real Estate Investment Trust (MREIT PM) – Megaworld REIT (MREIT) IPO: At the Front of the Back Office.

• The focus was on the currency this week ahead of the next BOJ meeting and waning inflationary pressures in the US. 
• Japanese stocks were basically flat. Retailers were up first announcing results – those with significant operations in China are doing very well.
• Advantest continues to defy gravity. The stock is up 200% over the past twelve months. Think about that….a Japanese stock up 200%!

• In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 3Q 2023.
• Of the 38 pair trades, 22 of them involved holdcos outperforming opcos YTD and 16 of them involved opcos outperforming holdcos in the same period.
• We highlight 38 pair trades that involve Korean holdcos and opcos.

• Busy week in India with the adhoc changes to the NIFTY, NSE Nifty Next 50, S&P BSE SENSEX and Nifty Bank due to the HDFC Limited and HDFC Bank merger.
• The IDX could announce the changes to the IDX30, LQ45 and IDX80 indices in the coming week, though there is no firm schedule for announcements.
• Yet another week of inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF and outflows from the Hang Seng H Share Index ETF (2828 HK). 

• According to Invest Chosun, Celltrion Inc (068270 KS) plans to submit a merger registration statement to the KRX in July, with Mirae Asset Securities acting as the lead underwriter.
• Fast Retailing (9983 JP) investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.
• Canon (7751 JP)‘s most recent buyback should be done now-ish. They have been ~15-20% of volume over the past month. The Trade would be short Canon vs Ricoh (7752 JP).