In today’s briefing:
- Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
- HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
- HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- CSI300 Index Rebalance Preview: Early Look at Potential Changes in December
- CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
- SSE50 Index Rebalance Preview: Potential Adds Powering Higher
- Japan Weekly | Kawasaki Kisen, Z Holdings, Rakuten, Uniqlo, Yaskawa
- ALT Co IPO Valuation Analysis
- Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
- Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
- Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock.
- I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.
HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
- We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
- There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.
Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
- We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
- The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
- We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.
HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
- The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
- With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.
CSI300 Index Rebalance Preview: Early Look at Potential Changes in December
- Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
- We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.
- The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last five months, though there is some near-term underperformance.
CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
- Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
- The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.
SSE50 Index Rebalance Preview: Potential Adds Powering Higher
- 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.
Japan Weekly | Kawasaki Kisen, Z Holdings, Rakuten, Uniqlo, Yaskawa
- Japanese stocks headed lower this week, tracking weaker US stocks.
- With a bout of profit-taking, we are also seeing some rotation out of high-valuation, strong momentum stocks into “cheap” laggards.
- Marine transportation stocks the big winners this week. Investors love those high dividends and low PBs
ALT Co IPO Valuation Analysis
- Our base case valuation of ALT is 33,365 won per share, which represents 63% higher than the high end of the IPO price range of 20,500 won.
- We estimate the company to generate sales of 69.7 billion won (up 57.3% YoY) in 2023 and 92.2 billion won (up 32.3% YoY) in 2024.
- ALT’s main business is in the testing of non-memory semiconductor value chain products including Display Drive IC, CMOS image sensor, and Power Management IC.
Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
- 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.
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