Smartkarma Daily Briefs

• Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
• Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
• Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.

• Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
• Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
• There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements. 

Asian Sea (ASIAN TB) announced its plans to list the pet food business currently held in the 100% subsidiary Asian Alliance International (AAI), subject to regulatory approvals.  Asian Sea will hold a majority stake (not less than 70%) in the spun-off subsidiary post listing. This could potentially help unlock value for Asian Sea assuming the high growth pet food subsidiary could attract greater investor interest and superior valuation, post listing. Currently Asian Sea (ASIAN TB)  trades at low double digit P/E in line with other Thailand based sea food processing companies.

In this insight, we discuss likely value upside to Asian Sea (ASIAN TB)  based on Asian Alliance’s possible valuations upon listing (based on its reported financials).

• As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
• Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
• Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

• There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
• Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
• Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key. 

• China MeiDong Auto (1268 HK) presents an excellent investment opportunity, trading at 13.3x/8.1x FY22/23e, post street estimate revisions downwards with a dividend yield of 6.0%/10% (assuming an 80% payout). 
• China MeiDong Auto (1268 HK) ‘s integration of Starchase is progressing better than we expected, with metrics on inventory dramatically improving. We believe the management will focus on aftersales now. 
• The company will join the EV bandwagon by collaborating on aftersales with players having operational (not financial) difficulties performing this service, presenting a good opportunity for the company. 

• MHI has a roadmap for becoming carbon neutral by 2040.  The transition to a decarbonized society will be funded by green/transition bonds
• MHI has issued its first green/transition bond amounting to 10 billion yen
• We remain bullish on MHI and believe it is a key beneficiary of decarbonization trends in Japan

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• Although not many, there are strong candidates for a safe play aimed at constituent change. Inclusion: Lotte Confectionery & Exclusion: Samyang Holdings
• Lotte Confectionery’s average daily market cap must fall by more than 30% to be pushed out of the borderline. Samyang Holdings’s market cap gap to the second-lowest one is 17%.
• The trading volume of these two is so small that a significant passive impact (relative to DTV) will likely occur. We should consider a little more aggressive approach, timing-wise.

• The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
• Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
• Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this.