In today’s briefing:
- HSCEI Index Rebalance Preview: Handling Treatment & Changes in March
- NIFTY100 Index Rebalance Preview: Active Trading Before Passive Trading Kicks In
- Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds
- HSTECH Index Rebalance Preview (March): Handling Treatment Changes Lead to High Turnover
- Nikkei 225 March Review – Quiddity Leaderboard (Jan 2023)
- How Far Has Corporate Governance Progressed in 2021? (1) ~ Board Practices Section
- Fu Shou Yuan (1448.HK)- China’s Soaring COVID-19 Death Rate Ignites High Demand for Funeral Services
- Korea Small Cap Gem #18: Shinwon
- Hormel Foods Corporation: Initiation of Coverage – Investment In Garudafood & Other Drivers
- Wayfair Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
HSCEI Index Rebalance Preview: Handling Treatment & Changes in March
- We expect one change to the Hang Seng China Enterprises Index (HSCEI INDEX) in March, though there is a possibility of a second change.
- The change in the index handling treatment for Secondary Listings and Dual Primary Listings will also result in some big float changes resulting in inflows to some stocks.
- If there are two changes to the index, estimated one-way turnover is 2.39% resulting in a one-way trade of HK$1,536m.
NIFTY100 Index Rebalance Preview: Active Trading Before Passive Trading Kicks In
- We expect 5 changes to the Nifty 100 Index (NSE100 INDEX) at the March rebalance. The review period ends on 31 January and the announcement should be late February.
- The largest impact of passive trading will be on Page Industries (PAG IN), Biocon Ltd (BIOS IN), Mphasis Ltd (MPHL IN) and ABB India Ltd (ABB IN).
- There are quite a few overlaps with the AMFI reclassification of stocks and there could be buying and selling from active fund managers over the next few weeks.
Alibaba – Cash Cows in Trouble & Rapidly Rising COVID Creates New Headwinds
- After bouncing more than 60% from a near-all-time low, Alibaba Group (9988 HK)’s progress seems to have ended abruptly with the share-price holding flat for almost a month in December-2022.
- Meanwhile, the company’s cash cows, Taobao and Tmall are losing market share. Rapidly rising COVID infections create new headwinds that could affect business performance for at least two more quarters.
- With the shares trading near the top end of the new downward trend channel, we are short Alibaba as earnings are expected to miss consensus estimates in the next two-quarters.
HSTECH Index Rebalance Preview (March): Handling Treatment Changes Lead to High Turnover
- We expect at least one change to the Hang Seng Tech Index (HSTECH INDEX) in March – though there could be another change as well.
- Changes to the index handling for Dual Primary Listings should result in an increase in free float and passive inflows to Li Auto (2015 HK) and XPeng (9868 HK).
- Estimated one-way turnover is 5.83% resulting in a one-way trade of HK$4.87bn and this is mainly driven by float and capping changes.
Nikkei 225 March Review – Quiddity Leaderboard (Jan 2023)
- There are four weeks left to go in the data period for calculating the next Nikkei 225 review for March, likely to be announced ~7 March 2023.
- The 3 ADDs should be Oriental Land (4661), Renesas Electronics (6723) , and Japan Airlines (9201). The 3 DELETES Toho Zinc (5707) , Toyobo (3101), and Nippon Light Metal (5703)
- Oriental Land is the one to watch in March. Slight underperformance would boost buying impact. The Sep23 rebalance and subsequent ones are smaller in size but more interesting in impact.
How Far Has Corporate Governance Progressed in 2021? (1) ~ Board Practices Section
- The revised Corporate Governance Code and the inclusion of prime market listing criteria have resulted in significant improvements in % of independent directors and in the practices of Nominating/Compensation Committee.
- Meanwhile, the chairmanship of the board of directors and the ratio of female directors, for which the Code didn’t specify improvements or provide numerical target, are improving at modest pace.
- There is the issue of whether the board/committees require independent directors to function fully independently, and the % of female directors indicates the seriousness of improving management and governance.
Fu Shou Yuan (1448.HK)- China’s Soaring COVID-19 Death Rate Ignites High Demand for Funeral Services
- China’s U-turn on COVID policy has led to skyrocketed infection cases/mortality. Demand for funeral services due to additional deaths would surge, so positive sentiment on Fu Shou Yuan could continue.
- Fu Shou Yuan’s performance is expected to rebound in 22H2 and 23H1 driven by high demand and relaxation of COVID-19 control measures. It’s a good short-term trade with strong catalyst.
- The acceleration and resonance of population aging trend, the new urbanization process and the increase of cremation rate of remains provide objective conditions for Fu Shou Yuan’s long-term upward performance.
Korea Small Cap Gem #18: Shinwon
- Shinwon Corp (009270 KS) is the 18th company in our Korea Small Cap Gems series.
- Established in 1973, Shinwon is a leading apparel company which has been in business for nearly 50 years. Its most popular apparel brands include Besti Belli, Si, Viki, and SIEG.
- The four key catalysts with Shinwon include significant share buybacks, strong growth in sales and profits driven by exports, potential change in the controlling shareholding structure, and discounted valuations.
Hormel Foods Corporation: Initiation of Coverage – Investment In Garudafood & Other Drivers
- This is our first report on Hormel Foods Corporation, one of the leading protein food companies across the globe.
- Hormel achieved another quarter of growth in organic sales led by its solid performances from its food service businesses and its center store grocery portfolio.
- In the quarter, Hormel saw growth from its food and ethnic forward portfolios.
Wayfair Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
- Wayfair is a renowned e-commerce platform providing a wide variety of products such as furniture, decor, housewares, and home improvement offerings.
- Wayfair has seen strong momentum in CastleGate as it drives various advantages for suppliers, lower retail prices because of ship cost savings, reduced damage rates, better visibility on sites, and quicker conversion via quick delivery.
- The company has been driving operational cost savings, which could reduce the cost of goods.
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