Smartkarma Daily Briefs

• Foreign shareholding in HDFC Limited (HDFC IN) has inched higher while moving a tad lower on HDFC Bank (HDFCB IN). Overall, no change in foreign room on the merged entity. 
• The merger could complete in Q1 2023 and there could be sizeable buying from MSCI trackers. There should be no change for FTSE trackers.
• The recently announced market consultation by NSE Indices should result in no buying/selling from passive trackers; there will be some additions to the NIFTY Index and Nifty Next 50 Index.

• MSCI announced the changes as part of the November SAIR. For Asia Pacific, there are 48 adds and 55 deletes (including one nationality change).
• The deletion of Wharf Holdings (4 HK) is the biggest surprise. The stock should trade weak given the large flow and days of ADV to sell.
• There are listing changes for BeiGene (BGNE US), Li Auto (LI US), Xpeng (XPEV US) and Hutchison China MediTech Ltd (HCM US) to their Hong Kong listed lines.

• Yesterday, with earnings, Tata Motors Ltd (TTMT IN) announced that it would delist its ADS, making an application on or around 13 January.
• This sounds relatively benign because since 2004 when the ADS was listed, local funding capacity has increased substantially. It may no longer be needed. 
• But it is MUCH more interesting than that. There is lots of fun to be had here. 

• FTSE has announced that it will be changing Golden Agri Resources (GGR SP)‘s nationality from Singapore to Ineligible at the close on 16 December. 
• This means the stock will be deleted from the FTSE All-World Index at the close on 16 December. We estimate passive trackers will need to sell multiple days ADV.
• Golden Agri Resources (GGR SP) trades cheaper than a lot of its peers but has outperformed them over the last year. There could be a short-term reversal.

• In addition to Hyundai Mipo Dockyard and LG Energy Solution, it is worth noting that Krafton will also have a significant passive inflow. 
• GS E&C can become a more focused flow trading target as it is an unexpected one that the market must have failed to notice.
• Since most deletions will have a relatively sizeable passive impact on considerable liquidity, building up a short position with a basket from now on wouldn’t be a flawed approach.

• Toshiba’s 2Q results were not pretty with OP of just ¥7.5bn despite strong revenues of ¥855bn, weak orders and a downward revision to guidance as we predicted. 
• While we expected weakness, every downside risk we flagged came through and in greater force than we had predicted. 
• It is almost as if some divine force completely unrelated to management is hinting that you should go for the JIP bid if and when it comes through.

• Mitsubishi Estate (8802 JP) reported Q2 earnings today. Domestic revenue and OP in the commercial property and residential businesses were down. International and investment management businesses were up A LOT.
• Most of the gains in international business were capital gains, but overall, H1 results were in line with full-year guidance. Condo deliveries are completely in H2. 
• The company also decided on a ¥100bn buyback. Headline says up to 70mm shares or 5.29% of shares out ex-Treasury. It’ll be 20+ smaller. Details, however, matter. 

• The bear market rally we have discussed since our Sept. 29 Int’l Compass has managed to surpass our price targets, which were the YTD downtrends on the ACWX-US and EFA-US.
• As you will see below, many countries are reversing topside their 6.5-month to YTD downtrends.
• As a result of these bullish reversals and breakdowns on the US dollar (DXY) and 10-year Treasury yield, we are upgrading our outlook to neutral. Buy on pullbacks.

Tata Motors’ Q2/22-23 results were better than expected, with reasonable improvement in revenue and earnings. That said, this was partly due to the low base effect last year, owing to COVID-19. The financial risk profile has improved slightly, on the back of the higher earnings and stable debt. Liquidity appears to be adequate, especially at Jaguar Land Rover (JLR).

The operating environment will likely remain difficult in FY 2022-23, and possibly for even longer. While we derive comfort from the growing order book, this accounts for only c. 50% of full-year deliveries for now, and is hence insufficient to provide firm revenue visibility. Still, the order book development indicates that demand for JLR’s vehicles is exceeding its ability to deliver.

• Brookfield and EIG/MidOcean are Offering Origin Energy (ORG AU) shareholders $9.00/share, a 54.9% premium to last close, by way of a Scheme. The Offer is non-binding and indicative.
• Negotiations kicked off at $7.95 for the LNG developer in early August. Exclusive due diligence has been granted. 
• A firm offer will be contingent on ACCC and FIRB approval. Such a takeover may actually play into the Albanese government’s future energy plans.