In today’s briefing:
- The TOPIX Big April Basket Flows: ¥200bn a Side Including Many Multi-ADV Flows
- Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge
- S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
- KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow
- Quiddity Leaderboard SSE50/180 Jun 24: Past Trades Successful but Time to Unwind Some
- China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group
- Itochu Targets Fashion E-Commerce Via Jade Takeover of Magaseek
- Industrivärden Q1 2024, NAV Evolution and Discount
- EQD | KOSPI 200 WEEKLY Buy-The-Dip Opportunity
The TOPIX Big April Basket Flows: ¥200bn a Side Including Many Multi-ADV Flows
- Every year in April there is an interesting phenomenon with TOPIX. It is what Janaghan Jeyakumar, CFA calls “The Big April Basket.” The TSE re-assesses Liquidity Factor Coefficients.
- It also does a FFW change, and this year it has Phased Weight Reductions for those slowly leaving TOPIX and PWR re-inclusions for those identified last October as going back.
- Janaghan had 18 “High Conviction” LF removals. All were hits. They are upweights. Then there are 34 changes to FFW coefficients.
Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge
- CSI 300 represents the 300 largest stocks by marketcap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500. There is subjectivity.
- Here we look at potential ADDs/DELs for the CSI 300/500 rebalance in June 2024. With 93% of time passed, I expect 11 changes for CSI300, 50 for CSI 500.
- Some names have changed since my last insight, but the long/short trades recommended eight weeks ago gained 11.26% since. We make small changes this time.
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
- With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
- The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
- There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.
KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow
- KT’s foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT’s Global Index weight.
- With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT’s adjustment factor dropping to 0.25 is likely.
- This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.
Quiddity Leaderboard SSE50/180 Jun 24: Past Trades Successful but Time to Unwind Some
- SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
- In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the June 2024 index rebal event.
- According to my estimates, the SSE 50 expected ADDs and DELs could see US$1.7bn index buying and US$828mn index selling respectively (leaving nearly $900mm of funding sales to do).
China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group
- Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
- The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
- We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.
Itochu Targets Fashion E-Commerce Via Jade Takeover of Magaseek
- Jade Group has acquired Magaseek and will merge the online mall with its own fashion e-commerce platform, Locondo and hopes to create a growing rival to Zozo.
- Magaseek was founded by Itochu 20 years ago, and the deal underlines Itochu’s growing influence over Jade as a proxy for its ambitions in fashion e-commerce and distribution.
- However, Jade Group has seen little organic growth for its Locondo platform in recent years, and while its acquisitions have added scale, integration has been haphazard.
Industrivärden Q1 2024, NAV Evolution and Discount
- As of end of Q1, NAV was SEK 166.8 billion (SEK 386/share). NAV increased by 11% due to a sharp decrease in leverage, while the portfolio value rose by 6%.
- Industrivärden C shares are trading at a 5.5% discount to NAV (vs. 8.8% average for the last 5 years). It seems risky to bet on a further discount reduction.
- My target NAV is SEK 173,116 million (SEK 400.8/share). My TP for the C shares of Industrivärden, assuming a 5% discount to NAV, is SEK 361.7.
EQD | KOSPI 200 WEEKLY Buy-The-Dip Opportunity
- The KOSPI 200 INDEX is currently pulling back for a 2nd week in a row.
- This could be an opportunity to go LONG, if the pullback is limited to this (or at most the next) week closing down and reaching targets between 365 and 338.
- If the index goes down for 3 weeks and reached below 343 caution is advised: the pullback may be larger than expected in that case.
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