In today’s briefing:
- SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well
- ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo
- Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking
- Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley
- Meituan 105 Buy Support
SSE50 Index Rebalance: In Line with Forecasts; Trades Performing Well
- There are 5 changes for the SSE50 Index that will be implemented at the close on 9 December. Passive selling on a few deletions is pretty large.
- We estimate a one-way turnover of 4.07% at the December rebalance leading to a one-way trade of CNY 3.36bn. Index arb activity could add to the impact on the stocks.
- The adds have dropped over the last few months while the deletes have moved higher. There could be a reversion of that trend till implementation of the changes.
ECM Weekly (27th Nov 2022) – Growatt, Lygend, Sunshine Ins, Weilong, DPC, Daiei, Skymark, GoTo
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, things are picking up again going into the year end.
- There were no large placement or blocks this week, although prior lockup linked blocks kept flowing through.
Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking
- Socionext (6526 JP) was offered in a range of ¥3,480-3,650, oversubscribed, IPOed at ¥3,650 and closed ¥4200 on Day 1. We can assume that was the “right price.”
- Since then, while peers are up 19.8% in the 6 weeks since then, Socionext is up 66%. This year’s biggest Japan IPO has been a big winner.
- The TOPIX inclusion is on Tuesday at the close. Beware, you don’t know who is in the stock and who is not.
Last Week in Event SPACE: Meituan, Link Admin/Pexa, DTAC/True, Medley
- You could imagine people covering their short in Meituan (3690 HK) now. The Hang Seng sell flow on 4 January 2023 is insignificant. But there will be more overhang later.
- If you buy Link Administration (LNK AU) outright, you are buying a package of three potential future takeout targets.
- It’s not certain the scrip terms will continue as stated in the DTAC /True merger, but if they change at all, that would almost certainly require a new shareholder meeting.
Meituan 105 Buy Support
- Meituan (3690 HK) has some big resistance hurdles to overcome and will act as tactical sell levels to seek out the 105 buy zone.
- A tactical bounce back to 165 is on the cards with 168/75 the high degree sell barrier. Secondary trendline resistance rests near 185 as the bigger sell zone.
- The bearish rising wedge stands out as the dominant force. The support break warns of fallout after a bounce attempt back to 168. A weak bounce would turn near 160.
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