Daily BriefsEvent-Driven

Event-Driven: Hangzhou Tigermed Consulting (H), Bayerische Motoren Werke AG, Zinus and more

In today’s briefing:

  • FTSE GEIS Index Rebalance Preview: IPOs and J-REITs
  • Liquid Universe of European Ordinary and Preferred Shares: November Report
  • KOSPI 200 Rebalancing Trade Data: Recent Passive Flow, Volatility, Upside, & Liquidity

FTSE GEIS Index Rebalance Preview: IPOs and J-REITs

By Brian Freitas

FTSE Russell will announce the changes to the Global Equity Index Series (GEIS) as a part of the quarterly review on 20 November and the changes will be effective after the close of trading on 18 December.

The quarterly review is used to include IPOs which did not qualify as an immediate fast entrant to the indices at the time of listing and were not listed for at least 3 months by the following semi-annual review to be included in the indices.

There will be passive buying on the J-REIT’s as part of the tranched inclusion in the GEIS – the inclusion commenced at the September 2020 semi-annual index review and this will be the second tranche.

Stocks that listed recently and could be included in the index are Hangzhou Tigermed Consulting (H) (3347 HK), Smoore International (6969 HK), Yeahka Limited (9923 HK), Dada Nexus Ltd (DADA US), Kingsoft Cloud (KC US), Li Auto Inc. (LI US), Agora Inc. (API US), Burning Rock Biotech (BNR US), Legend Biotech Corp (LEGN US), Mindspace Business Parks REIT (MBP IN), SK Biopharmaceuticals (326030 KS), Sri Trang Gloves (STGT TB) and Modalis Therapeutics (4883 JP).

Hangzhou Tigermed Consulting (H) (3347 HK), Smoore International (6969 HK) and Kingsoft Cloud (KC US) are also inclusions in the MSCI China index and passive funds tracking the MSCI Standard indices will need to buy the stocks at the close of trading on 30 November.

Liquid Universe of European Ordinary and Preferred Shares: November Report

By Jesus Rodriguez Aguilar


Discounts have generally tightened across the European space, in line with stock markets recovering.

Recommended trades

  • Bayerische Motoren Werke AG (BMW GR) : the discount has traded sideways since mid-September, and is now 23.7%. I would recommend setting up a trade long BMW prefs, short common shares with a target of a 15% discount.

  • Fuchs Petrolub SE (FPE GR) ‘s premium seems to vary within a range, which is probably liquidity related. It is 27% (vs. 34.4% in my October report). Remember that voting rights are valuable. Maintain the trade long ords/short prefs, with a 10% target.

  • Henkel AG & Co KGaA (HEN3 GR) shows a long-term trend towards a reduction of the premium of the preferred shares. The premium is 12.3% (down from 15.4% in my September report, and 13% in October). Maintain the trade long prefs/short common shares with a 10% premium target.

  • Voting rights are valuable in a company like Volkswagen (VOW GR) , so a 4.9% discount of the prefs. seems about right (5.8% by mid-October).  It has moved sideways since mid-September. Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. If you believe that this higher liquidity will mean that the discount will close, then a long prefs/ short common shares may be an option; plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range.

  • A 36% discount of Danieli & C Officine Meccanich (DAN IM) savers (vs. 37.5% in September and 39% in June) seems still too wide, and low liquidity does not help. I keep on recommending long savers/short ordinaries. A 30% discount is not a demanding target.

  • Grifols SA (GRF SM) B shares are trading at a 38.5% discount (vs. 41.9 by mid-September), there is a trend towards the tightening of this discount since mid-March. The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade long B shares traded on Nasdaq, short A shares traded in Madrid. The target is a 27% discount. Please note there is FX risk, which can be hedged.

  • The current discount in Atlas Copco AB (ATCOA SS) B shares vs. A shares is 12.7% (vs. 13.2% by mid-October). I recommend setting up Long B shares/short A shares, with a target of >10% discount.

  • Other than Industrivärden, the other major shareholder of SSAB AB (SSABA SS) is Solidium Oy (State of Finland). The reversal on the discount over the last 15 months has no obvious explanation. The discount has widened recently to 8%. If anything, I would short B shares and go long A shares.

  • The discount is now 33.4% (vs. 32.7% by mid-October and 27% by mid-September), but it reached 42% on 19 May. I would set up long non-voting/short voting shares.

Please read on for table and charts.

KOSPI 200 Rebalancing Trade Data: Recent Passive Flow, Volatility, Upside, & Liquidity

By Sanghyun Park

We are now four weeks before the KOSPI 200 rebalancing, December 12, Friday.

That is, we are supposed to be at an optimal point to trade.

So, I gather trading data (recent passive flow, volatility, price upside, and liquidity) on this rebalancing’s additions and deletions.

Before it’s here, it’s on Smartkarma