In today’s briefing:
- Alibaba (9988 HK): Dual Primary Listing Implications
- S&P/ASX Index Rebalance Preview: Busy Rebalance With Lots of Changes Expected
- IDX30/LQ45 Index Rebalance: Big Inflows on ARTO, BBRI, BBCA; Outflows on GOTO, TLKM, BMRI
- Detailing Why LG Energy’s MSCI Index Up-Weight Is November, Not August
- Revised Rules on Short Selling Restriction in Korea: Effective 3Q This Year
- PSMC Placement – Well Flagged and SI on the Rise, but Momentum Has Been Very Weak
- Advantest (6857) – Strong SoC Sales, Record Profits, Bullish Guidance, and a Buyback (+ Index Flow)
- China Beverage: Baijiu – The Most Addictive & Profitable Alcoholic Beverage in This Planet?
- BFI Finance Indonesia (BFIN IJ) – Pole Position in Multifinance
- Renesas (6723) | Buy the Dip
Alibaba (9988 HK): Dual Primary Listing Implications
- Alibaba Group (9988 HK) currently has a Secondary Listing in Hong Kong and is looking to become dual primary listed in Hong Kong and the U.S.
- The main change will be inclusion in the Southbound Stock Connect program where mainland investors will be able to buy the stock.
- Alibaba Group (9988 HK) is capped at 8% in the HSCEI INDEX and is close to 8% of the HSI INDEX, there will be negligible impact on the dividend futures.
S&P/ASX Index Rebalance Preview: Busy Rebalance With Lots of Changes Expected
- At the September rebalance, we expect changes to the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index. Announcement is on 2 September with implementation on 16 September.
- Potential adds/deletes with large flow and impact include Shopping Cntrs Austrls (SCP AU), Sayona Mining (SYA AU), Charter Hall Social Infrastructure REIT (CQE AU) and Capricorn Metals (CMM AU).
- Shorts have increased significantly on a few stocks over the last few weeks, indicating that there could be some pre-positioning on these stocks.
IDX30/LQ45 Index Rebalance: Big Inflows on ARTO, BBRI, BBCA; Outflows on GOTO, TLKM, BMRI
- There are 3 changes each for the IDX30 Index and LQ45 Index and 11 changes for the IDX80 Index at the upcoming rebalance to be implemented on 29 July.
- There is passive inflow on Bank Jago Tbk PT (ARTO) due to index inclusion, and on Bank Rakyat Indonesia (BBRI) and Bank Central Asia (BBCA) due to capping changes.
- With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.
Detailing Why LG Energy’s MSCI Index Up-Weight Is November, Not August
- Expectations are spreading in the market that the free-float rate of LG Energy will increase from 9% to 15% at the MSCI August QIR. However, this possibility is quite low.
- Only 1.57% will be reflected in this QIR, and 4.26% will be in November. So, the August IR will see 0.59x ADTV, and the November IR will welcome 2.93x ADTV.
- A conservative approach is still valid for flow trading on LG Energy for now, and a more aggressive approach is needed with long/short trading with LG Chem.
Revised Rules on Short Selling Restriction in Korea: Effective 3Q This Year
- If short-selling accounts for more than 30% of total daily trade volume, it will be newly designated as an overheated short-selling stock, resulting in a one-day short-selling ban.
- If the stock price falls by more than 5% on the day of the short-selling restriction, the restriction period is automatically extended by one more day.
- We should pay attention to a possible increase in the trading volume of single-stock futures (SSF) due to short-selling bans, which can result in a more significant basis distortion.
PSMC Placement – Well Flagged and SI on the Rise, but Momentum Has Been Very Weak
- Powerchip Semiconductor Manufacturing Corp (6770 TT) (PSMC) is looking to raise US$420m via its GDS offering.
- The firm is offering 23.3m GDSs (350m common shares at a 1 GDS to 15 common shares ratio) at a 6-9% discount to last close.
- The deal is well flagged via both media reports and the company’s announcements. Short interest has been growing in tandem as well.
Advantest (6857) – Strong SoC Sales, Record Profits, Bullish Guidance, and a Buyback (+ Index Flow)
- Advantest Corp (6857 JP) yesterday announced Q1 results, with Revenues/OP/NP at record levels, a H1 div hike of 30%, guidance well ahead of consensus, and a buyback.
- They also announced a Mid-Term Plan revision which shows forward guidance better than consensus.
- The buyback is smaller than the last one BUT float is not what you think it is. Understanding float dynamics here is key.
China Beverage: Baijiu – The Most Addictive & Profitable Alcoholic Beverage in This Planet?
- Baijiu, the most popular liquor in China, is perhaps one of the most addictive and profitable alcoholic beverages in this planet.
- The focus of this insight is a pair trade (go long on Luzhou Laojiao and go short on Jiangsu Yanghe Brewery).
- The major reasons for this pair trade include higher sales growth rate and ROE for Luzhou Laojiao as well as capitalize on the recent share weakness of Luzhou vs Jiangsu.
BFI Finance Indonesia (BFIN IJ) – Pole Position in Multifinance
- BFI Finance Indonesia continued to see rapid momentum behind its recovery with new bookings in 2Q2022 hitting all time highs and spreads improving to 13.5% with NPFs declining.
- The company’s growth is driven by the non-dealer used vehicle market with new bookings coming mainly through agents and repeat customers, and digital initiatives in place to improve origination.
- BFIN is the best quality multifinance player in Indonesia, with an ROE now above 21%. There will be more collaboration and synergies with Bank Jago going forward further driving growth.
Renesas (6723) | Buy the Dip
- Renesas stock is down around 8% following quarterly earnings and a very conservative Q3 outlook
- We think the market is over reacting and believe that Renesas is a key beneficiary of secular growth in auto and industrial electronics
- The stock trades at a discount to global peers, despite a strong story for improving shareholder returns
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