In today’s briefing:
- IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- WuXi AppTec (2359 HK) Placement: Strong Momentum & Index Flows
- GDS Holdings (9698 HK): Global Index Inclusion as Shorts Build Up
- Hyosung Heavy (298040 KS): Positioning Not Extreme as Index Inclusion Nears
- GF Securities (1776 HK): Global Index Inclusion as Sector Rallies
- NSDL (NSDL IN) IPO: Offering Details & Index Inclusion Timeline
- China Citic Financial (2799 HK): Global Index Inclusion as Valuation Blows Out
- Hitachi Energy India (POWERIND IN): Powering into a Global Index in August
- Ricoh (7752 JP): Potential Global Index Deletion in August
- Petrindo Jaya Kreasi (CUAN IJ): Potential Global Index Inclusion & The Risks
IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- There are 2 constituent changes each for the IDX30 Index and the LQ45 Index, and 3 constituent changes for IDX80 Index to be implemented at the close on 31 July.
- The largest passive flows are expected in Bank Central Asia, Bank Rakyat Indonesia, PT Adaro Andalan Indonesia, Mitra Adiperkasa, XLSMART Telecom Sejahtera, Indo Tambangraya Megah and Bank Mandiri Persero.
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
WuXi AppTec (2359 HK) Placement: Strong Momentum & Index Flows
- WuXi AppTec (2359 HK) is looking to raise US$650m at a price range of HK$104.16-106.4/share, a 5-7% discount from last close.
- There will be passive buying from global index trackers around the time of settlement of the placement shares. Then there will be some Hang Seng Index buying in August.
- Short interest in WuXi AppTec (2359 HK) has spiked and some shorts could cover into the placement. The AH premium could move higher following the placement.
GDS Holdings (9698 HK): Global Index Inclusion as Shorts Build Up
- Following a rally in the stock over the last 3 months, GDS Holdings (9698 HK) / GDS Holdings (ADR) (GDS US) could be added to a global index in August.
- Short interest in GDS Holdings (9698 HK) has been increasing. Add the short interest in GDS Holdings (ADR) (GDS US) and the number is pretty big.
- Despite the recent rally, GDS Holdings (9698 HK) trades cheaper than its closest peer and there could be opportunities to enter market neutral trades.
Hyosung Heavy (298040 KS): Positioning Not Extreme as Index Inclusion Nears
- In an all too familiar sight across a range of stocks across a range of markets, Hyosung Heavy Industries‘ stock price has doubled over the last 3 months.
- The increased market cap should result in index inclusion and passive trackers are estimated to buy 358k shares (US$291m; 4.5x ADV) at the close on 26 August.
- Hyosung Heavy has outperformed most peers over the last few months but still trades at reasonable relative valuations. Positioning does not appear excessive relative to peers.
GF Securities (1776 HK): Global Index Inclusion as Sector Rallies
- Following a rally in the stock over the last 4 months, GF Securities (H) (1776 HK) could be added to a global index in August.
- GF Securities (H) (1776 HK)‘ peers have also rallied over the same time frame and the stock trades in line with its peers on various valuation metrics.
- Positioning in the stock is in line with its peers and shorts have continued to increase as the stock price has moved higher.
NSDL (NSDL IN) IPO: Offering Details & Index Inclusion Timeline
- NSDL (NSDL IN) is looking to list on the exchanges by selling up to INR 40bn (US$464m) of stock at a valuation of up to INR 160bn (US$1.85bn).
- The stock will not get Fast Entry to either of the global indices. The earliest inclusion in a global index should take place in November.
- Central Depository Services (CDSL IN)‘s stock price has dropped following the announcement of NSDL‘s IPO price band and the muted results could lead to further downside in the stock.
China Citic Financial (2799 HK): Global Index Inclusion as Valuation Blows Out
- A doubling of the stock price over the last 4 months could lead to China Huarong Asset Management (2799 HK)‘s inclusion in a global index in August.
- China Huarong Asset Management (2799 HK) has outperformed its closest peer and trades at a much higher price to book.
- China Huarong Asset Management (2799 HK) was added to Southbound Stock Connect in March and investors have been buying the stock via the link.
Hitachi Energy India (POWERIND IN): Powering into a Global Index in August
- A big rally in Hitachi Energy India (POWERIND IN) this year could lead to the stock being added to a global index in August.
- Hitachi Energy India (POWERIND IN) has outperformed its peers and now trades at significantly higher valuations compared to its peer group.
- There is positioning in the stock and early entrants could be looking to unwind some of their holdings over the next couple of weeks.
Ricoh (7752 JP): Potential Global Index Deletion in August
- The slide in Ricoh Company Ltd (7752 JP)‘s stock price over the last few months could lead to the deletion of the stock from a global index in August.
- Ricoh Company Ltd (7752 JP) has underperformed its peers over the last couple of months and trades cheaper than the average of its peers.
- There are indications of positioning in the stock. However, positioning is likely smaller than the estimated passive selling and there could be more downside for the stock near-term.
Petrindo Jaya Kreasi (CUAN IJ): Potential Global Index Inclusion & The Risks
- PT Petrindo Jaya Kreasi Tbk (CUAN IJ) could be added to a global index in August but there are multiple risks for the stock.
- PT Petrindo Jaya Kreasi Tbk (CUAN IJ) trades at significantly higher multiples compared to its peers and the recent price spike raises the risk of addition to the UMA list.
- PT Petrindo Jaya Kreasi Tbk (CUAN IJ) has outperformed its peers and positioning is big, raising the risk of the stock moving lower over the next few weeks.
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