In today’s briefing:
- HSCI Index Rebalance and Stock Connect: Potential Changes in June and September
- SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow
- Hitachi Transport (9086 JP): Trading Too Wide
- JAPAN ACTIVISM: Silchester Goes After Chugoku Bank
- Asia Short Interest: Large Moves in April
HSCI Index Rebalance and Stock Connect: Potential Changes in June and September
- We see seven new listings as potential inclusions to the HSCI in June. One is already a part of Connect while five will be added to Southbound Stock Connect.
- We see 19 potential changes to the HSCI in September. Seven of the deletions are on market cap, four on liquidity, and eight due to prolonged trading suspension.
- Some of the potential deletions have large Southbound holdings and some of these could be trimmed over the next couple of months.
SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow
- SenseTime Group (20 HK) currently has a float of 1.4%. That will increase to 46% at the end of June as pre-IPO and cornerstone investor lock-ups end.
- The Hang Seng Tech Index FAF increase and potential inclusion in the Hang Seng China Enterprises Index will require passive trackers to buy 700m shares early September.
- Economic stimulus in China, outlook for China tech, lock-up expiry, inclusion in Southbound Connect and flows from passive trackers will drive the stock for few months and provide trading opportunities.
Hitachi Transport (9086 JP): Trading Too Wide
- The Hitachi Transport System (9086 JP) deal announced last week was a big win for minorities, discussed in Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO.
- Market ructions and the Hitachi Metals saga have this trading wide.
- This deal looks different in terms of approval risk and timing risk than Hitachi Metals and is worth a closer look now.
JAPAN ACTIVISM: Silchester Goes After Chugoku Bank
- In early February 2022, Silchester International Investors (according to its website) sent letters to four low-ROE-earning Japanese regional banks proposing a new dividend policy.
- The management and boards of each bank rejected the policy proposal though two of the four had upped their proposed dividend or changed policy prior, and two upped it afterwards.
- While Bank of Kyoto is the biggest equity portfolio, Chugoku Bank (8382 JP) is a relatively large, provincial, regional bank, with middling equity portfolio. Different shape. Different situation.
Asia Short Interest: Large Moves in April
- We look at short interest across Hong Kong, Japan, Korea and Taiwan in April to identify stocks/sectors that have seen the largest changes in each market.
- Korea and Taiwan are showing a clear divergence with short notional increasing as the market moves lower, indicative of new shorts being initiated.
- China Merchants Bank H (3968 HK) has seen the largest short covering as the stock has tumbled in the last couple of weeks.
Before it’s here, it’s on Smartkarma
