In today’s briefing:
- SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out
- Index Rebalance & ETF Flow Recap: SET50, Stock Connect, Kanzhun, Futu, AMFI
- Meituan (3690 HK): Passive Selling Next Week; Plus the Prosus Overhang
- “Buy the Worst” HSI Strategy: Big Win in 2022 and Let’s See if It Can Sustain in 2023
- JPX-Nikkei 400 Rebal 2023: End-Dec 2022
- Retrospectively Reviewing Prop Traders Vs. Retail on T±4 Ex-Date
- Bank Mandiri (BMRI IJ) – Growing By Digital Means
- Taiwan Semiconductors: Value Funds Drive Underweight
- MergerTalk: Regulators May Be Hard Pressed To Prove The Amazon/IRobot Deal Harmful To Competition
- Last Week in Event SPACE: Toyo, Takashimaya/H2O, Skyworth, Shandong Fengxiang, O2Micro
SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out
- Central Plaza Hotel, Com7 PCL, Delta Electronics Thai and Ratch Group will replace Bangkok Life Assurance, IRPC PCL, KCE Electronics PCL and Srisawad Power in the SET 50 Index.
- Passive trackers will need to buy between 2-4 days of ADV on the adds while selling between 0.6-3 days of ADV on the deletes.
- The adds have significantly outperformed the deletes over the last few months. We’d use any big moves over the next couple of days to trim positions.
Index Rebalance & ETF Flow Recap: SET50, Stock Connect, Kanzhun, Futu, AMFI
- The announcement of the changes to the Stock Exchange of Thailand SET 50 Index was made on 20 December and will be implemented at the close on 30 December.
- There are a lot of review cutoffs for different indices in the coming week with announcements in January and February.
- There were big inflows to Vanguard FTSE Emerging Markets ETF (VWO US) and big outflows from IShares Core MSCI Asia Ex Japan ETF (3010 HK) during the week.
Meituan (3690 HK): Passive Selling Next Week; Plus the Prosus Overhang
- Tencent (700 HK)‘s in-specie distribution of Meituan (3690 HK) shares goes ex-dividend next Thursday. Passive Hang Seng trackers will sell Meituan (3690 HK) stock at the close on 4 January.
- The passive impact is not very large but there could be selling from active investors, both before and after settlement of the shares that is scheduled for 24 March.
- Prosus/Naspers will receive 258.93m shares (HK$47.69bn; 6.5x ADV; 4.18% of shares outstanding) of Meituan (3690 HK) and that will be an overhang on the stock for the near future.
“Buy the Worst” HSI Strategy: Big Win in 2022 and Let’s See if It Can Sustain in 2023
- “Buy the Worst” strategy returned 1.9% in 2022, sharply outperformed HSI’s 15% drop. In the last two years, this strategy recorded massive aggregate outperformance of 41pp against HSI.
- For 2023, we expect to switch into Country Garden (2007 HK), Sunny Optical (2382 HK), Country Garden Services (6098 HK), Geely Auto (175 HK) and Techtronic Industries (669 HK).
- Aggressive investors can consider shorting 2022 best-performing portfolio of Sands China (1928 HK), Haidilao (6862 HK), Galaxy Entertainment (27 HK), China Shenhua (1088 HK) and China Unicom (762 HK).
JPX-Nikkei 400 Rebal 2023: End-Dec 2022
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-December 2022.
Retrospectively Reviewing Prop Traders Vs. Retail on T±4 Ex-Date
- This year is less intense compared to previous years. However, given this year’s overall market returns and the lower visibility of yearend dividends, it is still a reasonably aggressive flow.
- Most of this PROP flow should have been dividend hunting aimed at the distortion of ex-date price correction caused by RETAIL’s tax avoidance-driven selling flow.
- The performance of the individual stock position strategy (entering on T-4~1 ex-date) might not have been as juicy as expected, but it still managed to deliver a positive return.
Bank Mandiri (BMRI IJ) – Growing By Digital Means
- Bank Mandiri (BMRI IJ) is seeing significant rewards already being harvested from its digital strategy as it attracts low-cost fund through both its Livin’ app and its KOPRA platform.
- The bank’s 9M2022 results reflected the changing shape of its business, with lower costs and higher returns being generated through its move to higher-yielding assets and digital strategy.
- Bank Mandiri (BMRI IJ) remains a core holding among the Indonesian banks as a proxy for the overall economy with valuations attractive given rising and sustainable returns.
Taiwan Semiconductors: Value Funds Drive Underweight
- GEM funds reduce exposure to Taiwanese Semiconductors, switching from overweight to their largest underweight in over a decade.
- Absolute positioning levels still high, with Taiwanese Semiconductors the largest country/industry allocation for 61% of the managers in our analysis and a top 3 allocation for 78%.
- Value investors moved first, switching from near equal weight in early 2020 to -1.95% underweight today. All Style groups are now positioned underweight the MSCI EM benchmark, on average.
MergerTalk: Regulators May Be Hard Pressed To Prove The Amazon/IRobot Deal Harmful To Competition
- Amazon’s pursuit of robotic vacuum manufacturer iRobot is being scrutinized by the FTC, a merger which we think the regulator will be hard pressed to prove is harmful to competition.
- However, although unlikely, the pending ruling next month on the FTC’s unusual lawsuit against Meta’s acquisition of virtual reality start-up Within could rewrite regulatory guidelines for vertical mergers
- The 27% spread offers a potentially lucrative trade generating double-digit IRR even if deal completion is delayed by regulatory review, although it might be wise to entertain some downside protection
Last Week in Event SPACE: Toyo, Takashimaya/H2O, Skyworth, Shandong Fengxiang, O2Micro
- YFO has played a relatively upfront game for Toyo Construction (1890 JP) – badly at first, then better.
- With Takashimaya (8233 JP) and H2O (8242 JP) now more secure and cross-shareholdings more problematic, they will sell off their equity in each other but continue to work on joint projects.
- Skyworth Group Limited (751 HK)‘s latest buyback offers a minimum proration of 7.8%, although applying the last buyback two years ago, it’s likely to be 13%+.
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