In today’s briefing:
- HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
- FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT
- CES China Semiconductor Chips Index Rebalance: Four Changes in December
- FTSE EPRA Nareit Index Rebalance: One Deletion for Australia
- Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
- KLCI Index Rebalance: Preliminary Changes Announced; Should Be Same as Final
- Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom
- Hang Seng Indexes: Rebalances Today; Recent Trading Data
- Carbon Revolution: SPACed & Smacked
- Skymark IPO – Valuation
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
- The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
- The largest inflows will be on Alibaba Group, Haier Smart Home, Kuaishou Technology, Li Auto, PetroChina, Tencent, JD.com, China Resources Mixc Lifestyle Services and Tingyi Holding.
- The largest outflows will be on SMIC, NetEase, AIA Group, HSBC Holdings, China Construction Bank, Alibaba Health Information Technology, Innovent Biologics, China Mobile, Ping An Insurance and ICBC.
FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT
- JD Health (6618 HK) and Yum China Holdings Inc (9987 HK) will replace Longfor Properties (960 HK) and XPeng (9868 HK) in the FTSE China 50 Index on 16 December.
- The largest flow and impact of passive trading will be on Yum China Holdings Inc (9987 HK). There could be buying on Yum China Holdings, Inc (YUMC US) overnight.
- Short interest on the deletes is over 7% of float and there could be short covering against the passive selling at the close on 16 December.
CES China Semiconductor Chips Index Rebalance: Four Changes in December
- There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 December.
- Empyrean Technology, GalaxyCore, Shanghai Fudan Microelectronics and Shanghai Awinic Technology will replace Grinm Advanced Materials, Chengdu Corpro Technology, Shanghai Sinyang Smcndctr Mtls and Espressif Systems Shanghai in the index.
- Shanghai Fudan Microelectronics Group (688385 CH) will be added to the MSCI China Index at the close today and will also be added to the CSI 500 Index in December.
FTSE EPRA Nareit Index Rebalance: One Deletion for Australia
- There are no adds for the FTSE EPRA Nareit Developed Asia Index in December. The only deletion is Home Consortium Ltd (HMC AU).
- Passive trackers are estimated to sell 12x ADV on Home Consortium Ltd at the close 16 December. Short interest is nearly the same and there could be some covering.
- Home Consortium Ltd (HMC AU) has underperformed its peers over the last 12 months and still trades more expensive to its peer group.
Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
- On 17 Feb 2022, Janaghan Jeyakumar, CFA wrote about Appier Group (4180 JP) suggesting it was a TOPIX inclusion candidate in the not-distant future.
- In mid-August 2022, he reiterated his opinion. Three days later, the company said they had applied for TSE Prime membership. We are coming up on the timing for an announcement.
- It would mean buying, but the shareholder structure is interesting, and intentions are not easy to read. But if they announce imminently, the calendar makes the event even more interesting.
KLCI Index Rebalance: Preliminary Changes Announced; Should Be Same as Final
- Post market close yesterday, FTSE announced the preliminary changes to the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) for the December rebalance. The final changes will be announced today.
- As expected, AMMB Holdings (AMM MK) and Ql Resources (QLG MK) will replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) in the index.
- From a near 20% index weight in 2020, Malaysian glovemakers will have no representation in the index once these changes are implemented.
Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom
- Itochu Corp (8001 JP) has restarted accumulating Fuji Oil Holdings (2607 JP) shares, with an acquisition of 3.5m shares during the last-quarter to take its ownership percentage in Fuji-Oil to 44%.
- With both earnings and valuations at a cyclical bottom, Itochu could be encouraged to accumulate more Fuji Oil shares in the short term, resulting in Fuji Oil outperforming its peers.
- We think even a takeover offer could be possible while the share price is hovering near the cyclical bottom.
Hang Seng Indexes: Rebalances Today; Recent Trading Data
- The December rebalance of the HSI INDEX, HSCEI INDEX and HSTECH INDEX takes place at the close today. One-way flow is estimated at HK$8.4bn.
- There are 3 adds for the HSI INDEX and 4 adds/ 4 deletes for the HSCEI INDEX. There are float changes for a few stocks as well as capping changes.
- There is excess volume on most adds/deletes post announcement and short interest has also picked up significantly.
Carbon Revolution: SPACed & Smacked
- Following a one-month suspension, carbon-fibre wheel maker Carbon Revolution Ltd (CBR AU) announced it will merge (and delist from the ASX) with Twin Ridge Capital, a US-listed SPAC.
- CBR said it also requires upward of A$30mn in bridging finance to fund near-term costs (through to June 2023). The share price promptly tanked 50% upon the resumption of trading.
- It’s an intriguing situation with an implied notional share price of A$1.49/share under the merger, versus the current price of A$0.15. So I dig a little deeper.
Skymark IPO – Valuation
- Skymark is a little difficult to value given wide dispersions in peer multiples and earnings recovery trajectories.
- However, on balance we believe the issue looks to be on the cheap side.
- In addition, there are several quirks to the balance sheet, not all of which are negative.
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