In today’s briefing:
- NIFTY Bank Index: Big Flows & The Upcoming Methodology Change
- Hang Seng Biotech Index Rebalance Preview: Methodology Change Leads to 20 Deletions
- Gold Miners ETF (GDX US): Big Outperformance Driven by Benchmark Change; Valuation Gap Opens Up
- SK Telecom (017670 KS): Increasing Foreign Room & Passive Buying
- China A50 ETFs Rebalance Preview: Three Changes in September
- NIFTY MIDCAP150 Index Rebalance Preview: 11 Potential Changes in September
- Sun Corp (6736) – CLBT Has Round-Tripped, But Now Better ParentCo and a Buyback so Set-Up Is Better
- S&P/ASX Index Rebalance Preview (Sep 25): Potential Changes if Methodology Is Updated
- Current Samsung Biologics Split Dynamics with Alpha Potential Both Ways
- Tyro Payment (TYR AU) Fielding Offers. Again.
NIFTY Bank Index: Big Flows & The Upcoming Methodology Change
- In May, SEBI recommended changes to the minimum number of constituents for non-benchmark indices and the capping for those indices. The recommendations have to be implemented by 3 November.
- There is a high probability that NSE Indices implements the changes for the NSE Nifty Bank Index (NSEBANK INDEX) at the September rebalance. Nothing has been announced yet though.
- If implemented in September, Yes Bank and Union Bank Of India could be added to the index. Estimated one-way turnover is 22.35% and the round-trip trade is INR 149bn (US$1.7bn).
Hang Seng Biotech Index Rebalance Preview: Methodology Change Leads to 20 Deletions
- A methodology change for the Hang Seng Biotech Index (HSHKBIO Index) will result in 20 deletions at the close of trading on 5 September.
- Estimated one-way turnover at the rebalance is 9.5% resulting in a round-trip trade of HK$1.3bn (US$162m). Passive trackers need to sell between 0.05-1x ADV in the deletes.
- The forecast deletes have underperformed the other index constituents since the start of the year but there has been little movement since the announcement of the methodology change.
Gold Miners ETF (GDX US): Big Outperformance Driven by Benchmark Change; Valuation Gap Opens Up
- The VanEck Gold Miners ETF/USA (GDX US) will change benchmark from the NYSE Arca Gold Miners Index to the MarketVector Global Gold Miners Index at the close on 19 September.
- We forecast 8 adds and 25 deletes for the ETF. Estimated one-way turnover is 15.77% resulting in a round-trip trade of US$6.18bn.
- The forecast adds have outperformed the forecast deletes since the announcement of the benchmark switch and over shorter time frames too. The valuation gap has opened up.
SK Telecom (017670 KS): Increasing Foreign Room & Passive Buying
- Foreign room in SK Telecom (017670 KS) is over 21% now and increasing as foreign investors sell stock.
- Further foreign selling could take foreign room past 25% and that will result in passive inflows for the stock. Timing is dependent on when the 25% threshold is crossed.
- SK Telecom has underperformed its peers over the last 3 months and that has shrunk its valuation premium. Watch for a further increase in foreign room for an entry point.
China A50 ETFs Rebalance Preview: Three Changes in September
- Nearing the end of the review period for the September rebalance, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK).
- WuXi AppTec, Zhongji Innolight and BeiGene could replace China United Network, NARI Technology and China National Nuclear Power in the ETF at the close on 19 September.
- Passives will need to trade 0.1-0.7x ADV in the forecast changes. The forecast adds have massively outperformed the forecast deletes over the last 4 months.
NIFTY MIDCAP150 Index Rebalance Preview: 11 Potential Changes in September
- With the review period now complete, there could be 11 changes for the NIFTY Midcap 150 Index at the September rebalance.
- Estimated one-way turnover is 7.7% resulting in a round-trip trade of INR 17.6bn (US$201m). With over US$43bn tracking the index actively, the impact on the stocks will be much larger.
- The outright forecast adds have outperformed the forecast deletes over the last 4 months and there has been a jump in the last week.
Sun Corp (6736) – CLBT Has Round-Tripped, But Now Better ParentCo and a Buyback so Set-Up Is Better
- 12 months on from the Tender Offer which changed the shape of the shareholder register, Sun Corp (6736 JP) is up small and its main asset Cellebrite is -10%.
- The value of the rest of Sun Corp has probably increased to cover that 10% through new business earnings, but the main value is still Cellebrite. An exit still awaited.
- Now Cellebrite is lower, and SunCorp is lower (but recently rising) and SunCorp has announced a buyback which accounts for a big chunk of Real World Float. Hmmm…
S&P/ASX Index Rebalance Preview (Sep 25): Potential Changes if Methodology Is Updated
- S&P DJI have proposed methodology changes to the S&P/ASX family of indices to enhance representativeness and more quickly reflect changing market conditions. The consultation conclusions could be announced next week.
- The updated methodology could lead to 51 changes across the family of indices with implementation on 19 September. There will be a large impact on a number of stocks.
- The forecast adds have outperformed the forecast deletes over the last several months and near-term performance has been spectacular for the S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index changes.
Current Samsung Biologics Split Dynamics with Alpha Potential Both Ways
- One of the hottest local plays is gauging KRX and FSS leanings on Biologics split, which could drive short-term alpha across the three Samsung names alongside battery and HBM flows.
- Short-Term focus is KRX pre-listing review and FSS registration window. Once approval and lock-up kick in, Biologics and Samsung Electronics could outperform Samsung C&T.
- From a risk-hedge angle, this is a long-short alpha setup: if the split fails, Samsung C&T likely takes the hit, offering alpha potential both ways.
Tyro Payment (TYR AU) Fielding Offers. Again.
- Back in January 2023, point-of-sale payments play Tyro (TYR AU) provided Potentia with due diligence to “enable Potentia to develop a significantly improved proposal“. Potentia walked away from talks in May.
- Then crickets. Yesterday (12th August), Tyro’s shares gained 10.6%. After announcing this morning it has received unsolicited NBIOs, shares gained a further 8.6% (as I type), touching a 17-month high.
- At A$1.17/share, Tyro is ~27% adrift of Potentia’s last confirmed indicative Offer.
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