In today’s briefing:
- FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade
- Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
- FTSE All-World/All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery
- Hang Seng TECH Index Rebalance: Float & Capping Changes
- FTSE TWSE Taiwan 50 Index Rebalance Preview: Far Eastern Could Replace AUO
- FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
- 2023 High Conviction Ideas: Meituan
- CSI300 Index Rebalance: The Surprises Could Outperform
- STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week
- OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade
- Today is the review cutoff for dividend data and stock prices that will be used to select the inclusions and exclusions as well as for capping of index weights.
- We see 26 adds and 5 deletes for the index at the December rebalance resulting in one-way turnover of 46% and a one-way trade of TWD 78.1bn (US$2.51bn).
- Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 19 stocks and this will present trading opportunities.
Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
- With just over two months left in the review period, we expect three changes to the Nikkei 225 (NKY INDEX) at the March rebalance.
- Lasertec Corp (6920 JP), Oriental Land (4661 JP) and Renesas Electronics (6723 JP) could replace Toyobo Co Ltd (3101 JP), Nippon Light Metal (5703 JP) and Toho Zinc (5707 JP).
- As with the last rebalance, there will be a large funding trade estimated at JPY 417bn. There are many stocks with over 0.5x ADV to sell.
FTSE All-World/All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery
- For Asia Pacific, there are 2 adds to the FTSE All-World Index, 2 adds to the FTSE All-Cap Index and 2 deletions from the FTSE All-World Index.
- All changes are on expected lines. The one surprise is the non-inclusion of Rainbow Children’s Hospital (RAINBOW IN) to the All-Cap Index where it likely just failed investable market cap.
- Sungeel Hitech (365340 KS) is also an add to the KOSDAQ 150 Index at the close on 8 December, while there is a huge lock-up expiry for Delhivery (DELHIVER IN).
Hang Seng TECH Index Rebalance: Float & Capping Changes
- As expected, there are no adds or deletes for the Hang Seng Tech Index (HSTECH INDEX) in December. However, there are plenty of capping and float changes to drive flows.
- The December rebalance is expected to have a one-way turnover of 2.3% resulting in a one-way trade of HK$1.9bn.
- Short interest is greater than 5% of float on a few stocks and a continued recovering in markets could lead to a squeeze higher.
FTSE TWSE Taiwan 50 Index Rebalance Preview: Far Eastern Could Replace AUO
- Today is the review cutoff and we expect Far Eastern New Century (1402 TT) to replace AU Optronics (2409 TT) in the FTSE TWSE Taiwan 50 Index in December.
- Passive Taiwan 50 trackers will need to buy nearly 6 days ADV on Far Eastern New Century (1402 TT) and sell 1.6 days of ADV on AU Optronics (2409 TT).
- There will be same way flows from the FTSE TWSE Taiwan Dividend+ Index trackers and will substantially add to the impact on the stocks.
FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
- At the end of the review period for the December rebalance, we see JD Health (6618 HK) replacing XPeng (9868 HK) in the FTSE China 50 Index.
- There is a very slim possibility of Longfor Properties (960) being deleted; it could be replaced with either Yum China Holdings Inc (9987) or PICC Property & Casualty H (2328).
- Short interest has stayed rangebound on JD Health (6618 HK) this year, while shorts have gone parabolic on XPeng (9868 HK) over the last few months.
2023 High Conviction Ideas: Meituan
- Meituan is a leading “service e-commerce” platform in China, leveraging technology to connect consumers with merchants.
- With the gradual re-opening in 2023, core local commerce will deliver better than expected result.
- Tencent’s distribution of Meituan shares provides a good entry point.
CSI300 Index Rebalance: The Surprises Could Outperform
- There are 15 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 December.
- While most of the deletions are in line with forecasts, there are a few differences on the inclusions as the index committee has used its discretion to overlook some names.
- The Industrials, Materials and Utilities sectors gain index spots at the expense of Health Care, Financials, Consumer Staples and Consumer Discretionary.
STAR50 Index Rebalance: Adds Outperform Deletes in the Last Week
- The index committee has continued to use a 6-month minimum listing history leading to five changes to the SSE STAR50 (STAR50 INDEX) in December.
- All changes are in line with our forecasts and there appears to be some pre-positioning over the last week as the deletes have sold off hard.
- One-Way turnover is estimated at 5.34% and will result in a one-way trade of CNY 3,766m. The estimated impact on the deletes is higher than that on the adds.
OCI Spin-Off: Trade Opportunities Post Relisting, Valuations, & Impact on KOSPI 200
- After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).
- However, the degree of outperformance of OCI Co vs OCI Holdings is not likely to be similar to other recent spin-offs such as F&F Co and F&F Holdings.
- We have a long-term bullish view of OCI over the next one to two years. It is trading at P/E of 3.1x and P/B of 0.6x based 2022 earnings estimates.
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