In today’s briefing:
- FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: 46% One-Way Turnover and US$5bn Two-Way Trade
- Taiwan Div+ Index Dec22 Rebal Trade Up 6% So Far – Small Changes To Basket But HODL Til The End
- FTSE TWSE Dividend+ Dec 22 Quiddity Final Expectations: Crucial Shift in Tracking AUM a GAME CHANGER
- Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation
- FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
- KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)
- SET50 Index Rebalance Preview: Four Potential Changes in December
- China Huarong (2799 HK): Full Circulation & MSCI/FTSE Index Inclusion
- Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale
- Skymark Airlines Pre-IPO – Highly Leveraged with a History of Bankruptcy
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.
Taiwan Div+ Index Dec22 Rebal Trade Up 6% So Far – Small Changes To Basket But HODL Til The End
- The Taiwan Div+ cutoff date for the data used to calculate the Dec 2022 rebalance was yesterday’s close. Janaghan Jeyakumar, CFA has published two updates.
- I recommended a long vs short basket on 26 October. So far that long vs short basket is +6.1%. I recommend adjusting the basket to new names and continuing.
- Historically, the pattern from cutoff to date to Inclusion and then Inclusion to Inclusion+20 is quite clean. I would not expect differently this time.
FTSE TWSE Dividend+ Dec 22 Quiddity Final Expectations: Crucial Shift in Tracking AUM a GAME CHANGER
- In October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50 during the December 2022 Rebalance.
- Considering the combined effect of expected index changes and capping flows, there could be 27 potential inflows names and 28 potential outflow names with total one-way flow size of US$2.45bn.
- There are multiple names on both sides with several days of volume to trade.
Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation
- The last trading day to secure appraisal rights is today (the 22nd). You must buy stocks by today to make arb trade possible using appraisal rights.
- We should consider LONG FINANCIAL SHORT FIRE/SECURITIES. KSD allows us to maintain borrowed stocks of the target company without redemption procedures if new stocks are listed after the merger.
- K200 trackers will have to buy in for FIRE at the close on January 27, whereas SECURITIES will be on March 31. We should design a setup targeting this preemptively.
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.
KLCI Index Rebalance Preview: No More Glovemakers in the Index (Or How the Mighty Have Fallen)
- Ql Resources (QLG MK) and AMMB Holdings (AMM MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX).
- If the changes go through, glove makers will have no representation in the index. At one point in 2020, glove makers made up nearly 20% of the FBMKLCI INDEX.
- One-Way turnover at the rebalance will be around 3% and the impact of passive trading will be higher on the inclusions as compared to the deletions.
SET50 Index Rebalance Preview: Four Potential Changes in December
- The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) ends in 6 trading days.
- Following the market consultation and reduction in the turnover ratio, there could be four changes to the index. The DTAC/TRUE merger could result in another inclusion in Q1 2023.
- Estimated one-way turnover at the December rebalance is 8.1% and will result in a one-way trade of THB 7.4bn. More than 1x ADV to trade on most stocks.
China Huarong (2799 HK): Full Circulation & MSCI/FTSE Index Inclusion
- China Huarong Asset Management (2799 HK) has announced the full conversion of 8.358bn Domestic Shares to H-shares. The increased float could help the stock get added to the MSCI/FTSE indices.
- Depending on when the conversion is completed, the stock could be added to the MSCI China Index at the February QCIR though inclusion in May is more likely.
- There is a high probability of inclusion in the FTSE indices at the March SAIR – though it remains to be seen if that’s to the All-World or All-Cap Index.
Link Admin Is Cheap Amid PEXA In-Specie And Possible BCM/CM Sale
- Link Administration (LNK AU) has released the explanatory memorandum regarding the PEXA Group (PXA AU) in-specie distribution.
- Link shareholders will receive one PEXA share for every 7.52 Link shares. Shareholders will vote on the distribution on the 23 December. The IE, rightfully, deemed the process fair.
- If D&D buys Link’s BCM/CM ops for A$1.27bn, Link would be net cash of ~A$1.40/share versus an ex-entitlement price of ~A$1.58/share. And Link would still hold the lucrative RSS ops.
Skymark Airlines Pre-IPO – Highly Leveraged with a History of Bankruptcy
- Skymark Airlines (9204 JP) is looking to raise approximately US$218m in its upcoming Japan IPO.
- Skymark Airlines (SA) is a Japanese low-cost airline, being the third largest domestic airline according to the company. Unlike major airlines and other low-cost carriers, Skymark operates only domestic flights.
- In this note, we talk about the company’s past performance.
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