In today’s briefing:
- Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Constituent, FAF & Capping Changes
- Gold Miners ETF (GDX US): Big Outperformance Driven by Benchmark Change; Valuation Gap Opens Up
- Hang Seng Biotech Index Rebalance Preview: Methodology Change Leads to 20 Deletions
- China A50 ETFs Rebalance Preview: Three Changes in September
- NIFTY MIDCAP150 Index Rebalance Preview: 11 Potential Changes in September
- S&P/ASX Index Rebalance Preview (Sep 25): Potential Changes if Methodology Is Updated
- Taiwan Top 50 ETF Rebalance Preview: Another Inclusion for King Slide
- [Japan M&A] Founder, KEPCO, Try ¥2,750 Bain-Led MBO on Rezil (176A). Light Given Growth – Bumpity?
- Shengjing Bank (2066 HK): Another Rural Commercial Bank Delisting
- What’s Up (& Up) With Shandong Hi-Speed 412 HK)?
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Constituent, FAF & Capping Changes
- There are 3 potential changes for the HSIII Index in September. There are couple of names that are close to the inclusion/ deletion thresholds.
- The largest inflows will go to Horizon Robotics (9660 HK) following lock-up expiry that increases the Free-Float Adjusted Factor (FAF) by a factor of 7-8x.
- There are large capping changes too and the estimated one-way turnover is 9.8% resulting in a round-trip trade of HK$5.65bn (US$720m).
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.
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.
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.
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.
Taiwan Top 50 ETF Rebalance Preview: Another Inclusion for King Slide
- There could be 2 changes for the Yuanta/P-Shares Taiwan Top 50 ETF in September – one is high probability and the other is right at the cusp.
- King Slide Works (2059 TT) is being added to a global index this month, so the ETF inclusion will come hot on the heels of that.
- The impact on the stocks is pretty big with passive trackers needing to buy between 1.3-5.5x ADV in the adds and sell between 3.4-6.4x ADV in the deletes.
[Japan M&A] Founder, KEPCO, Try ¥2,750 Bain-Led MBO on Rezil (176A). Light Given Growth – Bumpity?
- To my knowledge, this may be the first Tender Offer takeout proposal on a “new ticker.” Rezil (176A JP) was listed just 16mos ago.
- This takeout is done on a highish-growth stock at 11.7x 1yr forward EV/EBITDA. It’s not expensive, but they have ~60%. BUT… there’s another Potential Player who may have Big Thoughts.
- Slightly long-dated, small-cap, likely to be illiquid. Watch how it trades early for hints.
Shengjing Bank (2066 HK): Another Rural Commercial Bank Delisting
- In Chinese RCBs: Two Bailouts. How Many More At Risk?, I concluded Shengjing Bank (2066 HK) was one bank I would avoid. It’s now suspended pursuant to the Takeovers code.
- Shengjing Bank had one of the largest P/B and net income declines in recent years. It had borderline allowance/provision coverage. It also had the lowest net interest margin.
- Shengjing Bank is PRC-incorporated, therefore any delisting proposal would involve a Merger by Absorption, incorporating a Scheme-like vote. And probably a tendering condition.
What’s Up (& Up) With Shandong Hi-Speed 412 HK)?
- Back on the 18th Feb 2025, Shandong Hi-Speed (412 HK) (SHS) closed its unconditional Offer for Shandong Hi-Speed New Energy (1250 HK). Shortly thereafter, SHS’ share price took off.
- SHS is now up 190% in the past six months. And ~1800% since Covid.
- What gives? It’s not index related. And forward earnings do not justify the move. This looks like a bubble. Short interest is on the move.
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