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Most Read: Hotel Property Investments, Baidu, KakaoBank, Great Wall Motor and more

In today’s briefing:

  • FTSE EPRA NAREIT – Lots of Adds In Developed Asia
  • FTSE China 50 Index Rebalance: High Turnover; Relatively Low Impact; Surging Shorts
  • KOSPI200 September Index Rebalance: Krafton, Kakao Bank Fast Entry Confirmed
  • Kakao Bank Placement – Its Expensive but the Discount Is Enticing
  • FTSE China A50 Index Rebalance: Strong Momentum; No Surprises

FTSE EPRA NAREIT – Lots of Adds In Developed Asia

By Brian Freitas

A short while ago, FTSE Russell announced the changes to the FTSE EPRA Nareit Global Real Estate Index Series that will become effective after the close of trading on 17 September.

As expected, there are a lot of inclusions for Developed Asia following the changes in the ground rules that lowered the basis points inclusion threshold from 0.3% to 0.1% to align the region with other Developed Markets.

There are 11 adds for Singapore, 10 for Australia, 3 for Japan, and 2 each for Hong Kong and New Zealand.

Stocks with the largest impact in terms of days of ADV to trade are Industria Reit (ADI AU), OUE Commercial REIT (OUECT SP), Cromwell European REIT (CERT SP), Sunlight REIT (435 HK), Far East Hospitality Trust (FEHT SP), Prosperity Reit (808 HK), Hotel Property Investments (HPI AU), Starhill Global REIT (SGREIT SP), Argosy Property (ARG NZ) and Growthpoint Properties Australia (GOZ AU).

The Australia inclusions have outperformed their peers significantly over the last couple of months and there could be some retracement there closer to the rebalance implementation date.

The Singapore inclusions have outperformed their peers marginally and there could be further gains till implementation date.


FTSE China 50 Index Rebalance: High Turnover; Relatively Low Impact; Surging Shorts

By Brian Freitas

Post HK market close today, FTSE Russell announced the changes to the FTSE China 50 Index as part of the June review. The changes will be effective after the close of trading on 17 September.

As expected, there are 4 sets of changes to the index. Baidu (9888 HK), Ganfeng Lithium (1772 HK)Geely Auto (175 HK) and Sunny Optical (2382 HK) have been added to the index, replacing Hansoh Pharmaceutical (3692 HK)Alibaba Health Information Technology (241 HK)Haidilao (6862 HK) and China Merchants Securities Co Ltd (H) (6099 HK).

Li Ning (2331 HK) just missed out on index inclusion and joins the Reserve List along with Bilibili (9626 HK), Shanghai Fosun Pharmaceutical (Group) (2196 HK), China Overseas Land & Investment (688 HK) and CRRC Corp Ltd H (1766 HK)

Estimated one-way index turnover is 11.07% and will result in a one-way trade of HK$5.03bn. The large turnover is a result of the number of changes and the capping changes to the largest index constituents. Final capping will use prices from the close of trading on 10 September.

Short interest has risen rapidly on the deletions and is at the high on three of the four names. There could be small covering close to implementation date.


KOSPI200 September Index Rebalance: Krafton, Kakao Bank Fast Entry Confirmed

By Brian Freitas

Last evening post market close, KRX announced the Fast Entry of KakaoBank (323410 KS) and Krafton Inc (259960 KS) to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close of trading on 9 September.

As expected, Lock&Lock (115390 KS) and Jw Pharmaceutical (001060 KS) will be deleted from the index.

Given the rapidly shrinking volumes in KakaoBank (323410 KS) and Krafton Inc (259960 KS), the impact of passive buying will be larger than what the headline numbers indicate.

The deletions were expected, the stocks have sold off from their highs, some shorts have been built, and they will no longer be short sell eligible from 10 September. Expect the stocks to move lower and then for short covering to begin as borrow is recalled.

Local institutions have been big buyers on both inclusions since listing. If part of this buying is for their passive tracking baskets, there could be less buying from now to implementation and the stocks may trade weak closer to rebalance day.

With the Kakao Pay (377300 KS) IPO back on the table, investors could look to switch out of KakaoBank (323410 KS) while the changing gaming rules and regulations in China could be a dampener for Krafton Inc (259960 KS).



FTSE China A50 Index Rebalance: Strong Momentum; No Surprises

By Brian Freitas

FTSE Russell has announced changes to the FTSE China A50 Index (XIN9I INDEX) as a part of the September review that will be implemented at the close of trading on 16 September.

There are 2 inclusions, Great Wall Motor (601633 CH) and Cosco Shipping Holdings (601919 CH), and 2 exclusions, CSC Financial Co Ltd (601066 CH) and China Citic Bank Corp (601998 CH).

Estimated one-way index turnover is 1.43% and will result in a one-way trade of CNY 698m. This is almost no impact of the funding trade on the other index constituents.

Only China Citic Bank Corp (601998 CH) has more than 1 day of ADV to trade from passive funds, but the strong momentum on the inclusions could continue.

Long/short trades on the stocks have been performing well over the last couple of months. There could be more opportunities over the next couple of weeks prior to implementation of the changes.

Important: The implementation will be at the close on 16 September, one day ahead of the other rebalances, since Northbound Stock Connect is shut on 17 September.


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