In today’s briefing:
- KOSPI200 Index Rebalance: Two Sets of Changes
- MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes
- MVIS Australia A-REITs Index Rebalance Preview: Capping Changes & Flows
- KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
- Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow
- HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications
- Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
- EQD | Asian Derivative YTD Range Trade Ideas
- EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation
- ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity
KOSPI200 Index Rebalance: Two Sets of Changes
- There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
- Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
- Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.
MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes
- There are unlikely to be any inclusions to the index in June while there are three stocks that are close to the deletion threshold.
- Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of over 4% and a one-way trade of A$78m.
- Short interest on AMP Ltd (AMP AU) has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.
MVIS Australia A-REITs Index Rebalance Preview: Capping Changes & Flows
- We do not expect any constituent changes in June (that could change though!). The only flows are likely to be from capping the constituents at 10% of the index weight.
- Capping changes will lead to a one-way turnover of 2.15% resulting in a one-way trade of A$14m. There are two stocks with over A$5m to trade.
- Stockland (SGP AU) will be the most affected stock with passive trackers needing to sell over 1 day of ADV. The stock has run up and shorts are increasing.
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
- Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
- Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
- Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.
Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow
- SBI Sumishin Net Bank (7163 JP) and Rakuten Bank (5838 JP) listed over the last couple of months and the stocks will be added to various indices over the year.
- First up, Rakuten Bank (5838 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 30 May.
- Then both stocks will be added to other global indices between August and December bringing in passive flows and helping support the stock.
HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications
- Media reports indicate that the HDFC Bank (HDFCB IN) merger with HDFC Limited (HDFC IN) is expected to complete in 4-5 weeks.
- There will be inclusions to the NIFTY Index, Nifty Next 50 Index and S&P BSE SENSEX Index and capping changes to the Nifty Bank Index apart from changes to global indices.
- While the impact on the merging entities is not big, there will be fairly large flows on some stocks that are index inclusions or affected by capping changes.
Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
- Nvidia’s results and guidance sparked a massive rally in the shares, marking one of the largest single-day increases in market cap in U.S. stock market history.
- The company sees a multi-year growth cycle of data center upgrades ahead. Key supply chain partners TSMC and ASML are rising as well.
- Wiwynn in Taiwan should be a key winner. We also highlight a potential wildcard smallcap AI play that we will investigate further.
EQD | Asian Derivative YTD Range Trade Ideas
- Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
- Many Asian Indices have Tight Ranges, Flat Returns YTD, Options Expensive to the Range.
- HSBC Holdings (5 HK) and Citic Ltd (267 HK) are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options
EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation
- The likelihood of the merger review not being approved appears to be low. Additionally, the purchase of only 3.8M additional shares is required, leading to a negligible cancellation risk.
- It is particularly noteworthy that the offering price of ₩30,000, targeting minority shareholders, may be adjusted upward depending on future share price increases.
- While there is a potential allocation risk, as Medtronic aims to delist the company, they are unlikely to lower the target quantity in the tender offer to a risky level.
ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity
- The possibility of SKC securing additional shares other than the planned 40% through a tender offer seems low. This is a basis for the recent short position build-up in ISC.
- ISC began to experience an influx of short selling, leading to it being designated as an overheated short-selling stock, and short selling was restricted for one day on the 26th.
- We need to pay attention to the potential disappointment in the market, which could lead to a sustained downward correction in the stock price.
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