In today’s briefing:
- KOSPI200 Index Rebalance: Two Sets of Changes
- KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
- Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start
- Advantest (6857) | Key Beneficiary of AI Tailwinds
- STAR50 Index Rebalance: Two Changes in June (As Expected)
- EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation
- SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
- Japan Weekly | Advantest, Ibiden, Kawasaki Heavy, SK Kaken, NCHD
- SSE180 Index Rebalance: Small Impact but Not Widely Tracked
- CSI300 Index Rebalance: 9 Changes as Discretion Used
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.
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.
Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start
- Canon has conducted 18 buybacks in the last 15 years. Every single one has been the same size. And the parameter-setting and how they are executed is… particular.
- For those with Canon to execute, using the information about patterns may be helpful.
- For those interested in a trade, there may be one here.
Advantest (6857) | Key Beneficiary of AI Tailwinds
- Advantest is a market leader in semiconductor testing and will be a major beneficiary of a multi-year AI tailwind
- Catalyst: News flow around new AI applications, increased investment dollars flowing into the space and visible acceleration in Nvidia’s data centre GPU growth
- Market concern over near-term correction in semiconductor market is giving investors an opportunity to buy Advantest at a 15% discount to its intrinsic value
STAR50 Index Rebalance: Two Changes in June (As Expected)
- The index committee has used a 6-month minimum listing history and that results in two changes. This is the first rebalance with less than 5 changes at a review.
- One way turnover is estimated at 1.03% and will result in a one-way trade of CNY 1,025m. Given the adds are new listings, there will be some reverse funding flow.
- There appears to be little pre-positioning on the adds while there is a bigger buildup on the deletes.
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.
SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
- There are 5 changes for the SSE50 Index that will be implemented at the close on 9 June. There is over 1x ADV to sell on a few deletions.
- We estimate a one-way turnover of 5.3% at the June rebalance leading to a one-way trade of CNY 3.84bn. Index arb activity could add to the impact on the stocks.
- The adds outperformed the deletes from February to April but have given up a lot of the outperformance over the last month.
Japan Weekly | Advantest, Ibiden, Kawasaki Heavy, SK Kaken, NCHD
- It was a relatively quiet week for the broader index. However, there was a big sector shift towards tech and AI winners.
- Japanese Heavy Equipment makers have technologies that will be in demand for decades. KHI trades below book.
- As we head into AGM season, we take a look at interesting activist campaigns.
SSE180 Index Rebalance: Small Impact but Not Widely Tracked
- There are 18 changes for the SSE180 Index that will be implemented at the close of trading on 9 June.
- The impact on the stocks is small but this is not a widely tracked index, so there could still be opportunities for some high risk/reward basket trades.
- With Northbound Stock Connect eligibility no longer drawing on the SSE180 Index constituents, the index could lose relevance over time.
CSI300 Index Rebalance: 9 Changes as Discretion Used
- There are 9 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 June.
- While nearly all the changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used discretion.
- The Energy sector is the biggest gainer in terms of index spots, while the Consumer Discretionary and Health Care sectors lose two index spots each.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars