In today’s briefing:
- FTSE All-World/All-Cap Index Rebalance: Inclusions, Deletions & Other Changes
- HSI Index Rebalance: Four Weddings & A Funeral
- BHP Woodside Distribution – Could Be a Large Block (~US$1bn) In Early June
- HDFC/HDFC Bank Mega Merger: Foreign Selling Now Could Lead to Foreign Buying Later
- Nufarm Placement – Cleanup by Strategic Investor
FTSE All-World/All-Cap Index Rebalance: Inclusions, Deletions & Other Changes
- For Asia Pacific, there are 8 inclusions each to the All-World Index and the All-Cap Index at the June QIR. Quite a few have over 3 days ADV to buy.
- There are also changes to the NOS and investability weights that will require passive funds to buy/sell a lot of stocks. Some have a reasonably large impact/flow.
- A lot of the IPOs are trading below their offering prices and investors could be looking to sell into any rallies that take the stocks close to their IPO prices.
HSI Index Rebalance: Four Weddings & A Funeral
- The inclusion of Orient Overseas International, Zhongsheng Group, Semiconductor Manufacturing International Corp (SMIC) and China Hongqiao plus the deletion of AAC Technologies Holdings takes us to 69 index stocks.
- Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover is 3.43% and will result in a one-way trade of HK$7,444m.
- There is huge short interest on Zhongsheng Group (881 HK) and China Hongqiao (1378 HK) and there could be some short covering from now to implementation.
BHP Woodside Distribution – Could Be a Large Block (~US$1bn) In Early June
- BHP shareholders will receive US$18bn worth of Woodside petroleum shares on 1st Jun 2022, post the completion of the merger. Block, worth US$1.5bn, could be sold in early June.
- As a part of the distribution, some shares belonging to ineligible and other small shareholders will have to be sold by the sales agent, JPM.
- In this note, we will look at the possible deal dynamics and the overall background of the deal.
HDFC/HDFC Bank Mega Merger: Foreign Selling Now Could Lead to Foreign Buying Later
- HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN)‘s stock prices have dropped and underperformed their peers since the announcement of the merger in April. Foreign investors have been selling.
- As of 13 May, foreign investors hold 68.56% of HDFC Limited (HDFC IN) and 66.55% of HDFC Bank (HDFCB IN), down from 72.16% and 70.08% respectively as of December 2021.
- The merged entity currently has foreign room of 16% now and this could lead to large buying from passive MSCI and FTSE trackers at the time of merger implementation.
Nufarm Placement – Cleanup by Strategic Investor
- Sumitomo Chemical (4005 JP) is looking to sell its entire stake in Nufarm Ltd (NUF AU) to raise A$338.3m (US$240.6m).
- Sumitomo Chemical had been a strategic investor, where it purchased 20% stake via a tender offer at A$14/share. The former had also acquired Nufarm’s South American businesses in mid-2020.
- While this would be a clean-up sale, the deal is a large one to process at 36 days ADV.
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