In today’s briefing:
- NIFTY NEXT50 Index Rebalance Preview: Potential Changes & Close Names
- 3SBio (1530 HK): Global Index Inclusion as Stock Soars
- Doosan Corp (000150 KS): Global Index Inclusion & A Relative Value Trade
- Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
- STAR Chip Index Rebalance Preview: Forecast Changes for September
- Meitu (1357 HK): AI-Driven Global Index Inclusion
- LIG Nex1 (079550 KS): Stock Soars; Momentum Stalls; Global Index Inclusion Next
- NIFTY50 Index Outlook Amid Ongoing Rebalance Review
- IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- Telix Pharmaceuticals (TLX AU): Why Negative Impact of SEC Probe Is A Temporary Setback
NIFTY NEXT50 Index Rebalance Preview: Potential Changes & Close Names
- With the review period nearing completion, there could be 4 changes (including 1 migration) for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September.
- There is one stock close to inclusion zone and one stock close to deletion zone and price movements over the rest of the month will determine the final changes.
- Estimated one-way turnover is 7.8% resulting in a one-way trade of INR 30.06bn (US$350m). Six of the eight potential changes will have over 2x ADV to trade from passive trackers.
3SBio (1530 HK): Global Index Inclusion as Stock Soars
- 3SBio Inc (1530 HK)‘s stock price has soared over the last couple of months, and the higher market cap should result in global index inclusion in August.
- 3SBio Inc (1530 HK) has gone from middle/bottom of the pack to best performer among its peer group over the last two months.
- There will be a lot of positioning in the stock, but we see a similar trend across stocks in the industry.
Doosan Corp (000150 KS): Global Index Inclusion & A Relative Value Trade
- A doubling of the stock price over the last 3 months could lead to Doosan Corp (000150 KS) being included in a global index in August.
- Doosan Corp (000150 KS) has outperformed its peers over the last few months and now trades at a huge valuation premium to its peer group.
- The stock is 17% off its recent highs and that provides an opportunity for a relative value trade heading into the index inclusion event.
Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
- Cloud Village (9899 HK)‘s stock price has doubled over the last quarter and the increased market cap should lead to global index inclusion in August.
- Short interest in Cloud Village (9899 HK) is at an all-time high and has increased in lockstep with the stock price.
- Cloud Village (9899 HK) has outperformed Tencent Music Entertainment Group (1698 HK) and now trades at much higher valuations. A pair trade looks attractive here.
STAR Chip Index Rebalance Preview: Forecast Changes for September
- There could be 2 constituent change for the STAR Chip Index at the September rebalance. There will also be a few capping changes.
- Estimated one-way turnover is 1.4% resulting in a round-trip trade of CNY 983m (US$137m). Passives need to trade between 0.4-1.9x ADV in the potential changes.
- Both forecast inclusions are newly eligible for index inclusion and the passive buying could provide some support following the drop in the stock price post listing.
Meitu (1357 HK): AI-Driven Global Index Inclusion
- Meitu Inc (1357 HK)‘s stock price has more than tripled over the last few months and the significantly higher market cap should lead to global index inclusion in August.
- Shorts covered a lot in 2024 and that has continued this year as the stock price has moved higher.
- Meitu Inc (1357 HK) has outperformed its peers significantly and there could be a pullback in the stock following index inclusion.
LIG Nex1 (079550 KS): Stock Soars; Momentum Stalls; Global Index Inclusion Next
- LIG Nex1 Co (079550 KS)‘s stock price has doubled over the last 3 months, and the increased market cap could now result in a global index inclusion.
- LIG Nex1 Co (079550 KS) has outperformed most of its peers over the last few months and now trades expensive on a range of metrics.
- While momentum could take the stock higher, there is a risk of pullback as positioning in the stock is unwound.
NIFTY50 Index Outlook Amid Ongoing Rebalance Review
- As outlined by Brian Freitas , the NIFTY Index ‘s September rebalance ends July 31st, the announcement of the changes will take place end August and implemented on September 29th.
- The index has been pulling back for 3 weeks, it’s oversold according to our model, 75% probability of reversing up this week.
- Lower support limit would be 24319, while a rally could take the index to 25642 across a couple of weeks. The rally won’t last more than 2 weeks probably.
IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- There are 2 constituent changes each for the IDX30 Index and the LQ45 Index, and 3 constituent changes for IDX80 Index to be implemented at the close on 31 July.
- The largest passive flows are expected in Bank Central Asia, Bank Rakyat Indonesia, PT Adaro Andalan Indonesia, Mitra Adiperkasa, XLSMART Telecom Sejahtera, Indo Tambangraya Megah and Bank Mandiri Persero.
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
Telix Pharmaceuticals (TLX AU): Why Negative Impact of SEC Probe Is A Temporary Setback
- Telix Pharmaceuticals (TLX AU) received a subpoena from the SEC seeking various documents and information primarily relating to the company’s disclosures regarding the development of prostate cancer therapeutic candidates.
- Telix is in the process of responding to the information request. The company has elected to notify the Australian Securities and Investments Commission of the SEC’s information request.
- SEC subpoena will not affect the normal business operation of Telix. While the matter is ongoing, Telix will continue clinical development programs for its prostate cancer therapy candidates.
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