In today’s briefing:
- US Debt Ceiling Raise Tells Us Gold Is Going Up… It Must Be Part Of Every Portfolio
- NVIDIA. Yikes! Have We Missed The Boat?
- CSI300 Index Rebalance: 9 Changes as Discretion Used
- STAR50 Index Rebalance: Two Changes in June (As Expected)
- SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
- Golden Eagle Retail (3308 HK): Controlling Family’s Privatisation Offer at HK$6.88
- Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post
- CES China Semiconductor Chips Index Rebalance: Six Changes in June
- Assessing the Canon Buyback and Follow-On Performance
- CSI500 Index Rebalance: Adds Starting to Outperform
US Debt Ceiling Raise Tells Us Gold Is Going Up… It Must Be Part Of Every Portfolio
- US debt ceiling agreement warns again about upcoming monetary inflation. Gold (and crypto) is a great hedge against monetary inflation, but less good against cost inflation
- US debt problem demands near double-digit annual growth in Fed balance sheet over next decade… QE is not dead!
- Gold could easily test US$3000/ oz. Bitcoin could do even better! Buy into any near-term weakness
NVIDIA. Yikes! Have We Missed The Boat?
- Q1’23 revenues of $7.19 billion, down 13% from a year ago but up 19% sequentially and ~10% higher than the guided midpoint.
- Current quarter outlook for revenues of $11 billion, a ~55% sequential increase, sparked mayhem in the markets and sent NVIDIA’s stock soaring over 24% in after hours trading
- Don’t go chasing waterfalls, there are many other ways to rise with the tide
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.
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.
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.
Golden Eagle Retail (3308 HK): Controlling Family’s Privatisation Offer at HK$6.88
- Golden Eagle Retail (3308 HK) disclosed a scheme privatisation offer from the controlling family at HK$6.88 per share, a 40.4% premium to the undisturbed price (HK$4.90 on 22 May).
- Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The shareholder with a blocking stake has provided an irrevocable.
- The offer price is final. The offer is reasonable particularly as the sentiment on the department store sector remains weak. This looks like a done deal.
Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post
- Rakuten Bank (5838 JP)‘s TOPIX inclusion is this week. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.
- Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific Airways (293 HK) tackles alleged language bias by flight attendants.
- Understanding real money demand on the Rakuten (4755 JP) story is key. If there is any, that makes deal overhang smaller than it looks.
CES China Semiconductor Chips Index Rebalance: Six Changes in June
- There are 6 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 June.
- All the inclusions are also additions to the CSI 500 Index and the passive flows will come from multiple trackers.
- The adds have outperformed the deletes over the last couple of weeks and there could be further outperformance over the next two weeks.
Assessing the Canon Buyback and Follow-On Performance
- 10 days ago Canon Inc (7751 JP) announced its 18th ¥50bn buyback in 15yrs. They have a pattern, both in execution and outperformance.
- Historically, they are reasonably aggressive. It may pay to observe market data to see when they are done. It may also pay to look at peer outperformance cycles.
- Here I look at both – buyback cycle performance and cycle outperformance. Good so far, and now I see a tactical trade but it’s not overwhelming.
CSI500 Index Rebalance: Adds Starting to Outperform
- There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 June.
- One way turnover at the rebalance is estimated at 9.45% leading to a one-way trade of CNY 5.93bn. The IT and Industrials sectors gain the most index spots.
- 8 adds to the CSI 500 Index are deletes from the CSI 300 Index while 3 deletes from the CSI 500 Index are adds to the CSI 300 Index.
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