In today’s briefing:
- Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
- Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes
- KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
- Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation
- IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
- KRX New Deal Index Rebalance Preview: Some Big Impact Names
- Adani Group: Hindenburg Report Spurs MSCI to Invite Feedback
- Kanematsu Electronics (8096 JP): JPY6,200 Tender Offer from Kanematsu Corporation
- Names to Watch for Inclusion in MSCI Korea May Review
- Index Rebalance & ETF Flow Recap: NKY, LQ45, New Deal, URA, NIFTY, Stock Connect, SenseTime, Adani
Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
- Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
- Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.
Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes
- Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
- Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
- Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.
KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
- Jb Financial Group (175330 KS) will replace Meritz Fire & Marine Insurance (000060 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 27 January.
- We estimate passive KOSPI2 INDEX trackers will need to buy 3.494m shares (KRW 36.34bn; 4.04 days of ADV) of Jb Financial Group (175330 KS) at the close on 27 January.
- DGB Financial Group (139130 KS) could be added to the KOSPI2 INDEX in April, replacing Meritz Securities (008560 KS) following its merger with Meritz Financial Group (138040 KS).
Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation
- The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn.
- Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of a “con.”
- Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.
IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
- There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
- Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ).
- With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.
KRX New Deal Index Rebalance Preview: Some Big Impact Names
- The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
- We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
- The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).
Adani Group: Hindenburg Report Spurs MSCI to Invite Feedback
- The Adani Group stocks have taken a dive following the Hindenburg Research report. Group market cap is down more than US$47bn with company promoters taking the biggest hit.
- The Adani Enterprises FPO is almost certain to be undersubscribed. MSCI, in an unprecedented step, is monitoring publicly available information and is seeking feedback from the investment community.
- We find that the real float of some Adani Group stocks is much lower than the headline numbers and there could be selling if MSCI lowers the FIF.
Kanematsu Electronics (8096 JP): JPY6,200 Tender Offer from Kanematsu Corporation
- Kanematsu Electronics (8096 JP) has recommended Kanematsu Corp (8020 JP)’s tender offer of JPY6,200 per share, an 32.9% premium to the undisturbed price (27 January).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
- The tender offer is attractive as it represents an all-time share price high and a premium to peer multiples. This suggests a done deal.
Names to Watch for Inclusion in MSCI Korea May Review
- Posco International‘s recent merger with Posco Energy increased the share count. The distance from the float market cap borderline is catchable, given the current share price uptrend.
- Hanwha Aerospace will likely fail inclusion in this February review. The gap with the hurdle is not large, so it can aim for inclusion in the May review.
- Among Outside IMI, Korea Gas is tricky as it is a FOL stock. MSCI-concluded float is 30%, and the gap with the float market cap hurdle is still quite large.
Index Rebalance & ETF Flow Recap: NKY, LQ45, New Deal, URA, NIFTY, Stock Connect, SenseTime, Adani
- The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
- The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
- There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP).
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