This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
- Unless Fast Retailing (9983) underperforms Nikkei 225 by 10% by Friday close, there will be a capping exercise at the next Nikkei 225 Rebalance at the end of March 2025.
- The evolution of tech stock movement in Japan in the next day or three is important to watch. There will be effects.
- The setup very near-term could be pretty interesting, and worth watching.
2. Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- Haitong Securities (H) (6837 HK) and Haitong Securities (A) (600837 CH) shares will stop trading after 5 February following the merger with Guotai Junan Securities (2611 HK).
- There will be small buying in Guotai Junan Securities (2611 HK) at the close on 5 February and there should be more buying in the A-shares and H-shares in March.
- There will also be a stock added to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) to bring the number of index constituents back to 300.
3. Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- With 3 days left in the review period, Fast Retailing (9983 JP) has a 11.29% weight in the Nikkei 225 (NKY INDEX). That means double capping in March.
- If Fast Retailing (9983 JP) underperforms the other index stocks by 1.8% from now to the close on 31 January, there will only be a single level of capping.
- Double capping will result in big selling on Fast Retailing (9983 JP) and big inflows into the other index constituents. Smaller impact for single level capping.
4. Sigma Healthcare (SIG AU): Shareholders Approve Merger; Passives Could Start Buying in Two Weeks
- Sigma Healthcare (SIG AU) and Chemist Warehouse (CWG) shareholders have approved the merger with 99.86% and 100% of the votes cast in favour.
- The Second Court Hearing is on 3 February and the merger will be implemented on 12 February, which is when the passive buying could commence.
- Sigma Healthcare has continued to trade higher on a record margin and sales expansion for CWG and expected passive buying that could top A$3bn over the next few months.
5. 3D Launches Partial Tender Offer on NTT UD REIT (8956)
- Seemingly out of the blue, Singapore-based activist investment fund 3D Investment Partners has launched a partial tender offer at a small premium on NTT UD REIT Investment Corporation (8956 JP).
- 3DIP currently owns 2.2% and at maximum, will own 15.00% of the REIT units outstanding less treasury units. It intends to own the units for “pure investment purposes.”
- “Shareholder” structure is different for J-REITs vs companies. And this J-REIT has an interesting future possibility. But…
6. Solactive Global Uranium & Nuclear Components Index Rebalance: DeepSeek Led Selloff & 1 Delete
- Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There is only 1 delete with implementation at the close on 31 January.
- As expected, GoviEx Uranium (GXU CN) will be deleted from the index and there will be a bunch of capping changes, especially for non-pure play stocks.
- Estimated one-way turnover is 5.8% resulting in a round-trip trade of US$386m. There are many stocks with multiple days of ADV to trade.
7. Indian Renewable Energy (IREDA IN) QIP: Index Implications
- IREDA has announced a Qualified Institutional Placement (QIP) of a maximum of INR 50bn as long as the Government of India’s holding does not drop by more than 7%.
- There will be passive buying at the time of settlement of the QIP shares while the increase in float will bring the stock closer to inclusion in another global index.
- With the stock close to index inclusion level and down 37% from its peak, there could be positioning in the stock for passive inflows.
8. PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
- As forecast, Areit (AyalaLand REIT) (AREIT PM) and China Banking (CBC PM) will replace Nickel Asia (NIKL PM) and Wilcon Depot (WLCON PM) in the Philippines Stock Exchange PSEi Index.
- Passive trackers will need to buy between 14-44 days of ADV in the adds while selling between 17-54 days of ADV in the deletes.
- The stocks have already moved a lot over the last few months and positioning has built up over that period. There could still be outperformance ahead of the passives trading.
9. Global Foods Creators (7559) – Another Stupidly Cheap MBO With Rigged DCF
- Today after the close, Global Food Creators (7559 JP) announced that the CEO would sell his 1.23% of the company into an MBO by a company he set up.
- The family company which owns 27%, and he would fund the takeover of the other 73% with 1% equity taken from his share sale, and 99% bank loans.
- The TOB is at 0.65x book for a cash-rich company. Liquidate the cash and the rest is being taken over at 0.33x book. Aaaaargh.
10. EQD | DeepSeek’s New AI: Price Supports and Broader Implications for META, NVDA, S&P 500, Nasdaq 100
- News that DeepSeek’s latest AI release appears to be superior to latest OpenAI’s ChatGPT in most (if not all) of the benchmark tasks have apparently shaken markets today.
- DeepSeek may be able to beat its competitors (including other AI developed by other US companies like Meta Platforms (META US) ), using lower cost chips and less data.
- Tech companies like NVIDIA Corp (NVDA US) are falling hard (like -12%) in pre-market, and so are the US Indices. Let’s see where support for reversal rallies can be found.
