Event-Driven and Index Rebalance

Weekly Top Ten Event-Driven and Index Rebalance – Jan 12, 2025

By January 12, 2025 No Comments
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. Jiangsu Hengrui Pharma (600276 CH): Index Inclusion Post H-Share Listing

By Brian Freitas, Periscope Analytics


2. Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

By Brian Freitas, Periscope Analytics

  • The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
  • There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
  • If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.

3. 7&I (3382 JP) – Dippity Doo Dah – Irrational Fears, Earnings Vol, But Restructuring Proceeding Apace

By Travis Lundy, Quiddity Advisors

  • Recent news on the Seven & I Holdings (3382 JP) situation includes better-than-expected possible sale of the SST business, a little headline fear-mongering on national security, and earnings.
  • Earnings this year will be volatile vs expectations. Timing (and magnitude) of kitchen-sinking matters. But neither ACT nor you should be buying it based on trough earnings expectations.
  • The call transcript is worth listening to. The math on the takeover maths well. This is a buy on dip. Again. 

4. HSTECH Index Rebalance Preview: One Constituent Change & US$884m Trade

By Brian Freitas, Periscope Analytics

  • The review period for the March rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 31 December.
  • There could be one constituent change in March. With capping changes, that could lead to a one-way turnover of 2.6% resulting in a round-trip trade of HK$6.88bn (US$884m).
  • Horizon Robotics (9660 HK) is also a potential inclusion to the HSCI Index in March, though inclusion in Southbound Stock Connect will only come through in May.

5. Sigma Healthcare (SIG AU): Index Inclusions & Upweights Increase Passive Buying to A$2.7bn

By Brian Freitas, Periscope Analytics

  • SigmaHealthcare and ChemistWarehouse shareholders meet on 29 January. If the merger resolutions are approved, Second Court Hearing is on 3 February and the merger will be effective on 4 February.
  • Upward migration in one large global index could take place on 13 February while upweights and upward migrations in the S&P/ASX indices should be at the close on 21 March.
  • Upward migration in the other global index could take place in March or June. Total passive buying estimate is A$2.76bn. This will be offset by positioning and CWG shareholders selling.

6. S&P/​​​​​​​​​ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger

By Brian Freitas, Periscope Analytics

  • Nearing the end of the review period, there could be 36 adds/deletes across the S&P/ASX family of indices in March.
  • Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
  • Completion of the merger with Chemist Warehouse in February will set off huge passive buying in Sigma Healthcare (SIG AU) over the February to June period.

7. HSCI Index Rebalance Preview and Stock Connect: Updated Potential Changes in March 2025

By Brian Freitas, Periscope Analytics

  • We see 38 potential and close adds and 51 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
  • There have been many new listings in the last weeks of December. Some of them are fairly large and will be added and that increases the number of potential deletions.
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

8. Fujitsu General (6755) – Long Sale Process Finally Over. Unexciting but Uncomplicated Deal.

By Travis Lundy, Quiddity Advisors

  • In December 2019, an article in slightly odd Japanese business magazine Sentaku (選択) suggested Fujitsu Ltd (6702 JP) would imminently seek to address dual listings of subs.
  • Some subs went early. The auction for Fujitsu General (6755 JP) started spring 2023, failed, started again, failed again, and the shares languished. 
  • Two years later we have a deal. Large privately-held company Paloma-Rheem Holdings is the buyer in a split-price deal which comes at a decent but not exorbitant premium.

9. Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Up to 5 Changes in March

By Brian Freitas, Periscope Analytics

  • The review cutoff date for the March rebalance of the HSIII was 31 December. The changes will be announced on 21 February and become effective after the close 7 March.
  • There could be 5 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
  • Horizon Robotics (9660 HK) is a potential inclusion to the HSCI and the Hang Seng TECH Index (HSTECH INDEX) in March.

10. NIFTY50 Index Rebalance Preview: Yuuge Flow & Impact; Positioning Mixed

By Brian Freitas, Periscope Analytics