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. ZTO Express (2057 HK): On Track for Double (Maybe Triple) Index Inclusion
- With improved liquidity, ZTO Express Cayman (2057 HK) could be added to the HSCEI INDEX early March and then to a global index a couple of weeks later.
- ZTO Express Cayman (2057 HK) is a lower probability inclusion to the Hang Seng Index (HSI INDEX) given the index committee discretion. Inclusion would further increase the impact.
- The stock has had a big drawdown recently and the potential index inclusion and passive demand provide a low-risk entry point into the stock, especially hedged with its peers.
2. Kokusai Electric (6525 JP): Lock-Up Expiry, Index Deletion, Index Inclusion – It’s All Happening
- The lock-up on KKR HKE ends next week, Kokusai Electric (6525 JP) should be deleted from a global index end-February and could be added to the NKY INDEX in March.
- There has been a buildup of shorts in Kokusai Electric (6525 JP) as the stock has underperformed the Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) by a lot.
- The global index deletion in February could provide an entry point into a long position ahead of the announcement of the Nikkei 225 (NKY INDEX) changes in March.
3. CATL (300750 CH): Index Inclusion Post H-Share Listing
- Contemporary Amperex Technology (CATL) (300750 CH) has announced plans for an H-share listing with media reports indicating a raise of at least US$5bn. Shareholders have approved the issuance.
- CATL (300750 CH) was designated as a Chinese Military Company earlier this year by the U.S. Department of Defense but is still not on the NS-CMIC list.
- The CATL (300750 CH) H-shares should get Fast Entry to the global indices and iShares China Large-Cap (FXI US) ETF. Inclusion in the HSCEI and HSI will take longer.
4. Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes Next Week
- Based on prices and turnover from 22 January, there could be one deletion from the index in January. Plus there will be capping and float changes.
- There are four stocks that meet the inclusion criteria, but all are non-pure play companies, and the index is already at the limit of 15 non-pure play companies.
- Estimated one-way turnover is 6.8% resulting in a round-trip trade of US$506m. There are many stocks with multiple days of ADV to trade.
5. Shinko Electric (6967) – All Approvals In, JIC Says “Mid-Feb” So Cash Is 19-21 March?
- JIC gave an official statement yesteday about the expected start of its Shinko Electric Industries (6967 JP) Tender Offer. A later-than-expected start has people asking questions.
- It has traded tighter since the SAMR approval news (I warned on 16 Dec it was coming and the next day it closed 6.6% gross).
- Below I discuss the language of the Conditions Precedent which would allow a MAC.
6. J&T Global Express (1519 HK): Global Index Inclusion Coming Up
- J&T Global Express (1519 HK) listed in October 2023 and was added to one global index in June 2024 and to the HSCEI INDEX in September 2024.
- J&T Global Express (1519 HK) could be added to a global index in February and there will be a big passive buying impact. The company is also buying back stock.
- J&T Global Express (1519 HK) has underperformed its peers over the past year and the index inclusion could help in closing some of that gap.
7. NIFTY NEXT50 Index Rebalance Preview: 7 Potential Changes in March
- With 10 trading days left in the review period, there could be 7 changes (including 2 migrations) for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in March.
- Estimated one-way turnover is 15.9% resulting in a one-way trade of INR 52bn (US$600m). All forecast changes, bar one, have over 1.5x ADV to trade from passive trackers.
- All the forecast deletes are F&O members while two adds are not. NSE Indices could revisit the index membership criteria especially given the launch of futures on the index.
8. Taiwan: Potential Global Index Changes; Last Review Day Today
- There could be 2 adds and 2 deletes for Taiwan in a global index in February. Today is the last trading day ahead of the CNY holidays.
- Passive trackers will need to trade between US$76m to US$370m of the stocks and impact will vary between 3.2x-7x ADV to trade.
- Shorts are small in the potential adds and there has been short covering recently, while there has been a big increase in shorts for one of the potential deletes.
9. Henlius (2696)’s Fail Sets (Another) Bad Precedent
- The question was asked in Henlius (2696 HK): So, When Was The Last Time A PE/VC Outfit Blocked A Deal? Well, now we have one as LVC inexplicably blocked.
- It didn’t appear to make economic rationale for LVC to crash the party – knowing they would do so, and not bother to reduce their position accordingly.
- In tandem with the TCM (570 HK) debacle, it sets another bad precedent for future/existing Hong Kong events. Expect spreads for HK arbs to widen. And Henlius to crater.
10. Tsuruha (3391) – Welcia (3141) Future Merger Ratio – Pounding the Table
- In late December, a Jiji article said Tsuruha & Welcia would look to integrate by end-2025, now that they no longer need SEC approval. Odd language, but we’ll take it.
- That means we look to what might happen between here and there. The companies will hire Legal and Financial Advisors, wait until both report FY, then start negotiating.
- What has been the long-term trend and the trend of the last two years is different. It’s worthwhile looking at valuations and expectations to decide how to trade. It’s good.