Event-Driven and Index Rebalance

Weekly Top Ten Event-Driven and Index Rebalance – Jan 7, 2024

By January 7, 2024 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. HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March

By Brian Freitas, Periscope Analytics

  • We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
  • We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
  • 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.

2. Allkem + Livent = Arcadium : Updated Expected Index Flows

By Travis Lundy, Quiddity Advisors

  • Allkem Ltd (AKE AU) saw its last day of trading on 21 December. There was large volume at the close as one major index provider gave it the boot. 
  • Another delayed their treatment at the last minute, and eliminated a cross-flow.
  • But there is still a lot of net buy flow tomorrow (3 Jan) and the next day in the US. Perhaps more than I expected. 

3. Korea’s Short Selling Ban to Stay, Likely Until EquiLend-Korean Version Launch

By Sanghyun Park, Clepsydra Capital

  • Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
  • Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea’s platform, necessitating a complex legal framework.
  • Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.

4. KRX New Deal Index Rebalance Preview: Changes with Flow & Impact

By Brian Freitas, Periscope Analytics

5. HSCEI Index Rebalance Preview: Zhongsheng (881 HK) Should Go This Time

By Brian Freitas, Periscope Analytics

  • Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
  • With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion. 
  • Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.

6. New Year New NISA Accounts – It’s BIG, But Not so Big

By Travis Lundy, Quiddity Advisors

  • The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
  • The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
  • If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That’s MUCH tougher.

7. NIFTY NEXT50 Index Rebalance Preview: Potential Adds Skyrocketing

By Brian Freitas, Periscope Analytics

  • Nearing the end of the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
  • Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 26.9bn. There will be more than 1.5x ADV to sell on nearly all deletes.
  • The potential adds have outperformed the potential deletes by 35% over the last two months and some stocks are looking extremely frothy.

8. Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp

By Arun George, Global Equity Research Ltd

9. NIFTY50 Index Rebalance Preview: One Change, Maybe Two, Low Probability of Three

By Brian Freitas, Periscope Analytics

10. NIFTY Bank Index Rebalance Preview: Canara Bank Could Replace Bandhan Bank

By Brian Freitas, Periscope Analytics