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. Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”
- Over two decades, Keisei Electric Railway Co (9009 JP) has been the subject of softer and harder activist efforts to have Keisei monetise its stake in affiliate Oriental Land (4661).
- The most recent efforts were by Palliser last fall, briefly discussed here two weeks ago when Keisei announced a buyback.
- Today, Keisei announced (Japanese only) an Accelerated Block Offering of 1% of Oriental Land shares. The accompanying announcement is worth reading. It’s pretty clear.
2. Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks
- The changes to the Nikkei 225 Average for the March 2024 Review were announced today after the close. A little earlier than I expected.
- Socionext, Disco, Zozo IN; Takara Hldgs, Sumi Osaka Cement, Pacific Metals OUT. Nitori PAF increase. US$4bn+ to trade one way on 29Mar close. One interesting surprise.
- Overall more impactful than it looks. And it changes the front-end arithmetic on Fast Retailing (9983 JP). There may be fun on the DELETEs.
3. Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
- DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
- Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP).
- Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.
4. S&P/ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning
- There is 1 change for the S&P/ASX20 Index, 2 changes for the S&P/ASX100 Index, 4 changes for the S&P/ASX200 INDEX and 14 adds/10 deletes for the S&P/ASX300 Index in March.
- The largest impact is expected on the changes to the S&P/ASX 200 (AS51 INDEX) while flows are large among changes to the S&P/ASX 20 Index and S&P/ASX 100 Index too.
- There has been a steady increase in cumulative excess volume for most stocks but there are a few where there has been a spike recently.
5. S&P 500/400/600 Index Rebal – It’s Not The Trade You Think
- On Friday after the close, the S&P DJI Index Committee announced changes to the S&P 100, S&P500, S&P MidCap400, and S&P SmallCap600. Changes happen at the close 15 March 2024.
- Super Micro Computer (SMCI US) and Deckers Outdoor (DECK US) replace Zions Bancorporation (ZION US) and Whirlpool Corp (WHR US) in the S&P500. 2 changes to 400, 6 to 600.
- The immediate reaction was to send SMCI up 12.5%. That’s shortsighted. It pays to count the pennies involved. There are a LOT of pennies.
6. Sep24 Nikkei 225 Rebal – 2 ADDs, 2 DELETEs Maybe, but Rebals Tougher, and Fastie+TEL Are the FUN
- Now that the March 2024 Nikkei 225 Rebalance is decided, we have a model for the Sep 2024 Review. As previously discussed on Smartkarma, actual name changes get tough now.
- As of now, there should be two ADDs and two DELETEs. They might not occur. But there are two other situations which create interesting dynamics around big names.
- The dynamics of Fast Retailing and Tokyo Electron promise more fun than the actual name changes in September 2024. It impacts how you trade Nikkei vs TOPIX and tech internals.
7. JSR Corporation (4185 JP): Something Is Brewing, but Nobody Knows Quite What
- JSR Corp (4185 JP)’s shares rose 4.8% due to a Nikkan Kogyo article that states that JIC will start the tender within the month due to concluding negotiations with SAMR.
- Caution is warranted as JSR has not provided a customary timeline update, no confirmatory disclosure from SAMR and JSR’s response to SUNY RF’s claims are yet to be filed.
- Based on current information, there are five possible tender scenarios. In the worst case, the downside risk on a deal break should be muted due to the market re-rating.
8. Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation
- Media reports indicate that the National Pension Service (NPS) could invest up to KRW 11tn (US$8.2bn) in a new index tracking stocks with low Price to Book ratios.
- Filtering stocks with market cap higher than US$500m, ADTV of atleast US$1m, div yield of atleast 1.5% and Price to Book less than 1 throws up 94 potential index candidates.
- Choosing an index of 50 stocks will require managers to buy between 1.7-3.4% of the float on the stocks. Increasing the number of constituents will reduce the impact.
9. STTF Index Rebalance: The Widening Emperador Spread
- The SPDR Straits Times Index ETF (STTF SP) will need to sell Emperador (EMI SP) at the close of trading on 15 March.
- Other global index trackers will need to sell Emperador (EMP PM) at the close on 15 March.
- There will be around US$55m to sell across both lines and varying liquidity has opened up a huge spread between the listings.
10. CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
- With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
- We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
- The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.
