MSCI November Rebalancing To Give A One Day Lift On JGS, Etc.?
Two weeks ago, it was announced that JG Summit Holdings, Inc. will be added in the MSCI Global Standard Index. ABS-CBN Holdings PDR (ABSP), Asia United Bank (AUB), Cosco Capital (COSCO), and Melco Crown (MCP) will likewise be included in the MSCI Global Small Cap Index. Meanwhile, Global Estates Resorts, Inc. (GERI) and Lepanto Consolidated Mining “B” (LCB) will be removed from the latter.
Note that the above changes will only take effect on closing of November 26, 2013. This means that the passive funds that track both the MSCI Global Standard and the MSCI Global Small Cap Indices will only purchase the names that will be added and sell the ones that will be deleted as close to the closing of tomorrow’s trading. Based on our personal handling of MSCI-related trades under Credit Suisse, a broker that handles majority of MSCI trades in the Philippines, we saw that these passive funds have 80% of their orders entered at ‘auction’ period (3:15pm to 3:19pm). Given the above, the late buying from these passive funds will likely push the names of the ones that will be added higher. The opposite may likely occur as the result of the late selling on the deleted names. These potential rise and decrease in prices, however, are typically temporary and will tend to reverse the following day.
Personal strategy: Buy any one of the names that will be added tomorrow morning and ‘sell down’ the same at auction period of the same day.
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