Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (<a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener">Swire Pacific (A) (19 HK)</a> | <a href="https://www.smartkarma.com/entities/swire-pacific-ltd" target="_blank" data-smartkarma-citation="entities:23726:1" rel="noopener">Swire Pacific (B) (87 HK)</a>).</li>
<li>The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.</li>
<li>Swire had been buying both every day. But they've been Buying Bs but no As for the last ten days in a row. This begs a few questions.</li>
</ul>


In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
Swire had been buying both every day. But they've been Buying Bs but no As for the last ten days in a row. This begs a few questions.


<ul>
<li>The Swire buyback has been impressive. In 27 trading days they have bought back 26.8% of teh HK$4bn promised. In that period, participation has been aggressive.</li>
<li>Swire has bought back As at a pace of 52% of pre-buyback one-year ADV. For Bs, it has been 105%. But Bs have dramatically underperformed As on "HK Re-opening" trades.</li>
<li>Historically, when B/A gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%. I'd buy B vs A.</li>
</ul>


The Swire buyback has been impressive. In 27 trading days they have bought back 26.8% of teh HK$4bn promised. In that period, participation has been aggressive.
Swire has bought back As at a pace of 52% of pre-buyback one-year ADV. For Bs, it has been 105%. But Bs have dramatically underperformed As on "HK Re-opening" trades.
Historically, when B/A gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%. I'd buy B vs A.


Swire B Vs A - Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile

David Blennerhassett

<ul>
<li>After Hong Kong announced abandoning hotel quarantine for inbound travellers, <a href="https://www.smartkarma.com/entities/cathay-pacific-airways-ltd" target="_blank" data-smartkarma-citation="entities:243:1" rel="noopener">Cathay Pacific (293 HK)</a> gained 2.6% last Friday, but finished up just 1%. That probably sums up the situation.</li>
<li>Preceding my comments on Cathay and <a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener">Swire Pacific (19 HK)</a> are the current setup/unwind tables for Asia-Pacific Holdcos. </li>
<li>These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.</li>
</ul>


After Hong Kong announced abandoning hotel quarantine for inbound travellers, Cathay Pacific (293 HK) gained 2.6% last Friday, but finished up just 1%. That probably sums up the situation.
Preceding my comments on Cathay and Swire Pacific (19 HK) are the current setup/unwind tables for Asia-Pacific Holdcos. 
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation &gt;20%.


StubWorld: Swire/Cathay And Hong Kong's "Opening"

<ul>
<li>And on the 6th Day, <a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener">Swire Pacific (A) (19 HK)</a> commenced its buyback. </li>
<li>It took until the 6th day for Swire to start its buyback, and now that it has started, we may have a little better idea of the parameters. And impact. </li>
<li>So far, they appear to be bending the rules a little, but it is still the way it should be. So there is still a trade here to do.</li>
</ul>


And on the 6th Day, Swire Pacific (A) (19 HK) commenced its buyback. 
It took until the 6th day for Swire to start its buyback, and now that it has started, we may have a little better idea of the parameters. And impact. 
So far, they appear to be bending the rules a little, but it is still the way it should be. So there is still a trade here to do.


Swire Buyback Update - It's On, and Regulatorily Constrained

<ul>
<li>Yesterday <a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener">Swire Pacific (A) (19 HK)</a> (and <a href="https://www.smartkarma.com/entities/swire-pacific-ltd" target="_blank" data-smartkarma-citation="entities:23726:1" rel="noopener">Swire Pacific Ltd-Cl B (87 HK)</a>) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn. </li>
<li>A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them. </li>
<li>The conclusions are surprising, and lead to one clear trading idea. </li>
</ul>


Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn. 
A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them. 
The conclusions are surprising, and lead to one clear trading idea. 


Swire A Vs Swire B - Regulatory Nuances REALLY Matter

Hong Kong

Swire Pacific Limited, through its subsidiaries, operates in the real estate, aviation, beverage, industrial, marine services, trading, and industrial businesses.

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Swire Pacific (A) (19 HK)

Swire Now Buying Back B Shares Only

Swire's buyback has been going on 5 months. They are now 65.6% done. A new development is that in the last ten days, they have only been buying B...

Travis Lundy

Swire B Vs A - Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile

Swire B vs A over the last 20 years shows unsurprising reversal patterns. We're in the right zone now to be reasonably confident. The buyback is...

Travis Lundy

StubWorld: Swire/Cathay And Hong Kong's "Opening"

I still like Swire Pac at 0.33x P/B, but it's had a great run after the buyback. If you had the trade on - long Swire Pac, Short Prop - I'd look to...

David Blennerhassett

Swire Buyback Update - It's On, and Regulatorily Constrained

Swire Pacific has started its buyback. The rules suggest they are constrained to buying 77 or Swire B shares for every 23 Swire As bought. They are...

Travis Lundy

Swire A Vs Swire B - Regulatory Nuances REALLY Matter

Swire announced a share buyback. The regulatory nuances described in the Announcement and the Appendix to the 2022 AGM Convocation don't cover...

Travis Lundy

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