Event-Driven

• The restructuring plan of Doosan Group announced today primarily consists of two merger events aimed at transferring the stake in Doosan Bobcat held by Doosan Enerbility to Doosan Robotics.
• The 50% price cut on Doosan Enerbility’s share price for merging with Doosan Robotics boosts Robotics’ advantage. This resulted in a swap spread opening with Doosan Bobcat.
• Considering an arbitrage strategy in the Doosan Robotics and Doosan Bobcat swap needs caution due to shareholder approval risks, especially with Doosan Enerbility’s low controlling stake potentially complicating the process.

• Yesterday after the close, Fast Retailing (9983 JP) reported salutary Q3 earnings, and raised its full-year (to August) guidance and its final dividend forecast (by ¥50/share)
• Q3 revenue and profit gained sharply (Rev +13.5%, OP +31.2%) everywhere but Greater China. OPMs were up, especially in Japan. Early summer has been good, despite FX impact. 
• New guidance is above consensus, the ADR popped, and with slightly stronger yen on US CPI, that should help. But we approach end-July. Expect lots of pop-sellers.

• Since waste-to-energy play Canvest Environmental Protection (1381 HK) announced a possible privatisation from Grandblue Environment (600323 CH) at $4.90/share (a 20.7% premium to undisturbed), shares are up just 6.4%. 
• There’s a lot to pack in here, not the least being this is an indicative Pre-Conditional Offer.
• But the fact the announcement mentions rolling over a specific number of shares of the controlling shareholders (7.23%), suggests negotiations are well advanced. So we explore.

• A week ago, the Keisei Electric Railway Co (9009 JP) AGM took place. The activist which had proposed a shareholder resolution saw ISS and Glass Lewis support.
• But that was to no avail as the shareholder proposal got 29.89% of the votes, and 26.15% of total voting rights. This likely informs the near-term future of such proposals.
• I expect the ask needs to change, and the agenda item needs to be difficult to be against. 

• This block deal has an unusual PSR (price swap return) contract at ₩58,200, the July 10th closing price, likely preventing Netmarble’s typical stock price correction today.
• In 2022, a similar-sized local PSR transaction involved Doosan Bobcat Inc, with 9.9 million shares and a PSR swap price of ₩37,500.
• As for Doosan Bobcat, the stock initially dropped but rebounded near the PSR swap price, prompting local brokerages, focused on PSR fee income, to sell rather than realize capital gains.

• Shanghai Henlius Biotech (2696 HK) announced that the share alternative pre-condition was satisfied. However, the share alternative offer remains at Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s discretion. 
• Loyal Valley Capital (LVC), a pre-IPO investor, emerged as a substantial shareholder on 10 July, the deadline for submitting letters of interest for the share alternative offer.
• The likely scenario is that the offer succeeds as the co-founders enter rollover arrangements, and a share alternative is introduced, which is taken by QIA and LVC. 

• After what appeared indecisiveness from Genesis Capital, Crescent Capital’s National Dental Care snuck in on the 29th April and entered into a Scheme with Pacific Smiles (PSQ AU) at A$1.90/share. 
• The Scheme Meeting is the 1st August with expected implementation on the 19th August. The IE (Deloitte) reckoned terms are fair & reasonable. All good right? Not quite.
• The Takeovers Panel has concluded Genesis Capital, with 19.9% of shares out, is free to vote. Assuming Genesis votes against the Scheme, Crescent Capital’s Offer is effectively dead.

• Following the regulatory approval from the Government of Canada, Glencore’s cash acquisition of 77% stake in Teck’s Elk Valley Resources (EVR) is expected to close on 11 July 2024.
• The cash acquisition is forecasted not to cause any passive fund flows based on the deal structure.
• The potential demerger introduces the risk for Glencore approaching the exit threshold of STOXX Europe 50. This is yet undetermined due to the long time horizon.

• Jollibee Foods (JFC PM) recently acquired Compose Coffee, the second-largest take-out chain in South Korea’s competitive value coffee retail segment.
• While the acquisition presents growth opportunities for Jollibee, the intense competition and inherent challenges of the value coffee retail segment warrant caution.
• With Jollibee’s Coffee & Tea business vertical now growing into a meaningful size, we recommend listing it separately to enhance visibility, accountability and unlock shareholder value.

• Shanghai Fosun Pharmaceutical (Group) (2196 HK)‘s (SFP) “Merger by Absorption” HK$24.60/share cash Offer for H-shares not held in Shanghai Henlius Biotech (2696 HK), tentatively includes a scrip alternative.
• The first hurdle for the share option – valid letters of interest from those shareholders wishing to rollover – was secured yesterday. SCP still has the discretion on providing scrip.
• But if SFP had any lingering doubts whether to offer scrip, that was answered earlier this week with the emergence of a substantial shareholder who is typically a pre-IPO investor.

• KKR and KSP Kokusai will offer 52.51m-60.38m shares (US$1.76bn-2bn) of Kokusai Electric (6525 JP) in a secondary offering that will likely be priced on 22 July.
• Kokusai Electric (6525 JP) will also buy back up to JPY 18bn of its shares. At the last close, that is 3.33m shares (1.2x ADV).
• Trackers of one global index will buy stock at the time of settlement of the shares. The (much) bigger buying will come at the end of August.

• Founder/CEO Mohamed Salleh Maricar (MSM) and his family have made a voluntary unconditional general Offer for the 14.94% in gold/jewellery retailer Second Chance Properties (SCE SP) (“SCP”) not held.
• The S$0.30/share cash Offer is a 39.5% premium to last close. The Offer price is final.
• The Offer is unconditional in all respects. This will trade tight. A delisting Offer is next on the cards.

• The review cutoff date for the September rebalance of the HSIII was 28 June. The changes will be announced on 16 August and become effective after the close 6 September.
• There could be 3 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
• Capping will result in passives buying Kuaishou Technology (1024 HK) and JD.com (9618 HK) while selling Meituan (3690 HK) and Tencent (700 HK).

• The Hong Kong Television Network (1137 HK) vote on the share buyback for a maximum of 100.0m or 11.25% of outstanding shares at HK$2.15 was comfortably passed at the EGM.
• The partial offer is designed to help the co-founders bypass the creeper rule and increase their grip on the shares. There is no minimum acceptance condition. 
• While the IFA opines the offer is fair and reasonable, it is unattractive. A 100% minority participation rate implies a minimum proration of 20.74%. The offer closes on 23 July.  

• Last month, apparel play Shinsung Tongsang (005390 KS) announced a Tender Offer from Canaan Co for 22.02% of shares out, at ₩2,300/share, a 15.84% premium to undisturbed.
• Canaan Co. and related parties hold a combined stake of 77.68%, which increases to 99.7% IF the Offer is successful. Canaan needs 95% to force delisting. 
• Shinsung’s share price has languished over the past 12 months or so, despite improving market share and earnings. Getting to 95% might be a stretch. In need of a bump?

• Second Chance Properties (SCE SP) has disclosed a voluntary unconditional offer from Mohamed Salleh’s family at S$0.30 per share, a 39.5% premium to the undisturbed price (10 July).
• The offer document will be despatched by 31 July. The offeree circular will be despatched by 7 August at the earliest, implying the earliest close of 28 August.
• The offer price has been declared final and is attractive as it represents an all-time high. The offeror will likely achieve the 90% compulsory acquisition threshold.

• The Technical Advisory Committee (CAT) in an extraordinary meeting adds Puig Brands (PUIG SM) to the IBEX 35 index and removes Melia Hotels International Sa (MEL SM).
• Although Puig Brands has only been publicly traded since 3 May, its market value exceeds €14.5 billion and its trading volume makes it deserving of a spot in the IBEX.
• Puig Brands is expected to see at least a 50% increase in trading volume by July 22, potentially adding four to eight additional days of trading volume.

• Last September in the release of its new Mid-Term Management Plan, Toyota Group member Aisin (7259 JP) announced a plan to cut cross-holdings to zero. JTEKT Corp (6473 JP) followed suit.
• It started with a selldown of Denso Corp (6902 JP), then Toyota Industries (6201 JP), now Aisin. Last FY, Toyota Group cos reduced crossholdings by ¥870bn. This year will be more.
• Attached below is a general breakdown of Toyota Group cross-holdings, discussion of cross-holding policies, and analysis of what is next, and what is not.

• The review period for the Nikkei 225 Index September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.
• Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.
• Fast Retailing (9983 JP)‘s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.

• Rex Minerals being acquired by major shareholder, Selim Group, for $393 million
• Acquisition comes after extensive partnering process and recent investment by Mac with 16% shareholding
• Rex’s Hillside project in South Australia has historical challenges but now looks set for development with new ownership and funding capabilities

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Today’s press release unveils details on new flow trading events in Korea’s local market from the second half of this year, highlighting two key points.
• Firstly, the disclosure rule starts with block deals from August 23rd. Secondly, a 30% or greater stock price correction on disclosure day may cancel the transaction plan.
• This highlights the need to consider cancellation risks in pre-disclosure positions and design setups with consideration for the potential for reverse flows as stock prices approach 30% corrections.

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• In the last few days, SUNWELS Co (9229 JP) and Macbee Planet (7095 JP) have announced their moves to TSE prime which would eventually trigger a TOPIX Inclusion event.
• Macbee Planet was in our highest conviction list but SUNWELS Co was not. In this insight, we have made some modifications to our methodology to improve future hit rates.

• In this insight, we discuss recent, active insiders buying and selling their shares prior to the mandatory block deal pre-announcement requirement starting 24 July in Korea.
• The three companies that announced insiders selling (July) are down on average 3% YTD. However, the three companies that announced insiders buying (July) are up on average 74% YTD. 
• LS Cable has been consistently increasing its ownership of LS Marine Solution, up from 46% stake as of 27 May 2024 to 56.14% as of 8 July 2024.

• The review period for the September rebalance ends 31 July, the changes will be announced in the first week of September and implemented at the close of trading 12 September.
• There are changes expected for each of the Secondary Battery, Bio, Internet, Game and BBIG indices. The Shift Up (462870 KS) listing should result in more changes.
• The largest flows will be in Posco Future M, Ecopro BM, SK Biopharmaceuticals, Alteogen, Douzone Bizon, SKC Co and Kakao Corp.

• Back in May, online shopping platform play Hong Kong Television Network (1137 HK) announced a buy-back of 11.25% of shares out, at $2.15/share, a mediocre 20.8% premium to undisturbed.
• The thrust of the Offer was to lift co-founder Ricky Wong’s stake to 51.55% from 45.75%.  But that required independent shareholders approving a whitewash waiver not to make a MGO.
• I didn’t expect shareholder pushback. And there wasn’t. Tendering closes on the 23rd July. Keep an eye on CCASS movements. Shares gained 4.7% yesterday prior to the EGM outcome. Mmm.

• As of end of H1, NAV was SEK 156 billion (SEK 361/share). NAV increased by 4%, gains in portfolio compensated by leverage increase. 5-y total return of 78.6% (OMX30, 76.4%).
• Industrivärden C shares are trading at a 4.8% discount to NAV (vs. 8.3% average for last 5-years). It seems risky to bet on a further discount reduction, rather a reversal.
• My target NAV is SEK 176,893 million. My TP for the C shares of Industrivärden, assuming a 5% discount to NAV, is SEK 360.3 (4.6% upside).

• Kakao has begun talks with potential buyers for Kakao Games, with Krafton leading discussions directly using its own investment team.
• Despite official denials, it’s viewed as procedural. Local markets anticipate the deal due to no direct refutation beyond formal announcements.
• A three-month compliance period from disclosure makes this quarter challenging, but completion announcement potential exists by Q4 this year.

• Despite the significant offering size, passive fund demand is unlikely to materialize due to non-strategic selling shareholders.
• Company’s number of shares and free float in the main global indices are forecasted to remain the same before and after the offering.
• Upcoming buybacks can lead to a decrease in float shares which can even cause passive fund supply at a subsequent quarterly review.

• Rex Minerals (RXM AU) has entered a scheme implementation deed with MACH Metals Australia at A$0.47 per share, a 70.9% premium to the undisturbed price (5 July).
• The key conditions are shareholder and FIRB approvals. FIRB approval should be forthcoming as Salim is the largest shareholder and the cordial Indonesia-Australia relations.
• While the offer represents a 10-year high, it implies multiples, which are light compared to precedent transactions. Nevertheless, this is a done deal. At last close, the spread was 9.3%.

• In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in September 2024.
• The index changes for the September 2024 index rebal will be announced on 16th August 2024.
• The HSI selection process is highly subjective and does not follow clear-cut rules. This insight is simply an attempt to provide readers with an overall understanding of the possible scenarios.

• The review period for the LQ45 Index July rebalance ended 30 June. The changes should be announced the last week of July, becoming effective after the close on 31 July.
• Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
• For a change, the impact on the potential inclusions will be higher since they will join the index with higher weights compared to the potential deletions.

• On 21 June 2024, Canaan Co. announced a tender offer and taking private of Shinsung Tongsang. Tender offered shares are 31.664 million shares, representing 22.02% of outstanding shares.
• It could be difficult to complete this tender offer at 2,300 won, because there could be many investors that simply refuse to sell their shares at such low valuations.
• On the business side, the company has successfully captured higher market share and enjoyed higher profit margins especially for the Top Ten apparel brand, taking away market share from Uniqlo.

• Around a third of the way though the review period, there could be 4 changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
• The impact on the potential inclusions ranges from 0.6-21 days of ADV while the impact on the potential deletions varies from 2.5-16 days of ADV.
• The potential adds have outperformed the potential deletions over the last few months and there could be more to go with short selling banned.

• Many minority shareholders have lodged complaints against ACC with the SFC, since unfair privatization price damages the ecology of the entire market.It depends on whether the SFC will take action.
• The failure of privatization does not necessarily mean better returns for investors. On the contrary, it may result in greater losses. ACC can have other ways “hollow out” the Company.
• Arbitrageurs can choose to bet on a second privatization (with higher Offer Price) and also on the potential dividends, but the prerequisite is that the management choose to “act honorably”.

• Grifols’ founding families and Brookfield ask the Board for the necessary information to evaluate an offer for 100% of Grifols SA (GRF SM). The CNMV has halted trading in the shares.
• Grifols is worth €5.5 billion, after plummeting 39% in 2024. The deal smacks of desperation from the founding families, worried not to lose control of the company to debt holders. 
• There should be a minimum premium to guarantee offer success, at least 15% to current share price (maybe even 30%). B shares are protected in case of takeover.

• With Hanwha Corporation (000880 KS) trading around a one-year low NAV discount, the Hanwha Group has made a Tender Offer for 8% of shares outstanding at ₩30,000/share.
• Preceding my comments on Hanwha are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Last year, the GPIF as a whole returned 22.67% in yen terms. As a whole, GPIF outperformed its benchmarks by 0.04% after paying 0.02% in fees and costs.
• GPIF traded ¥30trln of assets – relatively high turnover for a fund which espouses very low turnover – but there’s a reason for that. There were also sharp active/passive moves.
• This year is the last year in the “cycle” of the “old” Policy Allocation Framework. A new one is likely to be introduced this year.

• Grandblue Environment Co A (600323 CH) disclosed a potential pre-conditional privatisation of Canvest Environmental Protection Group (1381 HK) at HK$4.90 per share, a 20.7% premium to the last close price. 
• Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake. 
• While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk. 

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), A8 New Media (800 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK). 
• Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Chilled & Frozen Logistics Holdings (9099 JP), Tatsuta Electric Wire & Cable (5809 JP), Kfc Holdings Japan (9873 JP). 

• With all regulatory approvals received, the Scheme Meeting for Renesas Electronics (6723 JP)‘ acquisition of Altium Ltd (ALU AU) will take place on 12 July.
• If approved at the Scheme Meeting and at the Second Court Hearing, Altium Ltd (ALU AU) will stop trading from the close on 19 July.
• The replacements for Altium Ltd (ALU AU) in the ASX100/200 indices could be announced late this week with implementation at the close on 19 July.

• SOUTHBOUND was again a net buyer, for HK$10.9bn this week, on smallish two-way volumes. Banks were a big buy.
• The more I watch, the more I think the last few months have had serious national team buying of banks and energy, perhaps ahead of shareholder return policy changes.
• But valuations are acceptable. Flows are good. Policy changes are afoot. SOUTHBOUND may continue to see inflows – national team and otherwise.

• Fosun’s preferred arrangement for Henlius is to list the Company in A-shares.Since IPO in A-shares failed and Henlius has begun to generate profits, Fosun finally feels the need for privatization.
• Due to its “flaws”, undervaluation of Henlius in the Hong Kong stock market is difficult to fundamentally change. So, for conservative/cautious investors, Fosun’s one-time acquisition at a 30% premium is attractive.
• The Potential Share Alternative Offer seems a good option, but it is uncertain whether investors are still willing to believe in Fosun’s “good story” – the future re-listing is uncertain.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB 13.9bn of A-shares. NORTHBOUND bought utilities and raw materials and sold everything else, especially consumer names. Appliances remain on the sell side.
• It is notable that net flows as a percentage of value traded are clearly “short gamma”, which is to say, sector underperformers are being sold, not bought.

• The review period for the September rebalance ends 30 July. We expect the changes to be announced 30 August with the implementation taking place after the close on 13 September.
• We forecast 6 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
• Excluding the migrations, the potential adds have outperformed the potential deletes since the start of the calendar year and there could be further outperformance over the next few weeks.

• Copper-Gold play Rex Minerals (RXM AU) has entered into a Scheme with MACH Australia.
• MACH, wholly-owned by Indonesia’s Salim Group, is offering A$0.47/share in cash, a 71% premium to last close and a decade-high.
• Rex shareholder approval and FIRB are the key conditions. Rex’s board is unanimously supportive. This Offer will tentatively complete late October.

• With just over a third of the review period complete, there could be 12 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the December rebalance.
• Even with 12 potential changes, there is sector balance with over half the changes in the Information Technology sector. Passive trading impact varies from 0.04-4.1x ADV.
• The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index (KOSDQ150 INDEX) since the start of the year with a big move higher since mid-May.

• I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Just one new deal was discussed this week on Smartkarma: Sermsuk PCL (SSC TB)‘s Delisting Offer. There are also rumours of an Offer for Raffles Medical Group (RFMD SP).
• Key updates took place on: L’Occitane (973 HK), Shinko Electric Industries (6967 JP), MMA Offshore (MRM AU), and Hollysys Automation Technologies (HOLI US).

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: Aisin (7259 JP), Honda Motor (7267 JP) placements; Sanil Electric (062040 KS), Shift Up (462870 KS) and Timee Inc (215A JP) IPOs.
• Event-Driven developments: ESR Group (1821 HK), L’Occitane (973 HK), Hollysys Automation Technologies (HOLI US). 

• The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
• The reference period for the September 2024 index rebal event is now complete. In this insight, we take a look at our final expectations for index changes.
• Our current estimates suggest one-way flows due to index changes and capping could be around US$733mn but that could change by early September 2024.

• It’s just a question of when, not if, the bubble bursts for Barito Renewables Energy (BREN IJ), which is up 1,200% since it October 2023 IPO. 
• A Reuters article suggests a ¥500bn secondary offering for Honda Motor (7267 JP). Honda has since said there is smoke. And we can assume there is fire.
• Loo Choon Yong, Raffles Medical Group (RFMD SP)‘s founder and major shareholder, continues to chip away at minorities, and now holds 54.944%,

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In mid-June 2024, we had two expected ADDs and DELs for the September 2024 index rebal event and they remain unchanged even after the end of the reference period.
• However, our capping flow expectations continue to change as the pro-forma post-rebalance weights change with share prices. In this insight, we have provided our latest flow estimates.

• Hanwha Energy, wholly owned by the Hanwha Group’s owning family, announced a tender offer for an 8% stake in Hanwha Corp at ₩30,000. The tender period is until July 24.
• Hanwha Energy will buy all shares if tendered less than planned, otherwise pro-rata. Payment in cash eliminates cancellation risk but poses allocation risk.
• Approximately 10-15% of shares are likely to be the potential ceiling for tendering, minimizing allocation risk for the 8% target. A widening spread of 2-3% could offer arbitrage opportunities.

• On 20 May, I wrote that Japanese activist MURAKAMI Yoshiaki and relations/affiliates had gone from 5% to 20% of Mitsui Matsushima (1518 JP) in 5 trading days.
• I wondered if it was real, or a pump & dump, but they went to near 30% in following days. THEN they drifted off as Murakami-Fille sold while Murakami-Père bought. 
• The reasoning was not clear, but the story had real potential. Still does. Today, shareholders got more good news. 

• Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.
• He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.
• Kim’s appointment as FSC Chairman signals the government’s commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight include: J&T Global Express (1519 HK), Flat Glass (6865 HK), Lifetech Scientific (1302 HK), and PCCW Ltd (8 HK).

• On 5 July, Hanwha Energy announced a tender offer of 8% stake in Hanwha Corporation (000880 KS) worth 180 billion won.
• The tender offer price is 30,000 won. Hanwha Energy will launch a tender offer for up to 6 million shares of Hanwha Corp, representing 8% of outstanding shares. 
• Hanwha Corp’s 34% stake in Hanwha Aerospace which is worth 4.2 trillion won. (191% of Hanwha Corp’s market cap). 

• After an explosive rally in April, the Hang Seng Index has been in a downtrend since mid-May, many are wondering where the index is headed next.
• July 2024, based on our seasonal pattern analysis, does not have a great chance to close higher (it could, but the odds are not good).
• If the index goes down in the next 2 weeks, buy the 17600-17300 price area.

• Small cap Japanese manufacturer and purveyor of apparel Daidoh Ltd (3205 JP) has consistently been a target for value investors. In late 2022, Strategic Capital went over 5%.
• They have bought more, and as of end-March, they declared 24.85% of TSO (28% of voting rights), but they have 33%. They made proposals for the AGM. They won one. 
• Now Murakami-san has bought in, going over 5%. This gets interesting. Together they have 39.4% as of last week, and probably more now. That should get them 50+% next AGM/EGM.

• In a particularly altruistic move, live-streaming game platform play Douyu International Holdings (DOYU US)  announced a special cash dividend of US$9.76/share, vs. a last price of US$12.59.
• The cash outlay is roughly US$308mn, and Douyu had cash (as at 1Q24) of US$936.6mn. And no debt.  Founder/chairman/CEO Shaojie Chen (17.2% shareholder) will pocket a tidy ~US$53mn.
• An outlier; or should we expect more of the same for other cash-rich US-listed China plays?

• On 2 July 2024, nursing care operator SUNWELS Co (9229 JP) announced a sale of Treasury shares and newly-issued shares, and with it, a move to TSE Prime (therefore TOPIX)
• The stock, of course, popped. The stock starts with VERY low float because the CEO and his company own 64% of shares out ex-treasury. 
• The offering is much larger than the TOPIX inclusion, so this is really more about the growth story.

• Predicting KOSPI 200 rebalancing is straightforward, focusing on quantitative screening rather than qualitative factors, unlike other indices.
• Accurate simulation of KOSPI 200 requires daily data on shares, volume, and prices for six months, typically sourced from KOSCOM due to limitations in free data access.
• I plan to share a practical KOSPI 200 simulation file with Smartkarma readers, leveraging freely available data from Google Finance.

• Index Committee’s discretion decreases the predictability of index changes. Even when a company passes all eligibility criteria and thresholds, it might still not be selected.
• Understanding triggers for index changes, types of additions/deletions and selection patterns, narrows down the pool of candidates and increases conviction of forecasts.
• Dell Technologies (DELL US) is currently the main candidate to be added by transition to the S&P 500 in September 2024 Quarterly Rebalance.

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
• Nearly 6mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 16+wks ago, recommended taking profits.
• Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Gross spread is now 4.6% but time is shorter so annualised is 10+% even out to December launch.

• Bloomberg reports that the bidding consortium is in talks to bring in other partners, such as QIA, PIF, and CPP Investment Board, to aid in privatising ESR Group (1821 HK).
• Warburg Pincus and OMERS have blocking stakes for a Cayman scheme. Warburg Pincus is seemingly supportive, and the consortium’s expansion talks suggest confidence in meeting OMERS’ price expectations.
• Our best guess is that an offer is around HK$14.00. ESR’s current valuation is undemanding, with its forward EV/EBITDA multiple at a 40% discount compared to the median peers’ multiple.

• Barito Pacific (BRPT IJ)‘s 64.7% stake in Barito Renewables Energy (BREN IJ) (now Indonesia’s largest company by market cap), is worth 8x its market cap. That’s unsustainable.
• Preceding my comments on the Barito complex are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• The rally in Yangzijiang Shipbuilding (YZJSGD SP) over the last month should result in the stock being added to global passive portfolios late next month.
• Yangzijiang Shipbuilding (YZJSGD SP) trades cheaper than peers on forward PE but there has been a big rally in the stock over the last month.
• There has been an increase in cumulative excess volume since mid-May and there will be positioning for the event, but there could be further gains in the stock.

• Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.
• Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies. 
• Of these, they have a combined stake of over US$1bn in 23 companies.

• On 3 July, PUSU deadline, Bidco and Keywords Studios (KWS LN) have agreed to an acquisition to be carried out through a scheme of arrangement. 
• Shareholders will receive 2,450p/share in cash, cum dividend, 66.7% premium, for 22.4x Fwd P/E. There’s a minimal number of irrevocables and just 7.57% of capital in letters of intent. 
• I think the price is reasonable considering the recent challenges affecting the value of the stock, and deal will close. Spread is 2.45%/6.3% (gross/annualised, assuming settlement by 29 November). Long.

• Thai Beverage (THBEV SP) is proposing to take 64.67%-held Sermsuk PCL (SSC TB)  private by way of a voluntary Delisting Offer.
• The Offer price is THB 63/share, a 27.9% premium to last close.
• This Delisting Offer requires a Scheme-like shareholder vote. Payment may occur late 4Q24. This is an illiquid arb.

• Today just before the close, Reuters came out with an article saying Japan’s four major insurers and some financial institutions would offer ¥500bn of shares in a secondary offering.
• That implies about 275-280mm shares (insurers hold ~195mm). In May, Honda announced a ¥300bn buyback with earnings, with nothing done so far. 
• The supply/demand dynamics here are key. There are a lot of moving parts over time. Honda is cheaper than it looks but there are moving parts there too.

• This month (June) saw 1,673 Corporate Governance Reports filed and 5 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed. 
• We created a tool show every report, provide links to every document, and now a new diff file tool. Put in a name, see the difference between the Old/New Reports.
• We hope this took will help. It is designed to be a shelf reference. We update the tool once a month, a couple of weeks ahead of the TSE.

• Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 54.83% and that results in foreign room crossing the ‘magical’ 25% mark.
• The increase in foreign room could lead to passive trackers of a global index needing to buy 256m shares (US$5.3bn; 11.5x ADV) at the end of August.
• There will definitely be positioning in the stock but there should still be upside in the stock. The HDFC Bank (ADR) (HDB US) line was up 4.5% overnight.

• We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
• We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 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.

• The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
• Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
• China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.  

• In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in May and June 2024.
• On average, the share buyback announcements for the 13 companies that announced share buybacks in Korea represented 1.7% of outstanding shares.
• Major companies that have announced share buybacks in Korea in the past two months include Celltrion Inc (068270 KS), SK IE Technology (361610 KS), and NCSOFT Corp (036570 KS).

• ASM Pacific Technology (522 HK) is expected to replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the September rebalance.
• Constituent changes and capping changes will result in a one-way turnover of 3.7% and that will result in a round-trip trade of HK$7.8bn (US$1bn).
• Short interest is near the lows on both stocks but there has been a recent tick higher for ASM Pacific Technology (522 HK).