Event-Driven

On the 6 November 2023, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May.
The rights were discussed by Travis Lundy in Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting. He liked the stock. That was a good call.
The current implied stub – net of Expressway’s 40.3% look-through stake in Zheshang Securities (601878 CH) – is back to pre-Covid levels. I’d be looking to unwind the stub here.

S&P/ASX Index Rebalance Preview: Lots of Changes; A$1bn to Sell in Newmont

With over 80% of the review period complete, there could be 26 adds/deletes across the S&P/ASX family of indices in March.
The largest flow will be on Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
There will be 1.2-38 days of ADV to buy in the inclusions while the impact on the deletions will range between 1-21 days of ADV.

Quiddity Leaderboard STAR 50 Mar 24: Three Changes; ~US$1bn One-Way; Some Trade Ideas

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the March 2024 index rebal event.
I currently expect three changes for the STAR 50 index in March 2024.

L&F (066970 KS): Will the Stock Move Like PoscoDX Following the KOSDAQ to KOSPI Transfer?

Posco DX (022100 KS) rallied 50% following approval of its application to transfer from the KOSDAQ to the KOSPI market. Then the stock dropped 20% following completion of the transfer.
With L&F Co Ltd (066970 KS) applying for a section transfer a couple of weeks after Posco DX (022100 KS), approval could be imminent.
L&F Co Ltd (066970 KS) is up 46% since the start of November, but the stock has performed in line with the average of its peers.

A/H Premium Tracker (To 12 Jan 2024): STAY Long Hs Vs As: Premia Still Wide, Huge High-Div SOE Perf

The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND flows were net negative (ETFs negative, high-div SOEs positive) and NORTHBOUND flows a small net sell. AH premia rose slightly on average. Especially at narrow premia.
STILL time to go long Hs vs As for the new year. 52wk wide discounts were just four weeks ago. Wide A/H premia in renewables space look vulnerable.

TRYT Lock-Up – 60% of Outstanding to Be Released, Baring Would Have to Exit Sooner or Later

By Clarence Chu

TRYT (9164 JP) was listed on the TSE on 22nd July 2023. The IPO had been a 100% secondary offering.
TRYT offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
Coming up for six-month lockup is the sole pre-IPO investor who had sold some of its stake earlier in the IPO.

Seven & I Spends Another $950mn on Acquisitions, A Possible Defense Against Investor Activism

By Oshadhi Kumarasiri

Alongside results broadly aligning with consensus expectations, Seven & I Holdings (3382 JP) announced yet another major acquisition.
The company has agreed to acquire 204 convenience stores in the US for an acquisition price of $950m.
It seems that through aggressive overseas expansion and share buybacks, Seven & I is aiming to retain its overseas investors and simultaneously ward off potential investor activism.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Double Impacts for Some Names

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

Insiders Are Buying Shares In These Korean Companies in January 2024

We provide a list of four companies including Fila Holdings, Kolmar BNH, KG Mobility, and Hanwha Galleria where the insiders have been buying shares of their own companies.
These four stocks are up on average 5.6% in the past one month, outperforming KOSPI which is down 1.6% in the same period.
Insiders at Fila Holdings are probably increasing their stakes to capitalize on the price discrepancy as Fila Holdings’ 51% stake in Acushnet is 39% more than its current market cap.

Deutsche Bank/Commerzbank: Quick Take on Merger Talks

By Jesus Rodriguez Aguilar

The German Government is planning to reduce its stake in private companies (100+), which is reviving the talk of a merger between Commerzbank (15.75% owned by Germany) and Deutsche Bank.
In case of a (logical) all-share merger, the German Government would just exchange a 15.75% stake in Commerzbank for a smaller one in the New Deutsche Bank (estimated ~5.75%).
The most likely outcome is an accelerated book build among institutional investors (as the British Government has done with Natwest, formerly RBS, in the past), in my view.

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Jan 15

Daily Brief Event-Driven: Fuji Soft (9749) – Much Better Governance Process But The Stock Has Run Too Far and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fuji Soft (9749) – Much Better Governance Process But The Stock Has Run Too Far
Japan – Increasing Shorts on Some Interesting* Stocks; Positioning Appears Light
Merger Arb Mondays (15 Jan) – Shinko Electric, Benefit One, T&K Toka, Taisho, IJTT, IRC, Weiqiao
IRC Limited (1029 HK): Closing Date Extended as the Risk/Reward Turns Unattractive
KOSPI200 Index Rebalance Preview: Four Potential Changes in June
EQD | NIFTY Rising But SHORT Trade Possible From Friday…
Costa Group (CGC AU): Potential ASX200 Replacements
Quiddity Leaderboard SSE50/180 Jun 24: US$1.3bn One-Way; Some New Names in the Expected Changes List
Mainland Connect NORTHBOUND Flows (To 12 Jan 2024): Renewable Energy-Related Names Sold
HK Connect SOUTHBOUND Flows (To 12 Jan 2024); High Div SOEs Still the Biggest Buys

Fuji Soft (9749) – Much Better Governance Process But The Stock Has Run Too Far

After 3D Investment Partners bought a large slug of Fuji Soft Inc (9749 JP) in early 2022, the company started a review of governance and capital allocation.
The company updated investors in August, and bought in 4 listed subs in November-December 2023. The August update suggested a Q1 2024 decision on use/ownership of real estate.
The Final Report is due in a month. In the meantime, the stock rallied Friday off a news article suggesting the Board was reviewing take-private proposals. Yes, but…

Japan – Increasing Shorts on Some Interesting* Stocks; Positioning Appears Light

Some stocks have continued to underperform the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios next month.
Stocks that were expected to be deleted (but could now be safe) have outperformed the Nikkei 225 (NKY INDEX) over the last couple of weeks.
There has been two-way flow in a lot of stocks with market participants increasing and covering short positions as the stock prices have moved around.

Merger Arb Mondays (15 Jan) – Shinko Electric, Benefit One, T&K Toka, Taisho, IJTT, IRC, Weiqiao

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 – Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Probiotec Ltd (PBP AU), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU).
Lowest spreads – Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Benesse Holdings (9783 JP), Taisho Pharmaceutical Holdin (4581 JP).

IRC Limited (1029 HK): Closing Date Extended as the Risk/Reward Turns Unattractive

Irc Ltd (1029 HK) notes that the offeror (Nikolai Levitskii) and acceptances reached 35.77% at the first closing date, materially short of the 50% minimum acceptance condition.
The offeror has extended the closing date by 39 days (30 business days) to 20 February, the last day the offer can become or be declared unconditional.
The rise in iron ore prices and a light offer pose challenges. The risk/reward profile is unfavourable as the upside (5.4% spread) outweighs the downside (20.5% to the undistributed price).

KOSPI200 Index Rebalance Preview: Four Potential Changes in June

Less than halfway through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
The impact on the potential inclusion ranges from 0.14-6 days of ADV while the impact on the potential deletions varies from 3.6-12 days of ADV.
There are small shorts on the potential inclusions while short interest on the potential deletions varies from 5-10 days of ADV and 1.7-8.2% of free float.

EQD | NIFTY Rising But SHORT Trade Possible From Friday…

The NIFTY Index closed up last week (CC=+1), it is not overbought yet but it could become so at the end of this week (Friday).
Resistance begins at 22280/22800, these are the price areas from where SHORT trades can be initiated (target: 1 weeks reversal, close trade at Close).
Covering LONG holdings with Covered CALLs is also possible, Strikes should be =>22800.

Costa Group (CGC AU): Potential ASX200 Replacements

The Scheme Meeting for PSP’s acquisition of Costa Group Holdings (CGC AU) will be held on 30 January and Costa Group could stop trading after the close on 8 February.
Strike Energy (STX AU), SiteMinder (SDR AU) and Audinate (AD8 AU) are potential inclusions to the S&P/ASX 200 (AS51 INDEX) at an ad hoc rebalance.
For the stocks that are not added at the ad hoc rebalance, there is a very high probability of S&P/ASX 200 (AS51 INDEX) inclusion at the March rebalance.

Quiddity Leaderboard SSE50/180 Jun 24: US$1.3bn One-Way; Some New Names in the Expected Changes List

SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the June 2024 index rebal event.
I continue to expect 5 changes for SSE 50 and 18 changes for SSE 180 but some of the names have changed since my last insight.

Mainland Connect NORTHBOUND Flows (To 12 Jan 2024): Renewable Energy-Related Names Sold

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 2.4bn of A-shares on decent average activity.
Renewables and Kweichow Moutai (600519 CH) were the big net sells on the week.

HK Connect SOUTHBOUND Flows (To 12 Jan 2024); High Div SOEs Still the Biggest Buys

SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis, still.
SOUTHBOUND saw HK$6.8bn of net OUT-flows in the week to 12 Jan 2024. Total flows were HK$118bn.
SOUTHBOUND saw large net selling of ETFs (unwinding Week 1) and large net buying of high-div SOEs like CNOOC, China Mobile/Telecom/Unicom, and coal names.

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Jan 14

Daily Brief Event-Driven: Fuji Soft (9749 JP): A Potential Privatisation Faces Challenges and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fuji Soft (9749 JP): A Potential Privatisation Faces Challenges
Index Rebalance & ETF Flow Recap: HSI, LQ45, FXI, 2823 HK, SENSEX
(Mostly) Asia-Pac Weekly Risk Arb Wrap: TDCX, Orecorp, T&K Toka, Taisho Pharma, Benesse, IJTT
OCI Holdings Plans to Acquire a 27% In Hanmi Science – To Spark a Family Feud?
Last Week in Event SPACE: Furuya Metal, Visional, Wilmar, Samsung Electronics, ViinFast/Vingroup
Weekly Deals Digest (14 Jan) – T&K Toka, Fuji Soft, Taisho, Benefit One, IRC, Weiqiao, Amer, Ola

Fuji Soft (9749 JP): A Potential Privatisation Faces Challenges

Fuji Soft Inc (9749 JP) has disclosed that in response to a request from 3D Investment Partners, it has received non-binding privatisation proposals from several private equity funds.
A privatisation proposal would facilitate the exit of 3D, the largest shareholder representing 21.45% of outstanding shares, which has waged an activist campaign since 2022.
A binding privatisation proposal is challenging as the shares have hit a ten-year high, lofty multiple, and the Board seems to prefer its corporate value enhancement measures.

Index Rebalance & ETF Flow Recap: HSI, LQ45, FXI, 2823 HK, SENSEX

The review period for the next rebalance of a global index kicks off this week and that is where a lot of eyes will be focused.
There were big inflows to ETFs tracking the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) while there were redemptions from the Hang Seng H Share Index ETF (2828 HK).
Inflows continue for iShares Emerging Markets ex China (EMXC US) while there were outflows from iShares ACWI ETF (ACWI US).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: TDCX, Orecorp, T&K Toka, Taisho Pharma, Benesse, IJTT

I tally 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal discussed this week on Smartkarma: TDCX (TDCX US)‘s MBO.
Key updates took place on: Orecorp Ltd (ORR AU), T&K Toka Co Ltd (4636 JP), Taisho Pharmaceutical Holdin (4581 JP), Benesse Holdings (9783 JP), and IJTT Co., Ltd. (7315 JP).

OCI Holdings Plans to Acquire a 27% In Hanmi Science – To Spark a Family Feud?

After the market close on 12 January, OCI Holdings (010060 KS) announced that it plans to acquire a 27.03% stake in Hanmi Science (008930 KS) for 770 billion won.
Through this investment and integration between OCI Holdings and Hanmi Science, the OCI Group and Hanmi Pharmaceutical Group plans to establish a joint management system.
This deal between OCI Holdings and Hanmi Science is not over and it could lead to an M&A fight for the control of Hanmi Science by its family members.

Last Week in Event SPACE: Furuya Metal, Visional, Wilmar, Samsung Electronics, ViinFast/Vingroup

Furuya Metal (7826 JP) and Visional (4194 JP) are expected to be included in the TOPIX index at the end of January 2024.
Wilmar International (WIL SP)‘s current implied stub and simple ratio (Wilmar/ Yihai Kerry Arawana Holdings (300999 CH)) are both at all-time highs.
Reportedly, the mother and two sisters of Samsung Electronics (005930 KS) Chairman Jay Y. Lee plan to sell shares in a block deal worth ~₩2.8tn ($2.1bn billion.

Weekly Deals Digest (14 Jan) – T&K Toka, Fuji Soft, Taisho, Benefit One, IRC, Weiqiao, Amer, Ola

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 – Amer Sports (AS US), Ola Electric (1700674D IN) and Mixue Group (MIX HK) IPOs.
Event-Driven developments – Fuji Soft Inc (9749 JP), T&K Toka Co Ltd (4636 JP), Taisho Pharmaceutical Holdin (4581 JP), Irc Ltd (1029 HK), Weiqiao Textile Co (2698 HK).

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Jan 13

Daily Brief Event-Driven: OreCorp (ORR AU): Musings On The Minimum Bid Price and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

OreCorp (ORR AU): Musings On The Minimum Bid Price
Benesse (9783) – Through Terms But Maybe Not Enough To Threaten Bump as TOB Launch Approaches
EQD | Nikkei 225 WEEKLY Lift Off: Can It Go Higher?

OreCorp (ORR AU): Musings On The Minimum Bid Price

On the 27 Dec, to circumvent Perseus (PRU AU)‘s 19.9% dissenting vote, Orecorp (ORR AU) and Silvercorp (SVM CN) agreed to an off-market takeover, on the same terms.
That Offer – A$0.19 in cash and 0.0967 new Silvercorp shares – opened on the 3 January.
Silvercorp paid ~A$0.51/share, on-market, just prior to the Offer. OreCorp is currently trading ~A$0.51-$0.52/share. Is there any legal obligation to set a minimum floor price of A$0.51/share?

Benesse (9783) – Through Terms But Maybe Not Enough To Threaten Bump as TOB Launch Approaches

When the announcement for an MBO for Benesse Holdings (9783 JP) was made in November, they suggested it would take 3 months for approvals to launch. SAMR announced approval Wednesday.
Japan approval should be (or have been) easy. One might expect this deal to launch prior to “early February”. The stock is trading through terms…. but…
A reminder that this stock is TOO CHEAP. Bad management means low expectations means a decent premium still ends up at too low a price vs management’s own forecasts.

EQD | Nikkei 225 WEEKLY Lift Off: Can It Go Higher?

The Nikkei 225 INDEX experienced a 1-week explosive rally, last week, reaching nearly +6.6% higher than the previous week’s Close.
The index is now very overbought, can it continue to rise next week? and and how much higher can it go?
Go SHORT in the 36000-38350 price area, but the trade is not without risk.

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Jan 12

Daily Brief Event-Driven: IJTT (7315) – Last Trading Day for Still Truly Offensive Tender Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

IJTT (7315) – Last Trading Day for Still Truly Offensive Tender Offer
Taisho Pharmaceutical (4581 JP): Calm as Offer Heads for the 15 January Close
Quiddity Leaderboard CSI 300/500 Jun 24: Some Changes in Rankings; US$2.3bn One-Way
VinFast’s Global Expansion As Shares Stall
SENSEX Index Rebalance Preview: Likely Wipro Deletion Opens an Index Spot
An Early Look at the Potential KOSDAQ150 Rebalance Candidates in June 2024

IJTT (7315) – Last Trading Day for Still Truly Offensive Tender Offer

In IJTT (7315 JP) – A Truly Offensive Takeover Price and Process To Buy Out Minorities at 0.46x Book I laid it out like it was. It needed a bump.
It got a bump (IJTT (7315 JP) – Truly Offensive Takeover Price Gets Bumped, Offensively) to ¥850/share. From 0.46x PBR it got bumped to 0.48x PBR. For a cash-rich company.
Taking out net cash and securities, paying off deferred tax assets and UPBOs the deal is at 0.41x operating asset book for minorities. Still offensive. Beyond negligent.

Taisho Pharmaceutical (4581 JP): Calm as Offer Heads for the 15 January Close

Taisho Pharmaceutical Holdin (4581 JP)’s MBO JPY8,620 offer closes on 15 January. Since announcing the offer, the shares have traded above terms for 21 out of the 30 trading days.
Japan Catalyst has called the offer’s P/B of 0.85x too low. While shares trading above terms does not guarantee that the tender fails, it does increase the risk of failure.
The offeror has no compelling reason to bump as other activists have not publicly supported Japan Catalyst, the high 55.5% premium to undisturbed price and an achievable minority acceptance rate.

Quiddity Leaderboard CSI 300/500 Jun 24: Some Changes in Rankings; US$2.3bn One-Way

CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in June 2024.
Since my December 2023 insight, a couple of names have left the CSI 300 Expected ADDs basket and have been replaced by two other names.

VinFast’s Global Expansion As Shares Stall

After de-SPACing last August, shares in VinFast (VFS US), the EV arm of Vietnamese conglomerate Vingroup Jsc (VIC VN), went orbital, as discussed in Vingroup: VinFast’s Valuation Makes No Sense
VinFast cratered shortly thereafter. But still trades at a hefty ~25x P/S, well above industry peers.
Last Friday VinFast announced it was replacing both its CEO and CFO. Not a great look five months after IPOing. Even less attractive is the incoming CEO is VinGroup’s founder.

SENSEX Index Rebalance Preview: Likely Wipro Deletion Opens an Index Spot

Over a third of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
There are a bunch of stocks that could be added to the index as a replacement and price changes over the rest of the review period are important.
Passive trackers will need to trade over 1x ADV and over 7x of delivery volume on the index changes, so there will be decent impact on the stocks.

An Early Look at the Potential KOSDAQ150 Rebalance Candidates in June 2024

In this insight, we discuss the potential KOSDAQ150 rebalance candidates in June 2024.
The following companies are likely candidates to be included in KOSDAQ150 rebalance in June 2024, including LS Materials, Gigavis, and Cafe24 Corp.
We also provide a list of 10 companies that are potential exclusion candidates from KOSDAQ150 rebalance in June 2024.

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Jan 11

Daily Brief Event-Driven: Taisho Pharma (4581) – Slouching Activism May Not Get This Bumped and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Taisho Pharma (4581) – Slouching Activism May Not Get This Bumped
A Comprehensive Update on Implementation of Block Deals Pre-Disclosure in Korea
Naspers (NPN) X Prosus (PRX): A Look Back at 2023, Regulatory Risk Back in Spotlight
Interglobe Aviation (Indigo) Lockup – Still Has US$3bn+ Stake Left, After Three Prior Selldowns

Taisho Pharma (4581) – Slouching Activism May Not Get This Bumped

Six+ weeks ago, the founding family which controls a 33% stake in cash-rich Taisho Pharmaceutical Holdin (4581 JP) announced a Tender Offer MBO to buy out minorities.
¥8,620/Share is 0.85x PBR but the takeover is at 0.72x operating assets with net debt at zero That’s low – comps are 2+x book and twice the EV/EBITDA ratio.
But the scourge that is cross-holding investors blindly following management means they have 61-63% before this gets started, and only one small firm has voiced an objection.

A Comprehensive Update on Implementation of Block Deals Pre-Disclosure in Korea

By Sanghyun Park

The effective date, required by law to start six months post-promulgation, suggests implementation around July this year.
Enforcement decrees and regulations, under the Financial Services Commission’s purview, must be confirmed before the effective date (within six months post-promulgation). The announcement is likely in early to mid-March.
Expecting the amendment, there may be a pre-July surge in block deals as major shareholders expedite plans, creating assertive market activity in the first half with potential trading opportunities.

Naspers (NPN) X Prosus (PRX): A Look Back at 2023, Regulatory Risk Back in Spotlight

By Charlotte van Tiddens, CFA

Regulatory risks back in the spotlight, dampening decent year for both counters.
At the end of last year, China’s regulator released a proposal to introduce spending and time limits on gaming (22 Dec).
Tencent was down 12% on the day, Naspers and Prosus followed suit with more aggressive selling, sending both stocks down 17% for the half day of trading.

Interglobe Aviation (Indigo) Lockup – Still Has US$3bn+ Stake Left, After Three Prior Selldowns

By Sumeet Singh

InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 25%+ stake will be released from lock-up tomorrow.
He had earlier stated his intention to pare down his stake. He has sold shares in Sep 2022, Feb 2023 and Aug 2023.
In this note, we will talk about the lockup dynamics and possible placement.

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Jan 10

Daily Brief Event-Driven: TOPIX Inclusions: Who Is Ready (Jan 2024) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Inclusions: Who Is Ready (Jan 2024)
T&K TOKA (4636 JP): Expect ANOTHER Blandiloquent But Bletcherous Bump From Bain
StubWorld: Wilmar’s All-Time High Implied Stub As Yihai Kerry Touches New Lows
Offshore China ETFs Rebalance Preview: Two Changes Expected in March
T&K Toka (4636 JP): Decisions, Decisions as Tender Start Targeted for Mid-January
EQD | KOSPI 200 Readying for LONG Reversal

TOPIX Inclusions: Who Is Ready (Jan 2024)

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.
Furuya Metal (7826 JP) and Visional (4194 JP) are expected to be included in the TOPIX index at the end of January 2024
There are couple of other pre-event names that we have been tracking for the past few months.

T&K TOKA (4636 JP): Expect ANOTHER Blandiloquent But Bletcherous Bump From Bain

In August when Bain announced that it would launch a Tender Offer for T&K Toka Co Ltd (4636 JP) I suggested in my first piece it was the wrong price.
I suggested it needed another ¥1,000 added onto the price. If the ¥1,300 price Dalton initially indicated seemed low to T&K TOKA, another ¥100 doesn’t seem right.
It took time. Now it looks like a tender offer launch is imminent. The stock has traded through terms for almost 5 months, but not by a lot.

StubWorld: Wilmar’s All-Time High Implied Stub As Yihai Kerry Touches New Lows

Wilmar International (WIL SP)‘s current implied stub and simple ratio (Wilmar/Yihai Kerry Arawana Holdings C (300999 CH)) are both at all-time highs.
Preceding my comments on Wilmar 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%.

Offshore China ETFs Rebalance Preview: Two Changes Expected in March

Based on the close of 8 January, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (HKD) (2822 HK) in March.
Shaanxi Coal Industry (601225 CH) and China Everbright Bank Co A (601818 CH) could replace Bank Of Ningbo Co Ltd A (002142 CH) and Aier Eye Hospital Group (300015 CH).
The impact of passive trading will be higher on the inclusions compared to the deletions. Then there are cash and carry positions that will be rebalanced, adding to flow.

T&K Toka (4636 JP): Decisions, Decisions as Tender Start Targeted for Mid-January

T&K Toka Co Ltd (4636 JP) notes that Bain expects to satisfy the pre-condition and launch the JPY1,400 tender offer by mid-January.
The shares have, on average, traded 1.9% above the offer due to Dalton’s stakebuilding. Bain has three options – unchanged terms, allowing Dalton to roll over its shares, or bumping.
Bain is likely to bump as satisfying the minimum acceptance condition is challenging. A revised offer price of around JPY1,500 is possible.

EQD | KOSPI 200 Readying for LONG Reversal

The KOSPI 200 INDEX is correcting after a long multi-week rally. Currently down for 2 weeks (to be confirmed this Friday at close), it’s becoming OVERSOLD.
There is a risk of a large slide during this week, so LONG trades should be taken with a careful, hedged approach, but the LONG reversal is pending…
The price area between 345 and 334 is where the index could stop its pullback and reverse.

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Jan 09

Daily Brief Event-Driven: Event Trading on KOSPI Transfer Listings: Notable Post-Listing Price Patterns and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Event Trading on KOSPI Transfer Listings: Notable Post-Listing Price Patterns
March 2024 Nikkei 225 Rebal: Socionext, Disco, and a Consumer Goods Stock, Still
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
Hollysys (HOLI US): 8th Feb Shareholder Vote. Dazheng Fails The Sniff Test
Quiddity Leaderboard BSE/SENSEX Jun 24: Wipro SENSEX Deletion Possible
An Early Look at the Potential KOSPI200 Rebalance Candidates in June 2024
EQD | S&P/ASX200 Going Down… (Approaching Support to Go LONG)

Event Trading on KOSPI Transfer Listings: Notable Post-Listing Price Patterns

By Sanghyun Park

In the past year, four KOSPI transfer listings showed similar patterns, with pre-listing price increases and substantial corrections in the first five trading days post-listing.
ChatGPTAmid a sideways market and a 54.2% YoY growth in the local ETF market last year, the impact of passive flow imbalances may have been more significant than before.
A key factor is the short-selling ban. Posco DX’s SSFs showed significant backwardation pre-KOSPI listing, concentrating proactive short positions, requiring caution in adjusting pre-listing short position costs.

March 2024 Nikkei 225 Rebal: Socionext, Disco, and a Consumer Goods Stock, Still

No changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
There is the upweight to Nitori (9843) but now less funkiness with Fast Retailing (9983). But it will continue being an interesting Nikkei 225 influence (for years to come).

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March

At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.

Hollysys (HOLI US): 8th Feb Shareholder Vote. Dazheng Fails The Sniff Test

Hollysys Automation Technologies (HOLI US) has announced that an EGM is scheduled for February 8th to vote on the merger agreement with Ascendent Capital Partners.
The Offer price remains at US$26.50/ADS. The shareholder approval required is simple majority. Regulatory approvals include NDRC, MoC and SAFE. Maybe a national security review.
And the Dazheng consortium? Apparently insufficient information as to its financing sources and consortium structure ruled it out. Separately, the SGM to spill the board has now been called off.

Quiddity Leaderboard BSE/SENSEX Jun 24: Wipro SENSEX Deletion Possible

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the June 2024 index rebal event.
As things stand, there could be one index change for the SENSEX index.
There could be four ADDs/DELs for the BSE 100 index and four ADDs/DELs for the BSE 200 index.

An Early Look at the Potential KOSPI200 Rebalance Candidates in June 2024

We discuss the potential KOSPI200 rebalance candidates in June 2024. In the past several years, there have been a lot of alpha generating stocks arising from the KOSPI200 rebalances.
The following companies are likely candidates which could be included in KOSPI200 rebalance in June 2024, including Posco DX, Doosan Robotics, Hyosung Heavy Industries Corp, and DS Dansuk.
For the potential exclusion candidates, we included 10 stocks that are in the bottom 5% market caps in KOSPI200.

EQD | S&P/ASX200 Going Down… (Approaching Support to Go LONG)

The S&P/ASX 200 INDEX is oversold, currently down for 2 weeks (actually the second week down has just started), it has good chances to bounce this week.
The best set up would be: index closing the week down at the end of this week: GO LONG at Close (or at any high probability support level reached intra-week).
A reprise of the rally should last into the end of January (or longer).

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Jan 08

Daily Brief Event-Driven: A/H Premium Tracker (To 5 Jan 2024): STAY Long Hs Vs As: A Premia Still Wide and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

A/H Premium Tracker (To 5 Jan 2024): STAY Long Hs Vs As: A Premia Still Wide, High Div SOEs Moving
FXI Rebalance Preview: Two Potential Changes in March
Inabata & Co (8098) – LARGE Equity Secondary Offering by Sumitomo Chemical
LQ45 Index Rebalance Preview (Jan): Reading the Tea Leaves
Merger Arb Mondays (08 Jan) – Weiqiao Textile, IRC, Aoki Super, Hollysys, OreCorp, Tietto, Pact
HK Connect SOUTHBOUND Flows (To 5 Jan 2024); High Div SOEs Still Strongly Bought
Hollysys (HOLI US): Vote on 8 February as Hopes of a Rival Offer Fade
EQD | Tears and Despair for the Hang Seng Index May Not Be Over (Yet)
TDCX (TDCX US): Laurent Junique’s NBIO
Mainland Connect NORTHBOUND Flows (To 5 Jan 2024): Big Names Sold, Banks Bought

A/H Premium Tracker (To 5 Jan 2024): STAY Long Hs Vs As: A Premia Still Wide, High Div SOEs Moving

The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp.
STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.

FXI Rebalance Preview: Two Potential Changes in March

With a few weeks to go in the review period, CGN Power (1816 HK) and Yankuang Energy Group (1171 HK) could be added to the ETF in March.
China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK) are potential deletions while there is another stock close to deletion zone.
There are a lot of shorts on Yankuang Energy in terms of days of ADV and as a percentage of float while short interest on the other stocks is lower.

Inabata & Co (8098) – LARGE Equity Secondary Offering by Sumitomo Chemical

On Friday after the close, Inabata & Co (8098 JP) announced Sumitomo Chemical (4005 JP) would sell down a large stake in a ~$200mm secondary equity offering.
Mizuho Bank’s Retirement Benefit Trust account sells down too. Sumitomo Chem will keep 10+% and other crossholders remain.
This is “big” at 80 days of ADV with limited early index demand, but a 10% fall would make this cheap enough to buy vs Peers.

LQ45 Index Rebalance Preview (Jan): Reading the Tea Leaves

The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
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).
The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.

Merger Arb Mondays (08 Jan) – Weiqiao Textile, IRC, Aoki Super, Hollysys, OreCorp, Tietto, Pact

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 – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Adbri (ABC AU).
Lowest spreads – Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), A2B Australia (A2B AU), Tietto Minerals Ltd (TIE AU), IJTT Co., Ltd. (7315 JP).

HK Connect SOUTHBOUND Flows (To 5 Jan 2024); High Div SOEs Still Strongly Bought

SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis, still. Hs gave up some ground vs As in Week One.
SOUTHBOUND saw HK$14.4bn of net IN-flows in the 4-day week to 5 Jan 2024. Total flows were HK$96bn.
SOUTHBOUND start the year by buying ETFs, high-div SOEs like China Mobile and CNOOC, coal names, and sports/consumer names.

Hollysys (HOLI US): Vote on 8 February as Hopes of a Rival Offer Fade

Hollysys Automation Technologies (HOLI US) shareholders vote on Ascendent’s US$26.50 offer on 8 February. The special meeting will not be held as the 30% shareholding threshold is no longer satisfied.
The proxy statement shows that despite Dazheng Consoritum’s competing public campaign, it has withdrawn its court injunction and has struggled to provide proof of financing.
The proxy statement suggests that the special committee ran a fair process. While shareholders should approve Ascendent’s offer, the 0.2% gross spread indicates an unfavourable risk/reward profile.

EQD | Tears and Despair for the Hang Seng Index May Not Be Over (Yet)

The HSI INDEX index closed December (barely) up, no rally, nullifying completely the MONTHLY time bar count pattern suggesting a LONG MONTHLY trade (the 1-bar reversal has already happened).
The index is approaching the Q3 support at 16449. A WEEKLY bounce is possible from that level, but we don’t know if the bounce can last more than 1 week.
If the index keeps going down this week, it could find support between 16500 and 16000. A longer correction could end in the 15800-15600 price area. Use tight stops.

TDCX (TDCX US): Laurent Junique’s NBIO

TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, has announced a preliminary non-binding proposal from Laurent Junique, founder/CEO, and largest shareholder (98.3% of the voting power).
Junique is offering US$6.60/ADS, a 39% premium to the 30-day VWAP, but a 63% discount to its IPO price a little over two years ago.
One issue dogging TDCX is the key man risk given Junique’s almost absolute control. Now he’s trying to take the company private on the cheap.

Mainland Connect NORTHBOUND Flows (To 5 Jan 2024): Big Names Sold, Banks Bought

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 5.5bn of A-shares on lighter average activity. BIG net selling flows on the first day of the year for HK going north.
Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jan 07

Daily Brief Event-Driven: (Mostly) Asia-Pac Weekly Risk Arb Wrap: Aoki and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Aoki, Kerry Express Thailand, JOYY, Tietto Mins, Pact Group
Index Rebalance & ETF Flow Recap: HSCEI, HSCI, KRX New Deal, NIFTY50, NEXT50, CNXBANK
Last Week in Event SPACE: HS Holdings, Celltrion Pharm, NISA, PICC/PICC P&C

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Aoki, Kerry Express Thailand, JOYY, Tietto Mins, Pact Group

I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed this week: AOKI Holdings (8214 JP)‘s MBO and in-specied-triggered MTO got Kerry Express Thailand (KEX TB).
Key updates took place on: JOYY (YY US), Tietto Minerals Ltd (TIE AU)and Pact Group Holdings (PGH AU).

Index Rebalance & ETF Flow Recap: HSCEI, HSCI, KRX New Deal, NIFTY50, NEXT50, CNXBANK

Posco DX (022100 KS) continues to drop following its section transfer from the KOSDAQ market to the KOSPI market. Short interest in the stock nearly halved in December.
There were big net inflows to China ETFs with creations in CSI 300 Index ETFs and redemptions in ETFs tracking the CSI 500 Index and CSI 1000 Index.
Creations continued in the iShares Emerging Markets ex China (EMXC US) ETF with units outstanding reaching a new high.

Last Week in Event SPACE: HS Holdings, Celltrion Pharm, NISA, PICC/PICC P&C