Event-Driven

There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.

HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn

As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.

Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200

The Nikkei reports that Snow Peak Inc (7816 JP) is set to disclose a Bain-sponsored MBO this week “in the range of 1,200 yen per share.”
Mergermarket first disclosed a potential MBO on Friday. Snow Peak responded that while it is true that we are considering going private, no decision has been made at this time.
The rumoured JPY1,200 offer price is light vs historical trading ranges but attractive vs peer and historical multiples. The probability of an offer materialising is high.

What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS

The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.
Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.
NPS’s role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.

Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.

Merger Arb Mondays (19 Feb) – Outsourcing, JSR, Shinko, YSK, Vinda, Altium, Azure, Ansarada

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 – Probiotec Ltd (PBP AU), Shinko Electric Industries (6967 JP), Genetron Holdings Ltd (GTH US), JSR Corp (4185 JP), Lithium Power International (LPI AU), Altium Ltd (ALU AU).
Lowest spreads – Tietto Minerals Ltd (TIE AU), Pact Group Holdings (PGH AU), Orecorp Ltd (ORR AU), QV Equities Ltd (QVE AU), Yaizu Suisankagaku Industry (2812 JP).

STTF Index Rebalance Preview: One High Probability Change in March

Emperador (EMI SP) fails the liquidity test and could be sold by the SPDR Straits Times Index ETF (STTF SP) in March.
Emperador (EMP PM) will also be sold by global index trackers in March and the stock should remain under pressure for the next few weeks.
Frasers Centrepoint Trust (FCT SP) is ranked ahead of CapitaLand Ascott Trust (CLAS SP) by 9% on full market cap and should be added to the ETF in March.

Boral (BLD AU): Seven Group (SVW AU)’s Best & Final Offer

Seven Group Holdings (SVW AU) holds 71.59% in Boral Ltd (BLD AU) and is looking to acquire the remaining shares at A$6.05/share via a mix of SVW stock and cash.
The offer consideration ratchets higher to A$6.15/share if SVW’s aggregate shareholding reaches 80% and to A$6.25/share if SVW’s aggregate shareholding reaches 90.6%.
Seven Group Holdings (SVW AU) is an addition to a global index at the end of the month and a drop in the stock post inclusion will affect Boral Ltd.

Liquid Universe of European Ordinary and Preferred Shares: February‘24 Report

Since mid-January, spreads have tightened, same as in December, across our European liquid universe of ordinary and preferred shares (13 have tightened, 6 widened).
Recommended trades long preferred / short ordinary shares: Danieli, Grifols, Media-for-Europe, Sixt, Volkswagen.
Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, SSAB Svenska Stal, Roche.

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Feb 18

Daily Brief Event-Driven: Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest
Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Altium, Ansarada, Roland DG, Welbe, Orecorp, Vinda
HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In
Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning
Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest

In a surprise, the Hang Seng index committee has decided not to make any constituent changes to the Hang Seng Index (HSI INDEX) at the March rebalance.
We now see the index reaching its 100-member target in 2025 at the earliest, though we would not be surprised to see it spill into 2026 as well.
Free float and capping changes will result in one-way turnover of 1.2% resulting in a round trip trade of HK$4.54bn. HSBC Holdings (5 HK) is the biggest sell.

Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO

Apparently, MergerMarket had an article out Friday saying once-higher-flying outdoor/sporting goods retailer Snow Peak Inc (7816 JP) was considering going private. The company said(J) late they were considering multiple options.
A Nikkei article (J) Saturday said it was Bain would launch an MBO/Tender Offer as early as this week paying ¥50bn.
This will probably go limit up Monday. I’d expect an announcement post-close Monday. Long-suffering long-only investors who have already sold will be disappointed. Those who were late to sell? Happy.

[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming

There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors.
There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have
9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Altium, Ansarada, Roland DG, Welbe, Orecorp, Vinda

I tally 53 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed this week on Smartkarma: Altium Ltd (ALU AU), Ansarada Group Ltd (AND AU), Roland DG Corp (6789 JP), and Welbe Inc (6556 JP).
Key updates took place on JSR Corp (4185 JP) and Outsourcing Inc (2427 JP)

HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In

After narrowly avoiding deletion at the last two index reviews, Zhongsheng Group will be deleted from the HSCEI INDEX in March and replaced with China Unicom (762 HK).
Zhongsheng Group (881 HK) is down 25% for the year while China Unicom Hong Kong (762 HK) is up 10%.
There appears to be positioning on both stocks though the increase in shorts and jump in cumulative excess volume on Zhongsheng Group (881 HK) point to higher positioning.

Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning

There were index review announcements for the HSI, HSCEI INDEX, HSTECH, HSCI, HSIII and some global indices last week.
There are a bunch of review cutoffs early in the coming week followed by announcements for the STAR50 INDEX and STAR100 Index later in the week.
Another week of outflows for Tracker Fund of Hong Kong (2800 HK) and Hang Seng H Share ETF (2828 HK) as inflows to iShares Emerging Markets ex-China (EMXC US) continue.

Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues

Nobody “named” having >5.0% in Outsourcing (2427 JP); no public noise, the stock down; people won’t be fighting for a bump unless the delay and impairment are truly meaningless.
Stay long MGM China Holdings (2282 HK) as its FY23 top line surpasses pre-Covid levels.
Investors and risk arbitrageurs who are worried about the potential loss of the case to RF SUNY should simply avoid, or sell then avoid JSR Corp (4185 JP) shares.

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Feb 17

Daily Brief Event-Driven: Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations
StubWorld: Union Stikes Impact MGM; MGM China Tops Pre-Covid Numbers
EQD | HSI Rally: Possible Brief Stop This Week

Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations

Local sources confirm government’s focus on strengthening stock market for April election. Market expects aggressive policies for share cancellations, including corporate defense mechanisms.
Chosun Ilbo, a government-friendly and influential media outlet, advocates for corporate defense mechanisms to boost share cancellations, shaping a political atmosphere.
This theme is likely to emerge in Korea’s market. We must consider political dynamics and screen companies with high treasury shares for potential stock boosts.

StubWorld: Union Stikes Impact MGM; MGM China Tops Pre-Covid Numbers

MGM China Holdings (2282 HK)‘s FY23 top line surpasses pre-Covid levels. MGM Resorts International (MGM US) figures hit by union strike at MGM Grand Detroit.
Preceding my comments on MGM 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%.

EQD | HSI Rally: Possible Brief Stop This Week

By Nico Rosti

The Hang Seng Index is rallying as anticipated in a previous insight, but it could stop this week and pullback a bit.
3 possible trades available: go SHORT and hold to profit from a re-start of the downtrend, go SHORT and close after 1 week, wait the pullback and go LONG.
It’s unclear at the moment if the index will go lower or rebound after the upcoming pullback.

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Feb 16

Daily Brief Event-Driven: Renesas’ Transformative Offer For Altium and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Renesas’ Transformative Offer For Altium
Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating
Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out
Japan – Shorts & Positioning on Passive Sells
Altium (ALU AU): Renesas (6723 JP) Binding A$68.50 Offer
Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: US$313mn One-Way, Four Names with Double-Impacts
Quiddity Leaderboard SSE50/180 Jun 24: US$1.5bn Index Flows One-Way
Ansarada (AND AU): Datasite’s Binding A$2.50 Offer
Vitol/Saras: Time to Bid Farewell

Renesas’ Transformative Offer For Altium

Renesas Electronics (6723 JP), a supplier of advanced semiconductors, is offering Altium Ltd (ALU AU) shareholders A$68.50/share, in cash, a lifetime high, by way of a Scheme.
Back in June 2021, Altium rejected a A$38.50/share NBIO, then a A$40/share verbal Offer, from US engineering software giant Autodesk. This was discussed in Altium Ltd (ALU) Rebuffs Autodesk Offer
This is compelling Offer for Altium. For Renesas, this transaction is a paradigm shift away from its core semiconductors manufacturing ops.

Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating

I got a bunch of questions about my Outsourcing comments yesterday in Outsourcing (2427) – Earnings Delay Causes Consternation.
This piece is intended to clarify what I know (still limited), put parameters around what it might be, and draw lines in the sand which I might later erase.
This may be nothing. But it may not be. I will try to answer the questions I received in a kind of Q&A format, and I hope that helps.

Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out

Will there be changes in April’s rebalancing? With two weeks left, two names are likely. Wonik IPS may be replaced by ISC Co Ltd, given a ₩150B market cap difference.
In the previous rebalancing, constituent changes had a notable price impact. Despite a passive flow impact of +1.0x ADTV, HPSP and EO Technics saw about a 15% 3-day return.
Wonik IPS is estimated to receive -4.0x ADTV, while ISC is expected to receive +1.0x ADTV. This is also quite similar to the previous rebalancing.

Japan – Shorts & Positioning on Passive Sells

BayCurrent Consulting, Open House, Sumitomo Chemical, Koei Tecmo Holdings, Kose Corp, Oji Holdings, Daiwa House Reit Investment and Tosoh Corp will have passive selling at the close on 29 February.
Short interest has increased on all these stocks over the last few weeks and there has been big underperformance versus the Nikkei 225 Index and TOPIX Index.
Cumulative excess volume has increased on the stocks and there will be short covering in the last week of the month.

Altium (ALU AU): Renesas (6723 JP) Binding A$68.50 Offer

Altium Ltd (ALU AU) has entered a scheme implementation deed with Renesas Electronics (6723 JP) at A$68.50 per share, a 33.6% premium to the undisturbed price (14 February).
The offer will close in 2H, requiring several approvals – FIRB, CFIUS, HSR Act clearance, German Ministry FDI, German Federal Cartel Office clearance, and Turkish Competition Authority.
The offer price is attractive and 31% above the all-time high, lowering the chance of a competing proposal. At the last close, the gross spread is 3.8%.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: US$313mn One-Way, Four Names with Double-Impacts

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.

Quiddity Leaderboard SSE50/180 Jun 24: US$1.5bn Index Flows One-Way

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.
Since my last insight, there have been a couple of changes to our expected ADDs basket and a couple of changes to our expected DELs basket for the SSE180 index.

Ansarada (AND AU): Datasite’s Binding A$2.50 Offer

On 13 February, Ansarada Group Ltd (AND AU) entered a scheme implementation deed with Datasite. The offer price is A$2.50 per share, a 19.0% premium to the undisturbed price (12 February).
The offer requires FIRB approval along with shareholder approval of the inter-conditional scheme and carve-out transaction.
The offer price is reasonable and marginally short of the all-time high. At the last close and for an early June close, the gross/annualised spread is 2.5%/8.3%.

Vitol/Saras: Time to Bid Farewell

The Morattis have agreed to sell their 40% stake in Saras SpA (SRS IM) to Vitol at €1.75/share (implied equity value €1,664 million), which will trigger a mandatory takeover offer.
Saras has only an asset, the largest refinery in Italy, based in Sardinia, which should add scale to Vitol. At 12.5x Fwd P/E, the offer represents a premium to peers.
Considering the unimpressive stock market performance of Saras since listing, and potential Trafigura overhang, it’s a good time to cash in. Spread is 1.54%/8.58% (gross/annualised, assuming settlement by 23 April). Long.

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Feb 15

Daily Brief Event-Driven: Outsourcing (2427) – Earnings Delay Causes Consternation and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Outsourcing (2427) – Earnings Delay Causes Consternation
JSR (4185) – Updated Information in SUNY Lawsuit, and Other Developments
Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?
Carlyle Group Selling More than 320 Billion Won Worth of KB Financial in a Block Deal Sale
Renesas (6723 JP) To Acquire Altium (ALU AU) In a A$9.1bn Deal
S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell
Quiddity Leaderboard CSI 300/500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index

Outsourcing (2427) – Earnings Delay Causes Consternation

Originally, the MBO for Outsourcing Inc (2427 JP) was expected to get launched end-January 2024. A late-ish filing with regard to the EU’s Foreign Subsidies Regulation regime prompted a delay.
Yesterday Outsourcing announced a delay its earnings release by 3 business days, the delay “procedures related to impairment losses are continuing.”
Outsourcing shares are down hard on this. -1.5% as I write. I examine.

JSR (4185) – Updated Information in SUNY Lawsuit, and Other Developments

12 days ago, JSR Corp (4185 JP) announced that former research collaboration partner Research Foundation of the State University of New York had sued in an intellectual property ownership dispute.
I wrote about it here to the extent I could. Since then, more information has become available, or available to me. Some details on the case. Some on lawyers.
Since then JSR has reported earnings with unchanged forecast, and major pure play comp Tokyo Ohka Kogyo (4186 JP) today reported earnings; the stock popped 10+% to an all-time high.

Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?

Outsourcing Inc (2427 JP) has delayed the announcement of its 4QFY2023 results from 14 to 19 February as the impairment loss accounting is yet to be completed.
Outsourcing has a history of impairments, resulting in missed forecasts, which suggests a weak 4Q. The concern is that a weak 4Q could force Bain to trim its JPY1,755 offer.
Persol Holdings (2181 JP) guidance cut today suggests a weak 4Q reflects near-term industry weakness rather than company-specific issues. The weak 4Q is a valuable cover to justify the less-than-stellar offer.

Carlyle Group Selling More than 320 Billion Won Worth of KB Financial in a Block Deal Sale

By Douglas Kim

After the market close on 14 February, KB Financial announced that The Carlyle Group is trying to sell a 1.2% stake in the company through a block deal sale.
The expected block deal price range is 64,608 won to 65,954 won per share, representing a 2 to 4% discount to the closing price of 67,300 won on 14 February.
We would pass on this block deal sale. Despite excellent gains so far YTD, there is looming risk of many investors that may bail out of KB Financial post ex-dividend.

Renesas (6723 JP) To Acquire Altium (ALU AU) In a A$9.1bn Deal

Renesas Electronics (6723 JP) has entered a Scheme Implementation Agreement to acquire Altium Ltd (ALU AU) at A$68.5/share implying an equity value of A$9.1bn and an Enterprise Value of A$8.8bn.
The offer price is a 33.6% premium to the last close and a larger premium to VWAPs ranging from 30 days to 180 days.
There will be ad hoc inclusions to the S&P/ASX 100 Index and the S&P/ASX 200 (AS51 INDEX) on Altium Ltd (ALU AU)‘s last trading day (expected second half of 2024).

S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell

With two days left in the review period, there could be 28 adds/deletes across the S&P/ASX family of indices in March.
There is nearly A$1bn to sell in 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 could be 2-41 days of ADV to buy in the index inclusions while the impact on the deletions will range between 0.7-24 days of ADV.

Quiddity Leaderboard CSI 300/500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index

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.
I currently see 11 changes for the CSI 300 index and 50 changes for the CSI 500 index.

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Feb 14

Daily Brief Event-Driven: GMR Airports Infra (GMRI IN): Flying High and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

GMR Airports Infra (GMRI IN): Flying High
FEB 2024 REBALANCE Index Changes Announced, SA Constituents to Remain the Same
MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?
Ansarada Enters Scheme With Datasite
SET50 Index Rebalance Preview: Three Potential Changes in June
EQD | E-Mini S&P500 (ES) DAILY Sell-OFF: Where Do You Buy?
I-Mab to Divest Chinese Assets and Business Operations for up to $80M – An Escape by Crafty Scheme

GMR Airports Infra (GMRI IN): Flying High

At the last close, GMR Airports Infrastructure (GMRI IN) has a market cap of US$6.23bn and a free float market cap of US$2.48bn.
Passive global trackers are estimated to need to buy 223.33m shares (US$230m; 4.4x ADV) of GMR Airports Infrastructure (GMRI IN) at the close on 29 February.
GQG Partners (GQG AU) has been a big buyer since December and holds 4.98% of the company. The stock could run up for a few more weeks.

FEB 2024 REBALANCE Index Changes Announced, SA Constituents to Remain the Same

By Charlotte van Tiddens, CFA

Indices will be rebalanced at the end of the month on Thursday the 29th of February.
The three largest additions to the World Index measured by full company market capitalization will be Samsara A (USA), Corebridge Financial (USA) and Applovin Corp A (USA)
The three largest additions to the Emerging Markets Index measured by full company market capitalization will be Midea Group Co A (HK-C) (China), Punjab National Bank (India) and Union Bank Of India (India)

MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?

The review period for the March rebalance of the MVIS Australia Equal Weight Index ends on 29 February with results announced on 8 March and implemented on 15 March.
Lendlease Group (LLC AU), IDP Education (IEL AU) and IGO Ltd (IGO AU) are very close to deletion zone and price moves over the next couple of weeks are important.
IGO Ltd (IGO AU) is also a deletion from a global index in February and a lower stock price could lead to deletion from this index too.

Ansarada Enters Scheme With Datasite

Virtual room provider Ansarada Group Ltd (AND AU) has entered into a Scheme with Datasite, a leading global SaaS provider acquired by UK-based PE outfit CapVest Partners in 2020.
Datasite is offering A$2.50/share, in cash, a 19% premium to undisturbed and a lifetime high.
Apart from requiring Ansarada shareholder approval, the Scheme is conditional on FIRB and the carving out of certain assets to Ansarada’s CEO. This transaction should complete in early June.

SET50 Index Rebalance Preview: Three Potential Changes in June

Early days, but there could be three changes for the Stock Exchange of Thailand SET 50 Index at the June rebalance. Two names are reversals of the December changes.
Passive trackers will need to buy between 1.5-3.6 days of ADV on the inclusions and sell 1.1-1.4 days of ADV on the deletions.
There are a couple of stocks that are close to passing/failing the liquidity tests and a couple close to cutoff ranks. That could result in further changes to the index.

EQD | E-Mini S&P500 (ES) DAILY Sell-OFF: Where Do You Buy?

By Nico Rosti

E-Mini S&P 500 Futures closed down at 4971.29 on Tuesday. Big recovery rally at the end of the day, but the sell-off could continue into the end of the week.
Both the DAILY and WEEKLY time period are already OVERSOLD according to our models, however we see no reason to rush to buy.
This insight is a roadmap for the next 2-3 days, to find support levels to go LONG, to profit on the next, DAILY, LONG reversal.

I-Mab to Divest Chinese Assets and Business Operations for up to $80M – An Escape by Crafty Scheme

By Xinyao (Criss) Wang

I-MAB claimed that this divesture is the best strategic choice to respond to the overall environment of China and the US. I-MAB needs to make changes to appease investors.
The real situation is not as beautiful as it seems.This divesture means I-MAB US has actually been “hollowed out”, which is a big blow to I-MAB US and its investors.
With R&D team/production base, I-MAB Hangzhou is able to tell more good stories in the future, which has completed C1 round financing and plans to IPO in A-share or HKEX.

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Feb 13

Daily Brief Event-Driven: Southeast Asia EM: Potential Passive Flows in February and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Southeast Asia EM: Potential Passive Flows in February
Korea: Surging Share Cancellations in 2024
A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider
Mainland Connect NORTHBOUND Flows (To 9 Feb 2024): Decent Net Momo Buying, Especially in Financials
Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete
Merger Arb Mondays (12 Feb) – JSR, Benefit One, Lawson, Welbe, YSK, Hollysys, Silver Lake
HK Connect SOUTHBOUND Flows (To 9 Feb 2024); Net Tech Selling STILL, Net SOE Buying, STILL
Quiddity HSCEI Mar 24 Flow Expectations: Zhongsheng (881 HK) Downtrend Could Continue
Second Time Around

Southeast Asia EM: Potential Passive Flows in February

There could be large passive flows for stocks in Malaysia and Thailand in the next few weeks. Impact is especially high where there could be passive outflows.
YTL Corp (YTL MK) and YTL Power International (YTLP MK) are likely to have passive inflows.
Dialog Group (DLG MK), Berli Jucker (BJC TB), Osotspa Public Company Limited (OSP TB) and Banpu Public (BANPU TB) could have outflows.

Korea: Surging Share Cancellations in 2024

By Douglas Kim

We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year.
At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024.
Some of the leading Korean companies including Samsung C&T and KT&G that have announced share cancellations this year continue to outperform the market on average.

A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider

The New/Better 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 and NORTHBOUND flows net positive. AH premia on average rose so Hs underperformed As by 1.75%. Narrow premia pairs saw AH premia rise most.
Watch the SOE stock price KPI space. Wouldn’t be short SOEs vs Privates on H/A basis. Low-hanging fruit with some SOEs having large cash balances.

Mainland Connect NORTHBOUND Flows (To 9 Feb 2024): Decent Net Momo Buying, Especially in Financials

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 BUY RMB 16.1bn of A-shares on VERY strong average activity after +9.9bn and +12.1bn RMB the two weeks before. Some National Team buying this week.
Renewables selling was tempered. Finance and Industry saw large net buying. Five of the top ten buys among liquid NORTHBOUND stocks were finance. Info Tech saw net selling. Again.

Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place

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 index changes for HSTECH index for the March 2024 index rebal event will be announced on 16th February 2024.
In this insight, we take a final look at the expected index changes and our latest flow expectations.

MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete

The review period for the March rebalance ends in a couple of weeks. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 2.2% resulting in a one-way trade of A$13m. There are two stocks with over A$3m to trade.
With market participants expecting lower interest rates, there has been short covering on a lot of the REITs in the last few months.

Merger Arb Mondays (12 Feb) – JSR, Benefit One, Lawson, Welbe, YSK, Hollysys, Silver Lake

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 – Welbe Inc (6556 JP), Probiotec Ltd (PBP AU), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Genetron Holdings Ltd (GTH US), Lithium Power International (LPI AU).
Lowest spreads – Tietto Minerals Ltd (TIE AU), Orecorp Ltd (ORR AU), QV Equities Ltd (QVE AU), Pact Group Holdings (PGH AU), CPMC Holdings (906 HK), Irc Ltd (1029 HK).

HK Connect SOUTHBOUND Flows (To 9 Feb 2024); Net Tech Selling STILL, Net SOE Buying, STILL

A bad week for HK and Chinese shares. National Team buying seems lighter into the waning days of the Year of the Rabbit.
Net SOUTHBOUND buying was HK$4.0bn in the shortened pre-holiday week.
Remarkable this past week, again, was the tendency to net sell names which were down hard, and net buy names which have been performing well.

Quiddity HSCEI Mar 24 Flow Expectations: Zhongsheng (881 HK) Downtrend Could Continue

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
The index changes for HSCEI index for the March 2024 index rebal event will be announced on 16th February 2024.
In this insight, I have shown how my flow expectations have changed since I published my last HSCEI insight on 6th December 2023.

Second Time Around

The Della Valles and LVMH-backed L Catterton announced an agreement to launch a voluntary tender offer to buy 36% of Italian luxury group Tod’s SpA (TOD IM) at €43/share to take it private.
In spite of the 31% premium to the 3-month VWAP, and the loss of brand equity by Tod’s the offer seems cheap on a multiples basis, considering turnaround potential.
Considering a 95% squeeze-out threshold, 80.4% of the float must tender, which is high. A sweetening may be needed, although the offeror threatens with a merger with itself to delist.

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Feb 12

Daily Brief Event-Driven: Roland DG (6789) – Tender Offer by Taiyo Partners – Nice Premium But Too Cheap and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Roland DG (6789) – Tender Offer by Taiyo Partners – Nice Premium But Too Cheap
Screen Holdings (7735 JP): Positioning & Potential Passive Buying
Weekly Deals Digest (11 Feb) – Lawson, Benefit One, Welbe, China TCM, L’Occitane, Hollysys
Welbe (6556 JP) – MBO by Polaris
Exploring Prioritized Buyback/Cancellation of Samsung Electronics & Hyundai Motor Prefs
Magyar Vagon/Talgo: Looming Takeover Offer

Roland DG (6789) – Tender Offer by Taiyo Partners – Nice Premium But Too Cheap

Taiyo Pacific Partners took the original parent company (Roland Corp (7944 JP) of Roland DG Corp (6789 JP) private in 2014. It was re-listed in 2020.
Roland DG is one of the world’s leading large format digital printer manufacturers. They also make some interesting medical devices and systemic tools, and 3D milling/printing/engraving/photo impact machines.
This TOB is at a 30.1% premium. Almost a 10yr high. But it is not expensive. And even if TPP has 20%, there is a LOT of float left over.

Screen Holdings (7735 JP): Positioning & Potential Passive Buying

SCREEN Holdings (7735 JP) could be added to a global index at the end of the month and there will be a lot of buying in the stock.
There is a fair bit of positioning for the potential passive buying and there will be supply in the stock.
However, the stock trades cheaper than its peers and a correction could provide an opportunity for long-term investors to enter the stock.

Weekly Deals Digest (11 Feb) – Lawson, Benefit One, Welbe, China TCM, L’Occitane, Hollysys

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: Ola Electric (1700674D IN) and FirstCry (0172540D IN) IPOs.
Event-Driven developments: Benefit One Inc (2412 JP), Lawson Inc (2651 JP), Welbe Inc (6556 JP), China Traditional Chinese Medicine (570 HK), L’Occitane (973 HK), Hollysys Automation Technologies (HOLI US).

Welbe (6556 JP) – MBO by Polaris

On Thursday after the close, an entity tied to Polaris Capital announced an MBO of Welbe Inc (6556 JP). (Note this is Welbe not Welby Inc (4438 JP)).
The MBO by Tender Offer is set at ¥1,089/share is at a 29.952% premium to Thursday’s last trade. Coincidentally. It is well below where it traded 3-5 years ago.
If large domestic financial investors want a bump, we might see some fun, but I expect there is enough ownership willing to tender to get this over the hump.

Exploring Prioritized Buyback/Cancellation of Samsung Electronics & Hyundai Motor Prefs

Samsung Elec & Hyundai Motor’s high proportion of preferred stocks leads to their unusually high cost of capital, making themselves prime targets for the govt’s Corporate Value Up policy.
Policy likely focuses on aggressive share buybacks, especially preferred stock repurchase, to improve PBR. Pension funds may invest heavily in ETFs, offsetting dilution effects.
Hyundai Motor may pursue more aggressive shareholder returns due to the India listing, possibly prioritizing preferred share repurchases as it introduces risks of value transfer controversies within Korea.

Magyar Vagon/Talgo: Looming Takeover Offer

Trading in the shares of Spanish rolling stock manufacturer Talgo SA (TLGO SM) is suspended pending a possible €5/share takeover offer from Hungarian group Magyar Vagon.
Stock market performance of Talgo has been lacklustre. Now, at €4.79, the shares are trading above comparables, in line with my fair value estimate (DCF-based) of €4.76/share.
Top investors (>45%) seem very willing to cash in and I would imagine that Magyar Vagon has had the time to seek green light assurances from the Spanish Government. Long.

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Feb 11

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

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Silver Lake, Ssangyong Cement, Vinda, Benefit One, Hollysys
Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float
Last Week in Event SPACE: Mitsui Fudosan/Oriental Land, Giordano, JSR, Pasona, Lawson, L’Occitane
Quiddity Leaderboard ASX Mar 24: Five ASX 200 Changes Possible Including One Surprise

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Silver Lake, Ssangyong Cement, Vinda, Benefit One, Hollysys

I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals discussed this week on Smartkarma: Red 5 (RED AU)/Silver Lake Resources (SLR AU) merger; Ssangyong Cement Industrial (003410 KS)‘s Tender Offer; and Lawson (2651 JP) Tender Offer.
Key updates took place on: Symbio (SYM AU), Bwp Trust (BWP AU), Vinda (3331 HK), JSR Corp (4185 JP), Benefit One (2412 JP), Kerry Express Thailand (KEX TB), Hollysys (HOLI US)

Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float

There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the HSI, HSCEI, HSTECH, HSCI, HSIII and global indices.
The review period for the March rebalance of the S&P/ASX 200 and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.
There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.

Last Week in Event SPACE: Mitsui Fudosan/Oriental Land, Giordano, JSR, Pasona, Lawson, L’Occitane

Apparently Elliott is requesting Mitsui Fudosan (8801 JP) conduct a very large buyback and to sell down its stake in Oriental Land (4661 JP).
Some 17 months after the Cheng Family failed to secure 50%+ of Giordano International (709 HK), the family are now calling an SGM to install friendly directors.
TheLawson (2651 JP) deal is not terribly surprising. It’s not terribly surprising that it is being done cheaply. It IS being done too cheaply. This is bumpable by force.

Quiddity Leaderboard ASX Mar 24: Five ASX 200 Changes Possible Including One Surprise

In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2024 index review.
I expect one change for ASX 20, one change for ASX 100, and five changes for ASX 200 including a surprise deletion due to long term suspension of a stock.
The official index changes will be announced after the close on Friday 1st March 2024.

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Feb 10

Daily Brief Event-Driven: Barratt Redrow Plc and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Barratt Redrow Plc, the Land Banker
EQD | NIFTY’s Uncertainty: The Rally Could Pause for 1 More Week

Barratt Redrow Plc, the Land Banker