Event-Driven

The JIP Tender Offer for Toshiba Corp (6502 JP) closes today. I expect that we will see results announced as early as late tonight, but by law, by latest tomorrow.
There will be at least three major index downweights, and possibly deletions, most likely in the following five trading days.
This shows the approximate maximum share and dollar amounts to be sold, and approximate dates.

Itochu TOB on Itochu Techno Solutions – The Index Selldown Schedule for $700mm+ of Flows

In August, Itochu Corp (8001 JP) launched a Tender offer on Itochu Techno Solutions (4739 JP) to buy out minorities.
That tender offer ended last week, with Itochu and the acquirer vehicle owning 85+%.
Interestingly, there are near-term flow events as a result. Worth watching.

PCOMP Index Rebalance Preview: MPI Delisting Could See Bloomberry Added

Metro Pacific Investments Co (MPI PM) has announced that the public float of the stock will drop to 2.78% following the Tender Offer.
Metro Pacific Investments Co (MPI PM) shares are expected to be suspended from 26 September. That could see Bloomberry Resorts (BLOOM PM) added to the PCOMP INDEX on 25 September.
There will be large passive inflows to Bloomberry Resorts (BLOOM PM) as well as flows from active managers that track the PCOMP INDEX.

Newcrest-Newmont Merger: Fancy Index Shenanigans

Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun.
There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.

Descente a Key Part of Itochu’s Plans in Sports

By Michael Causton

Through all the upheavals in discretionary product distribution in the last decade, Itochu Corp (8001 JP)’s Itochu Textile subsidiary has managed to maintain huge power in the channel.
While the trading firm has traditionally focused on premium fashion brands, in the last few years it has invested heavily in the sports market, including its growing investment in Descente.
The move is part of wider plans to take lead share in sports, footwear and department store brands.

StubWorld: PTT Public Is Trading Cheap

The recent share price pullback sees PTT PCL (PTT TB) trading below its long-term averages, and with respect to peers.
Preceding my comments on PTT 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%.

Naspers (NPN) & Prosus (PRX): Initial Market Reaction to Leadership Changes

By Charlotte van Tiddens, CFA

Early on Monday morning, Naspers and Prosus announced the immediate resignation of CEO Bob van Dijk. Management hosted an investor call shortly after. Key takeaways are included below.
Ervin Tu, Group Chief Investment Officer, will take over as Interim CEO. Tu is a strong candidate for the permanent position.
After an initial bounce at the open, both counters sold off, widening the discounts by more than 1 percentage point intra-day.

Quiddity Leaderboard ASX Dec 23: 5 ASX 200 Changes and Other Large Potential Flow Events (NCM, AKE)

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the December 2023 Rebalance.
There could be up to five ASX 200 changes including the intra-review changes that could potentially be triggered by M&A events.
There are also couple of possibly large reverse funding flow scenarios involving Newcrest Mining (NCM AU) and Allkem Ltd (AKE AU).

HLB: Hires Korea Investment & Securities for a Potential Switch to a KOSPI Listing

On 20 September, HLB Inc announced that it has hired Korea Investment & Securities as an advisor for a potential switch from KOSDAQ to KOSPI listing.
In our view, there is a 80-90%+ probability of HLB switching its listing from KOSDAQ to KOSPI sometime in the next 6-12 months.
If HLB finally decides to switch its listing from KOSDAQ to KOSPI, it is likely that HLB will be included in KOSPI 200 index in 2024.

Deutsche Boerse Gets >90% of SimCorp

Deutsche Boerse (DB1 GR) offered a (full) price of DKK 735/share for SimCorp A/S (SIM DC) to grow in data & analytics. I recommend long. Acceptances total roughly 93.65% of share capital.
All conditions and approvals, including minimum acceptance of 50%+1 share have been fulfilled. Final results should be announced on 22 September and settlement should take place on 29 September.
Deutsche Börse will as soon as possible seek to initiate and complete a compulsory acquisition. After a recent dip, the shares trade again at the offer price.

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Sep 20

Daily Brief Event-Driven: Midea Group (000333 CH): H-Share Listing & Index Implications and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Midea Group (000333 CH): H-Share Listing & Index Implications
Korea NPS’s Funds Influx into Local Stock Market Starting Next Year: What to Know
Prosus/Naspers: Business As Usual As CEO Steps Down
Hang Seng Index Rebalance Preview: Foreign Companies Eligible from December
Tata Motors (TTMT/A IN) – Index Inclusion & The DVR Arb
Liquid Universe of European Ordinary and Preferred Shares: September‘23 Report
CellSource (4880) TOPIX Inclusion Coming Up
SBI Sumishin Net Bank IPO Lock-Up – A US$1bn Lockup Release, Will Sell a Little at Some Point
EQD | NIFTY Index New WEEKLY Supports Analysis for LONG Trades

Midea Group (000333 CH): H-Share Listing & Index Implications

Midea Group Co Ltd A (000333 CH) could raise between HK$35-54bn (US$4.5-6.9bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
The H-shares could get Fast Entry to some global indices depending on the number of shares that are allotted to cornerstone and/or strategic investors.
The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Korea NPS’s Funds Influx into Local Stock Market Starting Next Year: What to Know

The proposal to increase NPS’s annual target investment return rate by 1%p by 2028. A rough mathematical estimate suggests the necessity of an additional investment of nearly ₩60T until 2028.
It augments the overall investment volume in local stocks to ₩200T. This projection implies an annual net purchase of approximately ₩12T from the forthcoming year through 2028.
Consequently, this matter is currently among the most captivating topics in the Korean local market, and efforts are underway to identify the sectors and stocks that stand to benefit.

Prosus/Naspers: Business As Usual As CEO Steps Down

Bob van Dijk, CEO of both Naspers (NPN SJ) and Prosus NV (PRX NA), has stepped down, effective 18 September.
Van Dijk was instrumental in the 2019 listing of Prosus and the creation (and subsequent unwinding) of the highly-criticised Prosus/Naspers cross-holding structure.
His departure should have minimal impact. Everything else basically stays the same. Continue to be long Prosus vs. NAV – that is, Prosus vs. Tencent (700 HK).

Hang Seng Index Rebalance Preview: Foreign Companies Eligible from December

The move from 80 index constituents to 100 could take most of next year (and possibly even the year after that) to manage turnover and add profitable companies.
Foreign companies will be eligible for inclusion in the index from the December rebalance. That makes Samsonite (1910 HK) a high probability inclusion candidate.
We highlight 8 potential inclusions to the index with passive trading impact varying from 1.6-4.3 days of ADV. There are large shorts on some of the stocks.

Tata Motors (TTMT/A IN) – Index Inclusion & The DVR Arb

Tata Motors DVR (TTMT/A IN) now trades at a 32.9% discount to Tata Motors Ltd (TTMT IN) and there is another 4.4% in the trade following the scheme of arrangement.
Tata Motors DVR (TTMT/A IN) could be added to global indices in November and that will bring significant inflows to the stock.
The pre-positioning and passive buying could lead to the DVR discount narrowing further and provide trading opportunities for the next few weeks.

Liquid Universe of European Ordinary and Preferred Shares: September‘23 Report

Since mid-August, spreads have not followed a clear pattern across our European liquid universe of ordinary and preferred shares (10 have tightened, 9 widened).
Recommended trades long preferred / short ordinary shares: Carlsberg, Media-for-Europe, Sixt, Volkswagen (probably the most interesting situation), Grifols, Atlas Copco.
Possible trades long ordinary / short preferred shares: Fuchs, Henkel, Schindler, SSAB Svenska Stal.

CellSource (4880) TOPIX Inclusion Coming Up

Today, regenerative medicine service provider CellSource (4880 JP) announced a forecast revision lower for the year ending 31 October. It also announced a new dividend policy and dividend payout.
It also announced an equity offering of up to 3.542mm shares, increasing float by 60% followed by a move from the TSE Growth segment to TSE Prime.
The dynamics of shareholder structure and flow mean one can wait this one out.

SBI Sumishin Net Bank IPO Lock-Up – A US$1bn Lockup Release, Will Sell a Little at Some Point

By Sumeet Singh

SBI Sumishin Net Bank (7163 JP) raised around US$370m in its Japan IPO in Mar 2023. Its IPO linked lockup is set to expire on 24th Sep 2023.
SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
In this note, we will talk about the lock-up dynamics and updates since our last note.

EQD | NIFTY Index New WEEKLY Supports Analysis for LONG Trades

The NIFTY Index closed up 3 weeks in a row, then fell on Monday, but current pattern looks bullish according to MRM models, we expect a modest correction (if any).
Usually (69% of the times) this pattern brings a pullback that does not last for more than 1 week, then the following week the index closes up.
Broadly speaking buy-the-dips support for this week is found between 20050 and 19900. If the correction becomes multi-week, it can go much lower, we will re-assess in that case.

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Sep 19

Daily Brief Event-Driven: Poly Culture (3636 HK): H Share Class Meeting on 3 November and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Poly Culture (3636 HK): H Share Class Meeting on 3 November
Poly Culture (3636 HK)’s Offer: 3rd Nov Shareholder Vote. Still Get Involved
Lansen Pharma (503 HK): The Chairman Makes An Offer
Analyzing Proactive Flow Trading Targeting SK Telecom’s Passive Movements
HSCI Index Rebalance Preview: Low Probability Add in December
Costa Group (CGC AU): Paine Schwartz’s Final Proposal Poses a Dilemma
S&P/ASX Index Rebalance Preview: Changes from Now to December
Lotte Non-Life Insurance: Who Will Buy?
Quiddity Leaderboard BSE/SENSEX Dec 23: AllCap Sep 23 Rebal Done; Some Changes to Expectations
EQD | Nikkei 225 (NKY) Enters WEEKLY OVERBOUGHT Resistance Area

Poly Culture (3636 HK): H Share Class Meeting on 3 November

The Poly Culture Group Corp H (3636 HK) H Shareholders’ class meeting is scheduled for 3 November. The IFA considers the HK$8.88 per H share offer fair and reasonable.
The key condition is approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
The offer’s 77.6% premium to the undisturbed price and shareholder structure helps the vote. At the current price and for the 23 November payment, the gross/annualised spread is 3.3%/19.2%.

Poly Culture (3636 HK)’s Offer: 3rd Nov Shareholder Vote. Still Get Involved

Back on the 23 June, SOE-backed Poly Group tabled an HK$8.88 bid per Poly Culture Group (3636 HK) H Share and RMB8.17386240 per Domestic Share. Terms were declared final.
This Merger by Absorption Offer incorporates a Scheme-like vote. There is no tendering condition. The premium to last close is 77.6%; and a 112.5% premium to the five-day closing average.
The Composite Doc is out. Independent H-shareholders get to vote on the transaction on the 3rd of November. Payment is expected on or before the 23 November. I’d get involved.

Lansen Pharma (503 HK): The Chairman Makes An Offer

Specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK) has been a perennial takeover target. And now we have an Offer.
Wu Zhen Tao, NED and Chairman of Lansen, has made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.
This looks done. Get involved if small-cap illiquid arbs are your thing.

Analyzing Proactive Flow Trading Targeting SK Telecom’s Passive Movements

As of last Friday, SKT has utilized 86.2 billion won out of the allotted 300 billion won for share buybacks, resulting in the acquisition of 1,810,242 shares.
If there are indications of the foreign room potentially falling to a risky level, SKT will likely proceed with an aggressive buyback, targeting 20-30% of the daily trading volume.
Another particularly intriguing observation is the absence of local retail flow directed towards SKT. This indicates there is still potential momentum for an upward price movement at this juncture.

HSCI Index Rebalance Preview: Low Probability Add in December

There have only been 7 new listings on the HKEX (388 HK) in the third quarter of the year so far.
Of those stocks, only Keep Inc (3650 HK) has a chance of being added to the Hang Seng Composite Index in December and then into Southbound Stock Connect.
Keep Inc (3650 HK) is the largest online fitness platform in China and the name recognition could bring in substantial flows via Southbound Stock Connect.

Costa Group (CGC AU): Paine Schwartz’s Final Proposal Poses a Dilemma

Costa Group Holdings (CGC AU) has disclosed a revised non-binding indicative proposal from Paine Schwartz Partners at A$3.20 per share, 9.6% lower than the previous offer on a like-for-like basis.
The weak CY23 outlook impacted the debt that could be taken on to meet the IRR hurdles of the previous offer. The revised offer is the best and final offer.
The Board faces a dilemma as the offer is light, but some shareholders will want the Board to accept as trading volatility making Costa more suited to the private market.

S&P/ASX Index Rebalance Preview: Changes from Now to December

Privatisations could lead to two/three S&P/ASX 200 (AS51 INDEX) constituents being delisted in October/November and that means ad hoc inclusions to maintain the number of constituents at 200.
Then there could be one change for the S&P/ASX 20 Index and two changes for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in December.
The impact on the potential adds/deletes for the S&P/ASX 200 (AS51 INDEX) is high at between 7.5-23 days of ADV to trade from passive trackers.

Lotte Non-Life Insurance: Who Will Buy?

It was reported in numerous local media that the sale process of Lotte Non Life Insurance Co (000400 KS) could start in October 2023.
There are four companies including Shinhan Financial (055550 KS), Hana Financial (086790 KS), Woori Financial Group (316140 KS), and Kyobo Life Insurance that may be interested in acquiring Lotte Non-Life Insurance.
Minority shareholders are not likely to benefit from this potential huge management M&A premium of Lotte Non-Life Insurance.

Quiddity Leaderboard BSE/SENSEX Dec 23: AllCap Sep 23 Rebal Done; Some Changes to Expectations

In this insight, we take a look at the Potential ADDs/DELETEs for the BSE SENSEX, 100, and 200 Indices in the December 2023 Rebalance.
The BSE AllCap index Rebalance was completed in September 2023. There were 77 ADDs and 73 DELs.
Since the BSE AllCap index is the main universe for the BSE 200, 100, and SENSEX indices, there have been some changes to our December 2023 index change expectations.

EQD | Nikkei 225 (NKY) Enters WEEKLY OVERBOUGHT Resistance Area

The Nikkei 225 INDEX is getting WEEKLY OVERBOUGHT after just +1 week up. Rallying further during the next 2-3 weeks may be hard, it could stall or fall.
If the index rallies further this week, it could fall the following week. Alternatively it could stall this week and rally the following week/s, but OVERBOUGHT status won’t go away.
34256 is the Q3 resistance target on CC=+3, this should be a hard barrier to breach. An earlier barrier is Q3 resistance on the Gen.Pattern Boxplot = 33835.

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Sep 18

Daily Brief Event-Driven: Itochu Buying Descente (8114) – ANTA Selldown Offset Or Creeping Takeover? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Itochu Buying Descente (8114) – ANTA Selldown Offset Or Creeping Takeover?
Quiddity A/H Premium Weekly (15-Sep): Utilities, Insurance, China Mobile, BYD
Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
SK Telecom (017670 KS): Foreign Room & Passive Inflows
Merger Arb Mondays (18 Sep) – Eoflow, Costa, Liontown, Pact, T&K Toka, IMAX, Poly Culture
SET50 Index Rebalance Preview: Two Potential Changes in December
Costa Mulls Paine Schwartz’s Lower Bid
EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)
EQD | VIX Index WEEKLY Suggests Upcoming Increase in Volatility

Itochu Buying Descente (8114) – ANTA Selldown Offset Or Creeping Takeover?

Four years after Itochu got to 40.0% of votes in Descente (8114) in a hostile Tender Offer, Descente partner ANTA, which supported Itochu at the time started selling its stake.
A few months later, Itochu started buying shares of Descente in the market. As of 7 Sep, Itochu had bought Descente shares 81 days straight (9.7% of ADV).
This begs the question: Is Itochu ensuring they maintain voting control as ANTA sells? Or are they buying to lift their stake prior to another bid?

Quiddity A/H Premium Weekly (15-Sep): Utilities, Insurance, China Mobile, BYD

The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.

Wharf Holdings (4 HK): Improved Liquidity & Passive Buying

Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.

SK Telecom (017670 KS): Foreign Room & Passive Inflows

Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.

Merger Arb Mondays (18 Sep) – Eoflow, Costa, Liontown, Pact, T&K Toka, IMAX, Poly Culture

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 – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Costa Group Holdings (CGC AU), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), JSR.
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Pacific Current (PAC AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP).

SET50 Index Rebalance Preview: Two Potential Changes in December

There could be two changes for the SET50 INDEX with JMT Network Services (JMT TB) and I-TAIL (ITC TB) replacing Srisawad Power (SAWAD TB) and Ngern Tid Lor (TIDLOR TB).
With no further inclusions on the Market Surveillance Measure list, Delta Electronics Thai (DELTA TB) should be safe at the December rebalance.
There are a couple of stocks that are close to passing/failing the liquidity tests and that could result in further changes to the index.

Costa Mulls Paine Schwartz’s Lower Bid

Back on the 4 July, Paine Schwartz Partners (PSP) made an A$3.50/share NBIO for Costa Group (CGC AU) by way of a Scheme. PSP held 14.84% at the time.
The due diligence period came and went, or so it appeared, but Costa said it remained ongoing. Rumours circulated that PSP had gone cold. 1H23 results were also delayed.
Costa has now announced this morning that PSP has returned with a $3.20/share Offer – best and final – reduced for any permitted dividend of up to A$0.04, if declared.

EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)

The KOSPI 200 INDEX WEEKLY did rise last week and is approaching OVERBOUGHT territory based on the current short-term trend pattern (Q3 resistance is at 346).
The current pattern is bearish, but if the market gains momentum and rallies for 2 more weeks, it could reach 357 during the 3rd week up (not earlier).
The alternative scenario, a better fit for this bearish pattern, is that the index starts to pull back this week, or remains weak this week and falls the next.

EQD | VIX Index WEEKLY Suggests Upcoming Increase in Volatility

The VIX INDEX is currently OVERSOLD from a time perspective, but not yet from a price perspective: if it falls <13, there is a high probability it will reverse up.
A spike in the VIX will correspond to a drawdown in equities, globally. The MRM model indicates a 1-2 weeks duration for the event, price targets between 16 and 18.
After the spike, the VIX could start to fall again, so this upcoming volatility spike should be a brief, short-lived event.

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Sep 17

Daily Brief Event-Driven: Last Week in Event SPACE: Japan Post and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: Japan Post, Sun Hung Kai, LVS/Sands China, Kenedix REIT Complex, JFE
Quiddity Mainland Connect NORTHBOUND Flows (Week to 15Sep23) : Zhongzhi Innolight, BYD, and Amperex
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Central Banks Decide
Quiddity Leaderboard ChiNext & ChiNext 50: A Potential Basket Trade
Quiddity Leaderboard CSI 300/500 Dec 23: US$2.8bn One-Way; Might Be Time for a Basket Trade
Quiddity Leaderboard SSE50/180 Dec 23: US$937mn One-Way; Some Changes to Expectations
Quiddity Leaderboard STAR 50 Dec 23: One ADD and One DEL; Ninebot Could Underperform AIMA
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, United Malt, T&K Toka, Golden Eagle Energy, JMDC
Quiddity HK Connect SOUTHBOUND Flows (Week to 15Sep23) Banks, Real Estate, Telcos, and Big ETF Sales

Last Week in Event SPACE: Japan Post, Sun Hung Kai, LVS/Sands China, Kenedix REIT Complex, JFE

The Japan Post Holdings (6178 JP)/ Japan Post Bank (7182 JP) ratio looks more attractive as JPB climbs with other banks as the possibility of Offering-induced retail overhang increases.
The ACCC has until 28 September 2023 to make its decision on Origin Energy (ORG AU). Expect ACCC to be supportive – they haven’t built a strong “against” case.
There should be more for the Kenedix REIT complex on a fundamental basis, a future equity capital raise accretion basis, and because of significant net buying for index purposes.

Quiddity Mainland Connect NORTHBOUND Flows (Week to 15Sep23) : Zhongzhi Innolight, BYD, and Amperex

This is the brand spanking new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
We like the nifty interactive tables and charts and welcome feedback. This week saw RMB 15bn+ of net selling. That’s six weeks in a row of respectably large outflows.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10

It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.
Brilliance China Automotive (1114 HK) had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.
A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Central Banks Decide

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Quiddity Leaderboard ChiNext & ChiNext 50: A Potential Basket Trade

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 DELETEs in the December 2023 Rebalance.

Quiddity Leaderboard CSI 300/500 Dec 23: US$2.8bn One-Way; Might Be Time for a Basket Trade

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 December 2023.
Our latest estimates show that the combined one-way flow for CSI 300 and CSI 500 could be around US$2.8bn.

Quiddity Leaderboard SSE50/180 Dec 23: US$937mn One-Way; Some Changes to Expectations

SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on 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 December 2023 Rebalance event.
I currently expect 5 ADDs/DELETEs for the SSE 50 index 18 ADDs/DELs for the SSE 180 index. Some of these names are different from my previous expectations.

Quiddity Leaderboard STAR 50 Dec 23: One ADD and One DEL; Ninebot Could Underperform AIMA

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 December 2023 Rebalance event.
I currently expect one ADD and one DEL for the STAR 50 index in December 2023.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, United Malt, T&K Toka, Golden Eagle Energy, JMDC

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.
Four new deals this week: Pact Group Holdings (PGH AU); Golden Eagle Energy (SMMT IJ); Takisawa Machine Tool (6121 JP); and JMDC (4483 JP).
Key updates took place for: Origin Energy (ORG AU), United Malt (UMG AU), Liontown Resources (LTR AU), Poly Culture (3636 HK), IMAX China Holding (1970 HK), and T&K Toka (4636 JP).

Quiddity HK Connect SOUTHBOUND Flows (Week to 15Sep23) Banks, Real Estate, Telcos, and Big ETF Sales

This is the brand spanking new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
We like the nifty interactive tables and charts and welcome feedback. This week saw RMB 15bn+ of net selling. That’s six weeks in a row of respectably large outflows.

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Sep 16

Daily Brief Event-Driven: Latest Development & Potential First Target of Mandatory Tender Offer in Korea and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Latest Development & Potential First Target of Mandatory Tender Offer in Korea

Latest Development & Potential First Target of Mandatory Tender Offer in Korea

Considering the progress of the legislative process at this juncture, the effective date could be as early as the end of this year or, at the latest, early next year.
Ilooda (164060 KS) will likely become the first case. A tender offer at ₩11,000 (a 30% premium to the current price) per share for 14%+1 share may greet us.
There is sufficient value in monitoring the interaction between the offer structure and stock price movement in the context of the first application of a mandatory tender offer in Korea.

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Sep 15

Daily Brief Event-Driven: NTT’s Partial Offer for Intage (4326) Part Deux – Refining Pro-Ration Expectations and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

NTT’s Partial Offer for Intage (4326) Part Deux – Refining Pro-Ration Expectations
Kenedix J-REIT Family Merger – Still Room (And Time) To Move
JSE September 2023 Index Rebalance
SK Square: Will Alibaba Acquire 11st?
Golden Eagle Energy (SMMT IJ): Trading Wide To Terms
IMAX China (1970 HK): Risk as Scheme Vote on 10 October
Quiddity Primer for ChiNext & ChiNext 50 Index Rebalance Events
IMAX China (1970 HK)’s Offer: 10th Oct Shareholder Vote
Geminder’s Opening Salvo For Pact?
I Squared & TDR/Applus: Competing Offer at €9.75

NTT’s Partial Offer for Intage (4326) Part Deux – Refining Pro-Ration Expectations

Last week I wrote about NTT’s Partial Offer for Marketing Consultant Intage (4326) – (with a spurious hyphen at the end).
In the last couple of days, there have apparently been a few blocks printed on the tape. I have received questions about pricing and pro-ration.
So here I provide a set of 11 possible pro-ration cases, and suggest ways for traders and investors to think about the risks and possibilities.

Kenedix J-REIT Family Merger – Still Room (And Time) To Move

In mid-June, three months ago yesterday, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov1.
All three popped in price, and peaked three weeks later, both outright and vs Peers. Then it fell sharply back.
It is worth looking at the new Combined “KDX” entity on a pro-forma basis. There should be more to go.

JSE September 2023 Index Rebalance

By Charlotte van Tiddens, CFA

JSE indexes will be rebalanced in the closing auction tomorrow.
MCG will fall out of the TOPI and DTOP and HAR will enter. The ALSI gets reviewed semi-annually in March and September.
ACL and LBR will fall out of the ALSI, ALSI SWIX and the capped variants.

SK Square: Will Alibaba Acquire 11st?

Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
We estimate that the probability of Alibaba acquiring 11st is about 60-70%.

Golden Eagle Energy (SMMT IJ): Trading Wide To Terms

On the 26 July, Geo Energy Resources (GERL SP) announced an agreement to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
Via an S&P, GEO intends to buy a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group for US$154.1mn.
The completion of the S&P, which is subject to Indonesia’s OJK and Geo shareholder approval, will trigger an MTO at IDR 1,255/share.

IMAX China (1970 HK): Risk as Scheme Vote on 10 October

IMAX China Holding (1970 HK)‘s scheme document is out, with the court meeting scheduled for 10 October. The IFA considers IMAX Corp (IMAX US)‘s HK$10.00 offer fair and reasonable.
The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
A recovering box office, early indications of an effort to rally retail NO votes and a high minority participation rate in AGMs pose a risk. The risk/reward profile is unfavourable.

Quiddity Primer for ChiNext & ChiNext 50 Index Rebalance Events

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 brief look at the index selection methodology and the historical price and volume performance of ChiNext and ChiNext 50 rebalance baskets.

IMAX China (1970 HK)’s Offer: 10th Oct Shareholder Vote

Back on the 13 July, IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share. Terms have been declared final.
The price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day, suggesting apparent news leakage.
The Scheme Doc is out and independent shareholders get to vote on the transaction on the 10th October. This vote could – should – be close. Only for the brave.

Geminder’s Opening Salvo For Pact?

Plastic products manufacturer Pact Group Holdings (PGH AU) has announced an unconditional off-market takeover from its major shareholder, Raphael Geminder.
Geminder, with a current stake of 50%, is offering – via wholly-owned entity Kin Group – A$0.68/share, a paltry 0.07% premium to last close. Shares recently touched an all-time low.
The Offer is (should be) open for a month. As the bid is unconditional, there’s nothing to stop Geminder from buying shares higher, then simply lifting his Offer price.

I Squared & TDR/Applus: Competing Offer at €9.75

On 14 September, a “competing” acquisition offer for Applus has been made by Amber Equity, a vehicle of I Squared and TDR Capital, at €9.75/share, in cash, cum dividend.
The offer represents 10.7x EV/Fwd NTM EBIT and a 2.6% increase over Apollo’s offer, which seems to signal Amber will not raise its offer by much more.
I believe there will be an increased offer from Apollo, probably at least around €10/share (c. 2.6% increase). I’d be long Applus.

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Sep 14

Daily Brief Event-Driven: T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility
Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover
T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake
SK Innovation: Update on Its Rights Offering Subscription Allocation
A Fresh Short-Selling Target in Korea: Youlchon Chemical
Pact Group (PGH AU): Raphael Geminder’s Opportunistic Proposal
Mellby Gård/Duni: Start of Mandatory Offer Period
STAR50 Index Rebalance Preview: Bigger Tracking AUM = Bigger Impact

T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility

Last year, 20% owner Dalton approached T&K Toka Co Ltd (4636 JP) for an MBO, but walked when questioned. Then in January bid ¥1300 to double their stake to 44%.
They were not successful. The firm held a beauty contest. Bain won at ¥1400 despite ¥1300 getting no response and markets up big since. It’s possible not everyone was invited.
Since the Bain deal announcement, the stock has mostly traded at/through terms. Now we find out Dalton has been buying (now 23.77%). This increases the chances of a bump.

Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover

Nidec Corp (6594 JP) has had ambitions in machine tool space. They wanted to buy Takisawa Machine Tool (6121 JP) but Takisawa wouldn’t give them the time of day.
So Nidec announced hostile intentions and a 60-day period to negotiate. That’s done, and today they announced a now-friendly deal.
This looks like an easy done deal. There is one major risk factor remaining, then another consideration when thinking about path.

T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake

Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.

SK Innovation: Update on Its Rights Offering Subscription Allocation

On 13 September, SK Innovation announced that the subscription rate for the rights offering allocated to ESOA and existing shareholders was 87.66%.
The rights offering price is 139,600 won, which is 12.7% lower than current price of 159,900 won.
There is likely to be a strong demand for the subscription of rights offering forfeited shares for the general investors scheduled to take place on 14 to 15 September.

A Fresh Short-Selling Target in Korea: Youlchon Chemical

Youlchon Chemical’s CFD balance accounts for 3.54% of SO, with approximately 2x leverage trading. It is one of the few in the top CFD balance list that can be short-sold.
Our primary concern should lie with the upcoming December rebalancing of the KOSPI 200 index. Youlchon Chemical finds itself perilously close to the borderline within the Materials sector.
When proactive flow trading targeting KOSPI 200 is set to influence prices early October, we must remain vigilant regarding the potential trades aimed at exploiting a CFD balance squeeze.

Pact Group (PGH AU): Raphael Geminder’s Opportunistic Proposal

Pact Group Holdings (PGH AU) has disclosed an unconditional takeover proposal from Raphael Geminder at A$0.68 per share, a 0.7% premium to the undisturbed price (12 September).
Mr. Geminder’s justification for a little-to-no premium offer is based on the premise that minorities are clambering for a liquidity event to exit a no-hope situation.
The offer price is unattractive on any reasonable metric. A successful privatisation would require a bump. The shares closed 6.6% higher than the offer.

Mellby Gård/Duni: Start of Mandatory Offer Period

On 14 August, Mellby Gård crossed the 30% threshold and announced a mandatory offer for all shares of Duni AB (DUNI SS) at SEK 98.6/share. The offer period started 12 September.
The offer represents 0.41% premium to prior day to threshold crossing. Mellby Gård doesn’t seem interested in completing a takeover, rather being able to increase its stake after offer completion.
The offer represents 0.41% premium, 6.8x EV/Fwd EBITDA, 11.1 Fwd P/E (vs. 5-year averages of 8.8x and 15.4x). Gross spread is 2.1%, I wouldn’t get involved above SEK 95.

STAR50 Index Rebalance Preview: Bigger Tracking AUM = Bigger Impact

The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

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Sep 13

Daily Brief Event-Driven: Poly Culture (3636 HK): Trading Wide To Terms. Get Involved. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Poly Culture (3636 HK): Trading Wide To Terms. Get Involved.
KOSDAQ150 Ad Hoc Index Rebalance: VATECH (043150 KS) Replaces Lutronic (085370 KS)
HSTECH Index Rebalance Preview: Round-Trip Trade of US$255m in December
Origin Energy: ACCC’s Concerns And Brookfield’s Quid Pro Quo
HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)
EQD | S&P/ASX200 Index Looking Bearish: Resistance Levels Reset

Poly Culture (3636 HK): Trading Wide To Terms. Get Involved.

Back on the 27 June, art and culture play Poly Culture Group Corp H (3636 HK) announced a pre-conditional privatisation at HK$8.88 per H-share.
This Offer from SOE Poly Group is by way of a Merger by Absorption, incorporating a Scheme-like vote. There is no tendering condition.
The pre-cons have now been fulfilled. The Composite Document, including the H Share Class meeting/EGM date and IFA opinion, is expected to be despatched on or before the 30 September.

KOSDAQ150 Ad Hoc Index Rebalance: VATECH (043150 KS) Replaces Lutronic (085370 KS)

Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$255m in December

With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
Capping changes will result in a one-way turnover of a touch below 1% and that will result in a round-trip trade of US$255m.
The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

Origin Energy: ACCC’s Concerns And Brookfield’s Quid Pro Quo

After Origin Energy (ORG AU) entered into a Scheme Implementation Deed with Brookfield Asset Management/MidOcean Energy in late March, the ACCC approval process has played out in the public eye.
And it hasn’t been all beer and Skittles for the Offerors. Not just on competition issues. But also the perceived/apparent public benefit from Brookfield’s future commitment to renewable generation.
All the while, the ACCC recently blocked ANZ (ANZ AU)’s acquisition of Suncorp Bank, and Telstra Corp (TLS AU)/TPG Telecom (TPG AU)‘s mobile network sharing deal.

HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)

Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.

EQD | S&P/ASX200 Index Looking Bearish: Resistance Levels Reset

The S&P/ASX 200 (AS51 INDEX) closed down last week (CC=-1), this week is rising again, we analyze the new, reset resistance levels to see how far it can go.
Our previous, recent insight discussed the fact that the index has been locked in a range for 2 years, an uptrend may be unfolding but it must breach 7600.
The current trend pattern is bearish, the index won’t rise more than 2-3 weeks, and it would probably go not very far: 7300-7400 should be the limit

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Sep 12

Daily Brief Event-Driven: JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness
I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion
Poly Culture (3636 HK): Pre-Condition Fulfilled
TOPIX Inclusions: Who Is Ready (Sep 2023)
Pinduoduo: Short Seller, Grizzly Research Raises Spyware Concerns About TEMU
Australia: S&P/ASX, REMX, GDXJ, MVA, MVW & Other Index Flows on Friday
FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December
StubWorld: LVS Trading “Cheap” As Macau Recovers
EQD | Hang Seng Index (HSI) Post-Typhoon WEEKLY Trend Analysis

JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness

On 5 September, JFE Holdings (5411 JP) saw an article out of a capital raising. It was confirmed later in the day. Huge volumes traded. The stock fell sharply.
The offering supply/demand dynamics are…. complicated. The offering is to foreign instos. The net demand is probably mostly retail and index, and positioning is… also complicated.
The EPS dilution is already accounted for. The fall against Nippon Steel pretty much does it after considering the discount expected.

I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion

Skincare/Cosmetics company I-NE (4933 JP) on 31 August (¥2947) announced it would move to TSE Prime on 19 September, and announced a Secondary Offering by CEO Onishi-san to get there.
There was no greenshoe provided. The stock popped. Then drifted back to ¥3025 and the Offering priced today at ¥2,934/share.
75% went to Asian/European (non-US) offshore investors, and the rest to onshore institutions, which is unusual. But now we look to the TOPIX inclusion.

Poly Culture (3636 HK): Pre-Condition Fulfilled

The pre-condition relating to Poly Culture Group Corp H (3636 HK)’s privatisation offer from Poly Group at HK$8.88 per H Share has been fulfilled.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
The offer’s 77.6% premium to the undisturbed price and no minimum acceptance condition will help completion. At the last close and for 1 November completion, the gross/annualised spread is 7.1%/64.3%.

TOPIX Inclusions: Who Is Ready (Sep 2023)

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.
Since my last insight, three new TOPIX Inclusion events have been confirmed: M&A Research Institute (9552 JP), FP Partner (7388 JP), and I-NE (4933 JP)
Separately, Core Concept Technologies Inc (4371 JP) has announced it intends to work towards a Prime Market move in the future.

Pinduoduo: Short Seller, Grizzly Research Raises Spyware Concerns About TEMU

By Oshadhi Kumarasiri

Grizzly Research’s track record, especially with accusations against well-known Chinese ADRs like NIO (NIO US), ZTO Express Cayman (ZTO US), and Gaotu Techedu (GOTU US), hasn’t been successful lately.
Despite past setbacks, the company has recently targeted another renowned Chinese ADR, PDD Holdings (PDD US).
Grizzly Research alleges that Pinduoduo’s shopping app, “TEMU,” is a harmful malware/spyware secretly extracting user data.

Australia: S&P/ASX, REMX, GDXJ, MVA, MVW & Other Index Flows on Friday

Changes to the S&P/ASX indices, REMX US, GDXJ US, MVA AU, MVW AU and other indices will be implemented at the close on Friday.
There is over +/-A$5m to trade or +/-3x ADV to trade on nearly 100 stocks and will be a huge volume day for the stocks at the close.
Use the volume on the buy and sell side to increase/reduce positions especially on the deletes where there will be liquidity to cover shorts on stocks that have dropped significantly.

FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December

The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.

StubWorld: LVS Trading “Cheap” As Macau Recovers

Las Vegas Sands (LVS US) is coming up “cheap” on my monitor as Macau’s gross gaming revenue touches a new post-Covid high.
Preceding my comments on LVS 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 | Hang Seng Index (HSI) Post-Typhoon WEEKLY Trend Analysis