Event-Driven

When this was launched, it traded more volume than expected on the first day, then again on the second day. Since then it has traded cheap vs initial estimates.
A week after the launch, two separate Large Shareholder Filings came out. Those bear scrutiny.
The back end trade is still an interesting one in my opinion.

Market Information About Samsung Electronics’ Shareholder Return

The local market is increasingly convinced that Samsung Electronics’ quarterly dividends for the latter half of this year will experience a reduction.
Samsung Electronics plans to apply the updated regulations from the 2024 1st quarter dividends, following the conclusion of the capital market law revision at the end of this year.
It might be prudent to refrain from trading that bets on a reduction in the 1P discount in the first half of this year.

Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover

There should be 4 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 1 deletion for the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
The potential adds are driven by the AI-frenzy that has swept the market for the last few months. Most potential deletions are shipping stocks that are way off their highs.
Short interest on the potential deletions is high in terms of days of ADV and free float. The rise in shorts on the potential adds is being rapidly covered.

Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?

The premium of Ping An Insurance Group of (601318 CH) to Ping An Insurance (H) (2318 HK) has jumped from 4% to 14% in the space of a week.
There has also been a jump in the Hang Seng Stock Connect China AH Premium Index and big inflows to mainland China ETF raising the possibility of National Team buying.
A stabilisation in onshore China markets could lead to the AH premium dropping back towards parity and we would gradually scale out of long A/ short H positions.

SK Rent A Car: SK Networks’ Tender Offer

Korean car rental play SK Rent A Car (068400 KS) has announced a Tender Offer from SK Networks (001740 KS), its largest shareholder with ~76%.
SK Rent shareholders have the option of receiving cash or SK Networks scrip. Appraisal rights are also afforded.
The shareholder vote is a lock. The current trade is the cash offer, which is trading tight to terms.

SK Networks Launches a Tender Offer for SK Rent-A-Car

By Douglas Kim

We have a positive view of SK Networks’ tender offer of SK Rent-A-Car.
SK Networks is trying to buy the entire SK Rent-A-Car which is enjoying solid growth in sales and profits. SK Networks plans to eventually delist SK Rent-A-Car.
The shareholders of SK Rent-A-Car have a choice of tendering their shares receiving cash (at the tender offer price of 13,500 won) or receiving shares in SK Networks.

Quiddity Leaderboard T50/100 Sep 23: Final Expectations; AI Frenzy Fades; Wisdom Marine TDIV DEL

Today is the base date for the T50 and T100 Indices for the September 2023 Rebalance.
In this insight, we take a look at the final expectations for ADDs/DELs for the T50 and T100 Indices.
Previously, I expected five and three changes for the T50 and T100 indices, respectively, but now I see four changes for both indices.

Offshore China ETFs Rebalance Preview: Two Changes Expected in September

Based on the close of 21 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (HKD) (2822 HK) in September.
NARI Technology Co Ltd A (600406 CH) and CSC Financial (601066 CH) should replace Tongwei Co Ltd A (600438 CH) and Shaanxi Coal Industry (601225 CH) in the ETFs.
There are couple of stocks with over 1x ADV to trade from the ETFs. Plus there are cash and carry positions that will need to be rebalanced, adding to flow.

Quiddity Leaderboard TDIV Sep 23: Wisdom Marine Could Underperform the Index

In this insight, we take a look at Quiddity’s final flow expectations for the September 2023 index rebalance.
In my previous insight, I revised my AUM assumption upwards but now I have revised it downwards based on the latest available data.
Based on the latest available data, I see 47 names with positive index flow expectations and 3 names with negative index flow expectations (including the DEL Wisdom Marine).

Hanwha Ocean’s Massive Issuance: Clearly, This Is Test-The-Water and How to Approach It

Multiple local news outlets reported Hanwha Ocean is undergoing a 2.5 trillion won equity increase. The official disclosure regarding this matter is expected to be released within this month.
We have repeatedly observed a pattern of testing the waters through leaks to the local media. The case of Hanwha Ocean can also be seen in this light.
It’s challenging to envision this magnitude being absorbed seamlessly by the market. There is a considerable likelihood that both issuers and bankers will aggressively attract inflows of arbitrage-seeking hot money.

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Aug 21

Daily Brief Event-Driven: Hang Seng Index Rebalance: Sinopharm (1099 HK) Added and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted
Merger Arb Mondays (21 Aug) – Costa, OreCorp, Sanei, T&K Toka, Celltrion, Eoflow, Golden Eagle
Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
Week 2 of the Brand New and Extra Spiffy 🦄 H/A-Share Discount/Premium Weekly (As of 18 Aug 2023)
Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote
HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off
Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%
Weekly Deals Digest (20 Aug) – Celltrion, Sanei, T&K Toka, Costa, DDH1, Tesserent, VinFast
HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way

Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted

Sinopharm Group Co Ltd H (1099 HK) will be added to the Hang Seng Index (HSI INDEX) on 1 September while Country Garden Holdings Co (2007 HK) will be deleted.
Both changes are a surprise, but the impact on Sinopharm Group Co Ltd H (1099 HK) will be much larger. Given the recent increase in shorts, there could be covering.
Estimated one-way turnover is 1.9% leading to a one-way trade of HK$3.65bn. Capping will result in selling on Alibaba Group Holding (9988 HK), Tencent (700 HK) and HSBC (5 HK).

Merger Arb Mondays (21 Aug) – Costa, OreCorp, Sanei, T&K Toka, Celltrion, Eoflow, Golden Eagle

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), Symbio Holdings (SYM AU), ENM Holdings (128 HK), Eoflow (294090 KS), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), Costa Group.
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Celltrion Healthcare (091990 KS), Yaizu Suisankagaku Industry (2812 JP), Kenedix Retail REIT (3453 JP), Penguin International (PBS SP).

Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material

By Douglas Kim

Eoflow (294090 KS)’s shares rose 2.7% to 27,000 won on 18 August with 1.4 million shares traded, which was 5.7x higher than the previous three days of trading.
The main reason for this was due to the local news flow on Eoflow’s US subsidiary’s (Nephria Bio) technology on the advanced material MXene.
This news flow on MXene is likely to put further positive boost to Eoflow’s share price closer to the tender offer price (or at least limit further downside risk).

HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks

As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

Week 2 of the Brand New and Extra Spiffy 🦄 H/A-Share Discount/Premium Weekly (As of 18 Aug 2023)

This is the Brand Spanking New and Improved and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see H/A relationships easily.
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 19 Trade Recommendations.
We hope this new version serves readers even better. Improvements this week due to popular demand, and updated format. Further feedback is welcome/appreciated.

Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote

Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk.
The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote.

HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off

On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
Sinopharm Group Co Ltd H (1099 HK) is ADDED, Country Garden Holdings Co (2007 HK) – in no surprise, is deleted.
I see HK$4bn a side to trade, and the only “compelling” trade by ADV here is Sinopharm, but correlations with a Peer Basket are low.

Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%

The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE.
AAC is a significant flow event, and worth looking at. There are a few odds and ends too.

Weekly Deals Digest (20 Aug) – Celltrion, Sanei, T&K Toka, Costa, DDH1, Tesserent, VinFast

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 – Vinfast (VFS US)‘s rollercoaster debut, Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN) and Lalatech Holdings Co Ltd (LALA HK) IPOs.
Event-Driven developments – Celltrion Healthcare (091990 KS), Sanei Architecture Planning (3228 JP), T&K Toka Co Ltd (4636 JP), Costa Group Holdings (CGC AU), DDH1 (DDH AU), Tesserent Ltd (TNT AU).

HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way

The HSCEI Review for Sep 2023 was announced on Friday 18 August. There is one ADD Trip.com Group (9961 HK) and one DELETE Country Garden Services (6098 HK).
Neither of these two are a surprise. Neither are hugely impactful.
There is about 2.5% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

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Aug 20

Daily Brief Event-Driven: HSCI Index Rebalance: 22 Adds and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect
Share Buybacks In Japan – A 2023 Primer
Joyful Honda (3191) – Repeats Its ASR In Double the Size
Last Week in Event SPACE: Aussie Tax-Loss Selling, Japan Post Bank/Holdings, AviChina, Hang Lung
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Celltrion, Sanei Architecture, T&K Toka, MPI, Chindata
HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI

HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.

Share Buybacks In Japan – A 2023 Primer

The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to >1.0x. The easiest way to do that is raise ROE.
Raising R requires customers “agree” (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That’s easier for a company.
So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.

Joyful Honda (3191) – Repeats Its ASR In Double the Size

Last year, I wrote about Joyful Honda (3191 JP)‘s implementation of a ¥2.5bn ToSTNeT-3 into Accelerated Share Repurchase. It was the first such transaction I knew of in Japan.
This year, they have just announced another for nearly twice the size. It is worth looking at the details and comparing the stock vs Peers.
It is also worth understanding exactly what the incentives are for whom and how that impacts the path. And who might respond to it.

Last Week in Event SPACE: Aussie Tax-Loss Selling, Japan Post Bank/Holdings, AviChina, Hang Lung

Concerning Australian tax-loss selling baskets, the sell across the four baskets made 4.2% vs ASX200 in May, then is up.
Be long Japan Post Bank (7182 JP). Or longJapan Post Holdings (6178 JP) for a long JPB position. Don’t be short JPB or short JPB vs JPH.
As a PRC aviation/defense play, AviChina Industry & Technology H (2357 HK)‘s fundamentals are undemanding.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Celltrion, Sanei Architecture, T&K Toka, MPI, Chindata

I tally 48 – 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 this week: the Celltrion Inc (068270 KS)/Celltrion Healthcare (091990 KS) merger; and the Tender Offers for Sanei Architecture Planning (3228 JP) and T&K Toka (4636 JP).
Key updates took place for Tesserent Ltd (TNT AU), DDH1 (DDH AU), L’Occitane (973 HK), Metro Pacific Investments Co (MPI PM), and Chindata Group (CD US).

HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)

As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).

Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI

Friday was the review cutoff for the September rebalance of the ASX family of indices. The September changes for the Hang Seng family of indices were also announced.
The September changes for the SSE STAR50 (STAR50 INDEX) will be announced after the close of trading on 25 August.
For a second week running, there were big inflows to mainland China ETFs and were spread across multiple index trackers. There were outflows from iShares Emerging Markets (EEM US).

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Aug 19

Daily Brief Event-Driven: Celltrion Inc/Healthcare Merger. Pharm Is Next and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Celltrion Inc/Healthcare Merger. Pharm Is Next
Merger Between Celltrion Inc and Celltrion Healthcare (Phase I First)
Fully Disseting SK Rent A Car’s Hybrid Tender Offer Disclosure, Whose Cash Offer at a 5.7% Spread

Celltrion Inc/Healthcare Merger. Pharm Is Next

It’s finally happening: biopharmaceuticals developer and producer Celltrion Inc (068270 KS) will acquire Celltrion Healthcare (091990 KS).
Inc will issue 0.4492620 new shares for each share in Healthcare. The swap prices of ₩148,853 for Inc and ₩66,874 for Healthcare are firm.
Celltrion Pharm (068760 KS) is excluded from the original three-way merger plan, but is expected to be merged with the enlarged Inc/Healthcare entity around July 2024.

Merger Between Celltrion Inc and Celltrion Healthcare (Phase I First)

By Douglas Kim

On 17 August, Celltrion Inc announced that it will merge with Celltrion Healthcare. The merger ratio is 0.449262 Celltrion Inc share for each share of Celltrion Healthcare.
There was a negative surprise which was that Celltrion Pharm will not be included as part of the three companies merger which has been promised in the past several years.
Overall, we believe that this merger will have a positive impact on Celltrion Inc and Celltrion Healthcare’s share prices.

Fully Disseting SK Rent A Car’s Hybrid Tender Offer Disclosure, Whose Cash Offer at a 5.7% Spread

With just the SK Networks stake, both of these conditions are already satisfied. So, the key point will be how quickly the spread of the cash offer narrows next Monday.
We need to watch whether the spread for the exchange offer opens. As SK Networks is a K200 constituent, it’s subject to short selling, making a Long Short play possible.
Worth noting, among the 24% minority shareholders, NPS and KIT hold a combined 15%, potentially leading to limited market circulation volume. This is something we should also be mindful of.

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Aug 18

Daily Brief Event-Driven: Celltrion Merger: Index Implications and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Celltrion Merger: Index Implications
Celltrion Merger Swap: Conditions & Schedule
Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)
Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner
Quiddity Leaderboard STAR 50 Dec 23: The Real Deal
Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share
NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow
Tesserent’s Shareholders To Vote on 18 Sept As FIRB Mulls Thales Offer
T&K Toka (4636 JP): Bain’s JPY1,400 Pre-Conditional Tender Offer
Quiddity Leaderboard CSI 300/500 Dec 23: US$2.5bn One-Way Turnover; Some Changes to Expectations

Celltrion Merger: Index Implications

Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) will merge later this year. Celltrion Pharm (068760 KS) has been left out for now; it could be merged next year.
For each share of Celltrion Healthcare (091990 KS) held, shareholders will receive 0.449262 shares of Celltrion Inc (068270 KS).
There will be implications for the Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) with funding flows and index replacements.

Celltrion Merger Swap: Conditions & Schedule

The swap prices, ₩148,853 for Celltrion Inc and ₩66,874 for Celltrion Healthcare, specified below are not tentative prices but confirmed prices. So, the merger ratio has been determined as 1:0.4492620.
The key focus now is the appraisal rights exercise. Both offer attractive spreads. Yet, the ₩1T combined ceiling might seem restricted considering potential dissenting Celltrion Inc shareholders exceeding expectations.
Nonetheless, considering the strong determination of the company towards this merger, we should consider a strategy of approaching this spread aggressively while keeping the cancellation risk in mind.

Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)

Celltrion Inc (068270 KS) will merger with Celltrion Healthcare (091990 KS). Celltrion Healthcare shareholders will receive 0.4492620 Celltrion shares per Celltrion Healthcare share.
The merger requires shareholder (approval by at least two-thirds of the votes of the shareholders present representing at least one-third of the outstanding shares) and Fair Trade Commission approval.
The merger ratio, based on regulations, is attractive compared to historical VWAP exchange ratios and multiples. At last close prices, Celltrion Healthcare shares are trading broadly at terms.

Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner

[cue Tom Hardy gif saying “That’s Bait”]. But yes, this story has a backstory to the Japanese underworld, and while the original sin may have been minor, it’s everything.
The firm was raided, the CEO resigned, a govt authority “recommended” Sanei get rid of Mr Koike’s influence, banks got antsy, employee morale dropped. Sanei needed a saviour.
Koike-San asked Open House (3288 JP) to buy his shares. They agreed to take over the company. It’s basically a done deal with a possible twist.

Quiddity Leaderboard STAR 50 Dec 23: The Real Deal

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.
Recently, I discussed the historical price and volume performance of STAR 50 rebalance events in Quiddity Primer for STAR 50 Index Rebalance Events.
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.

Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share

In January 2023, NAVF and Michael 1925 LLC – affiliates of Dalton Investments LLC – announced a hostile partial Tender Offer for T&K Toka Co Ltd (4636 JP).
It failed. They wanted to buy 21.72% at ¥1300 to get to 44% post-Tender. The Company objected. Dalton/etc didn’t get the shares. Shares fell afterward.
Today, Bain announced a deal to take over the company at ¥1,400/share. T&K TOKA has agreed. It may not be as easy as that. And there is a fulcrum investor.

NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow

NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.
Punjab National Bank, Shriram Transport Finance, Trent, TVS Motor and Zydus Lifesciences will replace ACC, FSN E-Commerce Ventures, HDFC Asset Management, Indus Towers and Page Industries.
The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.

Tesserent’s Shareholders To Vote on 18 Sept As FIRB Mulls Thales Offer

Back on the 13 June, cybersecurity firm Tesserent Ltd (TNT AU) announced a Scheme with France’s Thales SA (HO FP). Thales is offering A$0.13/share, a 165% premium to last close.
The Scheme Doc has been despatched with Tesserent shareholders voting on the 18 September. Tesserent’s board (holding 9.23%) and the IE are supportive. Implementation expected on the 4 October.
The Offer is also subject to FIRB signing off. New Zealand’s OIO gave the green light on the 18 July.

T&K Toka (4636 JP): Bain’s JPY1,400 Pre-Conditional Tender Offer

T&K Toka Co Ltd (4636 JP) has recommended Bain’s pre-conditional tender offer of JPY1,400 per share, a 32.0% premium to the undisturbed price.
The pre-conditions relate to China TOB treatment measures (T&K Toka sell downs its Hangzhou Toka Ink stake to hold less than 30%) and various country approvals (Japan and Serbia).
The offer will open in early January 2024. The minimum acceptance condition requires a 39.2% minority acceptance rate (50.3% excluding Nippon Active), which is doable due to a reasonable offer.

Quiddity Leaderboard CSI 300/500 Dec 23: US$2.5bn One-Way Turnover; Some Changes to Expectations

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.
I currently expect 14 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.

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Aug 17

Daily Brief Event-Driven: S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed
Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer
Splitit Pursues Split From The ASX
Tesserent (TNT AU): Scheme Meeting on 18 September
Quiddity Leaderboard SSE50/180 Dec 22: 5 Changes for SSE50 and 18 Changes for SSE180
Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point
APAC WEEKLY Monitor: Current MRM Supports and Probabilities Re-Cap

S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed

We forecast 26 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
The review period ends tomorrow, so most changes are high probability. Though there are some changes that will be up to the discretion of the index committee.
There will be a lot of stock to trade on the changes to the ASX200 and indices higher up the hierarchy. But there will be a lot of pre-positioning too.

Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer

Sanei Architecture Planning (3228 JP) has recommended Open House (3288 JP)’s tender offer of JPY2,025 per share, an 18.0% premium to the undisturbed price (15 August).
The transaction is required to facilitate the exit of Mr Koike, the largest shareholder, and satisfy Article 27 of the Tokyo Metropolitan Organized Crime Exclusion Ordinance.
Irrevocables represent a 64.21% ownership ratio, and the lower limit requires a 6.9% minority acceptance rate. The offer is a reasonable solution to the current predicament.

Splitit Pursues Split From The ASX

Splitit Ltd (SPT AU) will seek approval from shareholders to delist the Buy Now, Pay Later micro-play from the ASX and redomicile to the Cayman Islands.
Concurrent with the voluntary delisting proposal, PE outfit Motive Partners will pump in US$50mn in exchange for preference shares – assuming the delisting occurs and certain earnings targets are met.
This is not an Offer for shares. If delisted, Splitit shareholders will hold scrip in an unlisted private vehicle.

Tesserent (TNT AU): Scheme Meeting on 18 September

Tesserent Ltd (TNT AU)‘s IE considers Thales SA (HO FP)’s A$0.13 offer fair and reasonable as it is above its valuation range of A$0.098 to A$0.109 per share.
The offer is subject to FIRB and shareholder approval. New Zealand’s OIO approval suggests that Australia’s FIRB approval should be forthcoming. Pearson’s recent selldown lowers the vote risk.
At the last close price and for the 4 October payment, the gross and annualised spread is 4.0% and 32.0%, respectively.

Quiddity Leaderboard SSE50/180 Dec 22: 5 Changes for SSE50 and 18 Changes for SSE180

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.
Earlier this month, I discussed the historical price and volume performance of SSE 50 and SSE 180 Rebalance events in Quiddity Primer for SSE 50/180/380 Index Rebalance Events.
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.

Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point

Lotte Tour has emerged as a prominent short-selling target in the Korean market, and there are efforts to use an ₩80B convertible bond (CB) to exploit its dilution/overhang risk.
Linden Capital and LMR, upon obtaining the CB, promptly borrowed 4.6M shares from Donghwa for short selling. Thus, the CB conversion incentive remains largely unaffected by stock price changes.
We should avoid synchronizing our entry point with CB conversion. Instead, we should target the likely rights issuance in the latter half of the year, anticipated in the market.

APAC WEEKLY Monitor: Current MRM Supports and Probabilities Re-Cap

By Nico Rosti

All the APAC markets we cover (Nifty50, HSI, Nikkei225, Kospi200, S&P/ASX200) are pulling back and some of them have been doing so for 3 weeks.
In this insight we want to offer a re-cap of all the MRM support levels and probabilities for the APAC markets above, after the August 16th Close.
Check our previously published single-market insights for deeper analysis and related investment ideas: Nifty50, HSI, Nikkei225, Kospi200, S&P/ASX200.

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Aug 16

Daily Brief Event-Driven: KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic
Smartkarma Webinar | Top Trade Ideas in European Event-Driven
StubWorld: AviChina Is Coming Up “Cheap”
Liquid Universe of European Ordinary and Preferred Shares: August‘23 Report

KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic

Following the two tender offers, Han & Co now holds more than 90% of the common shares in Lutronic Corp (085370 KS) and is looking to buy the remaining shares.
Lutronic Corp (085370 KS) is a member of the KOSDAQ 150 Index and delisting would mean an index replacement. Value Added Technologies (043150 KS) is a potential inclusion.
Value Added Technologies (043150 KS) has underperformed its peers and trades cheaper on nearly all valuation parameters.

Smartkarma Webinar | Top Trade Ideas in European Event-Driven

By Smartkarma Research

In the next installment of our Webinar series, we go live with Smartkarma Insight Provider Jesus Rodriguez Aguilar.
He will be sharing with us his top trade ideas and insights in the European event-driven space.
From current opportunities, to what we can expect next in the region, join us as we get the full picture from Jesus.

The webinar will be hosted on Wednesday, 23 August 2023, 17:00 SGT/HKT.

Register for the Webinar here

Jesus Rodriguez Aguilar is an Event-Driven Analyst looking across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations.

StubWorld: AviChina Is Coming Up “Cheap”

As a PRC aviation/defense play, AviChina Industry & Technology H (2357 HK)‘s fundamentals are undemanding.
Preceding my comments on AviChina 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%.

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

By Jesus Rodriguez Aguilar

Since mid-July, spreads have not followed a clear pattern across the European liquid universe of ordinary and preferred shares (9 have tightened, 9 widened, 1 at same level).
Spreads could further widen in the short-term. Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, Schindler, SSAB Svenska Stal.
Recommended trades long preferred / short ordinary shares: Carlsberg, Media-for-Europe, Sixt, VW, Grifols, Atlas Copco.

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Aug 15

Daily Brief Event-Driven: Japan Post Bank (7182) – The October TOPIX FFW Adjustment and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Japan Post Bank (7182) – The October TOPIX FFW Adjustment
Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
Brilliance China (1114 HK): Driving Back Into Passive Portfolios
[Update] Tax-Loss Selling In Australia – Closing the Circle on the Rebound Trade
UnitedHealth/EMIS: Provisional Clearance, Estimated Timeline
EQD | SPX MONTHLY Proxy Supports for APAC Markets

Japan Post Bank (7182) – The October TOPIX FFW Adjustment

Japan Post Bank (7182 JP) was effectively re-IPOed in March when Japan Post Holdings (6178 JP) offered more than a BILLION shares against the 400mm shares then in float.
It was a huge offering. A huge increase in float. Lots of immediate liquidity. A PERFECT opportunity for the TSE to do an ad hoc FFW change. But they didn’t.
Then in June they lowered the FFW (on a technicality). That leaves a big upweight in October. In this insight we measure the opportunity.

Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins

In March 2023, Japan Post Holdings (6178 JP) sold ¥1.1trln of shares in Japan Post Bank (7182 JP), lowering its stake considerably, raising float. There will be a TOPIX upweight.
In May, with earnings, they announced their intention to buy back ¥300bn of shares or up to 10% of shares out. Today, they announced the details. ¥300bn through March end.
In a ¥300bn ToSTNeT-3 tomorrow, the govt will sell back ¥105.7bn. That leaves a residual worth examining. So we examine.

Brilliance China (1114 HK): Driving Back Into Passive Portfolios

Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.

[Update] Tax-Loss Selling In Australia – Closing the Circle on the Rebound Trade

Originally, this was an analysis of tax-loss selling baskets over the years, and seasonal performance of baskets of stocks with certain attributes. On average, they fell vs index.
Of course, on average, they also rose vs index after the selling was done.
This insight puts a cap on the 2023 edition with results across the four baskets. The sell made 4.2% vs ASX200 in May, then is up

UnitedHealth/EMIS: Provisional Clearance, Estimated Timeline

By Jesus Rodriguez Aguilar

The CMA provisionally found that the acquisition of EMIS Group PLC (EMIS LN) may not result in a substantial lessening of competition. Final decision to be published on 5 October.
The Court sanctioning could take place on 16 October. The scheme would become effective on 17 October. Assuming settlement by 31 October, spread is 0.99%/4.81% (gross/annualised).
Assuming a break of 1,292p, the market is pricing a 97% probability of deal completion (vs. 6% by 15 June).

EQD | SPX MONTHLY Proxy Supports for APAC Markets

By Nico Rosti

The 2023 multi-month rally in APAC markets started roughly in autumn 2022, in sync with the US market rally, then stalled when the US market began to pull back.
We propose an analysis of the S&P500 MONTHLY, to find support levels to be used as a proxy for predicting APAC bloc’s markets supports.
Main forecast: August/September could be down, but the current MRM pattern reading is bullish – the correction (currently at Q2 supports) should not last beyond end of September.

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Aug 14

Daily Brief Event-Driven: The Brand Spanking New Extra Spiffy 🦄H/A-Share Discount/Premium Weekly (As of 11 Aug 2023) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The Brand Spanking New Extra Spiffy 🦄H/A-Share Discount/Premium Weekly (As of 11 Aug 2023)
L’Occitane (973 HK): Board Updates on the Potential Offer Structure and Price
Itochu Takeout of Daiken (7905) – Too Low at ¥3,000/Share But May Be Tough To Oppose
Where & How to Check CFD Trading Data Starting Sept 1st
MVIS Australia Equal Weight Index Rebalance Preview: Deletes, Close Deletes, Capping Changes
Weekly Deals Digest (13 Aug) – Toshiba, Kyoden, Eoflow, Chindata, Estia, InvoCare, OreCorp, Origin
MVIS Australia A-REITs Index Rebalance Preview: One Delete, One Close Delete & Capping
Daiken Corporation (7905 JP): Itochu’s JPY3,000 Tender Offer
Merger Arb Mondays (14 Aug) – Eoflow, Chindata, OreCorp, Origin, Estia, InvoCare, Daiken, Kyoden
EQD | Nikkei 225 (NKY) WEEKLY Resistance Targets

The Brand Spanking New Extra Spiffy 🦄H/A-Share Discount/Premium Weekly (As of 11 Aug 2023)

This is the Brand Spanking New and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see the relationships easily. We used to do it.
We decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations.
We hope this new version serves readers even better. Feedback is actively solicited to see if we can improve it from here.

L’Occitane (973 HK): Board Updates on the Potential Offer Structure and Price

In response to media speculation, L’Occitane (973 HK) has clarified that Reinold Geiger, the Chairman and the largest shareholder, is contemplating a possible transaction through a voluntary general offer.
However, the rumoured offer of HK$35 per share is false. Mr Geiger has confirmed that the potential offer price would be no less than HK$26.00 per share.
The floor price of HK$26 is light and needs a bump (towards HK$30), particularly if Mr Geiger wants 95% of voting rights to exercise the right of compulsory acquisition (squeeze-out).

Itochu Takeout of Daiken (7905) – Too Low at ¥3,000/Share But May Be Tough To Oppose

Itochu owns 36.3% of building materials and engineering firm Daiken Corp (7905 JP). They have launched a tender with gimmicky Majority-of-Minority to buy the rest at ¥3,000/share, 4.7x FY2024e EBITDA.
That’s low-ish, but given securities holdings, inventory, and net receivables at 4+x EBITDA it’s probably too cheap, but it gets quite close to the minimum threshold just with cross-holders.
This deal price doesn’t include synergies (according to the valuations and the SC) but a bump would need an agitator. Hope alone won’t get it.

Where & How to Check CFD Trading Data Starting Sept 1st

The CFD balance information (both overall and individual stock) will be provided by KOFIA and KOSCOM, starting from September 1st.
September 1st also marks the day when local brokerages that temporarily suspended CFD trading services will resume them.
With the disclosure of individual stock CFD balances starting from September 1st, there’s a high probability of another volatility turning point.

MVIS Australia Equal Weight Index Rebalance Preview: Deletes, Close Deletes, Capping Changes

There could be two deletes for the index in September. There are two other stocks that are close to the deletion threshold.
Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of around 2.7% and a one-way trade of A$51m.
Short interest has been increasing on Charter Hall (CHC AU) and JB Hi-Fi Ltd (JBH AU) and could be partially driven by potential index deletions.

Weekly Deals Digest (13 Aug) – Toshiba, Kyoden, Eoflow, Chindata, Estia, InvoCare, OreCorp, Origin

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 – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
Event-Driven developments – Eoflow (294090 KS), Kyoden Co Ltd (6881 JP), Toshiba Corp (6502 JP), Metro Pacific Investments Co (MPI PM), Estia Health (EHE AU), Origin Energy (ORG AU).

MVIS Australia A-REITs Index Rebalance Preview: One Delete, One Close Delete & Capping

There should be one deletion from the index in September. And there could be another deletion. And there will be capping changes for a few stocks.
The index changes will lead to a one-way turnover of 2.12% resulting in a one-way trade of A$13m. There is only one stock with over A$5m to trade.
Following the spinoff, Abacus Group (ABG AU) and Abacus Storage King (ASK AU) will be the lowest ranked index constituents and at risk of deletion from the index.

Daiken Corporation (7905 JP): Itochu’s JPY3,000 Tender Offer

Daiken Corp (7905 JP) has recommended Itochu Corp (8001 JP)’s tender offer of JPY3,000 per share, a 28.8% premium to the undisturbed price (10 August).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 31.83% ownership ratio.
The minimum acceptance condition (lower limit) requires a 50.0% minority acceptance rate (majority of minority condition). The tender offer is light vs historical multiples but represents a 5-year high price.

Merger Arb Mondays (14 Aug) – Eoflow, Chindata, OreCorp, Origin, Estia, InvoCare, Daiken, Kyoden

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 Daiken Corp (7905 JP), 111 Inc (YI US), Eoflow (294090 KS), Kyoden Co Ltd (6881 JP), Orecorp Ltd (ORR AU), Symbio Holdings (SYM AU), ENM Holdings (128 HK).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Allkem Ltd (AKE AU), Itochu Techno Solutions (4739 JP), Penguin International (PBS SP).

EQD | Nikkei 225 (NKY) WEEKLY Resistance Targets

By Nico Rosti

The Nikkei 225 index closed up last week and it has a good probability to rise further this week: the MRM tool has identified the current pattern as “bullish”.
Resistance targets are located past 33500, the index could reach that target this week.
If the index rises for 3 weeks or more, it could breakout from the previous resistance range around 33700, and reach targets past 34000.

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Aug 13

Daily Brief Event-Driven: Chindata (CD US): Bain’s Binding Proposal at US$8.60 Per ADS and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Chindata (CD US): Bain’s Binding Proposal at US$8.60 Per ADS
Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨
Index Rebalance & ETF Flow Recap: JPXNK400, Kenedix, Positioning – India, Japan, Korea
Last Week in Event SPACE: Toshiba, Hongkong Land, Inpex, L’Occitane
(Mostly) Asia-Pac Weekly Risk Arb Wrap: EOFlow, Invocare, Estia, Metro Pacific, Orecorp, Kyoden

Chindata (CD US): Bain’s Binding Proposal at US$8.60 Per ADS

Chindata Group (CD US) has entered a definite agreement with Bain Capital at US$8.60 per ADS, 7.5% higher than its previous offer of US$8.00 per ADS.
Completion is conditional on shareholder approval, dissenting shareholders representing less than 12% of outstanding shares and any applicable regulatory approvals. The completion conditions should be met.
CMC’s offer, while higher, does not meet the “superior proposal” criterion. At the last close price and December-end completion, the gross and annualised spread is 6.0% and 16.6%, respectively.

Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨

The data for the Nikkei 225 Rebalance is cemented as of 31 July 2023. Lasertec Corp (6920 JP) looks like a shoo-in. The DELETEs are obvious too.
Fast Retailing (9983 JP) doesn’t get a cap (yet). But the other ADDs are a real question. It is a matter of interpreting the methodology and qualitative aspects. And FLOAT.
One way, Socionext (6526) and Mercari (4385) are ADDs. Another way, it looks like Nitori Holdings (9843) and ZOZO Inc (3092) or Ryohin Keikaku (7453). FLOAT IS A PROBLEM ANYWAY.

Index Rebalance & ETF Flow Recap: JPXNK400, Kenedix, Positioning – India, Japan, Korea

The review period for the September rebalance of the S&P/ASX family of indices ends on Friday. There will be a lot of changes across the family.
Hang Seng Indices will announce the changes to the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index and the HSCI after market close on Friday.
There were HUGE inflows to onshore China focused ETFs during the week with CSI 300 Index, CSI 500 Index and SSE50 Index ETFs taking in the largest amounts.

Last Week in Event SPACE: Toshiba, Hongkong Land, Inpex, L’Occitane

The JIP TOB for Toshiba (6502 JP) is here. Finally. It’s still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
Hongkong Land (HKL SP) selling Three Exchange Square sounds purely speculative. At best. But it would have a bigly impact on Hong Kong Office sentiment if true.
Inpex (1605 JP) reported 1H results, a change in forecasts, and a bigly buyback. The mechanics are the same. The impact is a bit different, but it’s worth looking at.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: EOFlow, Invocare, Estia, Metro Pacific, Orecorp, Kyoden