Event-Driven

Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
The changes could lead to an increase in the index weighting for Li Auto (2015 HK) and the inclusion of XPeng (9868 HK) at the March rebalance.
The improved rankings for the Secondary and Dual Primary listings will lead to other changes to the index in March.

Acotec Scientific Holdings: Boston Scientific’s Partial Offer

Acotec Scientific Holdings (6669 HK), a Chinese medical technology company, has announced a Partial Offer from Boston Scientific (BSX US).
The Offer Price for up to 65% of shares out is HK20/share, a 31.6% premium to last close, but below last year’s IPO price of HK$23.80/share.
Irrevocables who intend to tender a total of up to 60.14% of shares out. This includes the CEO and the key pre-IPO investor.

Acotec Scientific (6669 HK)’s Partial Offer of HK$20 from Boston Scientific

Acotec Scientific Holdings (6669 HK) disclosed a partial offer from Boston Scientific (BSX US) to acquire a maximum of 203.7 million shares at HK$20 per share.
The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders. Irrevocables represent a minimum of 55.14% of outstanding shares.
Despite the recent share price pop on the back of FDA approval for Vericor, the partial offer represents an all-time share price high. Therefore, the offer will be declared unconditional.

HSTECH: Index Handling Changes & Flows in March

Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.

Genesis Minerals (GMD AU) And St Barbara (SBM AU) Merger

St Barbara Ltd (SBM AU) and Genesis Minerals (GMD AU) will merge via a scheme at a gross exchange ratio of 2.0338 SBM shares per GMD share.
The deal metrics are favourable for GMD shareholders. The gross exchange ratio is attractive and values GMD at a slight premium to mid-cap ASX peers on an EV/Resource basis.
The likely pushback from SMB shareholders is that the terms were struck from a position of share price weakness. However, the low SMB shareholder voting threshold (50%) will help.

Home Consortium (HMC AU) FTSE EPRA Index Deletion – Underperforming but STILL Expensive

Home Consortium Ltd (HMC AU) is a Super Stapled Security, having developed HomeCo Daily Needs REIT (HDN AU), overseen the Aventus Group (AVN AU) merger, IPOed HealthCo REIT (HCW AU).
The current market cap is 1.6x book and probably closer to 2x tangible book as a large “management and development capability premium” is baked in.
There is a FTSE EPRA Nareit index deletion on Friday. That could prompt further underperformance.

St Barbara’s Reverse Merger Of Genesis

Gold miners St Barbara Ltd (SBM AU) and Genesis Minerals (GMD AU) have agreed to merge via a Scheme. Inter-conditionally, SBM will demerge Atlantic, Simberi, and other assets.
SBM will issue 2.0338 of its own shares for each GMD share. Conditional on the Scheme and asset demerger, Genesis will raise $275m to fund the merged entity.
At completion, SBM shareholders will hold 38% in the combined group, current Genesis shareholders 41%, with the remaining 22% held by participants in the capital raising.

Dongkuk Steel Mill: Demerger Details & Passive Outflow Trading

The size of treasury shares in the Dongkuk Steel demerger event is not too large to expect a value accretion to the combined market cap after the split.
Based on the current market cap, all three companies will likely leave the KOSPI 200. To this end, K200 trackers must dispose of Dongkuk Steel right before the trade suspension.
The size of rebalancing trading before trade suspension should be about ₩40T. We should consider setting our entry into flow trading as early as two weeks towards the trade suspension.

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Dec 12

Daily Brief Event-Driven: Haidilao’s Spin-Off of Super Hi: Index Implications and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Haidilao’s Spin-Off of Super Hi: Index Implications
LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS
Tyro Payments (TYR AU): Potentia Returns with a A$1.60 Offer
Merger Arb Mondays (12 Dec) – Nitro, Tyro, Bigtincan, Warrego, Genex, Elmo, Golden Energy
Potentia Bumps But Tyro Shuts Down Talks

Haidilao’s Spin-Off of Super Hi: Index Implications

Haidilao (6862 HK) intends to spin-off its 90% holding in Super Hi International Holding (SHI HK) with an ex-date of 16 December.
Super Hi International Holding (SHI HK) will be deleted from the Hong Kong Hang Seng Index and Hang Seng China Enterprises Index at the close on listing day.
There could be nationality changes and selling from MSCI and FTSE trackers as well, though the timing is uncertain at this point.

LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS

The ESOP’s 3.5% stake will be released on January 27. Considering the extremely tight flow situation, this is by no means small. 3.48% is 20 times the recent ADTV.
NPS will likely move toward a minimum stake of 6% again for LG Energy, irrespective of LG Energy’s current valuation, despite its recent selling.
We should consider the possibility that NPS will contrarily utilize this ESOP lockup release, and we should also design a contrarian position for this lockup release.

Tyro Payments (TYR AU): Potentia Returns with a A$1.60 Offer

The AFR reports that Potentia has increased its offer for Tyro Payments (TYR AU) by 26.0% from A$1.27 to A$1.60 per share, a 62.4% premium to the undisturbed price.
The revised offer remains light and likely to be rejected again by the Board. Grok’s get-out clause with Potentia now sets the floor price of a competing bid at A$1.85.
Potentia’s revised bid is the catalyst for the other rumoured suitors (Westpac Banking (WBC AU) and Moneris) to get their act together. A competing offer of around A$2.00 is possible.

Merger Arb Mondays (12 Dec) – Nitro, Tyro, Bigtincan, Warrego, Genex, Elmo, Golden Energy

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), Bigtincan Holdings Ltd (BTH AU), Golden Energy & Resources (GER SP), Origin Energy.
Lowest spreads Nitro Software Ltd (NTO AU), Warrego Energy (WGO AU), Chip Eng Seng Corp (CHIP SP), Uzabase Inc (3966 JP), Elmo Software (ELO AU), OZ Minerals Ltd (OZL AU).

Potentia Bumps But Tyro Shuts Down Talks

Potentia has increased its indicative proposal for Tyro Payments (TYR AU) to A$1.60/share from A$1.27/share. Grok, holding 12.5% of shares out, remains supportive.
However, Tyro’s board believes the revised terms remain below what is considered fair, and has ceased all discussions.
Separately, Westpac has decided not to submit an Offer. After conducting due diligence. Shares are down 19.5% as I type.

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Dec 11

Daily Brief Event-Driven: EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Weekly Deals Digest (11 Dec) – Toshiba, Bigtincan, Nitro, Warrego, Xingda, VinFast, Weilong
Index Rebalance & ETF Flow Recap: ASX, HSTECH, TWDiv+, EPRA Nareit, HSCEI, PCOMP, STAR50, REMX, GDXJ
Last Week in Event SPACE: JAFCO, Jardine Cycle, Softbank, Star Health
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Xingda, Nitro, Chip Eng Seng, Traditional Chinese Medicine
Hong Kong CEO & Director Dealings (9 Dec): Hopefluent, Matrix, Country Garden Services

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

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

Weekly Deals Digest (11 Dec) – Toshiba, Bigtincan, Nitro, Warrego, Xingda, VinFast, Weilong

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 (1905332D VN) pre-markets a US$1bn IPO, I-Tail (ITC TB) and Sunshine Insurance (6963 HK) have tepid debuts, Weilong Delicious Global (WDG HK) launches a US$141m IPO.
Event-Driven developments – Bigtincan Holdings Ltd (BTH AU), Nitro Software Ltd (NTO AU), Warrego Energy (WGO AU), Xingda International (1899 HK), Chip Eng Seng Corp (CHIP SP).

Index Rebalance & ETF Flow Recap: ASX, HSTECH, TWDiv+, EPRA Nareit, HSCEI, PCOMP, STAR50, REMX, GDXJ

The rebalance implementation of the KOSPI2, KOSDQ150, CSI 300, CSI 500, STAR50 and other indices took place on 8/9 December. Plus MSCI/FTSE deletes due to Northbound Stock Connect changes.
Friday will see the implementation of the FTSE All-World/All-Cap, EPRA Nareit, S&P/ASX, KLCI, FTSE China and Sensex indices. The FTSE Taiwan Dividend+ Index will have the largest flows.
Big weekly redemptions from the Mirae Asset Tiger Top 10 ETF (292150 KS), ChinaAMC China 50 ETF (510050 CH) and IShares Core MSCI Asia Ex Japan ETF (3010 HK).

Last Week in Event SPACE: JAFCO, Jardine Cycle, Softbank, Star Health

In principle, Jafco Co Ltd (8595 JP) still wants to be greenmailed to get Murakami-san out.
Jardine Cycle & Carriage (JCNC SP)i is expensive here – relative to historical values – and from an implied stub perspective. And the MSCI inclusion event has now passed.
If you think this is a “risk”, then you want to be long when the discount is wide and Softbank Group (9984 JP) is monetising assets in some way.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Xingda, Nitro, Chip Eng Seng, Traditional Chinese Medicine

There are 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma: Xingda International (1899 HK)‘s partial MBO.
Key updates took place for: Nitro Software Ltd (NTO AU) , Chip Eng Seng Corp (CHIP SP) and China Traditional Chinese Medicine (570 HK).

Hong Kong CEO & Director Dealings (9 Dec): Hopefluent, Matrix, Country Garden Services

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
These insights may flag those companies where shares have been pledged. Stocks mentioned include Hopefluent Group (733 HK), Matrix Holdings (1005 HK), Country Garden Services Holdings (6098 HK).

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Dec 10

Daily Brief Event-Driven: Can Son-San Take Over Softbank Group Through Buybacks? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Can Son-San Take Over Softbank Group Through Buybacks?
JCNC Is Still Overstretched Vs. Astra
MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes

Can Son-San Take Over Softbank Group Through Buybacks?

On Thursday 8 December, an article showed up in Bloomberg suggesting Son-san had “increased his stake” as the company bought back shares, giving him more rights, “edging towards a buyout.”
That is a stretch. He went from below one-third to above one-third, giving him an explicit veto on shareholder super-majority resolutions, but it’s minor. He now has 34.2%.
The suggestion: if he got two-thirds, he could squeeze out minorities without a Tender Offer. Technically true, but not easy. I dig deeper and propose how it could be done.

JCNC Is Still Overstretched Vs. Astra

Jardine Cycle & Carriage (JCNC SP) is currently trading at a ~12% discount to NAV, just outside its narrowest post-Covid.
A key catalyst for the recent narrowing was JCNC’s inclusion in the SIMSCI Index at the end of last month.
JCNC is expensive here – relative to historical values – and from an implied stub perspective.

MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes

Filo Mining (FIL CN) and Tietto Minerals (TIE AU) are adds while Fresnillo (FRES LN), Galiano Gold (GAU US), Jaguar Mining (JAG CN) and Novo Resources (NVO CN) are deletes.
One way turnover is estimated at 4.3% resulting in a one-way trade of US$163m. There is over 1 day of ADV to trade on 24 stocks.
Largest inflows are on Filo Mining (FIL CN) and Tietto Minerals Ltd (TIE AU) while largest outflows are on Fresnillo PLC (FRES LN) and Centerra Gold (CG CN).

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the MVIS Global Rare Earth/Strategic Metals Index at the December rebalance.
There are free float and capping changes that will be implemented at the close on 16 December.
One way turnover is estimated at 4.26% and will result in a one-way trade of US$31.5m.

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Dec 09

Daily Brief Event-Driven: JAFCO (8595) Cancels Tender Offer – I Offer a Modest Proposal For Good Governance and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JAFCO (8595) Cancels Tender Offer – I Offer a Modest Proposal For Good Governance
China Rebalances at the Close Today- BIG Flows
Nitro Software (NTO AU): Potentia Raises to A$2.00 as the Battle Heats Up
Infosys (INFY)’s US$1.1bn Buyback
KODEX Battery Rebalancing Results Out: From Today to Next Tuesday
Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis
EQD | KOSPI2 Index: Short-Term Trading Opportunity Using Derivatives
Nitro Software: Potentia Matches KKR’s $2.00/Offer

JAFCO (8595) Cancels Tender Offer – I Offer a Modest Proposal For Good Governance

Jafco Co Ltd (8595 JP) announced the reference period VWAP for the Tender Offer Buyback was ¥2,362.4136 vs target ¥2,525. Murakami-san refused to play, so the Tender Offer is cancelled.
This is good news and bad news. The announcement wording doesn’t make JAFCO look good, but they will continue discussions with City Index Eleventh. But there is potential.
I shall now therefore humbly propose my own thoughts, which I hope will not be liable to the least objection (Jonathan Swift, 1729)

China Rebalances at the Close Today- BIG Flows

There are multiple local China indices that rebalance at the close of trading today. Plus MSCI China and FTSE All-World/All-Cap flows due to changes to the Northbound StockConnect Buy-and-Sell list.
China Pacific Insurance (Group) Co., (601601 CH) replaces Beijing-Shanghai High Speed Railway-A (601816 CH) in the FTSE China A50 Index (XIN9I INDEX).
The round-trip turnover at the close of trading today should be in excess of US$8bn.

Nitro Software (NTO AU): Potentia Raises to A$2.00 as the Battle Heats Up

Nitro Software Ltd (NTO AU) has received a revised Potentia off-market takeover offer at A$2.00 per share, an 11.1% premium to its previous offer and in line with Alludo’s offer.
By bumping its offer, adding a scrip alternative and signalling a potentially higher price on due diligence access, Potentia has ramped up the pressure on the Board.
Potentia/Alludo offer remains at the low end of the IE’s valuation range. Alludo would have anticipated this move and likely will have factored in the need to raise its offer.

Infosys (INFY)’s US$1.1bn Buyback

Infosys Ltd (INFO IN) (Infosys Ltd Sp Adr (INFY US)) on 5-6 December announced an on-market buyback of more than US$1.1bn.
The company has done buybacks before, and it is worthwhile looking at the details.
The buy-back looks small, and may be impactful near-term in near-space.

KODEX Battery Rebalancing Results Out: From Today to Next Tuesday

As expected, Sungeel Hitech (365340) made it to the index. And C&I System (222080) and Wonik PNE (217820) were added, whereas Ecopro (086520) and Dongwha Enterprise (025900) were deleted.
Among the existing constituents, Samsung SDI (006400), Ecopro BM (247540), SK Innovation (096770), L&F (066970), and SKC (011790) are expected to have a relatively significant impact.
Looking at the last rebalancing, the impact/price correlation was most significant on Day 1. So, we should consider aiming for LONG/SHORT today for those with a high relative impact.

Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis

Targetable names on KOSPI for dividend arbitrage: SK Telecom (017670), Woori Financial (316140), SK Hynix (000660), KB Financial (105560), Korea Zinc (010130), and HMM (011200)
Samsung Electronics (005930)‘ basis does not reflect special dividends, even though speculations have not disappeared entirely.
As the current basis hasn’t widened to an entirely sufficient level, we need to target arb trade openings focusing on the above stocks a bit more aggressively.

EQD | KOSPI2 Index: Short-Term Trading Opportunity Using Derivatives

KOSPI2 Index failed to break above the 200dma and has retreated
The index has now fallen back towards the 50dma and we see an short-term opportunity to play the upside
Use weekly options to play a short-term bounce and get the best risk-reward

Nitro Software: Potentia Matches KKR’s $2.00/Offer

Potentia Capital has bumped its Offer for Nitro Software Ltd (NTO AU) to A$2.00/share, matching KKR’s earlier Offer.
Potential’s proposal – which also boasts a scrip alternative for those investors wishing to remain invested – is open for tendering, and has no minimum acceptance threshold.
Nitro’s board has yet to provide a view on Potentia’s revised terms.

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Dec 08

Daily Brief Event-Driven: HDFC AMC: Abrdn’s Potential Placement & Index Implications and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HDFC AMC: Abrdn’s Potential Placement & Index Implications
Xingda Int’l (1899 HK): Kicking The Tyres
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)
TOPIX Inclusions: Who Is Ready (Dec 2022)
Yearend Dividend Play on Korean Stocks with High Yield/Borrow Rate
Xingda (1899 HK)’s Partial Offer from Management to Seize Statutory Control
Xingda International (1899 HK)’s to Draw a Privatisation Bid from Management?
Xingda Int’l (1899 HK): Partial MBO

HDFC AMC: Abrdn’s Potential Placement & Index Implications

Abrdn PLC (ABDN LN) is looking to sell its entire 10.21% stake in HDFC Asset Management (HDFCAMC IN) following which it will no longer be a sponsor of HDFC MF.
Depending on who the stake is sold to, there could be an immediate increase in the investability weight in the FTSE All-World Index.
More importantly, the increased free float will result in an increase in the FIF for the MSCI Standard Index and index inclusion could take place in February.

Xingda Int’l (1899 HK): Kicking The Tyres

Xingda International (1899 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
The controlling shareholders – more commonly known as the Five Parties – hold 45.6% of shares out.
Two years ago, Xingda sought to spin-off its key operating vehicle. Perhaps the Five Parties are privatising Xingda, then IPOing Xingda Steel Tyre Cord. Or, cashing out their positions.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)

Tongcheng-Elong Holdings Ltd (780 HK) could replace Ming Yuan Cloud Group (909 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
One way turnover is estimated at 2.1% resulting in a one-way trade of HK$1.7bn. Passive trackers will need to buy nearly 10x ADV on Tongcheng-Elong Holdings Ltd (780 HK).
After being deleted from the MSCI China Index at the November SAIR, this could be the next major index deletion for Ming Yuan Cloud Group (909 HK).

TOPIX Inclusions: Who Is Ready (Dec 2022)

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.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Oct 2022)
At present, there are 60 names that satisfy all of these conditions and there are more names that are close to being in that group.

Yearend Dividend Play on Korean Stocks with High Yield/Borrow Rate

We’d better pay attention to trading for price gain by building a position 2-3 weeks towards ex-dividend and getting out of it before ex-dividend, which often provides higher returns.
For this, we should focus on high dividend yield stocks, which also feature a high borrow rate, but on a decreasing trend.
They are Hyosung TNC (298020), HD Hyundai (267250), BNK Financial (138930), Woori Financial (316140), DL E&C (375500), LX Semicon (108320), KB Financial (105560 KS), and HDC Hyundai Development (294870).

Xingda (1899 HK)’s Partial Offer from Management to Seize Statutory Control

Xingda International (1899 HK) disclosed a partial offer from management to acquire a maximum of 80.0 million shares at HK$1.88 per share, a 24.50% premium to the undisturbed price.
The pre-condition is Executive approval. The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
The partial offer is an opportunistic foray to seize statutory control as it would not be sufficiently enticing to overcome FIL’s 9.99% blocking stake in a privatisation scheme.

Xingda International (1899 HK)’s to Draw a Privatisation Bid from Management?

Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers.
It is likely that the management, representing 45.60% of ordinary shares (through a five parties agreement), is seeking to privatise Xingda.
The bid is likely privatisation through a scheme. Due to FIL’s blocking stake, a decent premium is required, such as an offer approaching HK$2.00 (33% premium to the last close).

Xingda Int’l (1899 HK): Partial MBO

Late night Xingda (1899 HK) announced a partial Offer from a consortium comprising management – known as the Five parties – at HK$1.88/share – a 24.5% premium to last close.
The consortium – widely known as the Five Parties – currently holds 45.6%, and the intention of the Offer is to hold 50.01%, or a controlling stake.
There is a minimum/maximum number shares to be acquired under the Offer. I’d expect the minimum acceptance condition to be met.

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Dec 07

Daily Brief Event-Driven: Stock Connect Changes and MSCI/FTSE Deletes on Friday and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Stock Connect Changes and MSCI/FTSE Deletes on Friday
PCOMP Index Rebalance Preview Feb 23: Higher Free Float Means Fewer Changes
Toshiba (6502 JP): JIP’s Privatisation Bid Is Floundering
FTSE China A50 Index Rebalance: Stock Connect Deletion to Drive Change
Net Protections Holding IPO Lock-Up – PE Owner Is Free to Shed Its Remaining Stake
EQD | SPX Index/NDX Index : Big Data Week Coming Up-We Look at What Is Priced In
DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News
STAR50 Index Rebalance Preview: Another Five Potential Changes in March

Stock Connect Changes and MSCI/FTSE Deletes on Friday

The SSE180, SSE380 and SZSE1000 indices rebalance at the close on Friday and that will lead to changes to the list of stocks eligible for Northbound Stock Connect.
Deletion from the Northbound Stock Connect Buy and Sell list will result in MSCI and FTSE deleting stocks from their indices. That selling will take place at the close Friday.
We expect 37 stocks to be deleted from the MSCI and FTSE indices at the close on 9 December – the announcements should be made later today or tomorrow.

PCOMP Index Rebalance Preview Feb 23: Higher Free Float Means Fewer Changes

From December 2022, the minimum free float requirement to be a part of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) increases from 15% to 20%.
We see a high probability of DMCI Holdings (DMC PM) replacing Emperador (EMP PM) in the index at the upcoming rebalance.
There are a few other potential changes to the index and the passive flow on the stocks will be material.

Toshiba (6502 JP): JIP’s Privatisation Bid Is Floundering

JIP, Toshiba Corp (6502 JP)‘s preferred bidder, is reported to be under pressure from co-investors to cut its offer price. Securing financing continues to be troublesome.
An offer valuing Toshiba less than JPY2.2 trillion would face pushback from the special committee, let alone shareholders. There are no signs of a JIC/Bain coming to the rescue.
While the Toshiba/peers price ratio remains undemanding compared to historical ratios, Toshiba looks expensive vs peers on multiples. With short-term newsflow likely to be incrementally negative, remain on the sidelines.

FTSE China A50 Index Rebalance: Stock Connect Deletion to Drive Change

Beijing-Shanghai High Speed Railway-A (601816 CH) will be deleted from the Northbound Stock Connect Buy and Sell list from the close on 9 December.
Beijing-Shanghai High Speed Railway will be deleted from the SSE180, MSCI and FTSE indices. Plus a deletion from the FTSE China A50 Index (XIN9I INDEX).
The replacement for Beijing-Shanghai High Speed Railway-A (601816 CH) will be determined at the close of trading today and the announcement will be made post market close.

Net Protections Holding IPO Lock-Up – PE Owner Is Free to Shed Its Remaining Stake

By Sumeet Singh

Net Protections (7383 JP), a buy now pay later service provider, raised around US$570m via selling a mix of primary and secondary shares in its Japan IPO in Dec 2021.
As per Yano Research, it had 40% market share in the domestic BNPL market for B2C transactions.
In this note, we will talk about the upcoming lock-up expiry on 9th Dec 2022.

EQD | SPX Index/NDX Index : Big Data Week Coming Up-We Look at What Is Priced In

Next week is the last big week of data releases for the year
With CPI data and also a FED meeting there is lots of potential volatility to come
We look at what is priced in to the derivatives market and suggest some trade ideas

DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News

The December 2022 index changes for DAX, MDAX, and SDAX were announced late last night (5th December 2022).
Porsche AG (P911 GR)‘s addition to the DAX Index is the main talking point. There are more changes for the MDAX and the SDAX indices.
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.

STAR50 Index Rebalance Preview: Another Five Potential Changes in March

Nearly 85% of the way through the review period, we see 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
Given the significantly higher market cap of the inclusions using a 6-month minimum listing history, we expect the index committee will continue to use the shorter listing history requirement.
With 5 changes a side, one-way turnover is estimated at 5.15% and will result in a one-way trade of CNY 3,994m. Impact on some deletions is quite high.

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Dec 06

Daily Brief Event-Driven: Where Does Melco’s Discount To NAV Go From Here? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Where Does Melco’s Discount To NAV Go From Here?
Nippon Prologis REIT (3283 JP): Offering Could Be a Catalyst for Outperformance Vs Peers
HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)
KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern
Star Health IPO Lockup – Owned by Financial Investors, US$3.0bn Worth Shares Are Well in the Money

Where Does Melco’s Discount To NAV Go From Here?

On the 26 November, Macau’s government renewed the concession periods of the city’s six incumbent gambling concessionaires for another 10 years.
Genting Malaysia (GENM MK), a last-minute interloper, failed in its bid to secure a license. It scored lowest under the government’s bidding review. MGM China (2282 HK) topped the scoresheets.
As with all incumbents, Melco International (200 HK) and Melco Resorts & Entertainment (MLCO US) eked out strong gains following the renewal. Melco’s current discount to NAV is currently 20%.

Nippon Prologis REIT (3283 JP): Offering Could Be a Catalyst for Outperformance Vs Peers

Japan’s largest logistics REIT Nippon Prologis Reit (3283 JP) (“NPR”) announced a US$170mn follow-on equity offering to fund their recent acquisition of three logistics facilities.
The primary offer quantity will be 76,570 units out of which 44,410 units and 32,160 units are expected to be allocated for domestic and international investors, respectively.
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)

Nearing the end of the review period for the March rebalance, we see China Shenhua Energy Co H (1088 HK) replacing China Feihe (6186 HK) in the HSCEI INDEX.
Estimated one-way turnover is 1.64% resulting in a one-way trade of HK$1.02bn with passives needing to buy 1x ADV on China Shenhua Energy and selling 1.7x ADV on China Feihe.
The change will lead to an increase in the fair value of the HSCEI 2023 dividend futures by over 3 DIPS. Could be more if China Shenhua pays a special.

KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern

We should set the minimum level of the target size to estimate the flow impact on T-1 Effective at ₩15T from ETFs.
We then need to pay attention to the recent trend that an additional flow from NPS appears post-Effective, with a significant portion on T+1~3.
We should revise down our expected rate of return on our early-phase setup aiming at the preemptive trading (T-6W Effective) by NPS.

Star Health IPO Lockup – Owned by Financial Investors, US$3.0bn Worth Shares Are Well in the Money

By Sumeet Singh

In Dec 2021, Star Health (STARHEAL IN) (SHAI), the largest private health and retail health insurance company in India, raised around US$851m in its India IPO.
SHAI insured 20.5m people in FY21. SHAI primarily offers retail health insurance which accounted for 87.9% of its FY21 GWP. Individual agents accounted for 97% of its FY21 GWP.
In this note, we will talk about the upcoming lockup expiry.

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Dec 05

Daily Brief Event-Driven: FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive
FTSE EPRA Nareit Index Rebalance: Now One Add for Korea
Taiwan Div+ Index Dec22 Rebal Trade – +7.1% Now; Amend and HODL
Monadelphous (MND AU) Is The S&P ASX 200 ADD – There’s a Trade Here
Weekly Deals Digest (04 Dec) – Chip Eng Seng, Bigtincan, Genex, ReadyTech, Warrego, Sunshine,Growatt
Merger Arb Mondays (05 Dec) – Origin Energy, OZ Minerals, Genex, Bigtincan, Pendal, Golden Energy

FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive

There are 26 inclusions and 5 deletions for the index resulting in a one-way turnover of 46.3% and a one-way trade of TWD 79.52bn (US$2.6bn). That is HUGE!
There at 14 stocks that have over 5 days of ADV to buy from passive funds while there are 20 stocks with more that 5 days of ADV to sell.
Over the last 2 weeks and 4 weeks, short interest has decreased on most of the adds while increasing on all the deletes and most of the stocks with outflows.

FTSE EPRA Nareit Index Rebalance: Now One Add for Korea

SK REITs (395400 KS) will now be added to the FTSE EPRA Nareit Global Real Estate Index Series after market close on 16 December.
Based on the passive assets estimated to track the FTSE EPRA Nareit Index, there could be around 3.11m shares (US$11.3m; 19.2x ADV) to buy on SK REITs (395400 KS).
SK REITs (395400 KS) trades expensive as compared to ESR Kendall Square REIT (365550 KS) and we’d use an index inclusion driven rally to pare positions in the stock.

Taiwan Div+ Index Dec22 Rebal Trade – +7.1% Now; Amend and HODL

This trade is based on historical patterns described in the FTSE TWSE Taiwan Dividend+ Index: A Rare Gem for Index Rebal Trades AND additional considerations.
Those additional considerations were discussed in Taiwan Dividend+ Index Rebal Trades – Offsets Other Index Risk and subsequent insights. So far, the trade is +7.1% since 26 October.
The announcement of FTSE TWSE Dividend+ names described in FTSE TWSE Dividend+ Dec 22: Confirmed Index Changes and Revised Capping Flow Expectations changes the basket slightly for the home stretch.

Monadelphous (MND AU) Is The S&P ASX 200 ADD – There’s a Trade Here

Monadelphous (MND AU) will be added to the S&P ASX 200 Index on 16 December 2022.
This is not a surprise. It has been the lead contender for a December ADD slot since the day after the September rebalance was completed (see here).
There is a fair bit of volume to buy, and there are pair trades to do.

Weekly Deals Digest (04 Dec) – Chip Eng Seng, Bigtincan, Genex, ReadyTech, Warrego, Sunshine,Growatt

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 – Sunshine Insurance (6963 HK) launches a US$950m IPO, Lygend Resources & Technology (2245 HK) debuts flat, Growatt Technology (1833969D CH) puts its US$1 billion IPO on hold.
Event-Driven developments – Chip Eng Seng Corp (CHIP SP), Bigtincan Holdings Ltd (BTH AU), Genex Power Ltd (GNX AU), ReadyTech Holdings Ltd (RDY AU), Warrego Energy (WGO AU).

Merger Arb Mondays (05 Dec) – Origin Energy, OZ Minerals, Genex, Bigtincan, Pendal, Golden Energy

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), Golden Energy & Resources (GER SP), 111 Inc (YI US), Origin Energy (ORG AU).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Warrego Energy (WGO AU), Uzabase Inc (3966 JP), Lifestyle International Holdings (1212 HK), Nearmap Ltd (NEA AU).

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Dec 04

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: STAR50 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: STAR50, CSI300/500, SSE50/180/380, ChiNext, SZSE1000, CH50, EPRA
Chip Eng Seng (CHIP SP)’s Revised S$0.75 VGO from the Tangs
Warrego (WGO AU)’s Rinehart V Stokes Takeover Tussle in Full Swing
FTSE TWSE Dividend+ Dec 22: Confirmed Index Changes and Revised Capping Flow Expectations
KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective
TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective
S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
EQD | Tencent (700 HK): We Identify Three Derivative Trades into Year-End
FTSE TWSE 50 & 100 Dec 22 Rebal: Greatek Deletion Confirmed; One Surprise Change

Index Rebalance & ETF Flow Recap: STAR50, CSI300/500, SSE50/180/380, ChiNext, SZSE1000, CH50, EPRA

It was a busy week with the implementation of the MSCI Nov SAIR and the Hang Seng December rebalance, plus a lot of announcements for the FTSE indices.
The coming week has the implementation of the December rebalance for the KOSPI2 INDEX, KOSDAQ 150 Index and a range of indices in China.
Inflows to iShares MSCI Emerging Markets (EEM) and iShares MSCI ACWI ETF (ACWI US) during the week as markets move higher on expectations of slower rate hikes from the Fed.

Chip Eng Seng (CHIP SP)’s Revised S$0.75 VGO from the Tangs

Chip Eng Seng Corp (CHIP SP) disclosed a revised conditional VGO from the Tangs at S$0.75, a 4.2% premium to the previous offer of S$0.72. The offer is final.
The offeror (47.27% of outstanding shares) and immediate family represent 50.49% of outstanding shares or 48.63% of diluted shares, which is just shy of the 50%+ minimum acceptance condition.
The bump was to increase the chances of privatisation rather than hitting the 50%+ minimum acceptance condition. At the last close, the gross spread is 1.4%.

Warrego (WGO AU)’s Rinehart V Stokes Takeover Tussle in Full Swing

Beach Energy (BPT AU)’s revised offer of A$0.25 per share was quickly gazumped by Hancock’s revised off-market proposal of A$0.28 for Warrego Energy (WGO AU). All other terms remain unchanged.
Speculation that Strike Energy (STX AU) would also be a takeover target has resulted in its all-scrip offer rising to A$0.248 per share (at last close).
Expect another round of the takeover battle as the bidders are well capitalised and the strategic importance of Perth Basin as Australia’s premier onshore basin.

FTSE TWSE Dividend+ Dec 22: Confirmed Index Changes and Revised Capping Flow Expectations

The index changes for the FTSE TWSE Taiwan Dividend+ Index for the December 2022 index review were confirmed after market close on Friday 2nd December 2022.
There will be 26 ADDs and 5 DELs which are mostly in line with Quiddity’s expectations.
In this insight, we take a look at our revised expectations for capping flows taking into account the confirmed index changes for the December 2022 review

KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective

Names with a significant impact: KT (030200), Shinhan Financial (055550), Korean Air (003490), LG Energy (373220), Dongwon Industries (006040), Lotte Fine Chemical (004000), Meritz Fire (000060), & Mirae Asset (006800)
Limiting the target size of our flow trading to only the fund size that directly mirrors it (₩17.8T) on T-1 Effective will increase our winning rate.
Lately, local pensions have been seen as rather taking advantage of flow trading in index rebalancing events, so I also recommend keeping the trading window fairly tight.

TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective

Kakao managed to stay out of the relegation zone. Instead, Kia was pushed to the borderline. But POSCO failed to up its float rate, so Kia stayed in.
Besides that, LG Energy Solution and Celltrion made it to the index, replacing KB Financial and Shinhan Financial.
These passive flows appears to be of sufficient magnitude to cause a substantial price impact on T-1 Effectiveness. But it should also be approached with a fairly short window.

S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year

Pilbara Minerals (PLS AU) will replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) will replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
The largest impact from passive trading will be on Monadelphous (MND AU) while the largest flow will be on Pilbara Minerals (PLS AU).
There appears to be significant short positioning on Lendlease Group (LLC AU) as cumulative excess volume and short interest continue to rise.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

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

EQD | Tencent (700 HK): We Identify Three Derivative Trades into Year-End

Stock has recovered from an October low but may be running out of steam
Realised vol has been high and implied vols have not fallen as much as other equity assets
We suggest three trade ideas into year-end to take advantage of the vol surface and spot level

FTSE TWSE 50 & 100 Dec 22 Rebal: Greatek Deletion Confirmed; One Surprise Change