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Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
Finalized version similar to draft, with added content requested by listed companies, like R&D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry’s plan in July.
KRX keeps a screening framework for the index akin to March’s criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.

Chilled & Frozen Logistics (9099 JP): Irrational Exuberance Takes Hold

Chilled & Frozen Logistics Holdings (9099 JP) shares are trading 85.7% above AZ-Com Maruwa Holdings (9090 JP) JPY3,000 offer due to the disclosure of four counterbidders.
The white knight “winning” bidder can secure the Board’s recommendation if it is the highest offer (likely well below the last close) and does not result in AZ-COM Maruwa-type dis-synergies.
AZ-COM Maruwa would face the dilemma of bumping, particularly if the white knight bidder secures irrevocables and the Board presents a compelling case to support the white knight bidder.

HK Connect SOUTHBOUND Flows (To 24 May 2024); Strong Bank Buying and Tech Selling Continues

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

Weekly Deals Digest (26 May) – Henlius, HKTV, SciClone, KFC, Best World, PropertyGuru, Modec

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: Modec Inc (6269 JP) prices its US$535 million secondary offering.
Event-Driven developments: Shanghai Henlius Biotech (2696 HK), Hong Kong Television Network (1137 HK). Sciclone Pharmaceuticals (6600 HK), Kfc Holdings Japan (9873 JP), Best World International (BEST SP), PropertyGuru (PGRU US).

KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping

There are 13 inclusions and 13 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 13 June.
For the second consecutive review, Fadu (440110 KS) and Shinsung DeltaTech (065350 KS) have been kept out of the index. Not sure what the index committee’s beef with them is.
The adds have outperformed the deletes and the KOSDAQ150 since the start of the review period. This has been helped, in no small, part by the ban on short selling.

Hoshino Resorts REIT Placement – Another Raising to Fund an Accretive Acquisition

By Clarence Chu

Hoshino Resorts Reit (3287 JP) is looking to raise US$125m from a primary follow-on. Proceeds will be used to acquire the OMO7 Osaka asset.
The REIT has been active on the acquisition front, undertaking a number of capital raisings in recent years.
In this note, we will talk about the placement and run the deal through our ECM framework.

A/H Premium Tracker (To 24 May 2024): HK Stocks Have a BAD Week and AH Premium Rebounds In

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s buy streak continued this past week; every day was net positive. NORTHBOUND was net positive too. It is not clear how much is National Team buying. Much may be.
AH Premia rebounded off multi-year lows, on average, this past week as Hang Seng and other HK indices fell sharply and A-shares did not fall as much.

Merger Arb Mondays (27 May) – L’Occitane, SciClone, GA Pack, KFC Japan, CF Logistics, Best World

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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK), China Traditional Chinese Medicine (570 HK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today

Based on the close of 24 May, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) in June.
COSCO SHIPPING (601919 CH), CRRC (601766 CH) and China National NuclearPower (601985 CH) could replace LONGi GreenEnergy (601012 CH), CSC Financial (601066 CH) and China Tourism Group DutyFree (601888 CH).
There are a couple of stocks that are close adds and could become adds if they outperform higher ranked stocks in trading today.

FXI Rebalance Preview: Cutoff Today; Two Changes Likely in June

With a day to go in the review period, there could be 2 changes for the iShares China Large-Cap (FXI) (FXI US) in June.
There should be more than 1x ADV to buy on one of the adds while there will be nearly 5x ADV to sell on one of the deletes.
There will be positioning in all the potential changes but there appears to be higher interest in one of the potential adds and one of the potential deletes.

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May 26

Most Read: Hanmi Semiconductor, Sciclone Pharmaceuticals, DB Hitek Co., Ltd., Hang Seng Index, Alibaba Group Holding , Modec Inc, Best World International, Grape King Bio, BHP Group Ltd, Honda Motor Co Ltd (Adr) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions
SciClone Pharma (6600 HK): Scheme Vote on 19 June
Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT
EQD | Hang Seng Down: How Low Can the Pullback Go?
Alibaba Group: A Story Of Cross-Border E-commerce Scale-up! – Major Drivers
Weekly Deals Digest (26 May) – Henlius, HKTV, SciClone, KFC, Best World, PropertyGuru, Modec
Best World (BEST SP): Best and Final S$2.56 Offer
Asian Dividend Gems: Grape King Bio
(Mostly) Asia-Pac M&A: KFC Holdings Japan, Shanghai Henlius, Alumina, BHP/ Anglo American, SciClone
Honda Motor Co.: What Is The Positioning of Hybrid in Electrification Strategy? – Major Drivers

KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions

By Charlotte van Tiddens, CFA

The KRX have announced the index changes for the KOSPI200 June review.
The index will be rebalanced in the closing auction on Thursday the 13th of June.
There will be 6 additions to the index and 6 deletions.

SciClone Pharma (6600 HK): Scheme Vote on 19 June

Sciclone Pharmaceuticals (6600 HK)‘s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share 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.
This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.

Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

Unexpectedly, KRX included Cosmo AM&T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).
Cosmo AM&T’s unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.
Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.

EQD | Hang Seng Down: How Low Can the Pullback Go?

By Nico Rosti

The Hang Seng Index has been rallying for 3 weeks but then last week the rise was halted and the index gave up a good chunk of the gains.
It seems the index has become quite volatile but this week it could go up again, or otherwise next week, the reversal is imminent given its oversold condition.
It’s hard to predict if the rally can continue after the bounce, the index seems a bit long-term overbought, albeit short-term oversold. A contradiction, but that is the situation now.

Alibaba Group: A Story Of Cross-Border E-commerce Scale-up! – Major Drivers

By Baptista Research

Alibaba Group’s March Quarter and Full Fiscal Year 2024 results show that major segments such as the Taobao and Tmall Group, Alibaba International Digital Commerce, and core public cloud offerings are experiencing growth.
The Taobao and Tmall Group achieved double-digit year-over year growth, while Alibaba International Digital Commerce revenue increased by 45%.
Moreover, AI related revenue increased triple digit year-over-year, demonstrating the potential of AI technology in fueling the company’s growth.

Weekly Deals Digest (26 May) – Henlius, HKTV, SciClone, KFC, Best World, PropertyGuru, Modec

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: Modec Inc (6269 JP) prices its US$535 million secondary offering.
Event-Driven developments: Shanghai Henlius Biotech (2696 HK), Hong Kong Television Network (1137 HK). Sciclone Pharmaceuticals (6600 HK), Kfc Holdings Japan (9873 JP), Best World International (BEST SP), PropertyGuru (PGRU US).

Best World (BEST SP): Best and Final S$2.56 Offer

Best World International (BEST SP) has disclosed a revised exit offer which has been declared final. The S$2.56 offer is a modest 2.4% premium to the previous S$2.50 offer.
The key conditions are approval for the selective capital reduction (at least 75% of eligible shareholders) and delisting resolution (a majority holding not less than 75% in value).
The revised offer remains underwhelming. However, the headcount test risk is lowering as retail seems resigned to accepting it. At the last close, the gross spread was 2.4%.

Asian Dividend Gems: Grape King Bio

Grape King Bio has one of the most remarkable consistency in profit margins among all Asian F&B companies. Its net margins ranged from 13% to 15% in the past decade.
The company’s dividend yield increased from 3.8% in 2021 to 4.1% in 2022, and 4.4% in 2023. Its annual dividend payout averaged 69.6% from 2019 to 2023.
Established in 1969, Grape King Bio is one of the leading health food, drink, and supplement products manufacturers in Taiwan.

(Mostly) Asia-Pac M&A: KFC Holdings Japan, Shanghai Henlius, Alumina, BHP/ Anglo American, SciClone

I tally 51 – 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 this week: Carlyle’s tiult for KFC Holdings Japan (9873 JP). Shanghai Henlius Biotech (2696 HK) suspended pursuant to the Takeovers Code.
Key updates took place on: Alumina Ltd (AWC AU), L’Occitane (973 HK), BHP Group Ltd (BHP AU)/ Anglo American (AAL LN), and SciClone Pharmaceuticals (6600 HK).

Honda Motor Co.: What Is The Positioning of Hybrid in Electrification Strategy? – Major Drivers

By Baptista Research

Honda Motor’s earnings of FY ’24 reveals that the mobility company has been posting a historic high operating profit of JPY 1,381.9 billion, with an operating profit margin of 6.8%.
Underpinning this growth has been the company’s core strategy of focusing on environmental sustainability and safety, which is resonating well with the consumers.
For FY ’25, Honda has set a higher target for operating profit at JPY 1.42 billion, aiming to achieve an operating profit margin of 7%, a year ahead of their original plan.

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May 25

Most Read: Chilled & Frozen Logistics Holdings, Korea Stock Exchange KOSPI 200, Akeso Biopharma Inc, Shanghai Henlius Biotech , Shift Up, Sciclone Pharmaceuticals, Hanmi Semiconductor, DB Hitek Co., Ltd. and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Chilled & Frozen Logistics (9099) Gone Ballistic – Reminder of Structure, Price, and Incentives
FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling
Akeso Biopharma Placement (9926.HK) – Would Investors Be Willing to Take a Gamble?
Henlius Biotech (2696 HK): Fosun Offer?
Henlius (2696 HK): Privatisation by Fosun Pharma?
Shift Up IPO – The Negatives – Changing Monetisation Model, Censorship Issues
SciClone Pharmaceuticals (6600 HK): 19th June Shareholder Vote
SciClone Pharma (6600 HK): Scheme Vote on 19 June
KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions
Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

Chilled & Frozen Logistics (9099) Gone Ballistic – Reminder of Structure, Price, and Incentives

In late March, AZ-Com Maruwa Holdings (9090 JP) made an unsolicited (“hostile”) bid for Chilled & Frozen Logistics Holdings (9099 JP) at a near 50% premium at ¥3,000/share.
It traded through, then C&F ran a bid solicitation process, got four bids. Since the day AFTER that announcement, the stock is up 56%. We approach Alps Logistics multiples.
This deal doesn’t get the split price benefit that HTS and Alps Logistics did. And it is a fundamentally different logistics business. And target management dynamics are different.

FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling

Lee urgently appeard on TV today and said, “In June, we will explain whether and when short selling will be resumed, and what criteria we might use for the resumption.”
He noted considering flexible partial short selling resumption even if only some conditions are met, contrasting the Presidential Office’s stance from two days ago.
Presidential Office led short selling ban, now likely under FSC/FSS jurisdiction for resumption.

Akeso Biopharma Placement (9926.HK) – Would Investors Be Willing to Take a Gamble?

By Xinyao (Criss) Wang

Akeso’s product sales grew rapidly in 2023, mainly driven by off-label use of AK104. Since AK104’s commercialization potential on other indications was “overdrawn” in advance, sales growth would slow afterwards.
The key investment logic of Akeso is whether/how much its BsAb pipelines would grab shares from PD-1. The high valuation has somewhat priced in AK112’s successful head-to-head trial with pembrolizumab.
If AK112 does beat Keytruda, valuation will reach a new level. If AK112 fails in critical clinical trials, it would cast a shadow on the entire BsAb pipeline of Akeso.

Henlius Biotech (2696 HK): Fosun Offer?

Biopharmaceutical outfit Shanghai Henlius Biotech (2696 HK) is currently suspended pursuant to the Takeovers Code.
Shanghai Fosun Pharmaceutical (Group) (2196 HK) holds ~60% in Henlius, mostly via domestic shares. Co-founders and Qatar Authority hold ~28% and 8% the H shares respectively.
IF an Offer were to unfold, it would be the third in this space in the past two months, after Offers for Sciclone (6600 HK) and Yichang HEC (1558 HK),

Henlius (2696 HK): Privatisation by Fosun Pharma?

Shanghai Henlius Biotech (2696 HK) entered a trading halt “pending the release of an announcement pursuant to the Code on Takeovers and Mergers.” The likely bidder is Fosun Pharma.
A merger by absorption would require approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition.
The shares are 62% below the IPO price. However, shareholders with blocking stakes would welcome an offer suggesting a 30-40% takeover premium would be sufficient.

Shift Up IPO – The Negatives – Changing Monetisation Model, Censorship Issues

Shift Up (462870 KS) plans to raise up to US$320m in its upcoming South Korean IPO.
Shift Up is a South Korean games developer, which as released three games so far for the global markets.
In this note, we talk about the not-so-positive aspects of the deal.

SciClone Pharmaceuticals (6600 HK): 19th June Shareholder Vote

On the 28th March, Li Zhenfu (SciClone (6600 HK)‘s NED), Assicurazioni Generali (G IM), and concert parties (collectively controlling 36.61%), made an Offer at $18.80/share, a 33.9% premium to undisturbed.
The Offer price is bang in line with SciClone’s March 2021 IPO price. Terms were declared final. This is a clean deal.
The Scheme Document is now out. The Court Meeting will be held on the 19th June. Expected payment on or before the 12 July. FWIW: IFA says fair & reasonable.

SciClone Pharma (6600 HK): Scheme Vote on 19 June

Sciclone Pharmaceuticals (6600 HK)‘s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share 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.
This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.

KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions

By Charlotte van Tiddens, CFA

The KRX have announced the index changes for the KOSPI200 June review.
The index will be rebalanced in the closing auction on Thursday the 13th of June.
There will be 6 additions to the index and 6 deletions.

Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

Unexpectedly, KRX included Cosmo AM&T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).
Cosmo AM&T’s unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.
Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.

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May 24

Most Read: Rakuten, Keisei Electric Railway Co, Eoflow, Korea Stock Exchange KOSPI 200, Shanghai Henlius Biotech , Shift Up, Trent Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated
Activist Palliser Re-Engages on Keisei Electric (9009) But The Oppty Remains Unconvincing
EOFlow (294090 KS): Suitably Pumped
FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling
Henlius Biotech (2696 HK): Fosun Offer?
Henlius (2696 HK): Privatisation by Fosun Pharma?
EM Watch: Have Copper markets been hit by a bus full of tourists or by the Chinese economy?
Shift Up IPO – The Positives – All Games Have Done Well
NIFTY50 Index Rebalance Preview: Two High Probability Changes in September; Adds Are Flying
Ohayo Japan | Worst Day of 2024

If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated

A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone.

Activist Palliser Re-Engages on Keisei Electric (9009) But The Oppty Remains Unconvincing

Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%.
The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.

EOFlow (294090 KS): Suitably Pumped

For a company that strives to improve people’s lives, investors in EOFlow (294090 KS) shares have mostly faced a world of pain over the past year.
After Insulet Corp (PODD US) filed a lawsuit on the 8th August 2023, accusing EOFlow of misappropriating trade secrets, patent infringement, and trademark dilution, shares declined ~88% by year-end.
Earlier this month, the courts quashed Insulet’s preliminary injunction. EOFlow is up 200%. Insulet is up 3% (?). And Medtronic (MDT US), EOFlow’s prior suitor, is no doubt weighing options.

FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling

Lee urgently appeard on TV today and said, “In June, we will explain whether and when short selling will be resumed, and what criteria we might use for the resumption.”
He noted considering flexible partial short selling resumption even if only some conditions are met, contrasting the Presidential Office’s stance from two days ago.
Presidential Office led short selling ban, now likely under FSC/FSS jurisdiction for resumption.

Henlius Biotech (2696 HK): Fosun Offer?

Biopharmaceutical outfit Shanghai Henlius Biotech (2696 HK) is currently suspended pursuant to the Takeovers Code.
Shanghai Fosun Pharmaceutical (Group) (2196 HK) holds ~60% in Henlius, mostly via domestic shares. Co-founders and Qatar Authority hold ~28% and 8% the H shares respectively.
IF an Offer were to unfold, it would be the third in this space in the past two months, after Offers for Sciclone (6600 HK) and Yichang HEC (1558 HK),

Henlius (2696 HK): Privatisation by Fosun Pharma?

Shanghai Henlius Biotech (2696 HK) entered a trading halt “pending the release of an announcement pursuant to the Code on Takeovers and Mergers.” The likely bidder is Fosun Pharma.
A merger by absorption would require approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition.
The shares are 62% below the IPO price. However, shareholders with blocking stakes would welcome an offer suggesting a 30-40% takeover premium would be sufficient.

EM Watch: Have Copper markets been hit by a bus full of tourists or by the Chinese economy?

By Andreas Steno

Copper markets have been on a tear in recent months and our assessment is that the positive sentiment started when Chinese copper stock data points started supporting the notion that China was “hoarding” Copper concentrate ahead of 1) a devaluation, 2) an overhaul of the electrical grid or 3) a power grab on supply chains for EVs, Solar Panels, Data centers and the likes.
On top of this, we have seen how US officials have highlighted the option of creating a strategic reserve of Copper Cathode in the US, potentially in response to the stockpiling of refined copper seen in China (chart 1).
Why is the Chinese copper stock not receding here? That is the question macro-managers and geopolitical pundits are asking themselves daily!

Shift Up IPO – The Positives – All Games Have Done Well

Shift Up plans to raise up to US$320m in its upcoming South Korean IPO.
Shift Up is a South Korean games developer, which as released three games so far for the global markets.
In this note, we talk about the positive aspects of the deal.

NIFTY50 Index Rebalance Preview: Two High Probability Changes in September; Adds Are Flying

Trent Ltd (TRENT IN) and Bharat Electronics (BHE IN) should replace LTIMindtree (LTIM IN) and Divi’s Laboratories (DIVI IN) in the NIFTY Index (NIFTY INDEX) in September.
Jio Financial Services (JIOFIN IN) and Zomato (ZOMATO IN) meet the free float market cap requirements but are not part of the F&O segment.
Passive NIFTY Index (NIFTY INDEX) trackers will need to trade at least 3.8 days of ADV and 9 days of delivery volume on the index changes.

Ohayo Japan | Worst Day of 2024

By Mark Chadwick

Nvidia surged 9.3% following strong earnings and a stock split announcement, but failed to buoy the broader market.
A study by Japan’s Government Pension Investment Fund (GPIF) reveals that Japanese firms benefit from dialogue with investors, with positive impacts on market capitalization and performance indicators.
Teijin (3401) Hong Kong’s Oasis Management disclosed ownership of 2.49% of Teijin’s shares, acquiring about 4.8 million shares, ranking seventh among major shareholders.

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May 23

Most Read: Renesas Electronics, Anglo American, Korea Stock Exchange KOSPI 200, Chilled & Frozen Logistics Holdings, Hong Kong Television Network, Ls Industrial Systems, IDP Education, Go Digit General Insurance and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)
BHP/Anglo American: A Decarbonising Solution
July Short Selling Resumption in Korea: Local Market Info & Trading Considerations
Chilled & Frozen Logistics (9099) Gone Ballistic – Reminder of Structure, Price, and Incentives
HKTV (1137 HK): $2.15/Share Buy-Back
KOSPI Size Indices: Potential Migrations in September Are Moving
Tax-Loss Selling in Australia 2024 – A Trade Basket [Updated]
HKTV (1137 HK): Co-Founders’ Ruse to Increase Their Grip Through a Share Buyback at HK$2.15
Go Digit IPO Trading – Low Subscription Rate, Not All Shares Are Locked Up
Ohayo Japan | Nvidia Does Not Disappoint

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)

Today post-close, Denso Corp (6902 JP) (via BofA) announced a selldown of 78,127,800 shares of Renesas Electronics (6723 JP). This is the latest in a line of block exits.
There was the 130mm offering in November last year by INCJ. There was 123mm shares in Jan 2024 by NEC and Hitachi. A month later, 50mm shares from Mitsubishi Electric.
In general, they have been absorbed, but one hasn’t needed to buy in the market. Some have broken price. Here, the pricing range is aggressive.

BHP/Anglo American: A Decarbonising Solution

BHP (BHP AU)‘s all-scrip unsolicited Offer for Anglo American (AAL LN), zeroes in on AAL’s copper assets as demand for the metal increases for use in EVs and renewable power.
The proposal has been labelled highly opportunistic by some shareholders and South African politicians. And that the value of AAL’s Chilian/Peruvian copper mines are obscured by its sprawling business interests.
The Offer remains conditional and non-binding. A transaction hinges off AAL spinning off its South African iron ore and platinum businesses. Expect AAL to reject terms, but remain engaged.

July Short Selling Resumption in Korea: Local Market Info & Trading Considerations

According to market information confirmed so far, the resumption is set for July 1st, and short selling will be restricted to the constituents of KOSPI 200 and KOSDAQ 150.
The surge in trading volume likely stemmed from the return of long-short positions post-short-selling ban, leading to an overall market volume increase.
Another critical factor is the buying pressure on value-up stocks resuming in early July. We should aim at the price impacts of intersecting long-short flows and value-up stock purchases.

Chilled & Frozen Logistics (9099) Gone Ballistic – Reminder of Structure, Price, and Incentives

In late March, AZ-Com Maruwa Holdings (9090 JP) made an unsolicited (“hostile”) bid for Chilled & Frozen Logistics Holdings (9099 JP) at a near 50% premium at ¥3,000/share.
It traded through, then C&F ran a bid solicitation process, got four bids. Since the day AFTER that announcement, the stock is up 56%. We approach Alps Logistics multiples.
This deal doesn’t get the split price benefit that HTS and Alps Logistics did. And it is a fundamentally different logistics business. And target management dynamics are different.

HKTV (1137 HK): $2.15/Share Buy-Back

Online shopping platform play Hong Kong Television Network (1137 HK) (better known as HKTV) has announced a buy-back of 11.25% of shares out, at $2.15/share, a 20.8% premium to undisturbed.
If successful, the Offer elevates co-founder Ricky Wong’s stake, together with concert parties, to 51.55% (before exercising options), up from 45.75% currently.
HKTV has been in the news lately for all the wrong reasons: claims of non-payments to suppliers; and delaying its 2026 target after a 79% decline in FY23’s net profit.

KOSPI Size Indices: Potential Migrations in September Are Moving

The review period for the September rebalance of the KOSPI Size Indices will run from 1 June to 31 August.
We see 6 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 6 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.
Stocks migrating upward have outperformed stocks migrating lower. But there are still stocks trading at a Price to Book of less than 1.

Tax-Loss Selling in Australia 2024 – A Trade Basket [Updated]

Three weeks after instantiation of Phase 1, the ASX200 vs LiquidBasket is +1.8% if you traded the basket VWAP the next day. vs LessLiquid it is +8.5%.
Equal weight all names in the two is +3.1%. Trade VWAP over two days it is +0.7%, +7.6%, and +2.7%. So far things are OK.
Next week one would add another basket, then in the last week of June, one would cover and reverse the trade and hold on for 30-40 trading days or so.

HKTV (1137 HK): Co-Founders’ Ruse to Increase Their Grip Through a Share Buyback at HK$2.15

Hong Kong Television Network (1137 HK) has launched a share buyback to acquire a maximum of 100.0m shares (11.25% of shares) at HK$2.15, a 20.8% premium to the undisturbed price.
The offer is conditional on approval by the requisite majority of shareholders and the approval of the whitewash waiver. There is no minimum acceptance condition, and the offer price is final.
The offer is unattractive and is an inefficient use of cash to increase the co-founders’ grip on the shares. Nevertheless, the EGM vote is likely to get up.

Go Digit IPO Trading – Low Subscription Rate, Not All Shares Are Locked Up

Go Digit General Insurance raised around US$315m in its India IPO.
Go Digit General Insurance is a digital full stack insurance company, offering motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance and other insurance products.
We have looked at the company’s performance in our past note. In this note, we talk about the trading dynamics.

Ohayo Japan | Nvidia Does Not Disappoint

By Mark Chadwick

U.S. stocks fell Wednesday as Fed minutes revealed concerns about persistent inflation, dimming hopes for imminent rate cuts
Nvidia shares surged 5% as the company reported robust earnings, with data-center revenue skyrocketing 427% year-over-year to $22.6 billion, surpassing Wall Street’s expectations.
Nissan to halt the development of two EVs initially set for production at its Canton plant in Mississippi, due to a slowdown in EV sales growth in North America

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May 22

Most Read: Tokio Marine Holdings, Kfc Holdings Japan, Evergreen Marine Corp, Mitsubishi UFJ Financial (MUFG), Modec Inc, Kia Corp, KB Financial, Mitsui Matsushima, Prosus NV and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell
Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade
MUFG Cross-Shareholding – At Least US$20bn of Cross-Shareholding to Sell, Taking It Slow
MODEC (6296 JP): The Current Playbook
A Plausible Explanation for Korea NPS’s Unusually Large Outflow on Local Stocks in May
FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June
JAPAN ACTIVISM: Murakami Now 29% of Mitsui Matsushima. Activism? Or Effort to Make Murakami Listco
StubWorld: Bloisi’s Appointment Stalls The Prosus Accretion Trade

Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell

The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
Tokio Marine Holdings (8766 JP) had a stake over US$100m in at least 33 listed Japanese stocks, amounting to a total of US$16.5bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive

By Ethan Aw

Mitsui E&S Holdings (7003 JP) is looking to raise approximately US$451m through a secondary follow-on offering, via selling approximately 21.9m shares (32% of TSO) of Modec Inc (6269 JP)’s stock.
The deal is a large one to digest at 81 days of three month ADV.
In this note, we will talk about the placement and run the deal through our ECM framework.

Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction

Carlyle has a deal to buy Kfc Holdings Japan (9873 JP). ¥6,500/share is a 78% premium to undisturbed as a professional holder sells in an auction to the highest bidder.
That’s a great format for achieving a great price. And we got one. This should get done easily.
Importantly, the Bidco is named Crispy KK. It is 100% owned by Juicy KK. Juicy KK itself is 100% owned by Crispy Holdings L.P. Someone had some fun.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade

Using data from the close on 17 May, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 12.6% and a one-way trade of US$1.13bn.
Shorts have increased on the potential adds and potential deletes and covering will lead to rally in some stocks while providing support in others at rebalance implementation.

MUFG Cross-Shareholding – At Least US$20bn of Cross-Shareholding to Sell, Taking It Slow

Following up on our earlier cross-shareholding notes, in this note we look at Mitsubishi UFJ Financial (MUFG) (8306 JP)’s cross-shareholding.
MUFG had a stake over US$100m in at least 47 listed Japanese stocks, amounting to a total of around US$19bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

MODEC (6296 JP): The Current Playbook

Since the US$535 million secondary placement announcement, Modec Inc (6269 JP)’s shares are down 15% from the undisturbed price of JPY3,320 per share (14 May).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Modec’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 22 May. Investors who have participated in previous large Japanese placements tend to secure positive returns.

A Plausible Explanation for Korea NPS’s Unusually Large Outflow on Local Stocks in May

NPS’s May net selling of ₩700B likely stems from retrieving outsourced management funds to allocate to the newly selected three value-up outsider managers.
These value-up managers will start investing in Q3. NPS’s May net selling matches their allocations. We should design a setup targeting the likely inflow into value-up targets starting early July.
In particular, we should watch non-financial value-up stocks like Kia Corp and Hyundai Motor, which had more significant May price impacts likely due to NPS outflow.

FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June

The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of around US$1.2bn.
We currently forecast two potential changes at the next rebalance in June – one change is high probability while one could change depending on price moves over the next week.
The trade has performed well historically with positive performance till implementation followed by reversion post implementation.

JAPAN ACTIVISM: Murakami Now 29% of Mitsui Matsushima. Activism? Or Effort to Make Murakami Listco

Noted Japanese activist MURAKAMI Yoshiaki and his entities and relations went from 4.98% to 19.88% of Mitsui Matsushima (1518 JP) at an average ¥3,500/share from 2 May through 10 May.
Then they bought an additional 5.44% on 13 May, just before earnings, in the midst of a huge run-up, paying 40% more for that 5% than the first 5%.
I thought that might be the end, but in two days, they have bought an additional 9+%. There is something else going on. It is worthy of your attention.

StubWorld: Bloisi’s Appointment Stalls The Prosus Accretion Trade

Prosus (PRX NA)‘s discount to NAV and implied stub widened after Fabricio Bloisi’s CEO appointment late last week. But the sell-down of Tencent (700 HK) to buy-back Prosus will continue.
Preceding my comments on Naspers (NPN SJ)/Prosus/Tencent 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%.

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May 21

Most Read: Renesas Electronics, Korea Stock Exchange KOSPI 200, Kfc Holdings Japan, L’Occitane, Mitsui Matsushima, EcoPro Materials, Shift Up and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)
FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June
Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys
Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction
L’Occitane (973 HK): Who Owns What, And When
Renesas Block – While Not Particularly Well Flagged, Recent Selldowns in the Stock Have Done Well
JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm
Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital
KFC Holdings Japan (9873 JP): Carlyle Finger Lickin’ Tender Offer at JPY6,500
Shift Up IPO Preview

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)

Today post-close, Denso Corp (6902 JP) (via BofA) announced a selldown of 78,127,800 shares of Renesas Electronics (6723 JP). This is the latest in a line of block exits.
There was the 130mm offering in November last year by INCJ. There was 123mm shares in Jan 2024 by NEC and Hitachi. A month later, 50mm shares from Mitsubishi Electric.
In general, they have been absorbed, but one hasn’t needed to buy in the market. Some have broken price. Here, the pricing range is aggressive.

FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June

Lee Bok-hyun hopes for short selling to resume by late June. Given his influence on the Value-up policy, it’s likely to happen.
Lee expects key tax incentives for the value-up program to be included in the July tax reform bill, showing a market-friendly stance.
Yesterday’s New York event had a very positive atmosphere with more attendees than expected, showing genuine investor interest, likely ensuring sustained interest in Korea’s Value-up program.

Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys

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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction

Carlyle has a deal to buy Kfc Holdings Japan (9873 JP). ¥6,500/share is a 78% premium to undisturbed as a professional holder sells in an auction to the highest bidder.
That’s a great format for achieving a great price. And we got one. This should get done easily.
Importantly, the Bidco is named Crispy KK. It is 100% owned by Juicy KK. Juicy KK itself is 100% owned by Crispy Holdings L.P. Someone had some fun.

L’Occitane (973 HK): Who Owns What, And When

A fortnight ago, I sought access to L’Occitane (973 HK)‘s lesser-known shareholder register, a byproduct of investigative disclosure reports under Chapter 571, s329 of the Securities and Futures Ordinance.
This is the same register I discussed in Giordano (709 HK): A Closer Look At The Shareholder Register Ahead Of The SGM; and one also used by proxy solicitors.
The register confirms what has been long rumoured about a certain shareholder activist. It is also informative for what isn’t present.

Renesas Block – While Not Particularly Well Flagged, Recent Selldowns in the Stock Have Done Well

By Clarence Chu

Denso Corp (6902 JP) is looking to raise US$1.39bn from selling a portion of its stake in Renesas Electronics (6723 JP).
DENSO’s selldown is a small one at just 4.3 days of ADV. While there is an overhang of around 4% of TSO, DENSO will be locked up for 270 days.
In this note, we will talk about the placement and run the deal through our ECM framework.

JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm

Mitsui Matsushima (1518 JP) was a coal company starting over 100yrs ago. A bunch of years ago it started a solar energy business and then started M&A to diversify.
Coal closed last year and since, MMH has become an investment holdco for “basic businesses” (drinking straws, conveyor system chains, document shredders, weighing machines, crystal measuring devices, mask blanks, etc).
Murakami Group accumulated 4.98% in five weeks, then the next 14.9% in five days. Pump & Dump like Pacific Metals? Activism like JAFCO? Or something else more interesting?

Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital

After the market close on 20 May, it was reported that Blue Run Ventures (BRV) sold 204.1 billion won (US$150 million) worth of EcoPro Materials in a block deal sale.
The block deal sale price was 93,000 won, a 9.7% discount to the closing price on 20 May (103,000 won).
This block deal sale at a big discount is likely to raise overhang concerns about further block deal sales by BRV Capital in the coming years.

KFC Holdings Japan (9873 JP): Carlyle Finger Lickin’ Tender Offer at JPY6,500

Kfc Holdings Japan (9873 JP) has recommended a tender offer from Carlyle Group / (CG US) at JPY6,500 per share, a 20.4% premium to the last close.
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 31.54% ownership ratio.
Due to the Mitsubishi Corp (8058 JP) irrevocable, the minimum acceptance condition requires a 48.6% minority acceptance rate. The acceptance condition is achievable as the offer is a knockout bid.

Shift Up IPO Preview

Shift Up (462870 KS) is getting ready to complete its IPO in KOSPI in June 2024. Established in 2013, Shift Up is one of the leading game developers in Korea.
The IPO price range is 47,000 won to 60,000 won. The IPO offering amount is 340.8 billion won to 435 billion won.
According to the bankers’ valuation, the market capitalization range of the company ranges from 2.73 trillion won to 3.4 trillion won. This is the second largest IPO in Korea YTD.

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May 20

Most Read: Yichang HEC Changjiang Pharma, Korea Stock Exchange KOSPI 200, Li Auto , Japan Post Holdings, Tencent, L’Occitane, BYD Electronics, Nikkei 225, Zijin Mining Group Co Ltd H, JD.com and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane
HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs
Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys
Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted
EQD | The Nikkei Can Go Higher From Here
HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)
HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.

FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June

Lee Bok-hyun hopes for short selling to resume by late June. Given his influence on the Value-up policy, it’s likely to happen.
Lee expects key tax incentives for the value-up program to be included in the July tax reform bill, showing a market-friendly stance.
Yesterday’s New York event had a very positive atmosphere with more attendees than expected, showing genuine investor interest, likely ensuring sustained interest in Korea’s Value-up program.

HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way

The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane

There is Japan Post Bank (7182 JP) buyback risk that might cause Japan Post Holdings (6178 JP)/JPB unwinds; though probably a H2 risk.
Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms. Someone appears to be accumulating a stake to block an Exit/Delisting Offer, and force a bump.
L’Occitane (973 HK)‘s scrip pre-condition has been satisfied. But still the Offeror prevaricates.

HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys

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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted

BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.

EQD | The Nikkei Can Go Higher From Here

By Nico Rosti

The Nikkei 225 INDEX has been rallying a bit last week and closed the week up. A rebound from the previous downtrend is underway.
A temporary bottom may have been established in May, it is not clear if the index is about to go lower or higher, but our pattern model readings suggests higher.
If the index continues to rally, the first major resistance area will be around 40k.

HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)

Zijin Mining Group Co Ltd H (2899 HK) will replace Xinyi Solar Holdings (968 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) after the close on 7 June.
An increase in the FAF for SenseTime Group (20 HK) results in the stock avoiding deletion at the June rebalance.
Estimated one-way turnover at the rebalance is 2.9% resulting in a round-trip trade of HK$3.8bn with over 1x ADV to trade on the add and delete.

HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June. However, there are float and capping changes.
Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in Li Auto (2015 HK).
Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.

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May 19

Most Read: China Merchants Expressway Net, JD.com , Alibaba Group Holding , APT Medical , Shinva Medical Instrument A, Shenyang Xingqi Pharmaceutical, Eoflow, ESR Group , Li Auto , Yichang HEC Changjiang Pharma and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues
Eoflow: Financing Requirements, Changing Shareholding Structure, and the Next Steps
(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived

The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX).
We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June

We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes

With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.

CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains

The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?

ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues

With the review period now complete, we forecast 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
There are 4 stocks that could be added to both indices while some stocks will also have same way flows from CSI Smallcap 500 Index (SH000905 INDEX) trackers.
The potential adds have outperformed the potential deletes over the last 6 months. There has been a big move higher in the potential adds over the last few weeks.

Eoflow: Financing Requirements, Changing Shareholding Structure, and the Next Steps

In this insight, we discuss the additional financing requirements, changed shareholding structure, and the next steps for Eoflow.
Eoflow is one of the best performing stocks in the Korean stock market in the past one month as its shares have soared 249% in this period.
The details of the oral argument (Insulet vs Eoflow) at the U.S. Appellate Court suggest that the U.S. Appellate Court may rule in favor of Eoflow.

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market

Tally 51 – 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 was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs.
Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).

HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way

The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.

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May 18

Most Read: Alibaba Group Holding , L’Occitane, BYD Electronics, Ryohin Keikaku, HD Hyundai Heavy Industries , Samsung Life Insurance, Prosus NV, Japan Post Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
L’Occitane (973 HK): On Activism And The Scrip Alternative
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met
Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
Block Deal Sale of 3% Stake in HD Hyundai Heavy Industries
Potential Samsung Life Insurance Block Deals, Likely to Be Triggered by E Mart
Naspers X Prosus (NPN, PRX): Market Reacts Negatively to Appointment of CEO
Japan Post Bank – It’s like a Closed End Mutual Fund More Than Ever

L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough

By Xinyao (Criss) Wang

The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
Deploying China’s sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don’t think the current “technical bull market” to be lasting.

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

L’Occitane (973 HK): On Activism And The Scrip Alternative

In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known.

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

Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.

L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met

L’Occitane (973 HK) announced that the share alternative pre-condition was satisfied. However, The share alternative offer is at the offeror’s discretion and with the consent of the financing parties.
The share alternative offer poses a dilemma due to the requirement to satisfy the minimum acceptance condition while not breaching the upper limit of the share alternative offer.
The share alternative offer is a play on higher multiples by relisting the business. At HK$50.00, L’Occitane would trade in line with its median global beauty peers’ multiples.

Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse

The Sep 2024 Nikkei 225 Review data set is mostly done, and one can interpolate results relatively accurately. It still leaves us with one ADD, one DELETE, and capping fun.
Recently, Yanai-san sold more Fast Retailing (9983 JP). There is more Real World Float- more active holders own more stock (which may mean less interest to buy later).
There is a dark horse candidate which is on investor radar for other reasons. It would not be out of the question, but the precedent is old, and different.

Block Deal Sale of 3% Stake in HD Hyundai Heavy Industries

HD Korea Shipbuilding & Offshore Engineering (009540 KS) plans to sell 2.66 million shares (3% of outstanding shares) of HD Hyundai Heavy Industries (329180 KS) in a block deal sale.
We would avoid participating in this block deal sale and we have a Negative view of HD Hyundai Heavy Industries (329180 KS) over the next one year.
After this block deal sale, we believe there could be concerns about HD Korea Shipbuilding & Offshore Engineering potentially selling additional shares of HD HHI in the next 2-3 years.

Potential Samsung Life Insurance Block Deals, Likely to Be Triggered by E Mart