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• We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
• Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
• This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…

• With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
• The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
• There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

• 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.

• There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
• The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
• Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.

• Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu. 
• This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap. 
• Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.

• 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. 

• Chosun reports Korean financial authorities advance Value-up plan guidelines to May 2nd, citing momentum decline post-election. Chosun’s credibility enhances report validity.
• Companies will commence Value-up-related disclosures in alignment with the guidelines within May. A dedicated Value-up website is set to launch in May.
• The May 2nd guideline release date is crucial for Value-up momentum trading. Anticipate heightened volatility in Value-up stocks approaching this date.

• Eagle Nice International Holdings’ dividend yield averaged 9.2% from FY 2019 to FY 2023. Its annual dividend payout averaged 72.2% in the same period.
• Eagle Nice (Intl) Hldgs is mainly engaged in the design and manufacture of sportswear for adults and children on an OEM basis. Yue Yuen Industrial Holdings is the largest shareholder.
• Eagle Nice Holdings also has attractive valuations and consistent growth in sales and profits. 

• Originally, Brother Industries (6448 JP) wanted to buy Roland DG Corp (6789 JP).  Roland invited others to bid, didn’t tell Brother, then said Taiyo Pacific’s ¥5,035 bid won.
• That was low. Weeks later, Brother lobbed a ¥5,200 overbid. They are going through the approvals process but it isn’t clear Brother is negotiating.
• Taiyo has extended and extended and shown up in interviews. Now it has overbid at ¥5,370.

• The ES50 Index is one of the most highly-tracked and followed indices in Europe and the annual index review takes place in September every year.
• This annual index rebal event usually results in some of the most significant index flow events in Europe every year, typically amounting to billions of dollars of flows.
• In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2024.

• We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
• Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
• This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…

• There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
• The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ). 
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

• 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.

• In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months. 
• We review the the share price performances over different time periods (1 day, 1 week,  and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs. 
• On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

• Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu. 
• This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap. 
• Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.

• There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
• Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
• There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.

• There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
• The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
• Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.

• Today’s reveal includes two main parts: first, setting up internal balance management for investors; second, building the detection system to block naked short-selling.
• FSC and FSS haven’t provided a set date for system completion but suggest it may start late this year or early next year. Uncertainty remains on overseas investor participation.
• A decision on short selling is due in June, but no confirmation was given today. However, the local market anticipates short selling resuming before this system is fully operational.

• Four years ago, almost to the day, Bloomberg ran an article, “China Merchants Group Ltd. is exploring taking China Merchants Port Holdings private“. China Merchants Ports (144 HK) popped 23%.
• CMP gave back (most) of that gain a month later. Shares are up just ~10% since. 
• CMP’s implied stub is bouncing around a multi-year low; and the simple ratio (CMP/ Shanghai International Port Group (600018 CH)) is around an all-time low.

• With the rise in Coupang’s market cap, it’s imperative to evaluate if the Korea Index can attain eligibility to include foreign-listed companies.
• Coupang’s 45% YTD surge nears a $41B market cap, with a 65% free-float rate equating to $27B. Yet, to meet Korea Index eligibility, an additional $23B is needed.
• Aside from Coupang, more companies are preparing for overseas listings. Also, potential stock price increases for Coupang should be considered. The combined market cap approaches the US$50B threshold.

• The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
• We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
• With a big jump in tracking AUM over the last few months, passives will need to trade a lot of stock on implementation date.

• Again, Tesla reports a 1Q24 sales with 4% miss but post market share price up more than 10% for 6 reasons. 1. Gross margin was stable on 15% sales drop;
• 2. ASP was stable; 3. Affordable EV on track for 2025; 4. Factory expansion to slow; 5. Optimus to sell end of 2025; 6. 2024 EV shipment higher than 2023.
• Near term risks to remain: 1. When will margin trough? 2. Why bother to buy EV if 2nd hand market collapsing? 3. Will Robotaxi/FSD bring in meaningful sales/profits soon?

• HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range. 
• A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
• Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.

• Yesterday, post-close, Bloomberg reported a headline “*SILCHESTER REPORTS NIKON STAKE; MAY SEEK CAPITAL POLICY CHANGES“
• That was exciting. It was in all caps. It was activist-ish-y. Today the stock rose 10.3% and we got another article saying it was up because of Silchester’s filing.
• Beware the Bloomberg headline. Nuance is sometimes lost. They aren’t always designed to help investors invest. Often, the main purpose is clickbait.

• In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months. 
• We review the the share price performances over different time periods (1 day, 1 week,  and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs. 
• On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

• In RMB Dual Counter Trading Is Coming – This Changes AH Relationships, Travis Lundy discussed the forthcoming inclusion of RMB dual counters in the Hong Kong Southbound Connect programs.
• This is but one of the five capital market cooperation measures announced by the CSRC last Friday. 
• The other four measures include ETFs, improving mutual recognition of funds, increasing China IPOs in Hong Kong, and the inclusion of REITs. This insight discusses the latter.

• Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities.
• Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
• In this note, we talk about the not-so-positive aspects of the deal.

• There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
• The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ). 
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

• In this insight, we take a look at the potential ADDs/DELs for the DAX index and the MDAX index in the run up to the June 2024 index rebal event.
• I currently see no changes for the DAX index but there could be one change for the MDAX index.
• M&A candidate MorphoSys AG (MOR GR) could be deleted in the run up to the June 2024 review.

• There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
• Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
• There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.

• J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
• The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
• J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued. 

• Several days ago I published a piece showing the data for TOPIX flows for April month-end.
• This is an update reflecting new data companies have reported to regulators, one large correction to a data provider’s data, and one Very Large Flow.
• I believe that the revised data is more accurate. And there is more flow. With a spreadsheet attached. 

• A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
• They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
• RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.

• In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
• Since my last insight, my index change expectations and flow expectations have changed significantly.
• My latest estimate for one-way flow in June 2024 is US$1.06bn (down from US$1.22bn a month ago).

• Sichuan Baicha Baidao Industrial (2555 HK) (SBBI) raised around US$330m in its HK IPO.
• SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
• We have looked at the company’s performance and valuations in our past note. In this note, we talk about the trading dynamics.

• In Smartkarma Corporate Webinar | Elite Commercial REIT: Essential Assets at an Attractive Yield we conducted a fireside chat with Elite Commercial REIT.
• Elite Commercial REIT is a Singapore real estate investment trust established with the investment strategy of principally investing, directly or indirectly, in commercial real-estate related assets in the United Kingdom.
• The company has recently expanded its strategy to look at other commercial assets in the UK, beyond its existing portfolio of assets rented by the UK government.

This Insight is part of the Smartkarma Corporate Webinar series, supported by SGX through the Investor Education Fund.

• Despite this pattern persisting for years, there has still been a significant price impact each time it surfaces. Therefore, we should pay attention to the upcoming CB conversion schedule.
• A consistent observation is that the price impact is most significant at the announcement of early redemption requests.
• The anticipated announcement dates for the forthcoming early redemption requests are: around May 20th (195th conversion), around September 20th (196th conversion), and around March 20th of next year (197th conversion).

• Postal price hike approved  swinging the Post business from a loss to a profit
• Cancellation of 7.36% of outstanding shares from the latest buyback
• Management Plan to be released in May will provide further details on improving ROE and PB

• Nidec reported a solid set of quarterly numbers, except for another huge structural loss in its EV business. 
• Nidec saw sales growth and operating profitability improvements in all other segments
• We continue to think that Nidec is attractively priced at under 20x EV/ EBIT given structural growth drivers

• In this analysis, we provide a back testing analysis of the end of mandatory lock-up periods monthly data in Korea in the past six months.
• All in all, this end of mandatory lock-up period monthly data continues to provide some alpha generating results.
• In the past six months, they have tended to work better in periods when KOSPI declines rather than in periods when KOSPI rises. 

• Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ.  Maintained full year 2024 outlook
• Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
• SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!

• J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
• The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
• J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued. 

• SK Square is looking to raise around US$198m via selling 2.1% of Krafton (259960 KS).
• The stock has been doing well over the past few months and its earnings and price momentum remain strong.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
• They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
• RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.

• Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value is around its highest-ever level.
• The simple ratio of JCNC/Astra International (ASII IJ) is at its highest level outside the 2008 GFC.
• A weak Indonesian rupiah is likely a factor. Still, JCNC is trading rich to its NAV. A takeover from parent Jardine Matheson Holdings (JM SP) is idealistic.

• On 19 April, Taiyo Co-CEO Brian Heywood told Bloomberg and Reuters they were considering three options to Brother Industries (6448 JP)’s tender for Roland DG Corp (6789 JP). 
• Taiyo’s options are bumping its offer, walking away or tendering into the Brother’s offer if it bumps and alleviates dis-synergies concerns.
• All three options are likely a ruse. Taiyo’s primary play is to frustrate and pressure Brother to withdraw its bid if it cannot get the Board’s recommendation.

• Value Act’s recent statement might suggest that they have prevailed and Seven & I Holdings (3382 JP) has yielded to their demands. However, the reality might be less straightforward.
• Value Act sought new market expansion, but Seven & I is focused on reinforcing its presence in existing, well-established markets.
• Given Value Act’s impatience, their acceptance of Seven & I’s plan for a 2026 Super Stores IPO, contingent on a business transformation, is unexpected.

• After the market close on 22 April, it was reported that SK Square plans to sell 2.2% stake in Krafton in a block deal sale worth about 270 billion won. 
• The estimated block deal sales price range is from 243,000 won to 251,000 won, representing a 3.1% to 6.2% discount to the closing price of 259,000 won on 22 April.
• We would take the deal. The company’s valuations remain attractive and it has been successful in expanding its sales and profits. 

• A shares were up on the week, while Hs were down. BIG divergence among liquid names. 
• Net SOUTHBOUND buying was +HK32.1bn. SOUTHBOUND ended its consecutive post-CNY daily net buy streak on 25 March, then started a new one. No net sell days since.
• Little market news. More geopolitical news. SOE bank H-shares are seeing relentless net and gross buying, very very little selling.

• The Deputy Prime Minister Choi Sang Mok reaffirmed the Corporate Value Up program, pushing up the major value driven/low PBR stocks in Korea today.
• Deputy Prime Minister Choi emphasized that as part of Corporate Value Up program, corporate tax benefits to companies that have made efforts to strengthen shareholder return policy will be provided.
• The Korean government also plans to revise the law to separate taxation on the dividend income of shareholders of companies that expand dividends.

• Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
• KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
• There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details. 

• Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ.  Maintained full year 2024 outlook
• Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
• SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!

• Deputy PM Choi Sang-mok commits to aggressively pursue separate taxation of dividend income, marking a shift towards concrete action for value-up policies.
• Ever since the introduction of the Value-up policy earlier this year, the primary incentive championed by the local capital market has been the separate taxation of dividend income.
• Hence, the government’s official commitment to this marks a crucial step in reshaping the Value-up momentum.

• 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: Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Azure Minerals (AZS AU), QV Equities Ltd (QVE AU), Hollysys Automation Technologies (HOLI US), Shinko Electric. 
• Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Newmark Property REIT (NPR AU), Lawson.

• Pasona (2168 JP)will pay out 10-20% of the extraordinary gain from the Benefit One (2412 JP) sale. It will take its sweet time doing so. For no apparent reason.
• Hang Lung Properties (101 HK)‘s first-ever scrip dividend provides the means for the Chan Family to indirectly chip away at minorities. 
• Hollysys Automation Technologies (HOLI US) accountant resignation announcement is a nothing burger. An  update on PRC regulatory approvals would be welcome about now though. 

• TSMC and ASML reported 1Q24 results last week; both stocks have fallen post results, impacted by global concerns despite a strong outlook for these two leaders into 2025E.
• TSMC guided for strong growth not just in 2024E, but if one digs into management’s comments, they actually provided strong visibility into their 2028E internal revenue expectations.
• For ASML, its EUV product business is the key indicator to watch. We believe TSMC shares will continue to re-rate even through a period of global economic softness.

• The Nasdaq Composite extended its decline for a sixth consecutive session, marking its longest losing streak in over a year, as Nvidia’s plunge exacerbated market concerns
• Paramount Global’s shares surged over 10% after reports of discussions between Sony Pictures Entertainment, Apollo Global Management, and Paramount for a joint buyout bid.
• Sekisui House completed a $4.9 billion acquisition of U.S.-based MDC Holdings, expanding its U.S. homebuilding operations to 16 states

• JD.com (9618 HK) announced this week that it has repurchased 2.8% of the outstanding shares of the company in the first quarter of 2024. 
• Improved shareholder returns is a key thesis for the stock, given that there is little market expectation on such given limited track record.
• A positive catalyst on full year performance could be the government’s announced stimulus policy for home appliance in April this year (trading old for new).

• Unprecedented levels of FII option-buying & increasing geo-political risk causing IVs to re-price higher.
• Skew/ Smile characteristics of the Vol Surface reflect increased risk aversion but not it panic mode – yet.
• BankNifty IVs exhibiting unusual “kink-in-the-curve”. Enter barbell structures to position for reversion in curve shape.

• TSMC: +9.2% Premium, Major Breakdown From Previous Historically Extreme High
• UMC: -1.9% Discount, Is Near Low End of Historical Range
• ASE: +10.4%; ADR Short Interest Jumps to Very High Level vs. History

• SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
• For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
• Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

• Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
• There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
• The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.

• Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ.  Maintained full year 2024 outlook
• Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
• SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!

• On the 8th April, Azure Minerals (AZS AU) shareholders overwhelmingly approved the Sociedad Quimica y Minera (SQM US)/Gina Rhinehart’s Hancock transaction. Shares promptly closed down 7% on regulatory approval fears.
• Those fears are unwarranted. China’s Tianqi Lithium would indirectly own just ~11% in Azure post-deal.  China has recently lifted anti-dumping tariffs on a range of Aussie products. FIRB won’t block.
• An expected approval may have spurred Gina to buy more shares in Lynas (LYC AU). Why buy now if FIRB dings Azure; that outcome would push the whole sector lower.

• On the 2 January, TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, announced it had received a preliminary non-binding proposal from Laurent Junique to be acquired at $6.60/ADS.  
• On the 1st March, TDCX entered in a definitive agreement by way of a short form merger at US$7.20/ADS, a 48% premium to undisturbed.
• As Laurent Junique holds 98.4% of the voting power, there is no shareholder vote on the merger. This is done. The Offer should close in the 2Q24.  

• The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
• The index is reviewed quarterly. The next review will be in June 2024 and the evaluation date for the rankings for the constituent selection process is 6th June 2024.
• In this insight, we take a look at the Potential ADDs and Potential DELs for the June 2024 index rebal event and the intra-review ADDs/DELs.

• KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
• In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2024.
• We expect up to four changes in the KOSPI 200 index during the June 2024 index rebal event (down from 5 expected last month)  based on the latest available data.

• Tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• No new deals were discussed on Smartkarma this week; although a Lynas Corp Ltd (LYC AU) / MP Materials Corp (MP US)tie-in (again) rumoured.
• Key updates took place on: Azure Minerals (AZS AU), Tietto Minerals (TIE AU), JSR Corp (4185 JP), Shinko Electric (6967 JP), TDCX (TDCX US), and Hollysys Automation Technologies (HOLI US).

• Geopolitical concerns and disappointing ASML earnings were the key triggers for sharp pull back in equities this week
• Next week in Japan, all eyes will be on the Bank of Japan and the continued weakness in the exchange rate. Earnings season just around the corner too
• Semiconductor names were hit hard this week – Lasertec (-21%), Tokyo Electron (-15%) and Disco (-11%) sharply lower. 

• 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: Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) lock-ups. HD Hyundai Marine Solution (443060 KS), ZEEKR (ZK US) and Sichuan Baicha Baidao Industrial (2555 HK) IPOs.
• Event-Driven developments: Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), Inageya Co Ltd (8182 JP), Hang Lung Properties (101 HK), Tietto Minerals Ltd (TIE AU). 

• With the review period nearing completion, 6 stocks are in inclusion zone and 8 are in deletion zone. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 7% at the June rebalance leading to a one-way trade of CNY 9.7bn (US$1.34bn). Index arb balances could increase the impact on the stocks.
• The inflows into mainland China ETFs have further increased the flow and impact on the potential changes. The potential adds have continued to outperform the potential deletes.

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider. 
• 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
• Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

• TSMC reiterates 2024 sales y/y growth of 20-25% but revises down 2024 global semiconductor y/y sales from over 10% to 10% and global foundry sales growth from 20% to 15-19%.
• No more Moore’s Law: After 3 years ramp up gap between N5-N3, TSMC confirms 10-11 quarters of ramp up gap between N3 and N2 due to longer production cycle.
• Driven by stronger digital consumer (33% q/q), HPC (3% q/q), IoT (5% q/q) sales but weaker smartphone IC (-16% q/q), TSMC reports 1Q24 sales decline of only 5% q/q.

• The local market anxiously awaits the family’s ability to pay by early May. Failure could prompt the Tax Service to sell their pledged stocks, including Hanmi Science shares.
• Preventing Tax Service from selling Hanmi Science shares requires additional collateral, unlikely due to existing pledges. Rumor suggests mother and daughter may sell shares before May, followed by Tax Service.
• Given negotiation uncertainty with KKR, it’s crucial to prepare for potential failure rather than solely relying on success, necessitating a pragmatic approach.

• Shinko Electric Industries (6967 JP)‘s pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread widened from a low of 3.1% on 14 March to 7.0%. 
• The widening spread can be attributed to China SAMR approval timing, earnings risk, Ibiden Co Ltd (4062 JP)’s material underperformance lowering the break price and a large fund liquidating positions. 
• The deal break risks remain low with the timing remaining the key risk. The current 7.0% spread is an attractive opportunity to add. 

• Inageya Co Ltd (8182 JP) announced a share exchange offer by United Super Markets (3222 JP) at 1.46 USMH shares per Inageya share.
• The share exchange aligns with Aeon Co Ltd (8267 JP)’s well-flagged intention of making Inageya a wholly-owned subsidiary of USMH.
• Aeon’s 50%+ shareholding in Inageya and USMH facilitates the two EGM votes. The deal metrics are broadly fair for both sets of shareholders. 

• On the 8th February 2024, 85% of Hollysys Automation (HOLI US) shareholders present and via proxy, voted for Ascendent Capital’s Offer. After three-plus years, the end was finally in sight.
• Then crickets. The merger was to complete in the 1Q. On the 15th April, HOLI released an accountant resignation notice. No word on dissenters or regulatory approvals. Shares sold off. 
• The accountant resignation is a nothing burger. HOLI should lift their game and provide more transparency on the outstanding merger conditions. Still, the spread is attractive. This is a buy. 

• The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
• The index is reviewed quarterly. The next review will be in June 2024 and the evaluation date for the rankings for the constituent selection process is 6th June 2024.
• In this insight, we take a look at the Potential ADDs and Potential DELs for the June 2024 index rebal event and the intra-review ADDs/DELs.

• KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
• In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2024.
• We expect up to four changes in the KOSPI 200 index during the June 2024 index rebal event (down from 5 expected last month)  based on the latest available data.

• The prospect of this IPO mirroring the post-listing rallies seen with Ecopro Materials is what keeps local institutions fixated on this IPO despite valuation issues.
• The key factors are speculative trading frenzy among local retail investors and subsequent passive inflows through early entry into KOSPI 200/MSCI Standard.
• Considering two factors is vital. Hyundai Marine Solution’s IPO size is twice Ecopro Materials’, potentially limiting speculative buying. Sector-wide rallies, crucial for Ecopro Materials, haven’t been as prominent in shipbuilding.

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider. 
• 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
• Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

• Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer. 
• That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence. 
• News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been. 

• In a recent discussion with a client, one of the questions that was raised was regarding the impact the local investors are having on the corporate governance reforms in Korea.
• The number of local investors in the Korean stock market has jumped in the past few years from 5.3 million in 2017 to 14.4 million in 2022.
• All in all, I think Korea is about 3-5 years behind Japan in various corporate governance reforms. So it has a lot of catching up to do.

• Perfect Medical Health (1830 HK), post a correction of consumer discretionary stocks in HK, now trades at a yield of 11.5%, with cash&investments representing 24% of the market cap.
• HK is experiencing a dip in consumer sentiment, and the company isn’t immune to it, but flat sales/profitability, a 24% net margin, and >40% ROE provide great margin of safety.
• The stock trades at 9.3x FY24 PE and 11.5% yield (assuming a 110% payout average across company history) with a growth option once the HK economy kickstarts.

• Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
• There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
• The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.

• On the 8th April, Azure Minerals (AZS AU) shareholders overwhelmingly approved the Sociedad Quimica y Minera (SQM US)/Gina Rhinehart’s Hancock transaction. Shares promptly closed down 7% on regulatory approval fears.
• Those fears are unwarranted. China’s Tianqi Lithium would indirectly own just ~11% in Azure post-deal.  China has recently lifted anti-dumping tariffs on a range of Aussie products. FIRB won’t block.
• An expected approval may have spurred Gina to buy more shares in Lynas (LYC AU). Why buy now if FIRB dings Azure; that outcome would push the whole sector lower.

• TSMC reiterates 2024 sales y/y growth of 20-25% but revises down 2024 global semiconductor y/y sales from over 10% to 10% and global foundry sales growth from 20% to 15-19%.
• No more Moore’s Law: After 3 years ramp up gap between N5-N3, TSMC confirms 10-11 quarters of ramp up gap between N3 and N2 due to longer production cycle.
• Driven by stronger digital consumer (33% q/q), HPC (3% q/q), IoT (5% q/q) sales but weaker smartphone IC (-16% q/q), TSMC reports 1Q24 sales decline of only 5% q/q.

• Shinko Electric Industries (6967 JP)‘s pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread widened from a low of 3.1% on 14 March to 7.0%. 
• The widening spread can be attributed to China SAMR approval timing, earnings risk, Ibiden Co Ltd (4062 JP)’s material underperformance lowering the break price and a large fund liquidating positions. 
• The deal break risks remain low with the timing remaining the key risk. The current 7.0% spread is an attractive opportunity to add. 

• Inageya Co Ltd (8182 JP) announced a share exchange offer by United Super Markets (3222 JP) at 1.46 USMH shares per Inageya share.
• The share exchange aligns with Aeon Co Ltd (8267 JP)’s well-flagged intention of making Inageya a wholly-owned subsidiary of USMH.
• Aeon’s 50%+ shareholding in Inageya and USMH facilitates the two EGM votes. The deal metrics are broadly fair for both sets of shareholders. 

• Arm – which we estimate accounts for 45% of SoftBank group’s equity value – is experiencing limits to its “growth at any price” stock status; the shares fell 12% yesterday
• The JPY’s depreciation is supportive of the group NAV, but with the Fed’s hawkish stance well known and BoJ expected to raise interest rates, JPY weakness may be largely done
• SoftBank shares trade at a wide 53%+ discount to the estimated NAV; yet we see downside risks to Arm’s valuation, along with the potential for JPY weakness to reverse

• Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
• KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
• There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details. 

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider. 
• 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
• Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

• Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer. 
• That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence. 
• News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been. 

• And eagle-eyed reader spotted Hang Lung Properties (101 HK)‘s scrip dividend option for the FY23 final dividend. That’s the first time I’ve seen HLP provide this alternative. 
• Over the years, the Chan family and Hang Lung (10 HK) have chipped away at HLG’s and HLP’s minorities. HLP and HLG are currently trading at all-time low P/Bs. 
• This scrip dividend, which takes a page out of Jardine Matheson (JM SP)‘s playbook, would boost HLG’s stake in HLP to ~63% from 61.24% currently; if opting only for scrip.

• J&T Global Express, a global logistics provider, raised about US$500m in its Hong Kong IPO in Oct 2023. Its pre-IPO investors will be released from its IPO linked lockup soon.
• As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 25.4% market share as per 2023 parcel volume.
• In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

• In its final results on 30 January, the Hang Lung Properties (101 HK) board declared a final dividend of HK$0.60 per share, which can be paid in cash or by scrip.
• The Chan family’s share of outstanding shares has steadily increased from 53.15% in 2013 to 61.89%. The scrip dividend could increase the family to 63.57% of post-dividend outstanding shares. 
• The Chan family have plenty of headroom to chip away at minorities before breaching the 25% public float requirements. HPL’s valuation is undemanding, but a privatisation offer is unlikely.

• Lynas Corp Ltd (LYC AU) is the proverbial Aussie battler. Post the 2018 general elections, the new Malaysian government put Lynas on notice it may halt it rare-earth operations. 
• Since then, Lynas’ Malaysian facility, which cuts into China’s near-monopoly on processing elements for defense/aerospace/EV/electronics industries, has (mostly) operated without substantial disruptions. Profit peaked in FY22; but has since rolled-over.
• Gina Rhinehart’s Hancock has now disclosed a 5.82% stake in Lynas; having disclosed a 5.3% stake in MP Materials (MP US) earlier this month. Lynas confirmed discussions with MPM in February.

• Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
• There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
• The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.

• On the 8th February 2024, 85% of Hollysys Automation (HOLI US) shareholders present and via proxy, voted for Ascendent Capital’s Offer. After three-plus years, the end was finally in sight.
• Then crickets. The merger was to complete in the 1Q. On the 15th April, HOLI released an accountant resignation notice. No word on dissenters or regulatory approvals. Shares sold off. 
• The accountant resignation is a nothing burger. HOLI should lift their game and provide more transparency on the outstanding merger conditions. Still, the spread is attractive. This is a buy. 

• The market is experiencing its first bout of volatility this year, with the S&P trading below 50-day moving average
• Toshiba is considering cutting its domestic workforce by 5,000, approximately 7% of its total in Japan, in its latest move to accelerate restructuring
• ASML’s Q1 orders fall short, reflecting chipmakers’ cautious stance on equipment purchases.