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• KCE Electronics PCL (KCE TB) will replace Ngern Tid Lor (TIDLOR TB) in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 29 December.
• Estimated one-way turnover is 0.55% and will result in a one-way trade of THB 455m. There is nearly zero funding flow on the other index members.
• Passive trackers will need to buy close to 1.2% of KCE Electronics PCL (KCE TB)‘s free float while selling around 1.6% of float in Ngern Tid Lor (TIDLOR TB). 

• 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 early next year.
• The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
• Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.

• Posco DX (022100 KS) will move from the KOSDAQ Market to the KOSPI Market on 2 January. That means KOSDAQ150 Index (KOSDQ150 INDEX) deletion at the close on 28 December.
• In line with our forecast, Temc (425040 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) as a replacement.
• Short interest increased in Posco DX (022100 KS) following its inclusion in a global index and there should continue to be unwinding over the next week.

• In 2019, it became apparent Fujitsu Ltd (6702 JP) wanted to sell down its stakes in non-core businesses (Shinko Electric, Fujitsu General, and FDK), and move on to better things.
• In early January 2023, a Bloomberg article suggested a sale process. A 20 Jan 2023 article suggested Fujitsu General’s auction was imminent. I wrote a piece. It was not bullish.
• The stock rose a bit, then fell 40+% through last week. Now another article suggests some urgency at Fujitsu. That changes things.

• The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
• The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
• There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US). 

• Today after the close, SBI Holdings (8473 JP) made an announcement it would buy (up to) 3.0mm shares of Gumi Inc (3903 JP) shares between tomorrow and end-March 2024.
• SBI already owns 8.8mm shares, and this would bring them close to 30.0%. 
• SBI did not specifically say they would buy on market, but the next 400,000 shares would require a large shareholder filing amendment. 

• The New and Better (5mos old) 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 and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
• STILL time to go long Hs vs As for the new year at 52wk wide discounts.

• Open House (3288 JP) took over Sanei Architecture Planning (3228 JP) this past autumn when banks forced the issue over the former CEO/owner’s mafia ties discovered in an investigation.
• Seedheiwa (1739 JP) now better known as Meldia DC, is ~60% held by Sanei Architecture Planning, and 3% by Mr Koike. It has debt. So it needs cleaning up too.
• This is too light for minorities, and even lighter for whole co, but it’s a done deal. 

• Dazheng (without Recco) has returned with a revised US$29.00 offer for Hollysys Automation Technologies (HOLI US), 9.4% higher than Ascendent Capital’s US$26.50 binding offer.
• While Dazheng’s proposal represents an all-time high, it would likely not be a superior proposal based on the Ascendent merger agreement due to the clauses on financing and due diligence.
• Nevertheless, to avoid the high risk that shareholders vote down the Ascendent offer and/or there are substantial dissenting shareholders, the Board will likely ask Ascendent to match Dazheng’s offer.  

• IJTT Co., Ltd. (7315 JP) has recommended Sparx Group (8739 JP)’s revised tender offer of JPY850, 4.7% premium to its previous JPY812 offer. The revised offer has been declared final.
• The Isuzu Motors (7202 JP) share repurchase price has risen 4.0% from JPY677 to JPY704. The tender closes on 15 January 2024. All other terms are unchanged.
• The shares are trading above the revised terms. A final offer and no competing bidder points to an unfavourable risk/reward profile – a 21% downside on a deal break. 

• After being granted due diligence, Newmont (NEM US) firmed an all-scrip Offer on the 15 May for Newcrest (NCM AU) at 0.400 new Newmont shares for each Newcrest share held. 
• The Offer, by way of a Scheme, permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms. 
• The Scheme Booklet has now been lodged with ASIC. Newcrest shareholders vote on the transaction on the 13 October. The record date for the special dividend is the 19 October.

• IJTT Co., Ltd. (7315 JP) was perhaps one of the lower-priced parent takeovers (Isuzu remains central to the bidder post-buyout) at 0.46x book. Today, the last day, it got bumped.
• The new price is ¥850/share vs ¥812/share. +4.7% and a whopping 0.48x book now. ¥850 is where the stock traded just before the announcement. It immediately jumped to ¥875/share.
• It appears Isuzu is not getting any more money out of this, but they should be OK. They are buying back in at 0.48x book. With leverage. 

• 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 early next year.
• The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
• Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.

• As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
• We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone. 
• There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

• The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
• The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
• There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US). 

• Today after the close, SBI Holdings (8473 JP) made an announcement it would buy (up to) 3.0mm shares of Gumi Inc (3903 JP) shares between tomorrow and end-March 2024.
• SBI already owns 8.8mm shares, and this would bring them close to 30.0%. 
• SBI did not specifically say they would buy on market, but the next 400,000 shares would require a large shareholder filing amendment. 

• 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 – Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU), Volpara Health.
• Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group.

• Open House (3288 JP) took over Sanei Architecture Planning (3228 JP) this past autumn when banks forced the issue over the former CEO/owner’s mafia ties discovered in an investigation.
• Seedheiwa (1739 JP) now better known as Meldia DC, is ~60% held by Sanei Architecture Planning, and 3% by Mr Koike. It has debt. So it needs cleaning up too.
• This is too light for minorities, and even lighter for whole co, but it’s a done deal. 

• On the 1st November, cloud communication software outfit Symbio Holdings (SYM AU) backed Aussie Broadband Pty Ltd (ABB AU)‘s reduced cash/scrip Offer of A$2.99-$3.04/share, and entered into a Scheme agreement.
• Superloop Ltd (SLC AU), which had previously made two cash/scrip Offers for Symbio, promptly walked.
• Symbio’s Scheme Meeting has now been tabled for the 7 Feb, with implementation expected on the 28 February. The IE is supportive. This is done – and trading tight.

• The Irc Ltd (1029 HK) IFA opines that a mandatory conditional offer from Nikolai Levitskii (Chairman and 30.61% shareholder) at HK$0.118 per share is fair and reasonable. 
• The offer is open, with the first closing date of 12 January 2024. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. 
• While the offer is light, satisfying the minimum acceptance condition is possible. The risk/reward profile is favourable as the upside (25.5% spread) outweighs the downside (5.3% to the undistributed price). 

• There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
• Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
• Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

• As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
• We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone. 
• There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

• The New and Better (5mos old) 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 and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
• STILL time to go long Hs vs As for the new year at 52wk wide discounts.

• Nike’s Q2 results lead to a 12% drop in its shares, affecting sector peers Onon, Skechers, and Asics with significant declines.
• Challenging trading conditions in China and Europe, coupled with a subdued digital traffic outlook from Nike, raise broader concerns for the sector.
• Asics stock declines 20% post-Nike’s fall, presenting an attractive buying opportunity with an estimated 20% upside, positioning Asics as a cost-effective play in the global performance running market.

• The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
• The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
• There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US). 

• 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 – Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU), Volpara Health.
• Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group.

• Overseas: SPX +0.2%; PCE 3.2% v 3.3% exp; Nike -12% on job cuts, tough macro
• Today: NKY Futs +0.3% v cash. JPY142; Japan approves fiscal budget; Nexon ADR steadies after China game rout
• Japan: Dalton’s Xmas greetings to management & three shareholder proposals: effective capital allocation, strong alignment of interest, and a board with high independence and diversity

• 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 – Nothing of note in a quiet week.
• Event-Driven developments – Benefit One Inc (2412 JP), JSR Corp (4185 JP), Weiqiao Textile Co (2698 HK), Adbri (ABC AU), Azure Minerals (AZS AU), Link Administration (LNK AU).

• Many companies had the goal of IPOs as a means to save taxes rather than growth, but it’s good to seriously consider go private for the sake of their shareholders.
• This is due to companies’ awareness of listing costs, such as demands from overseas investors for improved governance and requests from TSE for “management with awareness of the stock price.”
• Another issue that needs to be examined is the loss of growth and profitability for companies that are delisted and then relisted.

• Fast entry is now permissible for KOSDAQ 150. Within 15 trading days post-listing, the average daily total market cap must rank among the top 30 ordinary stocks on KOSDAQ.
• KOSDAQ 150 will also allow newly established entities in corporate spin-offs, following KOSPI 200’s model. Inclusion is granted if the subsidiary ranks within KOSDAQ 150’s top 160 (80%).
• The ₩1.5T cutoff for KOSDAQ 150 fast entry suggests potential candidates nearing this threshold, like Oasis, Kurly (and maybe Kakao Entertainment).

• There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) in December but there are a lot of float and capping changes.
• Taiwan Semiconductor (TSMC) – ADR (TSM US) is the biggest sell while NVIDIA Corp (NVDA US) is the biggest buy.
• Estimated one-way turnover is 6.6% resulting in a one-way trade of US$682m. Couple of stocks have greater than 0.2x ADV to trade.

• The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
• Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
• We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

• Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
• Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
• Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK). 

• There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in December, but there are float and capping changes for some stocks.
• Estimated one-way turnover is 2.8% and that leads to a one-way trade of US$122m.
• There are 13 stocks with over US$5m to trade from passive trackers, though the impact is not very big on the stocks.

• A2 Milk Co Ltd (A2M AU), AMP Ltd (AMP AU) and Charter Hall (CHC AU) will be deleted from the MVIS Australia Equal Weight Index at the close 15 December.
• Constituent changes plus capping and float changes result in a one-way turnover of 5.05% and will result in a one-way trade of A$99m.
• There is a fair amount of short interest on the deletions and shorts could look to cover against the passive flow.

• There are no constituent changes for the Vaneck Vectors Australian Property ETF (MVA AU) in December but there are float and capping changes.
• Abacus Storage King (ASK AU) is the biggest sell and is due to a drop in float, a reversal of the excessively high float assigned at the September rebalance.
• Estimated one-way turnover is 4.5% and will result in a one-way trade of A$26m. There are a few stocks with over 1x ADV to trade.

• It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
• The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
• There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

• CEO Group JSC (CEO VN) will be added to the MarketVector Vietnam Local Index at the close on 15 December.
• Estimated one-way turnover is 5.24% and that results in a one-way trade of US$30m. There are a couple of stocks with more than 1x ADV to buy from passives.
• The largest passive inflows will be in Vingroup Jsc (VIC VN), Vietnam Dairy Products JSC (VNM VN), CEO Group JSC (CEO VN) and Vinhomes (VHM VN). 

• Posco DX (022100 KS) will move from the KOSDAQ Market to the KOSPI Market on 2 January. That means KOSDAQ150 Index (KOSDQ150 INDEX) deletion at the close on 28 December.
• In line with our forecast, Temc (425040 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) as a replacement.
• Short interest increased in Posco DX (022100 KS) following its inclusion in a global index and there should continue to be unwinding over the next week.

• As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
• We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone. 
• There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

For our next Corporate Webinar we are glad to welcome Lendlease Global Commercial REIT’s CEO, Mr Kelvin Chow.

In the upcoming webinar, Kelvin will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. Angus will also be providing an industry overview, featuring landscape commentary and returns analysis. The Corporate Webinar will include a live Q&A session.

In the spirit of the festive season, one of the attendees will also be awarded an Amazon Kindle as part of our lucky draw.

The Corporate Webinar will be hosted on Tuesday, 9 January 2024, 19:00 SGT.

About Lendlease Global Commercial REIT

Lendlease Global Commercial REIT’s portfolio comprises two leasehold properties in Singapore, Jem (office and retail property) and 313@somerset (retail property), and three freehold Grade A office buildings, Sky Complex, in Milan. It has a total net lettable area of approximately 2.1 million square feet, with an appraised value of S$3.65 billion. Other investments include a stake in Parkway Parade and the development of a multifunctional event space on a site adjacent to 313@somerset.

• Today, Dai Ichi Life Insurance (8750 JP) came out with a cover letter and an amended Announcement of Intention to Commence a Tender Offer on Benefit One Inc (2412 JP). 
• The cover letter says they have obtained information from Pasona Group (2168 JP) and Benefit One allowing them to calculate a Tender Offer of ¥2,123/share for minorities, and buyback at ¥1,491/share. 
• Now we wait. Again. Dai-Ichi Life “intends” to start a tender in mid-Jan 2024 (19 Jan likely earliest start possible) but it is not clear timing will come that early.

• This is our 5th annual edition of the IPOs Pipeline Worldwide (Top 100 Companies) report.
• After weak global IPO markets in 2022 and 2023, the near term trend for global IPOs continues to remain lackluster.
• For those investors that closely monitor the global IPO opportunities, this is a good reference insight to check out the largest potential IPOs that could get completed next year.

• The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
• One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

• China has tightened restrictions on online games again driving significant falls in names such as Tencent and NetEase. 
• While the move may surprise some given prior moves to restart approvals in our view the overall trend of regulation is not especially surprising. 
• In particular, the tightened regulations appear to target the most important drivers of mobile gaming profitability and today’s large drops may actually be underreactions.

• KCE Electronics PCL (KCE TB) will replace Ngern Tid Lor (TIDLOR TB) in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 29 December.
• Estimated one-way turnover is 0.55% and will result in a one-way trade of THB 455m. There is nearly zero funding flow on the other index members.
• Passive trackers will need to buy close to 1.2% of KCE Electronics PCL (KCE TB)‘s free float while selling around 1.6% of float in Ngern Tid Lor (TIDLOR TB). 

• Earlier this month, Dai Ichi Life (8750 JP) countered M3 with an unsolicited ¥1,800/share Offer of Equity Value TOB; followed by a Benefit One buyback to mop up Pasona‘s stake.
• Dai-Ichi has now amended the TOB Price for minorities in Benefit One to ¥2,123/share, and the tax-equivalent price of ¥1,800/share for Pasona would be ¥1,491 on the Buyback Tender, post-squeezeout.
• That price appears a bit higher for Pasona than expected, and therefore a bit lower for Benefit One minorities. Terms can still be bumped.

• Posco DX (022100 KS) will move from the KOSDAQ Market to the KOSPI Market on 2 January. That means KOSDAQ150 Index (KOSDQ150 INDEX) deletion at the close on 28 December.
• In line with our forecast, Temc (425040 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) as a replacement.
• Short interest increased in Posco DX (022100 KS) following its inclusion in a global index and there should continue to be unwinding over the next week.

• Taxi-Related services operator A2B Australia (A2B AU) has completed a large property sale and subsequently entered into a Scheme with Singapore’s ComfortDelGro Corp (CD SP).
• The property sale enabled a $0.60/share fully franked dividend. Separately, and in addition, ComfortDelGro is offering A$1.45/share. Or A$2.05/share all-in. Before franking credits, for those who can take advantage. 
• The special divi ex-date is the 12 January. It is not conditional on the Scheme. Implementation for the Scheme, assuming all approvals are met, is expected mid-April.

• Drugs maker/packager group Probiotec Ltd (PBP AU) has entered into a Scheme with Indonesia’s Pyridam Farma (PYFA IJ).
• Pyridam is offering Probiotec shareholders A$3.00/share (in cash, or a 19% premium to the undisturbed price). Interim and final  dividends up to A$0.035/share and A$0.04/share, respectively, may be added.
• It has not been declared final. The Offer has the board’s backing. A Scheme Meeting is expected to be held in May with possible completion in early June 2024.

• Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
• NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
• But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

• The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
• Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
• We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

• Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
• In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
• Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.

• Kurabo announced a bigly buyback on Tuesday. At last price it is equivalent to 8+% of shares out. Most likely to target buybacks from cross-holders. 
• The company is not cash-rich, but it is financial asset and real estate-rich. And it trades at cheap multiples without even thinking about those assets (themselves worth the market cap).
• The TSE’s “PBR1 OR BUST” movement combined with starting low valuation, high payout, excess assets, mean this value trap has room to move. 

• Today, Dai Ichi Life Insurance (8750 JP) came out with a cover letter and an amended Announcement of Intention to Commence a Tender Offer on Benefit One Inc (2412 JP). 
• The cover letter says they have obtained information from Pasona Group (2168 JP) and Benefit One allowing them to calculate a Tender Offer of ¥2,123/share for minorities, and buyback at ¥1,491/share. 
• Now we wait. Again. Dai-Ichi Life “intends” to start a tender in mid-Jan 2024 (19 Jan likely earliest start possible) but it is not clear timing will come that early.

• Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
• We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
• Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.

• Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY2,123 per share, a 32.7% premium to M3 Inc (2413 JP)’s offer.
• The other terms are unchanged. The pre-conditions relate to board recommendation, Pasona Group (2168 JP) support, and the M3 offer not being completed. The tender offer starts in mid-January 2024.
• While M3 has extended its offer period to 17 January 2024, it will unlikely engage in a bidding war. Expect the Board and Pasona to support the Dai-ichi Life proposal.

• The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
• One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

• This is our 5th annual edition of the IPOs Pipeline Worldwide (Top 100 Companies) report.
• After weak global IPO markets in 2022 and 2023, the near term trend for global IPOs continues to remain lackluster.
• For those investors that closely monitor the global IPO opportunities, this is a good reference insight to check out the largest potential IPOs that could get completed next year.

• A double dose of StubWorld this week as Hanwha Corporation (000880 KS) comes up “cheap” on my monitor.
• Preceding my comments on Hanwha 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%.

• Today, after the close, ASX-listed Allkem Ltd (AKE AU) (formerly known as Orocobre, which merged with Galaxy Resources in 2021) announced it would merge with Livent (LTHM US). 
• At US$10bn, this “merger-of-equals” NEWCO (pro-forma US$1.9bn revenue, US$1.2bn EBITDA), with NYSE primary listing and foreign entity listing on the ASX, would be a global lithium player. Deal closing end-2023.
• The doc (243 pages) and presentation (42p) are worth reading. There are interesting index effects, and there may be “Lithium Risk” in this deal for arbs, but it looks good.

• Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
• NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
• But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

• The New and Better (5mos old) 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 and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished. 
• Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week. 

• Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
• In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
• Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.

• Kurabo announced a bigly buyback on Tuesday. At last price it is equivalent to 8+% of shares out. Most likely to target buybacks from cross-holders. 
• The company is not cash-rich, but it is financial asset and real estate-rich. And it trades at cheap multiples without even thinking about those assets (themselves worth the market cap).
• The TSE’s “PBR1 OR BUST” movement combined with starting low valuation, high payout, excess assets, mean this value trap has room to move. 

• In September, YFO (Yamauchi Family Office) upped its Tender Offer proposal to ¥1,255/share. YFO presented. The Toyo Special Committee met, interviewed, examined, deliberated, then last week rejected YFO’s proposal. 
• The rejection was a three-parter. First, they rejected YFO for not bringing management/ownership experience. Second, they said the proposal didn’t add enough value. Third, the price was too low.
• There were no metrics against which to measure anything. And now Toyo has apparently decided to withdraw its Tender Offer Proposal.

• A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.
• Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.
• Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.

• Tsuruha sees itself as another recent victim of activist fund pressure. 
• The No. 2 drugstore chain has grown successfully over the past decade and today has the widest store coverage of any chain in its sector.
• This summer Aeon supported activists’ demand for strategic change. Tsuruha thinks the only way it can keep its independence may be to take the company private – Aeon probably agrees.

• Nippon Steel Corporation (5401 JP) and United States Steel (X US) have agreed an all-cash $55.00/share offer, 142% premium to where X traded before Cliff’s approach, a very generous 7x EV/24e EBITDA.
• A determined buyer seeks market share in the lucrative US market, with no meaningful synergies expected and willingness to keep all US Steel jobs and (greener) growth projects.
• Although unions and some lawmakers are voicing concerns, CFIUS shouldn’t pose a big hurdle. Spread is 12.04%/17.93% (gross/annualised, assuming late settlement by end of Q3 2024). Long.

• Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
• We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
• Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.

• The Allkem/Livent “merger of equals” discussed in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises and Allkem/​Livent: Enlarged Charging Unit is on track.
• As of the end of last month, all approvals are received or are expected to be received. The Scheme Booklet is expected next month. Deal is expected to close end-CY2023.
• The deal STILL has interesting side issues with index. Even more interesting than Newcrest/Newmont. This is an update with more detail as we probably have 8-10 weeks left.

• Today, after the close, ASX-listed Allkem Ltd (AKE AU) (formerly known as Orocobre, which merged with Galaxy Resources in 2021) announced it would merge with Livent (LTHM US). 
• At US$10bn, this “merger-of-equals” NEWCO (pro-forma US$1.9bn revenue, US$1.2bn EBITDA), with NYSE primary listing and foreign entity listing on the ASX, would be a global lithium player. Deal closing end-2023.
• The doc (243 pages) and presentation (42p) are worth reading. There are interesting index effects, and there may be “Lithium Risk” in this deal for arbs, but it looks good.

• The vote is tomorrow. It is slightly contested. Shareholder proxies have recommended approving. Some others say Allkem is going too cheap. 
• It probably should get done because of scale benefits, and if it breaks, it might be good for Allkem, which is “good risk arb risk”
• But the trade here is some combination of lithium rebound and index event, with index impact details here.

• Today after the close, JSR Corp (4185 JP) announced that the expected “end-December” commencement of JIC’s Tender Offer to take the company private would be delayed. 
• This was somewhat expected to widely expected based on initial FUD which then gave way to “specialised reporting” a couple of weeks ago which indicated as much.
• Here I look at potential implications, spreads, and risks. And it still looks like one has to let it run (and buy a dip).

• The data is crucial for year-end dividend arbitrage. We can strategically target Single-stock futures’ spread basis widening due to information timeliness disparities, focusing on companies with high dividend yields.
• Furthermore, it offers valuable insights into assessing the December-March spread levels, potentially leading to a rollover distortion in KOSPI 200 futures’ calendar spread trading.
• Postponed yearend dividend record dates to March may clash with first-quarter dividends, offering a new trading opportunity. this unique situation could significantly impact spot and futures prices.

• Chairman 69 years old Dr. Liu will retire and 70 years old CEO Dr. Wei will step up. What story do we believe? Will TSMC to regain its strong outperperformance?
• Positive impacts: we expect Arizona fab equipment move-in and ramp up might be further delayed if no subsidies are granted; two teams competing to one voice/team/direction.
• Three risks: 1. Dr. Wei at his age of 70 without a strong management backup; 2. Dr. Wei might make a wrong decision deeply; 3. absolute power corrupts.

• Google Search trends for Tokyo Disneyland and DisneySea in recent months point to potential vulnerabilities in Oriental Land’s FQ3 performance.
• Tokyo Disneyland’s rising ticket prices have narrowed the cost gap with Shanghai and Hong Kong Disneyland, potentially leading to a loss of customers to its counterparts.
• Should Oriental Land (4661 JP) shares fail to surpass its recent peak in January next year, we think shares could undergo a rather substantial correction.

• A consortium led by the Harim Group and JKL Partners has been chosen as the preferred bidder to acquire a 57.9% stake in HMM.
• Korea Development Bank (KDB) and the Korea Ocean Business Corporation (KOBC) are the main creditors of HMM, which is the largest shipping company in Korea.
• Pan Ocean is expected to complete a rights offering of nearly 3 trillion won which is 136% of its current market cap. This is excessive and negative for Pan Ocean.

• Last week, Taihan Electric Wire announced a rights offering of 50% of its outstanding shares.  The company is expected to raise 526 billion won. 
• Taihan Electric Wire is expected to use the rights offering proceeds to mostly expand its submarine cable production.
• With the share price falling 21% since the announcement of the rights offering last week, Taihan Electric Wire looks more attractive.

• This makes life a lot simpler. Gina Rinehart’s Hancock Prospecting will now team up with Chile’s SQM to take control of lithium play Azure Minerals (AZS AU).
• In a binding Offer, by way of a Scheme, the joint bidders (collectively holding ~37.79%) are offering A$3.70/share, a 5.1% bump in terms to SQM’s prior Scheme Offer. 
• An off-market takeover at A$3.65/share unfolds IF this Scheme were to fail. If both fail/lapse,  SQM will, “in certain circumstances”, be required to proceed with its off-market transaction of A$3.50/share.

• The vote is tomorrow. It is slightly contested. Shareholder proxies have recommended approving. Some others say Allkem is going too cheap. 
• It probably should get done because of scale benefits, and if it breaks, it might be good for Allkem, which is “good risk arb risk”
• But the trade here is some combination of lithium rebound and index event, with index impact details here.

• The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
• Stocks with buy flows dropped 0.51% on average on Friday while the stocks with sell flows dropped 0.92%. On a flow weighted basis, the numbers were -0.21% vs -0.75%.
• Since the start of November, the adds have outperformed the deletes and the TWSE INDEX. There has been significant outperformance in just the last week.

• It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
• The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
• There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

• East Buy’s stock price plunged after a conflict broke out between the top broadcaster and the management team.
• NIO will launch another brand for low price products, following BYD’s low price and Li Auto’s price reduction.
• Tencent will move its unimportant assets to China Literature again.

• Recent business updates of WuXi Bio led to a decline in WuXi AppTec’s share price and changed investors’ expectations for CXO. Now is the time to adjust forecasts.
• We analyzed the growth rate of various business of WuXi AppTec in 2024. In a neutral scenario, growth next year could fall short of management’s guidance.Reversal in 2025 is uncertain.
• If WuXi AppTec “unexpectedly” receives blockbuster orders, which are large enough to hedge against the downward trend of WuXi AppTec’s other businesses, then it will help to change performance expectations.

• MBK Partners has increased its Hankook & Company (000240 KS) partial tender offer to KRW24,000 per share, 20.0% and 51.4% above its previous offer and the last close, respectively.
• While the offer is attractive, we estimate that the minimum acceptance condition of 19.3 million shares (20.35% of outstanding shares) requires an 84.3% minority acceptance rate. 
• The minority acceptance rate is challenging unless MBK can secure a ruling preventing share purchases from Cho Yang-rai, who disclosed a 2.72% stake on 14 December and opposes the tender. 

• Link Administration (LNK AU), the largest provider of services in Australia’s superannuation administration industry, has entered into a Scheme with Mitsubishi UFJ Financial Group.
• MUFJ is offering long-suffering Link shareholders A$2.10/share (in cash) plus a A$0.16/share dividend (25% franked), or a 32.9% premium, all-in, to the undisturbed price. It has not been declared final. 
• The Offer has the board’s backing. A Scheme Meeting is expected to be held in May with possible completion in June 2024. 

• LG Display announced today that it will conduct a rights offering capital raise worth 1.36 trillion won. 
• The rights offering capital raise involves 142 million shares, which represent 39.7% of its existing outstanding shares. 
• We believe this rights offering will have a negative impact on LG Display’s share price as it will significantly dilute existing shareholders. 

• Link Administration (LNK AU) has entered a SID with Mitsubishi UFJ Financial (MUFG) (8306 JP) at A$2.26 (A$2.10 scheme consideration + A$0.16 dividend), a 32.9% premium to the undisturbed price.
• The presence of several substantial shareholders, lack of irrevocables, a light offer, recent derisking of the business and a long-dated offer pose a challenge for the scheme to get up. 
• MUFG’s offer could spark a rival offer, but Link’s long-suffering shareholders have endured a history of failed bids. At the last close, the risk/reward is unfavourable.

• Overseas: SPX +0.5%, M&A action drives market higher. Fed talks down interest rate cuts.
• Today: NKY Futs -0.1% v cash. JPY 142.9; Japan’s FSA wants to overhaul tender offer rules; Mit Elec to step up cross-share unwind
• Japan: Nippon Steel’s $15bn acquisition of U.S. Steel is a bold move; it secures a top-three global position & substantial share in the EV e-steel market.

• Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
• That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
• And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal. 

• The New and Better (5mos old) 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 and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished. 
• Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week. 

• In this insight, I review a fantastic book written by Morgan Housel called The Psychology of Money (published in 2020). 
• “The most important part of every plan is planning on your plan not going according to the plan.” 
• Three parts of the book were particularly outstanding including letter to author’s son, the story of Rick Guerin, and how mice helped the Russians to defeat the mighty German army. 

• After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price. 
• With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously. 
• MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.

• It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
• The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
• There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

• On 5 December, Tomony Holdings (8600 JP) – a holding company for two regional banks based in Tokushima Prefecture and Kagawa Prefecture – announced (gasp!) a NEW SHARE OFFERING. 
• It offered 28mm shares + 4.2mm greenshoe – a share count increase of 20%. At 0.27x book. This IS unusual. Especially when banks are being asked to produce better ROC. 
• The deal priced at ¥366. We’re there now. Banks have been sold. It is worth looking at where we are and what could happen next. It’s cheap.

• The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
• Stocks with buy flows dropped 0.51% on average on Friday while the stocks with sell flows dropped 0.92%. On a flow weighted basis, the numbers were -0.21% vs -0.75%.
• Since the start of November, the adds have outperformed the deletes and the TWSE INDEX. There has been significant outperformance in just the last week.

• 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 – Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Lithium Power International (LPI AU), Benefit One Inc (2412 JP). 
• Lowest spreads  Tietto Minerals Ltd (TIE AU), Azure Minerals (AZS AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Shidax Corp (4837 JP).

• We don’t consider Douyin an existential threat to Meituan, but we see the company’s growth increasingly be constrained by its business model itself.
• We believe Meituan will disappoint the market with regard to its bottom line growth in 2024, barring major overhaul of its new initiative businesses.
• Meituan will have to make tough choice between growth and profitability and either scenario won’t bode well for its valuation. We value the company at RMB410 billion, meaning 18% downside.

• Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
• MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
• Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.