Most Read

Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.

KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.

Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer

By Clarence Chu

A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?

In August, T&K Toka Co Ltd (4636 JP) announced a TOB by Bain with a clearance hurdle of selling a 3.51% stake in Hangzhou Toka Ink (SH:688571) before launch.
Friday, the company announced that they put up a 3.6% stake for auction, with the sale to be executed that day. That likely triggers an early launch of the TOB.
The TOB Price is offensively cheap at 0.63x “official” book, and 0.53x book adjusted for equity affiliate price. The shares have traded through terms since launch. This should get bumped.

CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks

There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.

Asahi Group (2502 JP): The Current Playbook

Since the US$1.3 billion secondary placement announcement, Asahi Group Holdings (2502 JP)’s shares are down -6.2% from the undisturbed price of JPY5,804 per share (16 November).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Asahi’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 28 November. Investors participating in previous large Japanese placements tend to secure positive returns.

2024 High Conviction: Buy Hollysys

Despite Hollysys Automation (HOLI US) receiving a myriad of proposals over the past three years, nothing moved forward. Calling an SGM to spill the board would change that status quo.
But Hollysys’ board stonewalled the SGM, pinning its reason – and a proposed injunction – on the subjective ownership of Ace Lead, and in turn, its 6.7% holding in Hollysys.
That injunction was dismissed last week. An SGM will now be held late January. A firm merger proposal is expected in the middle of next month. This is a buy.

StubWorld: Rumoured Interest In PCCW’s Fibre

Reportedly, Chinese investors, as well as Middle Eastern sovereign wealth funds, have expressed interest in acquiring a “significant ” minority stake in PCCW Ltd (8 HK)‘s fibre ops.
Preceding my comments on PCCW 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%.

CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon

There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

Breaking Down Korean Regulators’ Official Details on New Short Selling System

Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.

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Nov 27

Most Read: Taisho Pharmaceutical Holdin, Hygon Information Technology C, Asahi Group Holdings, Zhongjin Gold Corp A, T&K Toka Co Ltd, Sichuan Biokin Pharmaceutical, Fenbi Ltd, Xiaomi Corp, Hainan Island Construction, Semiconductor Manufacturing In and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Taisho Pharma (4581 JP) – Japan’s Newest Biggest MBO; The Price Is Light!
CES China Semiconductor Chips Index Rebalance: Another Inclusion for Hygon
Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer
CSI300 Index Rebalance: 14 Changes & A Few Surprises
T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?
STAR50 Index Rebalance: Big Impact Expected; Inclusion Up 40% in One Month
KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added
Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, Div+, Top50, ASX, FXI, Xiaomi, Tata Tech
Quiddity Aggregation of CSI300/500 and SSE50/180 Index Flows for Dec 2023: US$4.2bn One-Way!
SSE50 Index Rebalance: Five Changes; Adds & Deletes Moving in Lockstep

Taisho Pharma (4581 JP) – Japan’s Newest Biggest MBO; The Price Is Light!

Just past the 22-year anniversary of the deal-break from a previous takeover involving the large OTC drug firm, Taisho Pharmaceutical Holdin (4581 JP) announced an MBO Takeover for the company.
Set at a 55.5% premium, it is not particularly surprising as a deal. The family is rolling in their interests. It looks like estate planning. The Board supports and recommends.
Unfortunately, like many recent MBOs, this one is light at 0.85 book where net cash, securities, and net receivables and inventory make up 68% of the takeover price.

CES China Semiconductor Chips Index Rebalance: Another Inclusion for Hygon

There are 3 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 8 December.
Hygon Information Technology C (688041 CH) will be added to a global index in a week and then there will be multiple index inflows at the close on 8 December.
After underperforming from May to September, the adds have gained ground on the deletes over the last two months and there could be further outperformance over the next two weeks.

Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer

By Clarence Chu

A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

CSI300 Index Rebalance: 14 Changes & A Few Surprises

There are 14 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 8 December.
While most changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used their discretion.
The adds outperformed the deletes in the first half of the year with performance staying stable over the second half of the year. Position for outperformance ahead of implementation.

T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?

In August, T&K Toka Co Ltd (4636 JP) announced a TOB by Bain with a clearance hurdle of selling a 3.51% stake in Hangzhou Toka Ink (SH:688571) before launch.
Friday, the company announced that they put up a 3.6% stake for auction, with the sale to be executed that day. That likely triggers an early launch of the TOB.
The TOB Price is offensively cheap at 0.63x “official” book, and 0.53x book adjusted for equity affiliate price. The shares have traded through terms since launch. This should get bumped.

STAR50 Index Rebalance: Big Impact Expected; Inclusion Up 40% in One Month

As expected, the index committee has used a 6-month minimum listing history and that results in one change to the SSE STAR50 (STAR50 INDEX) in December.
Sichuan Biokin Pharmaceutical (688506 CH) will replace Ninebot (689009 CH) in the index at the close on 8 December.
One way turnover is estimated at 2.18% and will result in a one-way trade of CNY 3,065m. Sichuan Biokin Pharmaceutical (688506 CH) has moved up and there will be pre-positioning.

KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.

Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, HSCI, Div+, Top50, ASX, FXI, Xiaomi, Tata Tech

The capping for the Hang Seng family of indices will use closing prices from 28 November while implementation will take place at the close on 1 December.
The changes for the next S&P/ASX 200 (AS51 INDEX) rebalance will be announced after the close of trading on 1 December.
It was another week of inflows for the iShares Emerging Markets (EMXC US) to take units outstanding to a new high.

Quiddity Aggregation of CSI300/500 and SSE50/180 Index Flows for Dec 2023: US$4.2bn One-Way!

By Janaghan Jeyakumar, CFA

After market close on Friday 24th November 2023, the December 2023 index review results for CSI 300/500 and SSE 50/180 were announced.
CSI 300 and CSI will have 14 and 50 changes while SSE 50 and SSE 180 will have 5 and 18 changes respectively. There are many overlapping flows.
In this insight, I have presented the details of the index changes and aggregated the expected flows attributable to the four indices mentioned above.

SSE50 Index Rebalance: Five Changes; Adds & Deletes Moving in Lockstep

There are 5 changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 8 December. There is over 1x ADV to trade on some stocks.
We estimate a one-way turnover of 5.4% at the December rebalance leading to a one-way trade of CNY 4.85bn. Index arb activity could add to the impact on the stocks.
The adds, deletes and SSE50 Index (SSE50 INDEX) have moved nearly in lockstep since May and the passive flows could move things around a bit.

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Nov 26

Most Read: iSoftStone Information Technology Group, HKEX, Celltrion Healthcare , HDC Hyundai Development Co-Engineering & Construction, Orion Corp, Taisho Pharmaceutical Holdin, Hygon Information Technology C, KB Financial, Banco Pan SA and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance Preview: 13 Potential Changes in December
CSI500 Index Rebalance Preview: Potential Adds Starting to Close the Gap
Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi
KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises
KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used
2024 High Conviction: Orion Corp
Taisho Pharmaceutical (4581 JP): MBO Tender Offer at JPY8,620
CES China Semiconductor Chips Index Rebalance: Another Inclusion for Hygon
ELS Losses Related to Hong Kong H-Index Could Top Nearly 3 Trillion for Major Korean Banks in 2024
EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

CSI300 Index Rebalance Preview: 13 Potential Changes in December

With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.

CSI500 Index Rebalance Preview: Potential Adds Starting to Close the Gap

With the review period for the December rebalance of the CSI500 Index complete, we forecast 50 changes (the maximum permitted) for the index at the close on 8 December.
Estimated one-way turnover is 9.66% at the December rebalance resulting in a one-way trade of CNY 6.36bn. There are 29 stocks with over 1 day of ADV to trade.
The potential deletes have outperformed the potential adds over the last 6 months though there has been a narrowing of the gap recently. Position for a further narrowing.

Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.
The changes for the CSI 300, CSI 500, STAR50, SSE50 and a bunch of other mainland China indices will be announced after market close on Friday.
Relatively quiet week for ETF flows with no major creations or redemptions during the week.

KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises

There are 17 inclusions and 17 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 14 December.
While most of the inclusions were expected, there are many differences on the deletes. Trading the strategy becomes tougher with the short sell ban in place.
The adds have started to outperform the deletes over the last month and there could be more movement over the next 3 weeks to implementation.

KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used

There will be 7 additions and 7 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) at the December rebalance that will be implemented on 14 December.
The rebalance is on expected lines, though the index committee decided not to add Youngpoong Paper (006740 KS) to the index. Not really a big surprise given the price move.
HDC Hyundai Development Co-Engineering & Construction (294870 KS) is a surprise delete and there is not much short interest that could cover against the passive selling.

2024 High Conviction: Orion Corp

By Douglas Kim

We are positive on Orion Corp. Regardless of the overall market movement next year (up or down), we believe Orion Corp could outperform KOSPI in the next 6-12 months.
The company has millions of loyal customers in major overseas countries including China, Russia, and Vietnam. Despite difficult operating conditions, Orion continues to generate stable growth in sales and profits.
Orion Corp’s valuations are attractive. Orion Corp is currently trading at 2024E EV/EBITDA of 4.4x (42% lower than average valuation multiple from 2019 to 2023).

Taisho Pharmaceutical (4581 JP): MBO Tender Offer at JPY8,620

Taisho Pharmaceutical Holdin (4581 JP) has recommended an MBO tender offer of JPY8,620 per share, a 55.5% premium to the undisturbed (24 November).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
Irrevocables represent a 40.31% ownership ratio. The minimum acceptance condition requires a 44% minority acceptance rate. The offer is attractive vs. historical and peer multiples.

CES China Semiconductor Chips Index Rebalance: Another Inclusion for Hygon

There are 3 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 8 December.
Hygon Information Technology C (688041 CH) will be added to a global index in a week and then there will be multiple index inflows at the close on 8 December.
After underperforming from May to September, the adds have gained ground on the deletes over the last two months and there could be further outperformance over the next two weeks.

ELS Losses Related to Hong Kong H-Index Could Top Nearly 3 Trillion for Major Korean Banks in 2024

By Douglas Kim

The FSS has launched a formal investigation into KB Kookmin bank due to potentially massive losses related to the HSCEI linked ELS products.
The three major listed banking groups (KB Financial, Shinhan Financial, and Hana Financial) could be burdened with nearly 86% of the HSCEI linked ELS losses (close to 2.6 trillion won).
Major Korean banks may need a “Hail Mary” pass to avoid this disaster. Such positive outlook would include sharply rising HSCEI index in 2024, similar to what happened in 2016.

EM Neobanks – Positive on Banco PAN, Cautious on Nubank & KakaoBank Is One to Watch

By Victor Galliano

We turn positive on Banco PAN, for its consistently improving operational metrics to 3Q23, attractive valuations and sound capital adequacy
Nubank is operationally strong but we remain cautious on Nubank shares as we see this neobank to be challenged by capital constraints, as well as being on stretched valuations
Inter has been improving operationally, and is sound on capital but is in the shadow of PAN in terms of valuations; KakaoBank is sound operationally and one to watch

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Nov 25

Most Read: Eoflow , Celltrion Healthcare , JSR Corp, HDC Hyundai Development Co-Engineering & Construction, Korea Zinc, Carenet Inc, Taisho Pharmaceutical Holdin, Zensho Holdings, Orecorp Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Key Points We Should Know Regarding the Current Status of EOFlow
EOFlow (Further) Tests Investor Patience
KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises
JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware
KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used
Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea
CareNet (2150) – Watch the TOPIX Birdy (Smallcap)
Taisho Pharma (4581 JP) – Japan’s Newest Biggest MBO; The Price Is Light!
Zensho Holdings (7550) – ¥50bn Offering Is Not Meant For You
OreCorp: Silvercorp Bumps. Goyder Now Supportive

Key Points We Should Know Regarding the Current Status of EOFlow

It can be considered that the suspension of EOFlow’s trading and, furthermore, the risk of delisting have been completely eliminated at this point.
EOFlow emphasizes the possibility of circumventing sales of EOPatch by supplying EOPump to a JV in China. The key factors that initially sparked Medtronic’s interest in EOFlow are still valid.
If CEO Kim fails to repay a stock collateral loan of ₩20B or secure additional loans, approximately 4% of the total issued shares could be sold in the market.

EOFlow (Further) Tests Investor Patience

Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.

KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises

There are 17 inclusions and 17 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 14 December.
While most of the inclusions were expected, there are many differences on the deletes. Trading the strategy becomes tougher with the short sell ban in place.
The adds have started to outperform the deletes over the last month and there could be more movement over the next 3 weeks to implementation.

JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware

JSR Corp (4185 JP)’s pre-conditional tender offer from JIC is conditional on several regulatory approvals, notably China SAMR approval. JIC can waive the conditions precedent.
A takeaway from the Broadcom (AVGO US)/VMware Inc Class A (VMW US) SAMR clearance is that if JIC is willing to commit to restrictive conditions, SAMR approval can be obtained.
On 6 November, JSR reiterated a late December tender start. However, with time fast running out, the likely scenario is SAMR conditional approval with a delayed tender start.

KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used

There will be 7 additions and 7 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) at the December rebalance that will be implemented on 14 December.
The rebalance is on expected lines, though the index committee decided not to add Youngpoong Paper (006740 KS) to the index. Not really a big surprise given the price move.
HDC Hyundai Development Co-Engineering & Construction (294870 KS) is a surprise delete and there is not much short interest that could cover against the passive selling.

Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea

As the ex-dividend date in Korea has been before the dividend is determined, SSFs trade at a discount based on the anticipated dividend rather than adjusting dividend settlement proceeds explicitly.
The current dividend arbitrage yield for the financial companies can be seen as reflecting the postponement of the ex-dividend date to the next year.
We should pay attention to those with a significant dividend arbitrage yield but that did not amend their articles of incorporation earlier this year.

CareNet (2150) – Watch the TOPIX Birdy (Smallcap)

Carenet Inc (2150 JP) is a “medical contents” provider. It acts as a distributor of information to doctors and medical practitioners over the internet, and also consults with pharmaceutical companies.
On Wednesday, they announced that they were going to move from TSE Growth to TSE Prime as of 29 November.
At ¥31bn market capand this may turn people off, but it may be a treat for some. There is a reason why there are some big holders.

Taisho Pharma (4581 JP) – Japan’s Newest Biggest MBO; The Price Is Light!

Just past the 22-year anniversary of the deal-break from a previous takeover involving the large OTC drug firm, Taisho Pharmaceutical Holdin (4581 JP) announced an MBO Takeover for the company.
Set at a 55.5% premium, it is not particularly surprising as a deal. The family is rolling in their interests. It looks like estate planning. The Board supports and recommends.
Unfortunately, like many recent MBOs, this one is light at 0.85 book where net cash, securities, and net receivables and inventory make up 68% of the takeover price.

Zensho Holdings (7550) – ¥50bn Offering Is Not Meant For You

Zensho Holdings (7550 JP) has had a great couple of years in share price movement. And this year is seeing earnings explode to new highs. M&A and FX.
Now they want to build a “war chest” equivalent to 4% of market cap to go do more M&A.
This seems opportunistic. And the shareholder register is extraordinarily lopsided. There is really only one buyer for this deal.

OreCorp: Silvercorp Bumps. Goyder Now Supportive

On the 6 August, Canada’s Silvercorp (SVM CN) offered shareholders of Western Australian-based miner OreCorp (ORR AU) A$0.15 in cash and 0.0967 new Silvercorp shares, by way of a Scheme.
The Scheme Booklet was despatched on the 6 November with a Scheme Meeting on the 8 December. The IE viewed terms as fair.
Silvercorp has now bumped the cash terms to $0.19/share from $0.15/share. All other terms remain unchanged. Tim Goyder (5.14%) is now supportive. Done and done.

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Nov 24

Most Read: Zhejiang Expressway Co H, JSR Corp, Origin Energy, Helia Group , Xiaomi Corp, Celltrion Healthcare , Eoflow , HDC Hyundai Development Co-Engineering & Construction, Carenet Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
JSR (4185) – Time To Fight The FUD
Origin: Brookfield’s “Inferior” Alternative Proposal
S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement
Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities
KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises
EOFlow (Further) Tests Investor Patience
KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used
CareNet (2150) – Watch the TOPIX Birdy (Smallcap)
Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting

Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.

JSR (4185) – Time To Fight The FUD

Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come.
FUD and Flows would widen the spread. And they did.
Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.

Origin: Brookfield’s “Inferior” Alternative Proposal

Origin Energy (ORG AU)‘s Scheme vote today was always going to be a tenuous affair with AusSuper’s ~17.5% blocking stake, and Perpetual also firmly in the “against” camp.
The Scheme meeting has now been adjourned. Origin said that based on the proxy votes, it was unlikely the Scheme would have achieved the required 75% approval by shareholders.
In addition, the Brookfield-led consortium has pitched a alternative non-binding and indicative proposal which Origin views as inferior to the existing Scheme, and has significant reservations as to its complexity.

S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement

There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.

Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities

Xiaomi Corp (1810 HK) is a member of the Hang Seng Index, Hang Seng China Enterprises Index and Hang Seng TECH Index, among others.
Capping of stocks at 8% of the index weight will lead to selling in Xiaomi (1810 HK) at the close on 1 December, mainly from Hang Seng TECH Index trackers.
Relative underperformance vs the HSTECH Index from now to Tuesday will require passive to sell less stock, while outperformance will lead to increased passive selling. That opens up trading opportunities.

KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises

There are 17 inclusions and 17 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 14 December.
While most of the inclusions were expected, there are many differences on the deletes. Trading the strategy becomes tougher with the short sell ban in place.
The adds have started to outperform the deletes over the last month and there could be more movement over the next 3 weeks to implementation.

EOFlow (Further) Tests Investor Patience

Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.

KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used

There will be 7 additions and 7 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) at the December rebalance that will be implemented on 14 December.
The rebalance is on expected lines, though the index committee decided not to add Youngpoong Paper (006740 KS) to the index. Not really a big surprise given the price move.
HDC Hyundai Development Co-Engineering & Construction (294870 KS) is a surprise delete and there is not much short interest that could cover against the passive selling.

CareNet (2150) – Watch the TOPIX Birdy (Smallcap)

Carenet Inc (2150 JP) is a “medical contents” provider. It acts as a distributor of information to doctors and medical practitioners over the internet, and also consults with pharmaceutical companies.
On Wednesday, they announced that they were going to move from TSE Growth to TSE Prime as of 29 November.
At ¥31bn market capand this may turn people off, but it may be a treat for some. There is a reason why there are some big holders.

Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat

Origin Energy (ORG AU) has postponed its scheme meeting to 4 December after it received a non-binding indicative proposal from Brookfield/EIG to amend the current scheme.
The Board admitted the current scheme was likely to be voted down if the meeting was held today. The alternative transaction structure will struggle to gain shareholder support.
If Brookfield/EIG walks, the share price will fall, at least in the short term. We think a reasonable deal break price is A$7.40, an 11% downside to the last close.

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Nov 23

Most Read: Wharf Holdings, JSR Corp, Hanwha Ocean, Alchip Technologies, Hollysys Automation Technologies, Geely Auto, K Car , ZEEKR, Helia Group , Haitong International Securities Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
JSR (4185) – Time To Fight The FUD
What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?
Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?
Hollysys (HOLI US): In Court Today …
Geely Stalls As ZEEKR Spins Off
Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
Zeekr Pre-IPO – Thoughts on Valuation
S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement
Haitong Sec (665 HK) 15th Dec Scheme Vote

Wharf Holdings (4 HK): Improved Liquidity & Passive Buying

Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.

JSR (4185) – Time To Fight The FUD

Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come.
FUD and Flows would widen the spread. And they did.
Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.

What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?

The day the basis spread disappears is this Friday, the 24th of November. This mirrors a comparable pattern observed during Korean Air’s rights offering in 2020.
If the spot price does not fall below the futures price of our entry until this Friday, we could potentially be in a profitable range.
There has been a notable pattern where the spread continues to exist until just before the moment when new share selling becomes feasible.

Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?

Alchip Technologies (3661 TT) could replace Feng Tay Enterprise (9910 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the December rebalance.
This ETF inclusion for Alchip Technologies (3661 TT) could come back-to-back with another index inclusion scheduled for the end of November.
Shorts in Alchip Technologies (3661 TT) have been building up while shorts in Feng Tay Enterprise (9910 TT) have surged over the last few months.

Hollysys (HOLI US): In Court Today …

A fortnight after co-COOs pitched a US$25/share indicative Offer for Hollysys (HOLI US), Ascendent Capital, holding 13.7%, tabled a US$26/share Offer. The Recco/Dazheng consortium offered US$26.50 a week later.
There is currently a dispute over the ownership and control of Ace Lead’s shares in Hollysys, which was subject to an injunction hearing in the Hong Kong High Court.
That hearing took place today. So I went along to hear first-hand the key arguments from both sides.

Geely Stalls As ZEEKR Spins Off

Geely Auto (175 HK)‘s share price has largely swatted away the pending US-listing of ZEEKR (ZK US).
ZEEKR was valued at US$13bn after a US$750mn fund raising in February. At that value, Geely’s 54.7% stake is worth 58% of its market cap.
Geely is trading around a six and half year low, and below its five average trailing/forward metrics.

Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent

The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.

Zeekr Pre-IPO – Thoughts on Valuation

By Sumeet Singh

ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we will talk about valuations.

S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement

There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.

Haitong Sec (665 HK) 15th Dec Scheme Vote

Once the pre-cons were satisfied on the 15th November, it seemed pessimistic to stick to the delayed 29 December dispatch date for Haitong International Securities Group (665 HK)‘s Scheme Document.
And right on cue, the Doc was issued last night (21 Nov). The Court Meeting is the 15 December. with an expected cash despatch on or around the 18 January.
Trading at a gross spread to terms of 2.7%. The headcount test applies. But this should comfortably get up.

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Nov 22

Most Read: Teco Electric & Machinery, Gs Yuasa Corp, Hanwha Ocean, BeiGene , Hollysys Automation Technologies, Alchip Technologies, Trip.com, ZEEKR, Tata Consultancy Svcs, Healius and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade
Large GS Yuasa (6674) Placement – 20% Dilution, Needs Lots of Love
What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?
FXI Rebalance Preview: One Potential Change in December
Hollysys (HOLI US): In Court Today …
Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?
Trip.com Q3 Quick Take: Net Inc > Consensus | Progress on Expenses | But Not a Game-Changer
Zeekr Pre-IPO – Peer Comparison – Catching up with Little Spending
Tata Consultancy Services (TCS IN): US$2bn Mega Buyback; Two More Trading Days Before Ex-Date
Healius Taps The Market. ACL Should Walk

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade

Using data from the close on 20 November, there could be 6 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
There will also be capping and funding flows that will lead to a one-way turnover of 17.8% and a one-way trade of US$1.37bn.
There are 16 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

Large GS Yuasa (6674) Placement – 20% Dilution, Needs Lots of Love

Today after the close, noted Japanese battery maker Gs Yuasa Corp (6674 JP) announced a public equity offering accompanied by a 3rd party placement to Honda Motor (7267 JP).
Total $300mm+ raise is nearly 20.0mm shares against ~80mm shares out now. That’s 20% EPS dilution at a still-decent discount to book value.
This creates a weird situation of a low ROE stock becoming lower ROE, at a lower PBR, with “more growth ahead” in a hyper-competitive space.

What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?

The day the basis spread disappears is this Friday, the 24th of November. This mirrors a comparable pattern observed during Korean Air’s rights offering in 2020.
If the spot price does not fall below the futures price of our entry until this Friday, we could potentially be in a profitable range.
There has been a notable pattern where the spread continues to exist until just before the moment when new share selling becomes feasible.

FXI Rebalance Preview: One Potential Change in December

With the review period complete, BeiGene (6160 HK) could replace Anhui Conch Cement (914 HK) in the iShares China Large-Cap (FXI) (FXI US) in December.
There will be over 2 days of ADV to buy in BeiGene (6160 HK) and nearly 2 days of ADV to sell in Anhui Conch Cement (914 HK).
Short interest has been increasing in BeiGene (6160 HK) and dropping in Anhui Conch Cement (914 HK) over the last few months.

Hollysys (HOLI US): In Court Today …

A fortnight after co-COOs pitched a US$25/share indicative Offer for Hollysys (HOLI US), Ascendent Capital, holding 13.7%, tabled a US$26/share Offer. The Recco/Dazheng consortium offered US$26.50 a week later.
There is currently a dispute over the ownership and control of Ace Lead’s shares in Hollysys, which was subject to an injunction hearing in the Hong Kong High Court.
That hearing took place today. So I went along to hear first-hand the key arguments from both sides.

Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?

Alchip Technologies (3661 TT) could replace Feng Tay Enterprise (9910 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the December rebalance.
This ETF inclusion for Alchip Technologies (3661 TT) could come back-to-back with another index inclusion scheduled for the end of November.
Shorts in Alchip Technologies (3661 TT) have been building up while shorts in Feng Tay Enterprise (9910 TT) have surged over the last few months.

Trip.com Q3 Quick Take: Net Inc > Consensus | Progress on Expenses | But Not a Game-Changer

By Daniel Hellberg

Trip.com reported strong Q3 earnings, reflecting 2023’s ongoing tourism revival
Net Income beat expectations, and company made progress on expense control
But we don’t see “game-changing” numbers in Trip.com’s latest earnings release

Zeekr Pre-IPO – Peer Comparison – Catching up with Little Spending

By Sumeet Singh

ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
We have looked at the company’s past performance in our earlier notes . In this note, we will undertake a peer comparison.

Tata Consultancy Services (TCS IN): US$2bn Mega Buyback; Two More Trading Days Before Ex-Date

By Janaghan Jeyakumar, CFA

Indian IT services giant Tata Consultancy Svcs (TCS IN) launched a US$2bn Buyback last week.
The company will buy up to 40,963,855 shares in a Tender Offer-style Buyback at a Buyback Price of INR4,150/share (an 18% premium to today’s close).
In this insight, we take a closer look at the indicative timeline of key events in this Buyback, the company’s Buybacks history, proration details, and what this means for investors.

Healius Taps The Market. ACL Should Walk

Back on the 20 March, Australian Clinical Labs (ACL AU) announced a merger proposal for Healius (HLS AU), the completion of which would create Australia’s largest pathology provider.
In its Target Statement on the 4 May, Healius’ board unanimously recommended that Healius shareholders reject the Offer. A forthcoming ACCC decision may also conclude a merger is verboten.
Now Healius has announced a “capital restructure reset” via issuing new shares at $1.20/share, a hefty 34.6% discount to last close. This breaches a number of prescribed occurrences.

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Nov 21

Most Read: Pasona Group, BGF retail , Alibaba Group Holding , Daito Trust Construct, Gs Yuasa Corp, Prosus NV, Keep Inc, Teco Electric & Machinery, Taiwan Secom and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Pasona: The Wrong Price
Understanding Extreme SSF Spreads in Korea & Trading Approaches
Alibaba: Bull Thesis Shattered
Daito Trust (1878) Doing a ToSTNeT Buyback Which Is NOT a ToSTNeT Buyback… Unless It Is.
Large GS Yuasa (6674) Placement – 20% Dilution, Needs Lots of Love
StubWorld: Prosus Trading “Rich”. And So It Should Be
HSCI Index Rebalance: Keep (3650 HK) & TUHU Car (9690 HK) Added
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade
Quiddity Leaderboard TDIV Dec 23: US$1.36bn One-Way, 20%+ Turnover, 2 Weeks to Announcement
GS Yuasa Placement – Well Flagged but Relatively Large Deal, Liquidity Might Be an Issue

Pasona: The Wrong Price

As discussed here in a piece about the Partial Tender Offer, Pasona Group (2168) has agreed to sell its controlling stake in Benefit One (2412) to M3 (2413).
That will leave Pasona Group with a fair chunk of cash and possibly a residual stake in Benefit One, depending on the results.
Though we don’t know what the future holds, Pasona now is the wrong price for its future.

Understanding Extreme SSF Spreads in Korea & Trading Approaches

Futures backwardation resulting from the short selling ban will persist. Also, the contraction of market making will lead to more widespread and frequent occurrences of extreme spreads.
The straightforward sell arbitrage (reverse cash and carry) is no longer viable. We must pay attention to the emergence of new price and trading patterns driven by these market conditions.
One potential pattern is the possibility of spot buying centered around those that exhibited extreme spreads at expiration. This has already been observed to some extent in this month’s expiration.

Alibaba: Bull Thesis Shattered

By Oshadhi Kumarasiri

Optimism for improved shareholder returns through IPOs diminishes further as Alibaba (ADR) (BABA US) puts the Cloud spinoff on hold.
Jack Ma’s sale of 10m ADS, representing 5% of his Alibaba holdings, sparks concern. Investors should worry about his lack of optimism.
With the Cloud IPO on hold, Alibaba Group Holding (9988 HK) is vulnerable to numerous downside catalysts, as outlined below.

Daito Trust (1878) Doing a ToSTNeT Buyback Which Is NOT a ToSTNeT Buyback… Unless It Is.

Back on 30 October, Daito Trust Construct (1878 JP) announced a large earnings, a new Shareholder Return policy, a higher payout this year, and a big buyback.
It said the buyback period would start two days later, but they did not specify the method (Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year
Today they announced a ToSTNeT-3 purchase for “the whole size”, which is accompanied by a “Japan-style ASR.” Know your details.

Large GS Yuasa (6674) Placement – 20% Dilution, Needs Lots of Love

Today after the close, noted Japanese battery maker Gs Yuasa Corp (6674 JP) announced a public equity offering accompanied by a 3rd party placement to Honda Motor (7267 JP).
Total $300mm+ raise is nearly 20.0mm shares against ~80mm shares out now. That’s 20% EPS dilution at a still-decent discount to book value.
This creates a weird situation of a low ROE stock becoming lower ROE, at a lower PBR, with “more growth ahead” in a hyper-competitive space.

StubWorld: Prosus Trading “Rich”. And So It Should Be

The accretion trade is going to plan as Prosus NV (PRX NA) sells Tencent (700 HK); and Prosus and Tencent both back their own shares.
Preceding my comments on Prosus/Tencent One 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%.

HSCI Index Rebalance: Keep (3650 HK) & TUHU Car (9690 HK) Added

Keep Inc (3650 HK) and Tuhu Car (9690 HK) will be added to the Hang Seng Composite Index (HSCI) after the close of trading on 1 December.
Keep (3650 HK) will be added to Southbound Stock Connect from the open on 4 December while Tuhu Car (9690 HK) will only be added to Stock Connect in April.
There are lock-up expiries on both stocks, prior to or after inclusion in Stock Connect, and trading strategies will need to take that into account.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade

Using data from the close on 20 November, there could be 6 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
There will also be capping and funding flows that will lead to a one-way turnover of 17.8% and a one-way trade of US$1.37bn.
There are 16 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

Quiddity Leaderboard TDIV Dec 23: US$1.36bn One-Way, 20%+ Turnover, 2 Weeks to Announcement

By Janaghan Jeyakumar, CFA

In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the December 2023 review.
There are some key changes to expectations since my last TDIV insight as a consequence of changes in share prices and/or dividend expectations.
I currently expect 6 ADDs and 5 DELs during the December 2023 review.

GS Yuasa Placement – Well Flagged but Relatively Large Deal, Liquidity Might Be an Issue

By Sumeet Singh

Gs Yuasa Corp (6674 JP) (GSY) is looking to raise around US$240m via a public offering, along with placing shares via third-party allotment with Honda Motor (7267 JP) .
The company formed a JV with Honda Motors earlier this year and will use the bulk of the proceeds for investments in the JV.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

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Nov 20

Most Read: Alibaba (ADR), SK Square , BGF retail , WuXi AppTec, Li Auto , HKEX, Origin Energy, Meituan, Xiaomi Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

[Alibaba (BABA US, SELL, TP US$72) Rating Change]: The Casualty of Era…Downgrade to SELL
SK Square: Two Remaining Credible Options for 11 Street
Understanding Extreme SSF Spreads in Korea & Trading Approaches
Hang Seng Index Rebalance: Li Auto (2015) & WuXi AppTec (2359) Added
HSI Dec23 Index Review/Flows – Li Auto & Wuxi Apptec IN, No Deletes; 100 Names a Distant Dream
Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi
Origin Energy (ORG AU): State of Play
HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life
Hang Seng Tech Dec23 Index Review/Flows – No Name Changes, Some Big Capping Flows
HSTECH Index Rebalance: No Constituent Changes; Round-Trip Trade of US$1.4bn

[Alibaba (BABA US, SELL, TP US$72) Rating Change]: The Casualty of Era…Downgrade to SELL

By Ying Pan

BABA reported C3Q23 revenue, non-GAAP operating profit and GAAP net income in-line, 6% and (7%) vs. our est., and in-line, in-line and (14%);
Instead of appointing capable management to oversee key subsidiaries, BABA backpedalled to call off its spin-off plans;
We cut TP from US$ 127 to US$ 72, and downgrade to SELL.

SK Square: Two Remaining Credible Options for 11 Street

By Douglas Kim

We discuss the two remaining options for 11 Street post the cancellation of its sale to Qoo10 Pte.
As these strategic sale of 11 Street to Qoo10 Pte. has failed, the possibility of a forced sale of 11 Street by the financial investors has increased.
The higher probability event is for the Nile Holdings consortium to try to sell 11 Street to other financial investors.

Understanding Extreme SSF Spreads in Korea & Trading Approaches

Futures backwardation resulting from the short selling ban will persist. Also, the contraction of market making will lead to more widespread and frequent occurrences of extreme spreads.
The straightforward sell arbitrage (reverse cash and carry) is no longer viable. We must pay attention to the emergence of new price and trading patterns driven by these market conditions.
One potential pattern is the possibility of spot buying centered around those that exhibited extreme spreads at expiration. This has already been observed to some extent in this month’s expiration.

Hang Seng Index Rebalance: Li Auto (2015) & WuXi AppTec (2359) Added

Li Auto (2015 HK) and WuXi AppTec (2359 HK) will be added to the Hang Seng at the close on 1 December taking the number of index constituents to 82.
Neither inclusion is a surprise. The non-inclusion of primary listed foreign companies is a bigger surprise – that could take place at the next rebalance.
Estimated one-way turnover is 3.53%, estimated one-way trade is HK$6.88bn (US$882m). Capping leads to buying in Alibaba (9988 HK) and selling in Tencent (700 HK) and HSBC (5 HK).

HSI Dec23 Index Review/Flows – Li Auto & Wuxi Apptec IN, No Deletes; 100 Names a Distant Dream

On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
Li Auto (2015 HK) and WuXi AppTec (2359 HK) are added. There are no deletions.
I see 3.4% a side to trade and across the three major indices there are larger net flows, but few compelling ones given possible pre-positioning.

Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.
The changes for the CSI 300, CSI 500, STAR50, SSE50 and a bunch of other mainland China indices will be announced after market close on Friday.
Relatively quiet week for ETF flows with no major creations or redemptions during the week.

Origin Energy (ORG AU): State of Play

The Origin Energy (ORG AU) scheme vote is on 23 November. Brookfield/EIG’s best and final offer is A$6.59 and US$1.86 per share, currently worth A$9.45.
With AusSuper reportedly increasing its stake past 17% on Friday, the scheme vote remains too close to call. Brookfield/EIG will need a large YES vote turnout for a successful vote.
If the scheme is voted down, there are mainly three Plan Bs – Brookfield/EIG’s alternate transaction structure, Board-initiated strategic review or maintaining the status quo.

HSCEI Index Rebalance: Zhongsheng (881 HK) Uses Up Another Life

For a second review running, Zhongsheng Group (881 HK) has avoided being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX).
That means China Unicom Hong Kong (762 HK) misses out on index inclusion, but there is still hope for the next one.
There does not appear to be any significant positioning on either stock and any large moves early in the coming week could be short lived.

Hang Seng Tech Dec23 Index Review/Flows – No Name Changes, Some Big Capping Flows

The Dec 23 review results for the Hang Seng Tech Index were announced on Friday 17 November after the close.
There were no ADDs to or DELETEs from the index, in something of a surprise.
The “big flow” on HS TECH is the downweight on Xiaomi Corp (1810 HK) due to sharp capping after significant outperformance since the August review.

HSTECH Index Rebalance: No Constituent Changes; Round-Trip Trade of US$1.4bn

As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December. However, there are float and capping changes for a lot of stocks.
Estimated one-way turnover is 4.8% leading to a one-way trade of HK$5.29bn (US$679m). There are 4 stocks with over 1 day of ADV to trade.
The largest selling will be on Xiaomi Corp (1810 HK) offset by buying in Meituan (3690 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK).

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Nov 19

Most Read: GMO Payment Gateway, Adaro Energy, Shriram Finance , Benesse Holdings, Eoptolink Technology , Hygon Information Technology C, Ninebot , Tencent, iSoftStone Information Technology Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday
SSE50 Index Rebalance Preview: Five Potential Changes; Hygon Stands Out
Index Rebalance & ETF Flow Recap: NEXT50, SET50, L&F, Onewo, Celltrion, AMFI
Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price
ChiNext/ChiNext50 Index Rebalance Preview: Time for a Turnaround
CSI300 Index Rebalance Preview: 13 Potential Changes in December
STAR50 Index Rebalance Preview: Big Impact Expected on the Changes
Index Rebalance & ETF Flow Recap: SSE50, Chinext/50, Renesas, Tencent, Amman Mineral
CSI500 Index Rebalance Preview: Potential Adds Starting to Close the Gap

Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning

The coming week has a lot of review periods ending – KOSPI 200, KOSDAQ 150, CSI 300, CSI 500, SSE50, STAR50, ChiNext and SENSEX, among others.
The TOPIX rebalance will be implemented on Monday while the Global X Lithium & Battery Tech ETF (LIT US) and IDX indices will rebalance at the close on Tuesday.
There were outflows from Emerging Market ETFs including iShares Emerging Markets (EEM), iShares Core Emerging Mar (IEMG), Schwab Emerging Markets Equi (SCHE) and IShares Edge Min Vol Emerging Markets ETF (EEMV).

IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday

Float and capping changes will require passive trackers to sell Bank Central Asia (BBCA) and Adaro Energy (ADRO) while buying Bank Rakyat Indonesia (BBRI) and GoTo Gojek Tokopedia (GOTO).
There will be passive trading to other stocks too, though the impact and flow is not material on most of the stocks.
Passive trackers will trade at the close on 31 October, so there are only 3 days to implementation of the changes.

SSE50 Index Rebalance Preview: Five Potential Changes; Hygon Stands Out

With the review period complete, we see 9 stocks in inclusion zone and 10 in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 4.7% at the December rebalance leading to a one-way trade of CNY 3.86bn. Index arb balances could increase the impact on the stocks.
Apart from being added to the SSE50 Index, Hygon Information Technology (688041 CH) could also be added to other local/global indices over the next few weeks and months.

Index Rebalance & ETF Flow Recap: NEXT50, SET50, L&F, Onewo, Celltrion, AMFI

There were a bunch of indices where the review period ended last week. The changes will be announced this month and implemented in December.
Emerald Resources Nl (EMR AU) replaced Invocare Ltd (IVC AU) in the S&P/ASX 200 (AS51 INDEX) at the close on Friday.
There were large outflows from mainland China listed ETFs during the week. Outflows from iShares Emerging Markets (EEM US) continued for another week.

Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price

Just before the close Friday, the Nikkei reported Benesse Holdings (9783 JP) would be the subject of an MBO in order to restructure the flagging private shinken-zemi business. And grow.
It turns out it is EQT and the Fukutake family at ¥2600/share – a 2-year high. Wow. It is also a ridiculously cheap price given the assets and money flows.
I expect this may get some people upset as the valuation methodology is dodgy and the artful (hehehe) Balance Sheet has some easter eggs, and spotted pumpkins… or something.

ChiNext/ChiNext50 Index Rebalance Preview: Time for a Turnaround

With the review period complete, we forecast 9 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
Some of the potential adds will also have passive flows from the CSI Smallcap 500 Index trackers at the same time as the ChiNext Index rebalance.
The potential adds have slipped a lot versus the potential deletes over the last few months as the National Team has tried to stabilise the market via ETF creations.

CSI300 Index Rebalance Preview: 13 Potential Changes in December

With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.

STAR50 Index Rebalance Preview: Big Impact Expected on the Changes

With the review period complete, we expect one change for the STAR50 INDEX in December if the index committee continues to use a 6-month minimum listing history.
With net inflows to mainland China ETFs over the last few months, passive trackers will need to trade between 9-25 days of ADV on the potential add and delete.
SMIC (688981 CH) will be capped and there will be reverse funding flows on the index constituents. One-way turnover is estimated at 1.8% resulting in a one-way trade of CNY2,580m.

Index Rebalance & ETF Flow Recap: SSE50, Chinext/50, Renesas, Tencent, Amman Mineral

Wednesday will be a busy day as positions are put on and unwound following announcement of the changes to the MSC indices.
Friday will end the review cutoff for the ASX indices and Hang Seng Indexes will announce the December changes for the HSI, HSCEI, HSTECH and HSCI post market close.
Another week of large outflows for China focused ETFs with redemptions across all the major indices.

CSI500 Index Rebalance Preview: Potential Adds Starting to Close the Gap