Most Read

In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a non-binding proposal from Junro Ito (founder’s son) and Ito-Kogyo. No terms were disclosed.
Bloomberg suggests an MBO deal worth up to JPY9 trillion (US$58 billion), which implies an offer of JPY3,467.89, a 39.3% premium to the last close price.
The “white knight” MBO undermines Alimentation Couche-Tard (ATD CN)’s offer and is a proxy for the restructuring plan’s value. Couche-Tard will likely walk if a binding MBO proposal emerges.

Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.
Fast Retailing‘s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.

Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail

The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP).
This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.

Kansai Electric Placement – A US$3.5bn Raising Which Doesn’t Appear Well Flagged

Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
In this note, we will talk about the placement and run the deal through our ECM framework.

KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering

Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.

Situation Flagged: Sammy Stock Hits Level that Squeezes Family’s Loan Collateral Floor

Most loans with collateral floors are at or below thresholds, and all three court deposits are near or under a 30% drop from their initial valuation.
No solid intel on share sales yet, and it’s unlikely they’ll sell Samsung Electronics after a 30% dip. They may focus on their stakes in Samsung Life or Samsung SDS.
There’s talk Samsung might boost prices to help the family avoid the collateral floor issue, but with DRAM demand down, a major shareholder return seems unlikely for now.

KOSPI Size Indices: Global Index Selling Leads to Potential Downward Migration

The review period for the March rebalance of the KOSPI Size Indices commences on 1 December and will end on 28 February.
We see 5 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 8 stocks moving from SmallCap to MidCap and 1 new addition to MidCap.
The migrations from MidCap to LargeCap have outperformed the other migration categories. Four potential LargeCap to MidCap migrations will be deleted from a global index later this month.

SF Holdings A/H Listing – Thoughts on A/H Premium and past A/H Listings

S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, is now said to be looking to raise around US$1-1.5bn in its H-share listing in Hong Kong.
SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premium.

Weather Favorable For Rubber In Thailand But Can Trouble Indonesia, Vietnam

By Vinod Nedumudy

Thailand likely to receive less rains in the coming one-month period
Indonesia, Vietnam, Cambodia likely to have above normal rains
WMO predicts 60% chances of La Nina developing

Kansai Electric Power (9503 JP): A US$3.5 Billion Primary/Secondary Offering

Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).

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Oct 24

Most Read: Shin Kong Financial Holding, Seven & I Holdings, Tokyo Metro, Dexus Property, Samsung Electronics, Voltas Ltd, Korea Zinc, Pony AI and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here
The TOPIX October FFW Trade – BIG Numbers
The Tokyo Metro (9023 JP) IPO And Aftermarket – What To Look For
Tokyo Metro (9023 JP): Listing Tomorrow; Div Yield and Index Flows Should Take It Higher
Australia: Potential Passive Selling in November Will Be Big
Surging Buzz Around the Potential Split of Samsung Electronics
NIFTY200 Momentum30 Index Rebalance Preview: 56% Turnover, Big Trade & Strong Momentum
Korea Zinc: Remaining Free Float Post Tender and a Margin Call for Choi on Young Poong Precision?
Tokyo Metro (9023 JP): One Miss; A Bigger Index Inclusion Coming?
Pony AI Pre-IPO – The Positives – Scaling up Robotaxi & Robotrucks

Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here

Media reports indicate that the shareholder base of Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) have approved their merger.
Shin Kong meeting results were public just before the market closed. The results from Taishin were known earlier. The market and spread were un-moved. If anything, things widened a little.
Next, the two companies try to get fair Trade Commission, FSC, and Exchange approval to join to become Taishin Shin Kong FHC. And there’s a good trade to do here.

The TOPIX October FFW Trade – BIG Numbers

Post-Close on the 5th business day of October every year, the TSE announces the Free Float Weight review for all stocks where the FY ends in the Jan-March quarter.
Yesterday saw 210 decent changes to FFW (more up than down). There are still 400+ Phased Weight Reductions, 3 new adds (3663, 3993, 9341), and some share cancellation-based share-count reductions.
It turns out there is a LOT to trade. I see ¥2trln one-way (¥2trln net to buy on 245 names, and ¥2trln to sell on the other nearly 1,900 names).

The Tokyo Metro (9023 JP) IPO And Aftermarket – What To Look For

The Tokyo Metro (9023 JP) IPO is one of the largest IPOs of recent years, well-flagged, and it is hot hot hot! A super stable, well-known, well-respected, service provider.
There are numerous attractions but I expect people have not thought too deeply about the demand and supply dynamics of different holder types. It’s worth thinking about.
This was priced “cheap” but everyone knows that so there may be flippers. This is probably more Japan Post Bank than Japan Post Insurance.

Tokyo Metro (9023 JP): Listing Tomorrow; Div Yield and Index Flows Should Take It Higher

Tokyo Metro (9023 JP) priced its IPO at the top end (JPY 1200/share), raised JPY 348.6bn (US$2.3bn) and the company is valued at JPY 697bn (US$4.62bn).
The stock starts to trade today, and the grey market is indicating an open 20% higher. Not surprising considering that the IPO was heavily oversubscribed.
Even at a price of JPY 1440/share, the estimated dividend yield is 2.78% and that should keep the stock supported. Index inclusions will result in more buying next week.

Australia: Potential Passive Selling in November Will Be Big

There could be two or three Aussie names that are deleted from global passive portfolios in November. In each of the cases, there is a lot to sell from passives.
One name is very high probability while the deletion of the others depends on the day of the week chosen.
Shorts have been built up on the stocks and there are strong indications of positioning. But the extent of the positioning varies, and the stocks could have differently.

Surging Buzz Around the Potential Split of Samsung Electronics

We’re starting to see some local market players getting ready and setting up trades that bet on a potential split for Samsung Electronics.
Samsung could leverage the buzz around spinning off its foundry business to split key units—foundry, memory chips, and others—into two or three separate companies at the shareholder meeting.
Additionally, the valuation gap between Samsung Electronics and Biologics has narrowed more than it has in the last decade, making it an even more attractive opportunity.

NIFTY200 Momentum30 Index Rebalance Preview: 56% Turnover, Big Trade & Strong Momentum

There could be 16 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 30 December.
If all changes are on expected lines, one-way turnover is estimated at 55.6% and that will result in a one-way trade of INR 62bn (US$736m).
Since June, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

Korea Zinc: Remaining Free Float Post Tender and a Margin Call for Choi on Young Poong Precision?

According to Korea Zinc, it plans to disclose the treasury shares tender offer results on 28 October.
We discuss the remaining free float after the tender offer and the probabilities of share price decline or even a share price squeeze post announcement of the tender offer results.
All in all, this M&A fight for Korea Zinc remains tight with a slight advantage to MBK/Young Poong alliance.

Tokyo Metro (9023 JP): One Miss; A Bigger Index Inclusion Coming?

Tokyo Metro (9023 JP) had a blockbuster listing yesterday, finishing the day 45% higher. That took the estimated div yield down from 3.33% (at the IPO price) to 2.3%.
One expected index inclusion will not take place due to insufficient information on IPO allocations and that leads to a much lower free float than expected.
That inclusion will now be deferred to June; BUT there could be two other (bigger) index inclusions on the cards prior to that.

Pony AI Pre-IPO – The Positives – Scaling up Robotaxi & Robotrucks

Pony AI (PONY US) an autonomous mobility solutions provider, is looking to raise up to US$300m in its US IPO.
As per Frost & Sullivan, Pony AI was among the first companies in China to obtain licenses to operate fully driverless robotaxis in all four Tier-1 cities in China.
In this note, we talk about the positive aspects of the deal.

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Oct 23

Most Read: Fuji Soft Inc, Hyundai Motor India , Tokyo Metro, International Games System, Dexus Property, Shinko Electric Industries, China Resources Beverage and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Fuji Soft (9749 JP) – The Fine Print Is Worth Reading
Shinko Electric (6967 JP) Takeover – THIS Is a Dip to Buy
Hyundai Motor India IPO: How Far to Fast Entry?
Tokyo Metro (9023 JP): Listing Tomorrow; Div Yield and Index Flows Should Take It Higher
Tokyo Metro IPO Trading – Robust Demand for Quality Asset
The Tokyo Metro (9023 JP) IPO And Aftermarket – What To Look For
International Games System (3293 TT): Positioning & Potential Passive Buying
Australia: Potential Passive Selling in November Will Be Big
Shinko Electric (6967 JP): A Casualty of the China TCM Deal Break
China Resources Beverage IPO Trading – Still a Bit of Fizz Left

Fuji Soft (9749 JP) – The Fine Print Is Worth Reading

On 11-Oct, Bain submitted a binding proposal for Fuji Soft Inc (9749 JP). On 15-Oct, FSI acknowledged, but questioned the Nozawa family commitment. Founder Nozawa wrote letters the 17th.
O 18-Oct, FSI reiterated support for the KKR First Tender in a late night drop. It included fine print, but no media coverage. Today, FSI filed a Target Opinion Amendment.
That filing included yet more fine print not in the public filing Friday. And KKR extended. The new fine print is nuanced. But worth reading.

Shinko Electric (6967 JP) Takeover – THIS Is a Dip to Buy

Over the last few days, Shinko Electric Industries (6967 JP) shares have dipped lower than the previous standard trading range.
I expect this weakness is related to investors in other deals deciding to sell this deal too. I believe it is not related to Shinko specifically.
For that, while gap risk remains somewhat high, I still see break risk as low and see this as a great opportunity to buy the dip.

Hyundai Motor India IPO: How Far to Fast Entry?

Hyundai Motor (005380 KS) raised INR 279bn (US$3.3bn) by selling some of its stake in Hyundai Motor India (1342Z IN), valuing Hyundai India at INR 1,593bn (US$18.95bn).
The anchor investor book was fully subscribed. The non-institutional and retail books were undersubscribed, so institutions got more stock. And that changes the free float estimates for one global index.
Even with the higher float, Hyundai Motor India (1342Z IN) is unlikely to get Fast Entry to one global index later this month. Index inclusions should commence in February 2025.

Tokyo Metro (9023 JP): Listing Tomorrow; Div Yield and Index Flows Should Take It Higher

Tokyo Metro (9023 JP) priced its IPO at the top end (JPY 1200/share), raised JPY 348.6bn (US$2.3bn) and the company is valued at JPY 697bn (US$4.62bn).
The stock starts to trade today, and the grey market is indicating an open 20% higher. Not surprising considering that the IPO was heavily oversubscribed.
Even at a price of JPY 1440/share, the estimated dividend yield is 2.78% and that should keep the stock supported. Index inclusions will result in more buying next week.

Tokyo Metro IPO Trading – Robust Demand for Quality Asset

Tokyo Metro (9023 JP)‘s shareholders raised around US$2.4bn in its Japan IPO.
Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
We have looked at the company’s past performance and valuations in our previous notes. In this note, we will talk about the trading dynamics.

The Tokyo Metro (9023 JP) IPO And Aftermarket – What To Look For

The Tokyo Metro (9023 JP) IPO is one of the largest IPOs of recent years, well-flagged, and it is hot hot hot! A super stable, well-known, well-respected, service provider.
There are numerous attractions but I expect people have not thought too deeply about the demand and supply dynamics of different holder types. It’s worth thinking about.
This was priced “cheap” but everyone knows that so there may be flippers. This is probably more Japan Post Bank than Japan Post Insurance.

International Games System (3293 TT): Positioning & Potential Passive Buying

International Games System (3293 TT) could be added to a global index at the end of November and there will be a lot of buying in the stock.
The big rally in the stock has led to International Games System (3293 TT) trading expensive to its regional peers.
There has been an increase in cumulative excess volume over the last month. But there could still be more to go over the next week.

Australia: Potential Passive Selling in November Will Be Big

There could be two or three Aussie names that are deleted from global passive portfolios in November. In each of the cases, there is a lot to sell from passives.
One name is very high probability while the deletion of the others depends on the day of the week chosen.
Shorts have been built up on the stocks and there are strong indications of positioning. But the extent of the positioning varies, and the stocks could have differently.

Shinko Electric (6967 JP): A Casualty of the China TCM Deal Break

At first glance, the Shinko Electric Industries (6967 JP) and China TCM merger arb has little or no similarities regarding the region, precondition, sector, type of offeror, or offer structure.
The aftermath of China Traditional Chinese Medicine (570 HK) has resulted in funds resizing well-held merger arb positions, mainly long-dated names with tail event risks. This has increased the Shinko spread.
Shinko’s tail event risk (no SAMR approval) remains low. Timing remains the primary risk, as a delay is possible. At the last close, the gross/annualised spread was 8.9%/29.2%.

China Resources Beverage IPO Trading – Still a Bit of Fizz Left

China Resources Beverage (2460 HK) raised around US$750m in its Hong Kong IPO, after pricing at the top-end.
China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
We have looked at the company’s past performance and valuations in our previous notes. In this note, we will talk about the trading dynamics.

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Oct 22

Most Read: China Traditional Chinese Medicine, Shinhan Financial, Fuji Soft Inc, Shinko Electric Industries, Cambricon Technologies Lt, Tokyo Metro, JD.com , Korea Zinc, Doosan Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TCM (570 HK): Likely Rush for The Exits As Deal Busts
China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price
Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming
Fuji Soft (9749 JP) – The Fine Print Is Worth Reading
Shinko Electric (6967 JP) Takeover – THIS Is a Dip to Buy
SSE50 Index Rebalance Preview: Potential Inclusions Continue to Outperform; Trim into Strength
Tokyo Metro (9023 JP) IPO: Trading Debut
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Capping Flows in December
Entry Opportunities from Delisting Risk Due to Korea Zinc’s Post-Buyback Volume Drying Up
Doosan’s Tweaked Restructuring Play: My Take on Hitting Robotics’ 13% Spread

TCM (570 HK): Likely Rush for The Exits As Deal Busts

China Traditional Chinese Medicine (570 HK) (TCM) has been a frustrating deal, for a deal that shouldn’t be frustrating.
As feared from its 16th October monthly update, the inability to secure investor group consents appears to have torpedoed the transaction. Will we eventually find out why this got stonewalled?
This deal lapse changes the Hong Kong M&A landscape; if you can’t rely on SOE transactions to get up, what next? The immediate question now is downside support on Monday.

China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price

Shockingly, the Sinopharm-led consortium’s offer for China Traditional Chinese Medicine (570 HK) has lapsed as the precondition long stop date has not been extended.
This deal break caught many, including me, off guard. There are lessons to be learnt and questions to be asked.
Shareholders will have a bruising Monday. Our analysis suggests a deal break price of around HK$3.44, a 10% downside to the last close.

Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming

The KRX announced the 100 constituents of the much-awaited Korea Value-Up Index on 24 September. There were hits and misses but broad consensus was that the index is a miss.
Following market feedback, the KRX could conduct a special rebalance of the index in December. But this could be after the launch of ETFs tracking the index.
With a big overlap and similar characteristics as the KOSPI 200 Index, there could be limited assets benchmarked to the Korea Value-Up Index in the short-term.

Fuji Soft (9749 JP) – The Fine Print Is Worth Reading

On 11-Oct, Bain submitted a binding proposal for Fuji Soft Inc (9749 JP). On 15-Oct, FSI acknowledged, but questioned the Nozawa family commitment. Founder Nozawa wrote letters the 17th.
O 18-Oct, FSI reiterated support for the KKR First Tender in a late night drop. It included fine print, but no media coverage. Today, FSI filed a Target Opinion Amendment.
That filing included yet more fine print not in the public filing Friday. And KKR extended. The new fine print is nuanced. But worth reading.

Shinko Electric (6967 JP) Takeover – THIS Is a Dip to Buy

Over the last few days, Shinko Electric Industries (6967 JP) shares have dipped lower than the previous standard trading range.
I expect this weakness is related to investors in other deals deciding to sell this deal too. I believe it is not related to Shinko specifically.
For that, while gap risk remains somewhat high, I still see break risk as low and see this as a great opportunity to buy the dip.

SSE50 Index Rebalance Preview: Potential Inclusions Continue to Outperform; Trim into Strength

With over 95% of the review period complete, 4 non-constituents are in inclusion zone and 6 constituents are in deletion zone.
We estimate one-way turnover of 6.5% at the December rebalance leading to a one-way trade of CNY 11.95bn (US$1.7bn). Index arb balances could increase the impact on the stocks.
The potential adds have continued to outperform the potential deletes. There has been a big jump in the last few weeks as markets have rallied. Trim positions into strength.

Tokyo Metro (9023 JP) IPO: Trading Debut

Tokyo Metro (9023 JP) priced its IPO at JPY1,200 per share to raise gross proceeds of US$2.3 billion. The shares will start trading on 23 October.
We previously discussed the IPO in Tokyo Metro (9023 JP) IPO: The Bull Case, Tokyo Metro (9023 JP) IPO: The Bear Case and Tokyo Metro (9023 JP) IPO: Valuation Insights.
The peers have modestly derated since the prospectus was released on 20 September. The IPO price remains attractive, particularly relating to the implied dividend yield.

Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Capping Flows in December

The December rebalance for the HSIII Index only involves capping to limit stocks to 12% of the index weight. There will not be any constituent changes.
Estimated one-way turnover at the rebalance is 4.4% resulting in a round-trip trade of HK$2.9bn (US$378m).
The largest outflows are expected to be from Meituan (3690 HK) and JD.com (9618 HK) with inflows spread across the other index constituents.

Entry Opportunities from Delisting Risk Due to Korea Zinc’s Post-Buyback Volume Drying Up

Korea Zinc’s delisting daily trading volume cutoff is 20K, about 0.12% of the total. We might see volumes plummet, making it tough to maintain even that 20K level.
Keep an eye on trading opportunities; we have some time with delisting risks, but low trading volume could lead to being booted from the KOSPI 200 and Global Index.
This sell-off could spike short-term volatility and create great entry points for trading, especially after the court approved the buyback tender, denying MBK’s injunction.

Doosan’s Tweaked Restructuring Play: My Take on Hitting Robotics’ 13% Spread

The big question is how to cash in on the dissenters’ rights spread for Robotics. The main concern is cancellation risk, but the FSS doesn’t seem too negative on approval.
To sustain nuclear momentum, Enerbility needs heavy borrowing for facility investments, requiring a lower debt ratio. Offloading debt-heavy Bobcat is a move shareholders might support.
With NPS unlikely to ignore the government’s nuclear push, Robotics’ spread could narrow quickly. Despite cancellation risk and no hedge, the remaining juice makes an outright position worth considering.

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Oct 21

Most Read: China Traditional Chinese Medicine, Fuji Soft Inc, Horizon Robotics, Fujikura Ltd, Shinhan Financial, Cambricon Technologies Lt, Exedy Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price
TCM (570 HK): Likely Rush for The Exits As Deal Busts
Fuji Soft (9749) Reiterates Support for KKR Tender#1, Recos Shareholders Wait, Ignores Nozawa Letter
Horizon Robotics (9660 HK) IPO: The Bear Case
Fuji Soft (9749 JP): The Board’s Unchanged Recommendation Caps the Upside
China Healthcare Weekly (Oct.20)-A Big Lesson from China TCM’s Deal Break, “Must Option” of Biotech
Fujikura (5803 JP): Positioning & Potential Passive Buying
Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming
SSE50 Index Rebalance Preview: Potential Inclusions Continue to Outperform; Trim into Strength
[JAPAN ACTIVISM] Murakami Group Now 23.5% on Exedy (7278) – LOTS of Room Left To Run

China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price

Shockingly, the Sinopharm-led consortium’s offer for China Traditional Chinese Medicine (570 HK) has lapsed as the precondition long stop date has not been extended.
This deal break caught many, including me, off guard. There are lessons to be learnt and questions to be asked.
Shareholders will have a bruising Monday. Our analysis suggests a deal break price of around HK$3.44, a 10% downside to the last close.

TCM (570 HK): Likely Rush for The Exits As Deal Busts

China Traditional Chinese Medicine (570 HK) (TCM) has been a frustrating deal, for a deal that shouldn’t be frustrating.
As feared from its 16th October monthly update, the inability to secure investor group consents appears to have torpedoed the transaction. Will we eventually find out why this got stonewalled?
This deal lapse changes the Hong Kong M&A landscape; if you can’t rely on SOE transactions to get up, what next? The immediate question now is downside support on Monday.

Fuji Soft (9749) Reiterates Support for KKR Tender#1, Recos Shareholders Wait, Ignores Nozawa Letter

On Tuesday, Fuji Soft Inc (9749 JP) said they had received the legally-binding Bain proposal on 11 October, but noted they could not confirm founder Nozawa-san’s agreement or intentions.
Founder Nozawa Hiroshi responded with a pair of impassioned letters Thursday criticising process, asking Fuji Soft to withdraw support for KKR, and switch to or allow the Bain Offer.
Fuji Soft on Friday reiterated support for the KKR First Tender, but interestingly, saw a majority resolve to suggest common shareholders NOT tender because of the optionality.

Horizon Robotics (9660 HK) IPO: The Bear Case

Horizon Robotics (9660 HK), a provider of autonomous driving products and services, is seeking to raise up to US$696 million through a HKEx IPO.
In Horizon Robotics (9660 HK) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on high related parties’ revenue, customer concentration risk, pricing pressure, uncertain path to profitability, high cash conversion cycle and FCF burn.

Fuji Soft (9749 JP): The Board’s Unchanged Recommendation Caps the Upside

The Fuji Soft Inc (9749 JP) Board has maintained its recommendation of KKR’s first-stage tender offer. However, the recommendation was not unanimous, with four dissenting directors.
Bain’s likely next move is to waive the precondition and launch its offer. To bring KKR to the negotiating table, Bain will want to acquire as many shares as possible.
KKR’s first stage closes on 21 October. Success requires KKR to either work with Bain or match terms. As shares trade through Bain’s terms, there is little or no upside.

China Healthcare Weekly (Oct.20)-A Big Lesson from China TCM’s Deal Break, “Must Option” of Biotech

By Xinyao (Criss) Wang

The “industry clearing” of innovative drug companies is far longer and more brutal than imagined. But Chinese innovative drug ecosystem will ultimately usher in a better innovation pattern in the future.
For every innovative pharmaceutical company with ambitious goals, globalization is a “must option”. With more and more Chinese biotech achieving success, the internationalization prospects will become better and better.
China TCM’s privatization failure made us realize large SOEs we always believe in would violate their commitments to market/investors.Now, we need to get back to the fundamentals to minimize losses.

Fujikura (5803 JP): Positioning & Potential Passive Buying

Fujikura Ltd (5803 JP) could be added to a global index at the end of November and there will be a lot of buying in the stock.
Following the rally in the stock, Fujikura Ltd (5803 JP) trades expensive to the average and median of its peers on most valuation metrics.
The increase in cumulative excess volume in Fujikura Ltd (5803 JP) over the last 3 months far outpaces the increase in its peers.

Korea Value-Up Index: Estimated Passive Flows as ETF Launches Coming

The KRX announced the 100 constituents of the much-awaited Korea Value-Up Index on 24 September. There were hits and misses but broad consensus was that the index is a miss.
Following market feedback, the KRX could conduct a special rebalance of the index in December. But this could be after the launch of ETFs tracking the index.
With a big overlap and similar characteristics as the KOSPI 200 Index, there could be limited assets benchmarked to the Korea Value-Up Index in the short-term.

SSE50 Index Rebalance Preview: Potential Inclusions Continue to Outperform; Trim into Strength

With over 95% of the review period complete, 4 non-constituents are in inclusion zone and 6 constituents are in deletion zone.
We estimate one-way turnover of 6.5% at the December rebalance leading to a one-way trade of CNY 11.95bn (US$1.7bn). Index arb balances could increase the impact on the stocks.
The potential adds have continued to outperform the potential deletes. There has been a big jump in the last few weeks as markets have rallied. Trim positions into strength.

[JAPAN ACTIVISM] Murakami Group Now 23.5% on Exedy (7278) – LOTS of Room Left To Run

This past week, activist Murakami-san’s City Index Eleventh announced that the companies which jointly report now own 20.3%, which translates to 23.5% of voting rights. Average in-price? ¥2,928/share.
The 2030 Plan from April saw 8% ROE by 2030, 6% by 2026. They’ve since bought back 11% of shares out. Better, but 1/4 of market cap is net cash+securities.
If one assumes they spend the net cash+securities to buy back stock 10% higher than here, pro-forma PBR is <0.6x. ROE would be 7+%. There’s room to run here, still.

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Oct 20

Most Read: CAR Group , Korea Zinc, Inox Wind Ltd, Tower Ltd, China Traditional Chinese Medicine, Fuji Soft Inc, Allegro MicroSystems and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up
Scenario Analysis of Korea Zinc’s Share Buyback, Cancellation, and Tender Offer + NPS’s Five Options
Clean Energy & Global Water ETFs: Changes for Asia & Impact
China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price
S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)
TCM (570 HK): Likely Rush for The Exits As Deal Busts
Fuji Soft (9749) Reiterates Support for KKR Tender#1, Recos Shareholders Wait, Ignores Nozawa Letter
Japan Weekly | Insane AI Demand
(Mostly) Asia-Pac M&A: GJS/Haitong, Fuji Soft, Bossini, Dyna-Mac, Beijing Capital Grand, TCM
Allegro MicroSystems Inc.: Enhanced Product Portfolio With Focus on Automotive & E-mobility Applications Driving Our Bullishness! – Major Drivers

S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up

With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December.
There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.

Scenario Analysis of Korea Zinc’s Share Buyback, Cancellation, and Tender Offer + NPS’s Five Options

We discuss the next steps in the fight for the control of Korea Zinc, after the completion of the tender offer by the MBK Partners and Young Poong alliance.
After the tender offer, MBK and Young Poong’s stake in Korea Zinc increased from 33.13% to 38.47%, coming close to more than half of the voting rights.
We continue to believe that at current stage, MBK/Young Poong alliance has the advantage in the fight for the control of Korea Zinc.

Clean Energy & Global Water ETFs: Changes for Asia & Impact

There are 3 adds and 2 deletes for the iSharesGlobal Clean Energy ETF while there are 2 adds and 2 deletes for the iShares Global Water UCITS ETF.
With US$5bn benchmarked to the iSharesGlobal Clean Energy and related ETFs, and US$3.5bn benchmarked to the iShares Global Water and related ETFs, there is multiple days of ADV to trade.
We see a noticeable rise in cumulative excess volume over the last two trading sessions, so there will be positioning in the stocks.

China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price

Shockingly, the Sinopharm-led consortium’s offer for China Traditional Chinese Medicine (570 HK) has lapsed as the precondition long stop date has not been extended.
This deal break caught many, including me, off guard. There are lessons to be learnt and questions to be asked.
Shareholders will have a bruising Monday. Our analysis suggests a deal break price of around HK$3.44, a 10% downside to the last close.

S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)

Arvida (ARV NZ) will be deleted from the S&P/NZX 50 Index following its acquisition by Stonepeak Alps BidCo. Tower Ltd (TWR NZ) will be added to the index.
Passive NZX50 Index trackers will need to buy nearly 18m shares of Tower Ltd (TWR NZ) – that is over 26 days of ADV.
There has been a lot of positioning in Tower Ltd (TWR NZ) since Stonepeak’s offer for Arvida (ARV NZ). There should be enough supply for the passive trackers.

TCM (570 HK): Likely Rush for The Exits As Deal Busts

China Traditional Chinese Medicine (570 HK) (TCM) has been a frustrating deal, for a deal that shouldn’t be frustrating.
As feared from its 16th October monthly update, the inability to secure investor group consents appears to have torpedoed the transaction. Will we eventually find out why this got stonewalled?
This deal lapse changes the Hong Kong M&A landscape; if you can’t rely on SOE transactions to get up, what next? The immediate question now is downside support on Monday.

Fuji Soft (9749) Reiterates Support for KKR Tender#1, Recos Shareholders Wait, Ignores Nozawa Letter

On Tuesday, Fuji Soft Inc (9749 JP) said they had received the legally-binding Bain proposal on 11 October, but noted they could not confirm founder Nozawa-san’s agreement or intentions.
Founder Nozawa Hiroshi responded with a pair of impassioned letters Thursday criticising process, asking Fuji Soft to withdraw support for KKR, and switch to or allow the Bain Offer.
Fuji Soft on Friday reiterated support for the KKR First Tender, but interestingly, saw a majority resolve to suggest common shareholders NOT tender because of the optionality.

Japan Weekly | Insane AI Demand

By Mark Chadwick

U.S. stocks showed a “slightly bullish” trend this week, driven by stronger-than-expected September Retail Sales, which pushed the S&P 500 up 0.9%
Japan’s stock market experienced a volatile week, with the Nikkei 225 Index declining 1.6% and the broader Topix Index down 0.6%
ASML’s cautious guidance hit Japanese SPE Stocks, but AI-related chip demand remains “insane” according to TSMC

(Mostly) Asia-Pac M&A: GJS/Haitong, Fuji Soft, Bossini, Dyna-Mac, Beijing Capital Grand, TCM

I tally 44 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deals discussed this week: Bossini International (592 HK) low-balled scrip Offer from Viva Goods (933 HK). Beijing Capital Grand (1329 HK) also suspended due to the Takeovers code.
Key updates took place on: GJS (2611 HK)/Haitong Securities (600837 CH), Fuji Soft Inc (9749 JP), Hotel Property Investments (HPI AU), TCM (570 HK) and Dyna Mac Holdings (DMHL SP)

Allegro MicroSystems Inc.: Enhanced Product Portfolio With Focus on Automotive & E-mobility Applications Driving Our Bullishness! – Major Drivers

By Baptista Research

Allegro MicroSystems presented their first fiscal quarter 2025 results, positioning themselves within a competitive and challenging market environment.
Positive indicators can be discerned from their performance, although there remain areas of concern which reflect broader market conditions and segment-specific issues.
Starting with the positives, Allegro MicroSystems reported first-quarter sales of $167 million, which was above the midpoint of their guidance.

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Oct 19

Most Read: Seven & I Holdings, Tower Ltd, China Traditional Chinese Medicine, K Bank, Korea Zinc, Adani Enterprises, Hotel Property Investments and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Privatization Update – The Long Stop Date to Extend or Not?
TCM (570 HK): “Uncertain” To Spook Shares
Couche-Tard Execs in Tokyo, “Hoping” For Meetings But Really There To Hold a Press Conference
S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)
China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price
K-Bank’s IPO Cancellation: What Led to This Move and Plan for a Comeback
Korea Zinc’s 2.4% Treasury Shares – Devil Is In the Legal Loophole
Thematic Report : Investment Opportunities in Indian Markets Led by Promoter Buying
Charter Hall Bumps With Final HPI Bid
Need a Game Plan to Tackle Korea Zinc’s Buyback Tender with a 20% Proration Risk

China TCM (570.HK) Privatization Update – The Long Stop Date to Extend or Not?

By Xinyao (Criss) Wang

Investors are concerned the Long Stop Date may be extended.But the style of SOEs is rigorous, which means CNPGC has anticipated the potential delays and reserved more time in advance.
Although CNPGC can extend Long Stop Date, this indicates CNPGC fails to complete the set work in scheduled time, which is equivalent to admitting its previous work arrangement was “inappropriate”.
If there’re unexpected circumstances, one possible scenario is privatization would be completed before the Chinese New Year.Because entering 2025, integrating China TCM and Taiji will be the focus of CNPGC.

TCM (570 HK): “Uncertain” To Spook Shares

China Traditional Chinese Medicine (570 HK) (TCM) will fall today. Perhaps a lot.
With two days left on the clock to secure the pre-conditions (18th October), the Offeror said “it remains uncertain” whether it can secure an extension from the investor group.
Such wording could be viewed as boilerplate SFC legalise. I would argue the use of “uncertain” is superfluous, unhelpful, and for investors, downright worrying.

Couche-Tard Execs in Tokyo, “Hoping” For Meetings But Really There To Hold a Press Conference

Alimentation Couche-Tard (ATD CN)‘s CEO, former CEO, CFO, and founder were in Tokyo today giving a press conference about their trip and designs on Seven & I Holdings (3382 JP).
There was some passive-aggressive behaviour. Their bid was better than 7&i’s plan. They said it was a high price. They said they wanted to meet management, the ITOs, the government.
None of that will win the hearts and minds of the Special Committee.

S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)

Arvida (ARV NZ) will be deleted from the S&P/NZX 50 Index following its acquisition by Stonepeak Alps BidCo. Tower Ltd (TWR NZ) will be added to the index.
Passive NZX50 Index trackers will need to buy nearly 18m shares of Tower Ltd (TWR NZ) – that is over 26 days of ADV.
There has been a lot of positioning in Tower Ltd (TWR NZ) since Stonepeak’s offer for Arvida (ARV NZ). There should be enough supply for the passive trackers.

China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price

Shockingly, the Sinopharm-led consortium’s offer for China Traditional Chinese Medicine (570 HK) has lapsed as the precondition long stop date has not been extended.
This deal break caught many, including me, off guard. There are lessons to be learnt and questions to be asked.
Shareholders will have a bruising Monday. Our analysis suggests a deal break price of around HK$3.44, a 10% downside to the last close.

K-Bank’s IPO Cancellation: What Led to This Move and Plan for a Comeback

The institutional demand forecasts were much worse than expected, leading to the company’s blunt admission in the latest filing that the book-building flopped, prompting them to cancel the IPO.
Bankers NH and KB suggested an offering price below 8,500 KRW, but pre-IPO backers like Bain Capital and MBK strongly opposed, unhappy with shrinking proceeds, pushing for cancellation.
K-Bank plans to regroup and adjust the heavy 50% secondary share portion to retry the IPO in six months before their prelim review window expires.

Korea Zinc’s 2.4% Treasury Shares – Devil Is In the Legal Loophole

Devil is in the legal loophole. Issuing treasury shares to employees as bonuses is an exception that is not bound by the condition of ‘6 months after treasury shares acquisition.
It would be nearly impossible for Korea Zinc to sell 2.4% of its treasury stock to an external friendly force and transform it into a friendly stake by February 2025.
Although MBK/Young Poong Alliance has the advantage right now in this M&A battle for Korea Zinc, it is by no means over.

Thematic Report : Investment Opportunities in Indian Markets Led by Promoter Buying

By Nimish Maheshwari

In the overheated Indian markets where selling spree by promoters is going at record pace.
We identified certain interesting companies where promoters are buying giving confidence in their business
We further delve into the thesis and key triggers for these companies

Charter Hall Bumps With Final HPI Bid

Back on the 9th September, pub play Hotel Property Investments (HPI AU) announced – and summarily rejected – a A$3.65/share cash Offer from Charter Hall Retail Reit (CQR AU).
Charter Hall has now increased terms to A$3.85/share (best & final), a 17.7% premium to undisturbed. The Offer remains conditional on an 50.1% minimum acceptance condition. Charter Hall holds 14.7%.
HPI’s reported response? “While Charter Hall’s improved offer provides an attractive exit for shareholders, we remain committed to evaluating all options that deliver the best long-term value.“

Need a Game Plan to Tackle Korea Zinc’s Buyback Tender with a 20% Proration Risk

NPS is now viewing their voting rights on Korea Zinc purely from a returns angle, shifting from earlier expectations of siding with Choi due to political pressure.
We need a tendering strategy for a 20% proration risk, focusing on when MBK will buy that extra 3.7% stake to cut losses on untendered shares.
MBK will aim to buy leftover shares cheaply. Their approach depends on the progress of Choi and Trafigura’s talks

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Oct 18

Most Read: China Traditional Chinese Medicine, Seven & I Holdings, Hyundai Rotem Company, Horizon Robotics, SGX Rubber Future TSR20, SAMTY HOLDINGS Co Ltd, K Bank, Tower Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

7&I Holdings (3382 JP) – Artisan Writes Another Letter – Based on Content, They Should Sell Any Pop
TCM (570 HK): “Uncertain” To Spook Shares
Couche-Tard Execs in Tokyo, “Hoping” For Meetings But Really There To Hold a Press Conference
Korea: Stocks with Potential Passive Flows in November
Horizon Robotics IPO – Peers Are Down a Lot, Its Valuation Isn’t
Rubber Board Says Q1 FY25 Production Near Stable But ATMA Disputes
Samty (187A) Deal Looks Somewhat Vulnerable to Potential Interlopers
K Bank IPO Bookbuilding: To Price Lower than Low IPO Price Range or Even Potential Cancellation
Horizon Robotics (9660 HK) IPO: The Bull Case
S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)

7&I Holdings (3382 JP) – Artisan Writes Another Letter – Based on Content, They Should Sell Any Pop

Some two weeks after it became apparent Alimentation Couche-Tard (ATD CN) had lobbied a bid in for Seven & I Holdings (3382 JP), Artisan Partners wrote a letter.
It was full of misguided analysis, ungrounded insinuation of a general nature without specifying where they would have a problem. It seemed to be complaint for the sake of complaint.
Today another public letter. This time there are a couple of worthwhile suggestions, some accusations of fiduciary impropriety based on no evidence, and an implicit admission they should have sold?

TCM (570 HK): “Uncertain” To Spook Shares

China Traditional Chinese Medicine (570 HK) (TCM) will fall today. Perhaps a lot.
With two days left on the clock to secure the pre-conditions (18th October), the Offeror said “it remains uncertain” whether it can secure an extension from the investor group.
Such wording could be viewed as boilerplate SFC legalise. I would argue the use of “uncertain” is superfluous, unhelpful, and for investors, downright worrying.

Couche-Tard Execs in Tokyo, “Hoping” For Meetings But Really There To Hold a Press Conference

Alimentation Couche-Tard (ATD CN)‘s CEO, former CEO, CFO, and founder were in Tokyo today giving a press conference about their trip and designs on Seven & I Holdings (3382 JP).
There was some passive-aggressive behaviour. Their bid was better than 7&i’s plan. They said it was a high price. They said they wanted to meet management, the ITOs, the government.
None of that will win the hearts and minds of the Special Committee.

Korea: Stocks with Potential Passive Flows in November

There are a few stocks in Korea that have outperformed/ underperformed their peers and could be added to or deleted from global passive portfolios next month.
There could be buying in Hyundai Rotem, while there could be selling in KT Corp, Celltrion Pharm, Kum Yang, Hyundai Engineering & Construction, Hyundai Steel, CosmoAM&T and L&F.
Based on our estimate of passive assets, trackers will need to trade between US$57m to US$230m of the stocks. Impact will vary between 3x-14.5x of ADV to trade.

Horizon Robotics IPO – Peers Are Down a Lot, Its Valuation Isn’t

Horizon Robotics is looking to raise up to US$696m in its Hong Kong IPO.
Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

Rubber Board Says Q1 FY25 Production Near Stable But ATMA Disputes

By Vinod Nedumudy

Consumption declines by .3% to 356,000 tons in Q1 FY 25
ATMA says April-Sept 2024 production 37% lower year on year
ATMA asks Rubber Board to expedite data publishing

Samty (187A) Deal Looks Somewhat Vulnerable to Potential Interlopers

The Hillhouse (Asia-based global PE firm) deal for SAMTY HOLDINGS Co Ltd (187A JP) has seen Samty shares trade tight to terms in the first three days of trading.
Some 7.5mm shares have traded. This is only 16% of shares out, but it is a much larger portion of Maximum Real World Float.
This begs the question of whether the deal could be put in jeopardy by the actions of one or two shareholders.

K Bank IPO Bookbuilding: To Price Lower than Low IPO Price Range or Even Potential Cancellation

Chosun Business Daily mentioned that K Bank IPO book building results among institutional investors have been very poor so far.
As a result, the bankers and K Bank are currently considering on potentially reducing the IPO price to about 8,500 won or even cancelling the IPO altogether.
Our base case valuation of K Bank is target price of 9,151 won per share. Even if the IPO is priced at 8,500 won, we would pass on this IPO.

Horizon Robotics (9660 HK) IPO: The Bull Case

Horizon Robotics (9660 HK), a provider of autonomous driving products and services, is seeking to raise up to US$696 million through a HKEx IPO.
Horizon ranked fourth among all global ADAS and AD solution providers in China by solution installation volume in 2023 and 1H24, with a market share of 9.3% and 15.4%, respectively.
The bull case rests on a large TAM, a blue-chip customer base, a robust backlog, a core business in good health, a high gross margin, and a strong balance sheet.

S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)

Arvida (ARV NZ) will be deleted from the S&P/NZX 50 Index following its acquisition by Stonepeak Alps BidCo. Tower Ltd (TWR NZ) will be added to the index.
Passive NZX50 Index trackers will need to buy nearly 18m shares of Tower Ltd (TWR NZ) – that is over 26 days of ADV.
There has been a lot of positioning in Tower Ltd (TWR NZ) since Stonepeak’s offer for Arvida (ARV NZ). There should be enough supply for the passive trackers.

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Oct 17

Most Read: Horizon Robotics, Mazda Motor, Taiwan Semiconductor (TSMC) – ADR, China Traditional Chinese Medicine, Korea Zinc, Seven & I Holdings, Baimtec Material , Haitong Securities Co Ltd (H), Inox Wind Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Privatization Update – The Long Stop Date to Extend or Not?
Horizon Robotics (9660 HK) IPO: Index Inclusion Possibility & Timelines
Japan: Potential Passive Selling in November
Taiwan Dual-Listings Monitor: TSMC Premium Holding Up; ASE & CHT See Sharp Drops
China Traditional Chinese Medicine (570 HK): Theatre of the Absurd
Scenario Analysis of Korea Zinc’s Share Buyback, Cancellation, and Tender Offer + NPS’s Five Options
7&I Holdings (3382 JP) – Artisan Writes Another Letter – Based on Content, They Should Sell Any Pop
CSI 500 Index Rebalance Preview: 50 Changes; 11% Turnover; US$5bn Round-Trip Trade
GJS/Haitong Merger Musings
Clean Energy & Global Water ETFs: Changes for Asia & Impact

China TCM (570.HK) Privatization Update – The Long Stop Date to Extend or Not?

By Xinyao (Criss) Wang

Investors are concerned the Long Stop Date may be extended.But the style of SOEs is rigorous, which means CNPGC has anticipated the potential delays and reserved more time in advance.
Although CNPGC can extend Long Stop Date, this indicates CNPGC fails to complete the set work in scheduled time, which is equivalent to admitting its previous work arrangement was “inappropriate”.
If there’re unexpected circumstances, one possible scenario is privatization would be completed before the Chinese New Year.Because entering 2025, integrating China TCM and Taiji will be the focus of CNPGC.

Horizon Robotics (9660 HK) IPO: Index Inclusion Possibility & Timelines

Horizon Robotics (1395186D CH) is offering 1.355bn shares in its IPO at a price range of HK$3.73-3.99/share. With the overallotment option, the IPO could raise up to HK$6.2bn (US$801m).
Cornerstone investors will take up a third of the offer. Those shares will be locked up for 6 months and will significantly reduce the free float of the stock.
Index inclusions will commence with the HSCI in March 2025 – however, as a stock with Weighted Voting Rights, inclusion in Southbound Stock Connect will only take place in May.

Japan: Potential Passive Selling in November

Up to 9 stocks could be deleted from global passive portfolios in November. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.
The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names.

Taiwan Dual-Listings Monitor: TSMC Premium Holding Up; ASE & CHT See Sharp Drops

By Vincent Fernando, CFA

TSMC: +15.6% Premium; Relatively Aggressive Trade is to Long Premium
ASE: -3.0% Discount; Good Level to Go Long the Premium
CHT: -2.8% Discount; Good Level to Go Long the Premium

China Traditional Chinese Medicine (570 HK): Theatre of the Absurd

China Traditional Chinese Medicine (570 HK)’s monthly update notes that the consortium has secured SAMR approval and made progress in obtaining the other regulatory approvals.
As expected, the precondition will not be satisfied before the 18 October long stop date. Unexpectedly, whether the consortium members will consent to the extension remains uncertain.
The extension will be forthcoming as the delay is procedural, there is a reputational risk from a deal break, the time investment is significant, and the warning was legally required.

Scenario Analysis of Korea Zinc’s Share Buyback, Cancellation, and Tender Offer + NPS’s Five Options

We discuss the next steps in the fight for the control of Korea Zinc, after the completion of the tender offer by the MBK Partners and Young Poong alliance.
After the tender offer, MBK and Young Poong’s stake in Korea Zinc increased from 33.13% to 38.47%, coming close to more than half of the voting rights.
We continue to believe that at current stage, MBK/Young Poong alliance has the advantage in the fight for the control of Korea Zinc.

7&I Holdings (3382 JP) – Artisan Writes Another Letter – Based on Content, They Should Sell Any Pop

Some two weeks after it became apparent Alimentation Couche-Tard (ATD CN) had lobbied a bid in for Seven & I Holdings (3382 JP), Artisan Partners wrote a letter.
It was full of misguided analysis, ungrounded insinuation of a general nature without specifying where they would have a problem. It seemed to be complaint for the sake of complaint.
Today another public letter. This time there are a couple of worthwhile suggestions, some accusations of fiduciary impropriety based on no evidence, and an implicit admission they should have sold?

CSI 500 Index Rebalance Preview: 50 Changes; 11% Turnover; US$5bn Round-Trip Trade

With 95% of the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index at the close on 13 December.
We estimate a one-way turnover of 11% at the rebalance resulting in a one-way trade of CNY17.56bn (US$2.48bn). The Information Technology and HealthCare sectors gain at the expense of Industrials.
After drifting lower over the last couple of months, the forecast adds have outperformed the forecast deletes over the last couple of weeks. There should be more to go here.

GJS/Haitong Merger Musings

Back in March, the CSRC said it aimed to “form two to three investment banks and institutions with international competitiveness and market leadership by 2035″.
Last week’s announced merger between China’s leading state-backed brokerages, Guotai Junan Securities (2611 HK) and Haitong (6837 HK), is a move in that direction. Expect more scrip mergers to follow.
There have also been some media reports that the GJS/Haitong terms disadvantage holders of other Hong Kong broker stocks if potentially acquired in a merger. It’s not quite that simple.

Clean Energy & Global Water ETFs: Changes for Asia & Impact

There are 3 adds and 2 deletes for the iSharesGlobal Clean Energy ETF while there are 2 adds and 2 deletes for the iShares Global Water UCITS ETF.
With US$5bn benchmarked to the iSharesGlobal Clean Energy and related ETFs, and US$3.5bn benchmarked to the iShares Global Water and related ETFs, there is multiple days of ADV to trade.
We see a noticeable rise in cumulative excess volume over the last two trading sessions, so there will be positioning in the stocks.

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Oct 16

Most Read: Korea Zinc, China Shipbuilding Industry Group Power, Evergreen Marine Corp, China Resources Beverage, Jiangsu Hoperun Software, Shengyi Electronics, Horizon Robotics, Dyna Mac Holdings, Bossini International Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MBK’s Korea Zinc & Young Poong Precision Tender Results Officially Out
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Impact and US$3bn Round-Trip Trade
China Resources Beverage (2460 HK) IPO: Index Inclusions & Stock Connect in 2025
Quiddity Leaderboard ChiNext Dec 24: US$400mn Expected Inflow for Jiangsu Hoperun
Thematic Report : How India’s Biggest IPOs Have Performed?
Quiddity Leaderboard STAR 50/100 Dec 24: Shocking Changes to Expectations After Wild Market Swings
Horizon Robotics Pre-IPO – PHIP Updates – More of the Same, Lots to Watch Out For
Dyna-Mac (DMHL SP): No Alternative As Hanwha Group Bumps
Bossini (592 HK): Viva Goods Offer?

MBK’s Korea Zinc & Young Poong Precision Tender Results Officially Out

MBK officially disclosed that they scooped up 5.34% of the Korea Zinc (010130 KS) shares in the tender that wrapped up today.
MBK scored a partial win by securing more voting rights than Choi, with unexpected backing from foreign and local institutions, likely due to proration risk over legal issues.
Still, securing just 5.34% puts MBK in a tough position, requiring them to navigate minority shareholder votes while pushing hard on the legal front to block the buyback.

CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar

There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Impact and US$3bn Round-Trip Trade

Using data from the close on 11 October, there could be 6 adds and 5 deletes for 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 15% and a one-way trade of TWD 49bn (US$1.52bn)
Shorts have been building up in some of the forecast deletes and in a couple of the forecast adds as well.

China Resources Beverage (2460 HK) IPO: Index Inclusions & Stock Connect in 2025

China Resources Beverage (CRB HK) is offering 347.8m shares in its IPO at a price range of HK$13.5-14.5/share. With the overallotment option, the IPO could raise up to HK$5.8bn (US$474m).
Cornerstone investors will take up nearly half the offer. Those shares will be locked up for 6 months and will significantly reduce the free float of the stock.
Index inclusions will commence with the HSCI in March 2025 – that will also result in Stock Connect inclusion. The next index inclusion will take place in June.

Quiddity Leaderboard ChiNext Dec 24: US$400mn Expected Inflow for Jiangsu Hoperun

By Janaghan Jeyakumar, CFA

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.

Thematic Report : How India’s Biggest IPOs Have Performed?

By Nimish Maheshwari

Hyundai Motor India (1342Z IN) plans India’s largest IPO, valued at Rs. 27,870 crore.
Historical data shows large IPOs often underperform, raising concerns about valuation and market timing.
Caution is essential; analyzing fundamentals over hype is crucial for IPO investments.

Quiddity Leaderboard STAR 50/100 Dec 24: Shocking Changes to Expectations After Wild Market Swings

By Janaghan Jeyakumar, CFA

STAR 50 index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
STAR 100 index tracks the next 100 names (51st-150th ranks) and it represents the mid-cap segment of the STAR market.
In this insight, we take a look at the potential ADDs/DELs for the STAR 50 and STAR 100 indices for the December 2024 index rebal event.

Horizon Robotics Pre-IPO – PHIP Updates – More of the Same, Lots to Watch Out For

Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO.
Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
In this note, we talk about the recent updates from its filings.

Dyna-Mac (DMHL SP): No Alternative As Hanwha Group Bumps

On the 11th September, Hanwha Ocean (042660 KS) and Hanwha Aerospace (012450 KS), collectively holding 25.36%, made a S$0.60/share cash Offer for shares not owned, conditional on a 50% acceptance.
The transaction stalled on the 24th September, when the estate of Dyna-Mac’s founding shareholder, Desmond Lim Tze Jong (holding ~35% currently) reckoned the Offer “does not adequately reflect” Dyna-Mac’s value.
Hanwha Group has now bumped terms by 11.67% to S$0.67/share, best & final. That’s a 35.4% premium to undisturbed, and a decade high. No word, yet, from the Lim estate.

Bossini (592 HK): Viva Goods Offer?