Most Read

Tencent (700 HK) announced in-specie dividends of JD.com (9618 HK) (US$15bn+) in 2021 and Meituan (3690 HK) (US$20bn) in 2022.
With the Tencent (700 HK) Board meeting on 15 November to approve Q3 results and considering the payment of a dividend, the pattern could repeat this year.
Tencent (700 HK) owns stakes of US$1bn+ in 10 listed companies. We take a look at the stocks that could be next in line to be paid as in-specie dividends.

Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints

Descente Ltd (8114 JP) saw Itochu report it had continued its streak of consecutive days of buying, extending it to 115. Now they own 44.1% of voting rights.
ANTA gave hints to the progress of Descente China in the Interim Results, and Q3 Operational Update. Descente analysts are 20% ahead of guidance, but they’re probably low still.
Descente reports Q2 tomorrow. I expect the numbers and presentation to surprise at the Net Profit level. I expect a forecast revision.

Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban

Given Korea’s blanket ban on short-selling, we should concentrate on the likelihood of these ADRs being significantly discounted compared to their underlying shares.
It should persist for an extended period, highlighting the importance of continuously monitoring ADR spreads over the next 2-3 months to seize the opportune entry timing.
Since all these carry single-stock futures, a flexible setup targeting this spread can be designed, ideally incorporating currency hedges.

Will Semiconductor GDR Listing – Well Flagged and Short Interest Has Been on the Rise

Will Semiconductor Shan (603501 CH) is looking to raise US$450m in its Switzerland GDR listing. The bookrunners on the deal are UBS and JP Morgan.
In its base deal, the firm is offering 31m GDRs (1 GDR to 1 ordinary A-share) for sale, at a 5.4-17.2% discount to last close on its A-share leg.
The base deal would be a relatively small one for the firm to digest, representing just 3.8 days of three month ADV on its A-share leg.

China Vanke (2202 HK): Short Term Trading Opportunity Post Conference Call

By Steve Zhou, CFA

China Vanke (H) (2202 HK) saw a major drop in bond and stock prices recently, due to fear of default.
Yesterday, the company held a conference call, with representatives from Shenzhen SASAC and Shenzhen Metro (major shareholder of Vanke and owned by Shenzhen SASAC) participating in the call.
The strong support shown by Shenzhen SASAC/Shenzhen Metro represents a good short-term buying opportunity, for both Vanke stock and bonds.

WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors

WuXi XDC Cayman (1877628D HK) is looking to raise US$470m in its Hong Kong IPO.
WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
In this note, we will look at the deal dynamics and share our final thoughts on valuation.

TOPIX Inclusions: Who Is Ready (Nov 2023)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Our main pre-event candidate CELSYS (3663 JP) has outperformed TOPIX by ~12.6% since 1 Sep (when it was highlighted) and 6 Nov 2023.
There are three TOPIX Inclusion events confirmed for the end of November and two other interesting pre-event names we are closely monitoring.

Sankyo (6417) – Second Go-Round for a BIG Buyback

Back in late September, Sankyo Co Ltd (6417 JP) announced a 10mm share buyback along with a new dividend policy. Only 4.22mm shares showed up to sell.
The largest holder – Exec Chair Busujima-san – sold 2.22mm shares under his own name and his company’s name. Hikari Tsushin, which had been selling in the market, didn’t participate.
Now Sankyo has launched another 10mm share ToSTNeT-3 buyback tomorrow (8 Nov) AM at ¥6,099/share. They may not complete. But they may continue buying later. They have oodles of cash.

Japan H1 Bank Earnings: Last Minute Update; Suruga Bank Reacts Well

I wrote Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still last week mentioning the trends in guidance revisions.
Since then, five have reported H1. +20%, +53%, +23% vs guidance; +25.6%, and +28.2% vs Last Year. Eight more have added new guidance, weighted average H1 up 48%.
Four more report tomorrow, eight on Thurs, 43 on Friday. The Top 5 are all next Mon/Tues. Watch for comments about portfolio restructuring efforts in H2 as market yields rise.

Hollysys (HOLI US): Ascendent Capital Joins the Fray

Ascendent Capital has made a non-binding proposal for Hollysys Automation Technologies (HOLI US) at US$26.00 per share, a 4.0% premium to the MBO and Recco proposal of US$25.00 per share.
Ascendent has also become the largest shareholder by securing 13.69% of outstanding shares at an average price of A$20.84 per share. Ascendant is supportive of the special meeting request.
The Board has tried several delaying tactics, but the emergence of Ascendant ramps up the pressure on the Board to conduct a transparent sale process and address shareholder concerns.

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Nov 07

Most Read: Korea Stock Exchange KOSPI 200, Korea Stock Exchange Kospi Index, Samsung Electronics, Descente Ltd, Samsung Sds, Amman Mineral Internasional, Tencent, HYBE , WuXi XDC Cayman , Will Semiconductor Shan and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications
Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights
Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes
Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints
Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions
Amman Mineral (AMMN IJ): Potential Passive Inflows Coming Up Soon
Tencent (700 HK): Board Meets Next Week; In-Specie Dividend Candidates
Block Deal Sale of HYBE by Netmarble
WuXi XDC IPO: Valuation First-Look
Will Semiconductor GDR Listing – Well Flagged and Short Interest Has Been on the Rise

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.

Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights

There seems to be no immediate requirement to close existing contracts. However, even the chairman of the Financial Services Commission was unable to offer a definitive answer.
The comprehensive investigation and prohibition of the customary naked short selling could lead to a rapid decline in overall market liquidity.
The first is the short-term view, focusing on futures backwardation, and the second is the medium to long-term perspective, examining how the overall market liquidity decline will affect market flows.

Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes

Lee family plans to sell additional 2.6 trillion won worth of Samsung Group companies as part of their fourth installment of inheritance taxes.
This inheritance tax share sale is likely to have a negative impact on Samsung Electronics, Samsung C&T, Samsung SDS, and Samsung Life Insurance.
This may be just a coincidence but the regulators announced today a temporary ban on stock short selling which should help the Lee family to unload their shares.

Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints

Descente Ltd (8114 JP) saw Itochu report it had continued its streak of consecutive days of buying, extending it to 115. Now they own 44.1% of voting rights.
ANTA gave hints to the progress of Descente China in the Interim Results, and Q3 Operational Update. Descente analysts are 20% ahead of guidance, but they’re probably low still.
Descente reports Q2 tomorrow. I expect the numbers and presentation to surprise at the Net Profit level. I expect a forecast revision.

Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions

Considering year-end dividends, it appears likely that the trading timing might extend beyond this year. In the previous case, the trade execution timing was one month before the contract expired.
Short selling is prohibited. However, all four companies offer single-stock futures, which provide instruments for proactive positioning. Nevertheless, aspects to consider are likely to increase regarding trading convenience and liquidity.
The potential for inadequate liquidity might increase the discounts for these deals, potentially offering us fresh trading opportunities. We should proactively prepare trading setups that consider these contextual conditions.

Amman Mineral (AMMN IJ): Potential Passive Inflows Coming Up Soon

Amman Mineral Internasional (AMMN IJ) listed on the Main Board of the IDX in July by raising US$715m in the largest Indonesia IPO for the year.
The stock did not get Fast Entry to any of the local or global indices given the low float, but there could be multiple index inclusions in the near future.
The stock is up 3x from its IPO price and there could be supply from some of the investors that got in at the offering price.

Tencent (700 HK): Board Meets Next Week; In-Specie Dividend Candidates

Tencent (700 HK) announced in-specie dividends of JD.com (9618 HK) (US$15bn+) in 2021 and Meituan (3690 HK) (US$20bn) in 2022.
With the Tencent (700 HK) Board meeting on 15 November to approve Q3 results and considering the payment of a dividend, the pattern could repeat this year.
Tencent (700 HK) owns stakes of US$1bn+ in 10 listed companies. We take a look at the stocks that could be next in line to be paid as in-specie dividends.

Block Deal Sale of HYBE by Netmarble

After the market close on 6 November, Netmarble announced that it will sell 2.5 million shares of HYBE which represents 569 billion won in amount at current price.
The actual block deal amount is likely to be less than 569 billion won as there will likely be a block deal discount rate.
We would avoid this deal, mainly because we think HYBE is overvalued relative to its peers.

WuXi XDC IPO: Valuation First-Look

WuXi XDC Cayman (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.
We previously discussed the IPO in WuXi XDC IPO: The Bull Case and WuXi XDC IPO: The Bear Case.
In this note, we present our forecasts and take the first look at WuXi XDC’s potential valuation range.

Will Semiconductor GDR Listing – Well Flagged and Short Interest Has Been on the Rise

Will Semiconductor Shan (603501 CH) is looking to raise US$450m in its Switzerland GDR listing. The bookrunners on the deal are UBS and JP Morgan.
In its base deal, the firm is offering 31m GDRs (1 GDR to 1 ordinary A-share) for sale, at a 5.4-17.2% discount to last close on its A-share leg.
The base deal would be a relatively small one for the firm to digest, representing just 3.8 days of three month ADV on its A-share leg.

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Nov 06

Most Read: Korea Stock Exchange KOSPI 200, Korea Stock Exchange Kospi Index, Samsung Electronics, Chindata Group, Descente Ltd, Samsung Sds, Guangzhou Automobile Group, Haitong International Securities Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications
Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights
Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes
Chindata (CD US): Maximum Dissent Condition in Focus as Oasis Builds a Stake
EQD | KOSPI 200 SHORT-SELLING BAN: Upward Push and Pullbacks
Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints
Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions
A/H Premium Tracker (To 3 Nov): Volatility Off, Spreads Jumpy, Short Sellers a NatSec Concern?
Merger Arb Mondays (06 Nov) – Haitong Intl, NWS, Poly Culture, Eoflow, Origin, Azure, Tietto

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.

Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation

We should consider the complete prohibition of short selling for the next six months as practically finalized.
Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.

Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights

There seems to be no immediate requirement to close existing contracts. However, even the chairman of the Financial Services Commission was unable to offer a definitive answer.
The comprehensive investigation and prohibition of the customary naked short selling could lead to a rapid decline in overall market liquidity.
The first is the short-term view, focusing on futures backwardation, and the second is the medium to long-term perspective, examining how the overall market liquidity decline will affect market flows.

Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes

Lee family plans to sell additional 2.6 trillion won worth of Samsung Group companies as part of their fourth installment of inheritance taxes.
This inheritance tax share sale is likely to have a negative impact on Samsung Electronics, Samsung C&T, Samsung SDS, and Samsung Life Insurance.
This may be just a coincidence but the regulators announced today a temporary ban on stock short selling which should help the Lee family to unload their shares.

Chindata (CD US): Maximum Dissent Condition in Focus as Oasis Builds a Stake

Chindata Group (CD US)’s US$8.60 per ADS offer from Bain Capital is conditional on dissenting shareholders representing less than 12% of outstanding shares.
Oasis Management, an activist fund, recently disclosed a shareholding representing 65.9 million ordinary shares, 8.99% of outstanding shares and 1.24% of voting interest.
Precedent transactions where the dissent condition was exceeded suggest two possibilities – the offeror waives the condition or persuades sufficient shareholders to withdraw as dissenters.

EQD | KOSPI 200 SHORT-SELLING BAN: Upward Push and Pullbacks

By Nico Rosti

Banning short-selling for stocks will provide some propulsion to the KOSPI 200 INDEX but inevitably there will be pullbacks when strong resistance areas are reached.
The index is joining a wide global equities bounce, it is not recommended to go SHORT soon. There is a chance it may pullback briefly this week (buy the dip?)
Our models say the index can rise from 2 to 4 weeks, before reversing: resistance will be met at 320, 328 and (hard to reach) 349.

Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints

Descente Ltd (8114 JP) saw Itochu report it had continued its streak of consecutive days of buying, extending it to 115. Now they own 44.1% of voting rights.
ANTA gave hints to the progress of Descente China in the Interim Results, and Q3 Operational Update. Descente analysts are 20% ahead of guidance, but they’re probably low still.
Descente reports Q2 tomorrow. I expect the numbers and presentation to surprise at the Net Profit level. I expect a forecast revision.

Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions

Considering year-end dividends, it appears likely that the trading timing might extend beyond this year. In the previous case, the trade execution timing was one month before the contract expired.
Short selling is prohibited. However, all four companies offer single-stock futures, which provide instruments for proactive positioning. Nevertheless, aspects to consider are likely to increase regarding trading convenience and liquidity.
The potential for inadequate liquidity might increase the discounts for these deals, potentially offering us fresh trading opportunities. We should proactively prepare trading setups that consider these contextual conditions.

A/H Premium Tracker (To 3 Nov): Volatility Off, Spreads Jumpy, Short Sellers a NatSec Concern?

The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Absolutely STONKING performance this past week – +1.62% Friday to Friday across 42 trades. Positive performance in every sector. Portfolio at new high. Southbound inflows. BigCapHighDiv SOE outflows.
Short sales this week now need 100% in the account for hedge funds. And the MSS claims some are short-selling or talking bearishly on stocks for political reasons.

Merger Arb Mondays (06 Nov) – Haitong Intl, NWS, Poly Culture, Eoflow, Origin, Azure, Tietto

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU), JSR Corp (4185 JP), Orecorp Ltd (ORR AU), Lithium Power.
Lowest spreads – Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Chindata Group (CD US), Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Allkem.

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Nov 05

Most Read: Gs Yuasa Corp, Youngone Holdings, GMO Payment Gateway, Tuhu Car , Kyocera Corp, KCE Electronics PCL, Korea Stock Exchange KOSPI 200, SK Square , Softbank Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
KOSPI200 Index Rebalance Preview: The Tail End
Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running
Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
SoftBank Group (9984 JP): Results Preview, Key Topics
Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade

Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.

KOSPI200 Index Rebalance Preview: The Tail End

With the review period nearly complete, we expect 7 changes to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December. Couple of changes are low probability though.
The Materials sector could be the biggest gainer at the rebalance while nearly all deletions could come from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.15-15 days of ADV while the impact on the potential deletions varies from 1.7-8.1 days of ADV.

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).

HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running

There were only 14 new listing on the Main Board of the HKEX (388 HK) in the third quarter. Half of the listings were in the last week of September.
Of those stocks, only Tuhu Car (9690 HK) and Keep (3650 HK) have a chance of being added to the HSCI in December and then into Southbound Stock Connect.
Keep Inc (3650 HK) could be added to Stock Connect in early December while Tuhu Car (9690 HK) will have to wait till April for inclusion to the link.

Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?

Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI shares (after an AGM disaster).
The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago.
The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.

Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation

We should consider the complete prohibition of short selling for the next six months as practically finalized.
Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.

Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT

KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
If we observe a somewhat unusual downward trend in SK Square’s price from the 15th, this could be seen as a hint foretelling the announcement of SK Square’s exclusion.

SoftBank Group (9984 JP): Results Preview, Key Topics

By Victor Galliano

WeWork appears to be approaching bankruptcy; we expect SoftBank’s exposure to be at least USD1.4bn including credit lines
Arm Holdings post-IPO performance has been lacklustre, but we continue to believe that it remains dangerously over-valued against peers – and Arm provides 30% of the group’s equity value
We believe that JPY depreciation has supported SoftBank Group’s share price (given the high share of USD-denominated portfolio assets); in addition, we still see risks to current private company valuations

Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?

On 3 November, numerous local media outlets reported that the Korean government is likely to temporarily suspend short selling in the Korean stock market.
According to a high level ruling party official, the Korean government plans to announce temporary ban on short selling stocks no later than on 15 November for about six months.
There is a major legislative election in Korea in April 2024. If there is a temporary ban on short selling stocks, this could be viewed negatively by many foreign investors.

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Nov 04

Most Read: GMO Payment Gateway, Origin Energy, Kyocera Corp, Celltrion Healthcare , Polycab India , Tongcheng Travel Holdings , Midea Group Co Ltd A, SK Square , Olink Holding 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
NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover
Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer
Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
Celltrion Merger Update: Limits Lifted
AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet
Quiddity HSTECH Dec 23 Flow Expectations: US$512mn One-Way Flows if the Expected Change Takes Place
Midea Group H Share Listing: The Investment Case
Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
Start of Tender Offer

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).

NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover

Halfway through the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
Estimated one-way turnover is 15.26% and that will result in a one-way trade of INR 24bn. There will be more than 2x ADV to sell on nearly all deletes.
There is a possibility of an index methodology change, but no news for the last 4 months could indicate pushback from users or more stocks added to the F&O market.

Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer

Origin Energy (ORG AU) has disclosed a best and final offer from Brookfield/EIG at A$6.59 and US$1.86 per share, which implies A$9.53 per share, 8.1% higher than the previous offer.
AusSuper will vote against the final offer. Taking advantage of the share price dip, AusSuper is said to have further increased its shareholding to 14.98% of outstanding shares.
The scheme will likely fail as a minority YES vote turnout of 88% is required to pass. Brookfield/EIG could return with an off-market takeover offer, but it also faces issues.

Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?

Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI shares (after an AGM disaster).
The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago.
The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.

Celltrion Merger Update: Limits Lifted

Back on the 17 August, biopharmaceuticals developer and producer Celltrion Inc (068270 KS) announced a merger with Celltrion Healthcare (091990 KS).
On October 23rd, shareholders approved the merger. The appraisal rights exercise period commenced on the 23 October and ends on November 13. 28th December is the merger’s effective date.
Initially, the stock purchase rights limit was set at 1₩tn; however Celltrion Group’s founder/Chairman Seo Jung-jin has removed this limit. That takes care of NPS, which opposes the merger.

AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet

We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.
Some stocks are expected to be inclusions to global indices later this month while others are potential NIFTY Index and/or Nifty Next 50 Index changes in March.
On average, the upward migrating stocks have outperformed the downward migrating stocks by close to 100% over the last 8 months. The passive flow can be used as an exit.

Quiddity HSTECH Dec 23 Flow Expectations: US$512mn One-Way Flows if the Expected Change Takes Place

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
The index changes and the indicative component weights for the December 2023 index review will be published in a couple of weeks.
In this insight, we take a look at the potential index changes and the resultant capping flows for the HSTECH Index in December 2023.

Midea Group H Share Listing: The Investment Case

Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, has filed for a H Share listing to raise US$1 billion, according to press reports.
Midea is the world’s largest home appliance company in sales volume and revenue in 2022. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies.
The investment case rests on return to growth, margin on an upward trajectory, cash generation, strong balance sheet and undemanding valuation.

Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT

KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
If we observe a somewhat unusual downward trend in SK Square’s price from the 15th, this could be seen as a hint foretelling the announcement of SK Square’s exclusion.

Start of Tender Offer

By Jesus Rodriguez Aguilar

The $26.00/share cash offer of Thermo Fisher Scientific (TMO UN) for Swedish Olink Holding (OLK US) started on 31 October. The 74% premium reflects that high-growth, positive adjusted EBITDA targets are rare.
The offer values Olink at ~12.2x EV/NTM Fwd revenue vs. 6.4x median of peers. Irrevocables total 66%, but the minimum acceptance condition requires acceptances from a high 70.6% of float.
Barring any unforeseen circumstances, such as regulatory action, I anticipate the deal closing and set my TP at $26/share. Gross spread is 4.81%.

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Nov 03

Most Read: Origin Energy, EcoPro Materials, Celltrion Inc, Celltrion Healthcare , Kyocera Corp, Tongcheng Travel Holdings , Midea Group Co Ltd A, Zhongsheng Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Origin: Brookfield Bumps. AustralianSuper Say Meh.
Ecopro Materials: Reduces IPO Price Range
Celltrion Merger: Appraisal Rights & Passive Flows
Celltrion Merger Update: Limits Lifted
Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer
Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
Quiddity HSTECH Dec 23 Flow Expectations: US$512mn One-Way Flows if the Expected Change Takes Place
Midea Group H Share Listing: The Investment Case
Past A/H Listings Performance – Have Been a Mixed Bag
Quiddity HSCEI Dec 23 Rebalance: Zhongsheng Vs China Grand Pair Interesting if Deletion Is Confirmed

Origin: Brookfield Bumps. AustralianSuper Say Meh.

On the 31st October, AustralianSuper (with 13.67% of shares out and Origin Energy (ORG AU)‘s largest shareholder) argued the Brookfield/EIG-backed Consortium Offer remained substantially below its estimate of fair value.
Brookfield/EIG have now increased their Offer by 8% to $9.53/share from $8.81/share, which now comprises cash components of A$6.59/share and US$1.86/share. A consideration-reducing fully-franked dividend of A$0.39/share is expected.
The Offer is declared “best and final.” It is above the top-end of the IE’s valuation range. AustralianSuper should accept the revised terms. But they say no.

Ecopro Materials: Reduces IPO Price Range

Ecopro Materials reduced the upper end of the IPO price range from 46,000 won to 44,000 won.
The bankers reduced the IPO discount, EV/EBITDA valuation multiple, and outstanding shares.
We maintain our Bearish view of the Ecopro Materials IPO. Our base case valuation of 37,436 won per share is towards to lower end of the IPO price range.

Celltrion Merger: Appraisal Rights & Passive Flows

The Appraisal rights exercise period ends on 13 November. If the NPS and other large shareholders exercise their rights in Celltrion Inc (068270 KS), the merger could be in trouble.
Both stocks are trading close to their exercise price and could be supported due to the companies buying back their shares.
There will be passive flows from local and global trackers and there does not appear to be pre-positioning. That is likely due to the risk of potential merger cancellation.

Celltrion Merger Update: Limits Lifted

Back on the 17 August, biopharmaceuticals developer and producer Celltrion Inc (068270 KS) announced a merger with Celltrion Healthcare (091990 KS).
On October 23rd, shareholders approved the merger. The appraisal rights exercise period commenced on the 23 October and ends on November 13. 28th December is the merger’s effective date.
Initially, the stock purchase rights limit was set at 1₩tn; however Celltrion Group’s founder/Chairman Seo Jung-jin has removed this limit. That takes care of NPS, which opposes the merger.

Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer

Origin Energy (ORG AU) has disclosed a best and final offer from Brookfield/EIG at A$6.59 and US$1.86 per share, which implies A$9.53 per share, 8.1% higher than the previous offer.
AusSuper will vote against the final offer. Taking advantage of the share price dip, AusSuper is said to have further increased its shareholding to 14.98% of outstanding shares.
The scheme will likely fail as a minority YES vote turnout of 88% is required to pass. Brookfield/EIG could return with an off-market takeover offer, but it also faces issues.

Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?

Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI shares (after an AGM disaster).
The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago.
The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.

Quiddity HSTECH Dec 23 Flow Expectations: US$512mn One-Way Flows if the Expected Change Takes Place

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
The index changes and the indicative component weights for the December 2023 index review will be published in a couple of weeks.
In this insight, we take a look at the potential index changes and the resultant capping flows for the HSTECH Index in December 2023.

Midea Group H Share Listing: The Investment Case

Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, has filed for a H Share listing to raise US$1 billion, according to press reports.
Midea is the world’s largest home appliance company in sales volume and revenue in 2022. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies.
The investment case rests on return to growth, margin on an upward trajectory, cash generation, strong balance sheet and undemanding valuation.

Past A/H Listings Performance – Have Been a Mixed Bag

By Sumeet Singh

Two of the biggest deals in the Hong Kong pipeline are A/H listings for S.F. Holding (002352 CH) and Midea Group (000333 CH), both looking to raise around US$3bn.
Prior to the deals going live, we had a quick look at the A/H premium, subscription and past performance of some of the earlier A/H listings.
Overall, most of the recent A/H listings haven’t done much in the near term.

Quiddity HSCEI Dec 23 Rebalance: Zhongsheng Vs China Grand Pair Interesting if Deletion Is Confirmed

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” Securities listed in Hong Kong.
In a couple of weeks, the official index changes and the indicative weights for the final index members for the December 2023 rebalance will be announced.
In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI in December 2023.

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Nov 02

Most Read: Socionext, Kakao Corp, TOPIX-Banks Index, Polycab India , Celltrion Inc, Hokuhoku Financial Group, WuXi XDC Cayman Inc, Symbio Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
Concerns About A Major Accounting Fraud at Kakao Mobility
Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover
Celltrion Merger: Appraisal Rights & Passive Flows
Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still
Pre-IPO WuXi XDC (PHIP Updates) – Some Points Worth the Attention
Symbio Backs ABB’s Reduced Terms
AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet
WuXi XDC IPO: The Bear Case

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD

In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024.
DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added.

Concerns About A Major Accounting Fraud at Kakao Mobility

It was reported in numerous local media in Korea that FSS is investigating Kakao Mobility for a potential accounting fraud.
There are suspicions that Kakao Mobility may have artificially inflated its sales from 2020 to 2023 to enhance the value of the company prior to its IPO listing.
Given that the regulators are unlikely to make a final decision on this matter until next year, this is likely to be negative on both Kakao Mobility and Kakao Corp.

Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”

In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.

NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover

Halfway through the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
Estimated one-way turnover is 15.26% and that will result in a one-way trade of INR 24bn. There will be more than 2x ADV to sell on nearly all deletes.
There is a possibility of an index methodology change, but no news for the last 4 months could indicate pushback from users or more stocks added to the F&O market.

Celltrion Merger: Appraisal Rights & Passive Flows

The Appraisal rights exercise period ends on 13 November. If the NPS and other large shareholders exercise their rights in Celltrion Inc (068270 KS), the merger could be in trouble.
Both stocks are trading close to their exercise price and could be supported due to the companies buying back their shares.
There will be passive flows from local and global trackers and there does not appear to be pre-positioning. That is likely due to the risk of potential merger cancellation.

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still

40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.
92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.
Big tables with data, reasons for guidance changes, and buyback history of each presented below.

Pre-IPO WuXi XDC (PHIP Updates) – Some Points Worth the Attention

By Xinyao (Criss) Wang

We’ve seen increasing global cooperation for ADC pipelines. However, licensing deals alone cannot be used as the only basis for judgment. We still need to wait for solid clinical evidence.
ADCs are far less “general and popularized” than PD-1. If compare ADC with GLP-1s, the difference is more obvious.How big the real market is for ADC is a question mark.
WuXi XDC’s share price could perform well after IPO due to positive sentiments towards ADC, but whether its long-term valuation would be higher than peers remains to be seen.

Symbio Backs ABB’s Reduced Terms

Back on the 22 September, Superloop Ltd (SLC AU) lobbed a best and final cash/scrip NBIO for Symbio Holdings (SYM AU) with an implied price of A$2.85/share.
Aussie Broadband Pty Ltd (ABB AU) then tabled a cash/scrip Offer, with an implied price of A$3.151/share. Symbio was supportive, if terms were firmed. Superloop’s Offer subsequently lapsed.
ABB returned with a reduced cash/scrip Offer of A$2.99-$3.04/share. Symbio has unanimously recommended the Offer (at A$3.011/share) and they entered into a Scheme agreement. A partially/fully franked dividend is permitted.

AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet

We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.
Some stocks are expected to be inclusions to global indices later this month while others are potential NIFTY Index and/or Nifty Next 50 Index changes in March.
On average, the upward migrating stocks have outperformed the downward migrating stocks by close to 100% over the last 8 months. The passive flow can be used as an exit.

WuXi XDC IPO: The Bear Case

WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.
In WuXi XDC 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 margins on a downward trend, large customer concentration, high related party transactions and volatile FCF generation.

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Nov 01

Most Read: Socionext, Emerald Resources Nl, KCE Electronics PCL, Treasury Wine Estates, SK Hynix, Kakao Corp, WuXi XDC Cayman Inc, TOPIX-Banks Index, Doosan Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
Treasury Wine Entitlement Offer – Not as Straightforward as It Sounds
SK Hynix. DRAM To The Rescue
Concerns About A Major Accounting Fraud at Kakao Mobility
WuXi XDC IPO: The Bull Case
Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023
WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD

In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024.
DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added.

S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)

Shareholders have approved Invocare Ltd (IVC AU)‘s acquisition by TPG and IVC is expected to stop trading after the close on 3 November.
Invocare Ltd (IVC AU) will be replaced by Emerald Resources Nl (EMR AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 3 November.
Boss Resources (BOE AU) misses out this time but should be added to the index late November or at the regular rebalance in December.

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.

Treasury Wine Entitlement Offer – Not as Straightforward as It Sounds

By Sumeet Singh

Treasury Wine Estates (TWE AU) aims to raise up to US$525m (A$825m) via a renounceable fully underwritten entitlement offer.
Proceeds from the placement will be used to part fund the acquisition of DAOU Vineyards, a luxury wine brand based in California.
In this note, we will talk about the deal dynamics.

SK Hynix. DRAM To The Rescue

By William Keating

SK Hynix reported Q323 revenues of 9.066 trillion won, up 24% QoQ but still down 17% YoY
Net income was -2.185 trillion won, a 27% improvement on the losses in the prior quarter.
While DRAM has turned profitable, NAND remains stubbornly loss making and is likely to remain so for the foreseeable future

Concerns About A Major Accounting Fraud at Kakao Mobility

It was reported in numerous local media in Korea that FSS is investigating Kakao Mobility for a potential accounting fraud.
There are suspicions that Kakao Mobility may have artificially inflated its sales from 2020 to 2023 to enhance the value of the company prior to its IPO listing.
Given that the regulators are unlikely to make a final decision on this matter until next year, this is likely to be negative on both Kakao Mobility and Kakao Corp.

WuXi XDC IPO: The Bull Case

WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.
WuXi XDC ranked No. 2 globally and No. 1 in China among CRDMO for antibody-drug conjugates and other bioconjugates in terms of revenue in 2022, according to Frost & Sullivan.
The bull case rests on large addressable markets, market share gains, fast-paced revenue growth, strong revenue visibility, a solid balance sheet and ambitious capacity expansion plans.

Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”

In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.

End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023

We discuss the end of the mandatory lock-up periods for 48 stocks in Korea in November 2023, among which 6 are in KOSPI and 42 are in KOSDAQ.
These 48 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
Among these 48 stocks, top five market cap stocks include Doosan Robotics, Fadu, CanariaBio, Enchem, and Gigavis.

WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong

WuXi XDC Cayman Inc (1877628D HK) is looking to raise around US$500m in its upcoming Hong Kong IPO.
WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
In our previous notes we looked at the company’s past performance, peer comparison, and shared our thoughts on valuations. In this note, we discuss WXDC’s PHIP updates.

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Oct 31

Most Read: Kenedix Office Investment Co, GMO Payment Gateway, Onewo , Bank Rakyat Indonesia, Amorepacific Group, Nippon Electric Glass, Teraoka Seisakusho, KCE Electronics PCL, Mitsubishi Motors, Tietto Minerals Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
Onewo (2602 HK) – Full Circulation & HSCI Inclusion
Bank Rakyat Indonesia (BBRI IJ) – Forging a Healthier Future
StubWorld’s: Amorepacific’s Multi-Year Lows
BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
Tietto (TIE AU): Zhaojin Makes An Offer

KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade

The merger between Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) is done. Newco starts trading this week as KDX.
The trade was fine until I wrote 9 days ago there was still room to run. It fell the next day, bounced 3%, then got CRUSHED into the index upweight.
NEWREIT is now as cheap relative to its Pro-Forma Peer Group as it was at announcement.

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).

Onewo (2602 HK) – Full Circulation & HSCI Inclusion

Onewo (2602 HK) has announced the full conversion of 1.05bn Domestic Shares and Unlisted Foreign Shares to H-shares. The increased market cap will help in HSCI inclusion.
Onewo (2602 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect soon after index inclusion.
Onewo (2602 HK) has drastically underperformed its peers since listing and the HSCI inclusion could mark a turning point for the stock.

Bank Rakyat Indonesia (BBRI IJ) – Forging a Healthier Future

By Angus Mackintosh

Bank Rakyat Indonesia’s numbers made for positive reading with loan growth coming through in productive areas, especially for Kupedes commercial micro-loans but also from its PNM and Pegadaian subsidiaries.
The bank maintained its funding costs at highly competitive levels despite rising rates and time deposit growth with NIMs improving due to a better loan mix in micro.
Bank Rakyat Indonesia (BBRI IJ) remains the most direct way to get exposure to greater financial inclusion and the underbanked in Indonesia. Valuations remain attractive with rising ROA and ROE.

StubWorld’s: Amorepacific’s Multi-Year Lows

Both the implied stub for Amorepacific Group (002790 KS) and the simple ratio (Group/Amorepacific Corp (090430 KS)) are around lifetime low levels.
Preceding my comments on Amorepacific 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%.

BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling

Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results.
In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.

Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster

A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.

Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-October 2023.

Tietto (TIE AU): Zhaojin Makes An Offer

SOE-Backed Zhaojin Mining Industry H (1818 HK), China’s fourth largest integrated gold producer, has tabled a non-binding Offer for Aussie-listed West African gold miner Tietto Minerals Ltd (TIE AU).
The A$0.58/share cash Offer is a 36% premium to undisturbed. Zhaojin is seeking 50.1% of shares out, with 7.02% already held.
Conditions include a raft of PRC and Côte d’Ivoire regulatory approvals. None of these should face opposition.

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Oct 30

Most Read: Japan Post Bank, Kenedix Office Investment Co, GMO Payment Gateway, Lansen Pharmaceutical Holdings Co, Ltd., Eoflow , Kokusai Electric , L&F Co Ltd, Onewo and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
Lansen Pharma (503 HK): 27th November Scheme Vote
Weekly Deals Digest (29 Oct) – Eoflow, Haitong Intl, Hollysys, Azure, Symbio, EcoPro, Cainiao
ECM Weekly (29th Oct 2023) – Kokusai, J&T, Midea, Wuxi XDC, Cirrus, Cello World, Honasa, SIA
Ohayo Japan | Tech Rebounds but Markets in Correction; The New Lexus Concept Car
L&F (066970 KS): Index Implications of KOSDAQ to KOSPI Transfer
Onewo (2602 HK) – Full Circulation & HSCI Inclusion
A-H Premium Weekly (Oct 27th): Beigene, CMS, Guangzhou Auto, China Longyuan

Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us

Japan Post Bank (7182 JP) gets a dramatic upweight in TOPIX on Monday 30 October. There is a LOT of stock to buy. Call it US$2.2bn.
Shares have to come from someplace. Basically it will all come from retail or from those who pre-positioned themselves in the stock (buying from retail). Some could come from short-sellers.
The stock WAS not cheap vs regional banks (what I see as their best set of comps) and the Q2 Unrealised Loss on Securities has ballooned. But care is needed.

KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade

The merger between Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) is done. Newco starts trading this week as KDX.
The trade was fine until I wrote 9 days ago there was still room to run. It fell the next day, bounced 3%, then got CRUSHED into the index upweight.
NEWREIT is now as cheap relative to its Pro-Forma Peer Group as it was at announcement.

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).

Lansen Pharma (503 HK): 27th November Scheme Vote

On the 17 September, specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK), a perennial takeover target, finally announced an Offer.
Wu Zhen Tao, NED and Chairman of Lansen, made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.
Composite Doc is now out. Court Meeting is the 27th November. Expected last day of trading is the 28 Nov. 28 December payment. IFA says fair and reasonable. Looks done.

Weekly Deals Digest (29 Oct) – Eoflow, Haitong Intl, Hollysys, Azure, Symbio, EcoPro, Cainiao

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – EcoPro Materials (ECO123 KS), Cainiao Smart Logistics (1437124D HK), VNG (VinaGame) (VNG US) IPOs
Event-Driven developments – Eoflow (294090 KS), Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Symbio Holdings (SYM AU), Haitong International Securities Group (665 HK), Hollysys Automation Technologies (HOLI US).

ECM Weekly (29th Oct 2023) – Kokusai, J&T, Midea, Wuxi XDC, Cirrus, Cello World, Honasa, SIA

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, Kokusai Electric (6525 JP) provided some relief in the ECM space, even as J&T Global Express (1519 HK) didn’t do much.
Given the earnings seasons, there weren’t any placement during the week. We did look at Singapore Airlines (SIA SP)‘s upcoming placement lockup expiry.

Ohayo Japan | Tech Rebounds but Markets in Correction; The New Lexus Concept Car

By Mark Chadwick

Overseas: SPX -0.5%, Nasdaq; +0.5%; Energy stocks weaker on poor results; US inflation still too high
Today: NKY Futs -1.3% v cash. JPY149.7; Weak results from Omron, Seiko, Sumi Chem
JapanX: Lexus’s LF-ZC concept car offers a 1,000 km range with advanced batteries, AI integration, and a commitment to luxury, signaling Toyota’s EV ambitions

L&F (066970 KS): Index Implications of KOSDAQ to KOSPI Transfer

L&F Co Ltd (066970 KS) has applied to the KRX for a transfer from the KOSDAQ market to the KOSPI market.
Based on history, the approval for the transfer and the listing change could take place some time in December.
L&F (066970 KS) will not be short-sell eligible for 6 months or longer. That means short covering prior to index deletion and a possible overshoot in the stock price.

Onewo (2602 HK) – Full Circulation & HSCI Inclusion