Most Read

Today saw 65mm shares of Newcrest Mining (NCM AU) print at the close and 85+mm shares crossed in blocks post-close. There was another 15mm shares traded in additional excess volume.
That suggests a certain lack of “risk taking” by passive managers, increasing today’s trade in NY.
Furthermore, the settlement logistics appear to indicate an interesting trade to do 7 November (worth checking with your custodian/broker).

Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading

First, we can take on some risk and build up a short position using SSFs from now, aiming for an aggressively low price (likely Day 1) during the rights trading.
If this approach seems somewhat risky, the second is to wait until the rights trading and, although accepting some sacrifice in the spread, build positions relatively risk-free.
We can also actively build up a long position in the significantly backwardated SSFs from now and, instead, set up an aggressive short on the underlying shares.

Keisei Electric: Activists Arrive As Expected

By Oshadhi Kumarasiri

Just as we suspected earlier in the year, there is now talk of an impending investor activism campaign targeting Keisei Electric Railway Co (9009 JP).
The activist is Palliser Capital, a multi-strategy fund based in London and run by former employees of Elliott Management, a company well-known for its activist campaigns in Japan.
Their proposal is simple and straightforward, requesting for a 35% reduction in Keisei Electric’s Oriental Land holding.

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.

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

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

Increasing Probability of Kakao Corp Losing Its Controlling Shareholding of Kakao Bank

In this insight, we discuss the increasing probability of Kakao Corp (035720 KS) losing its controlling shareholding of KakaoBank (323410 KS).
The FSS Chairman Lee Bok-Hyun emphasized that the FSS may punish Kakao Corp for a potential stock manipulation of S.M.Entertainment amid the M&A tender offer process earlier this year.
At this point, the higher probability event appears to be a combination of fine and Kakao Corp selling at least 10% of its stake in Kakao Bank to another company.

J&T Global Express IPO: Trading Debut

J&T priced its IPO at a fixed price of HK$12.00 per share to raise the gross proceeds of the offering of US$500 million. The shares will start trading tomorrow.
We previously discussed the IPO in J&T Global Express IPO: The Bull Case, J&T Global Express IPO: The Bear Case and J&T Global Express IPO: Valuation Insights.
The market sentiment on the sector continues to weaken. The de-rating of peers lowers our SoTP valuation to HK$10.01 per share, 16.5% below the IPO price.

Passive Flow Trading Opportunities Emerge from L&F’s Transition to KOSPI Listing

L&F will likely be listed on the KOSPI in mid-December. The top reserved issue within the KOSDAQ 150 IT Sector will be added to the index via an ad-hoc change.
Selvas AI stands as the foremost candidate for the screened top reserved issue, with a mere two trading days remaining in the six-month screening period.
Given the relatively limited proactive position buildup due to more uncertainty regarding timing, the price impact leading up to the effective date might become even more significant.

Alibaba (BABA US): Still One of if Not the Best China Consumer Play

By Eric Chen

The increasing dominance of retailers (off/online) in the US consumer sector measured by market cap over last three decades tellingly illustrates the long term potential of Alibaba in China.
While we believe consensus underestimates bottom line for 2QFY24, investors will likely focus on the outlook for 2024, with growth of Taobao/Tmall group remaining key share price driver.
Investors pulling out of Alibaba due to geopolitical risks remind me of how ESG drove investments away from oil & gas years ago and eventually led to the latter’s outperformance.

Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap

Stellantis, a merger between France’s PSA with Fiat Chrysler Automobiles NV (FCAM BQ), is buying a 17% stake (14.53% fully diluted) in Zhejiang Leapmotor Technologie (9863 HK).
Leapmotor will issue 194mn H shares at HK$43.8/share, a 19% premium to last close, in a HK$8.51bn transaction. Stellantis will also hold a 51% stake in newly formed JV.
Stellantis is paying a chunky 3.64x market cap-trailing-revenue; but ~2.25x forward revs, which compares to the average for key peers of 1.9x.

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Oct 27

Most Read: Newmont Mining, Eoflow , Elite Material, Keisei Electric Railway Co, Medtronic Plc, Azure Minerals, Mini Kospi 200 Futures, Ecopro BM , KakaoBank , Hollysys Automation Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Newcrest/Newmont – More Selling on the NCM Means More Buying on NEM, And Settlement Logistics Matter
Medtronic’s M&A of Eoflow Timeline Postponed
Yuanta/P-Shares Taiwan Div Plus ETF Rebalance Preview: In-The-Money; Turnover & Trade Remain High
Keisei Electric: Activists Arrive As Expected
EOFlow/Medtronic: Signs of Life
Gina Can’t “Liontown” SQM’s Bid For Azure
Key Points to Consider at This Stage Regarding the Year-End Ex-Dividend Play
Ecopro Innovation Is Selling Ecopro BM Shares
Increasing Probability of Kakao Corp Losing Its Controlling Shareholding of Kakao Bank
What To Make Of Hollysys’ Latest Offer

Newcrest/Newmont – More Selling on the NCM Means More Buying on NEM, And Settlement Logistics Matter

Today saw 65mm shares of Newcrest Mining (NCM AU) print at the close and 85+mm shares crossed in blocks post-close. There was another 15mm shares traded in additional excess volume.
That suggests a certain lack of “risk taking” by passive managers, increasing today’s trade in NY.
Furthermore, the settlement logistics appear to indicate an interesting trade to do 7 November (worth checking with your custodian/broker).

Medtronic’s M&A of Eoflow Timeline Postponed

On 25 October, Eoflow announced that the M&A of Eoflow by Medtronic has been postponed.
The closing date for Eoflow’s stock transfer agreement with Medtronic has now been changed to 3 January 2024.
Although we believe Medtronic will continue to pursue Eoflow, the M&A tender offer price could be lowered to about 26,000 won, which would be nearly 20% higher than current price.

Yuanta/P-Shares Taiwan Div Plus ETF Rebalance Preview: In-The-Money; Turnover & Trade Remain High

Using data from the close on 25 October, there could be 6 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
There will also be capping and funding flows that will lead to a one-way turnover of 19.5% and a one-way trade of US$1.39bn.
A long adds/ short deletes trade is up double digits over the last three weeks and there are a few trade adjustments based on the new rankings.

Keisei Electric: Activists Arrive As Expected

By Oshadhi Kumarasiri

Just as we suspected earlier in the year, there is now talk of an impending investor activism campaign targeting Keisei Electric Railway Co (9009 JP).
The activist is Palliser Capital, a multi-strategy fund based in London and run by former employees of Elliott Management, a company well-known for its activist campaigns in Japan.
Their proposal is simple and straightforward, requesting for a 35% reduction in Keisei Electric’s Oriental Land holding.

EOFlow/Medtronic: Signs of Life

When EOFlow (294090 KS) was suspended on the 11th October, and ceased global sales, either the Medtronic (MDT US) deal was (largely) toast; or it was a tactical move.
I’m firmly in the latter camp. Insulet‘s lawsuit was expected. And completing the transaction enables the more financially and legally resource-rich MDT to become the party to the litigation.
The SPA between Jesse Kim and MDT was expected to complete on 25 October. That was not a hard date. It has now been pushed out to 3 January 2024.

Gina Can’t “Liontown” SQM’s Bid For Azure

When lithium mining play Azure Minerals (AZS AU) was halted this week “regarding a potential change of control transaction“, Sociedad Quimica y Minera (SQM/B CI) was the obvious suitor.
This was confirmed this morning with a A$3.52/share Offer, a 44.3% premium to undisturbed, by way of a Scheme. A concurrent conditional off-market takeover at A$3.50/share is also present.
$3.50 is locked in, no matter what. Gina may take her stake up to 19.9%, but it won’t affect the A$3.50 floor. But it may kickstart a competitive bidding situation.

Key Points to Consider at This Stage Regarding the Year-End Ex-Dividend Play

The pivotal question now is the number of these companies that will effectively defer their year-end ex-dividend date to April next year.
The most reliable way to accurately confirm this would be to check how many of them will publicly announce the dividend reference date two weeks before the December year-end deadline.
This will serve as the most critical indicator in determining whether this year’s year-end flow trading event, the most significant in Korea, will recur.

Ecopro Innovation Is Selling Ecopro BM Shares

On 26 October, it was announced that Ecopro Innovation is selling 160k shares of Ecopro BM shares (0.2% of outstanding shares), representing about 32 billion won.
Although the percentage of shares is small relative to its outstanding shares, this additional selling is likely to further negatively impact Ecopro BM’s shares in the near term.
Ecopro BM’s shares have seen a significant drop in price over the past few months, but its current P/E (87.3x in 2023) and EV/EBITDA (46.9x in 2023) multiples remain unattractive.

Increasing Probability of Kakao Corp Losing Its Controlling Shareholding of Kakao Bank

In this insight, we discuss the increasing probability of Kakao Corp (035720 KS) losing its controlling shareholding of KakaoBank (323410 KS).
The FSS Chairman Lee Bok-Hyun emphasized that the FSS may punish Kakao Corp for a potential stock manipulation of S.M.Entertainment amid the M&A tender offer process earlier this year.
At this point, the higher probability event appears to be a combination of fine and Kakao Corp selling at least 10% of its stake in Kakao Bank to another company.

What To Make Of Hollysys’ Latest Offer

Hollysys (HOLI US), a leading automation control system solutions provider in China, has been subject to at least six indicative Offers since December 2020, ranging from US$15.47/share to $US$25/share.
Yue Xu and Lei Fang, the co-chief operating officers of Hollysys, who previously tabled a NBIO of US$23.00/share in August 2021, have now pitched a US$25/share proposal.
What is different this time? >32% of the share registry has banded together to demand changes. That’s dramatically different vs previous Offers.

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Oct 26

Most Read: Newcrest Mining, Gs Yuasa Corp, Cosmo Energy Holdings , Eoflow , Tuhu Car, LS Materials, Hollysys Automation Technologies, Medtronic Plc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price
Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
Cosmo Energy (5021) – Headed to an EGM Showdown for the Poison Pill
EOFLOW/Medtronic Tender: Closing Date Extended to 3 January 2024
HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running
Medtronic’s M&A of Eoflow Timeline Postponed
EOFlow Situation: Latest Disclosure, Market Speculations, & Key Short-Term Focus
LS Materials IPO Preview
Hollysys (HOLI US): MBO Proposal and Updates
EOFlow/Medtronic: Signs of Life

Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price

Newcrest Mining (NCM AU) saw its shareholder meeting vote through the Scheme, then on teh 18th, the Special Div went ex-.
Since then, as gold has rebounded sharply, Newmont Mining (NEM US) has underperformed peers and juniors (VanEck Gold Miners ETF/USA (GDX US)) since gold has spiked.
Thursday is the last day of trading and there is a LOT of NEM to trade.

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.

Cosmo Energy (5021) – Headed to an EGM Showdown for the Poison Pill

Japanese activist Murakami-san and Cosmo Energy Holdings (5021 JP) have been duking it out for 18 months. He now has 20%. Wants more. Management wants to exercise the poison pill.
Cosmo’s efforts are not completely honest, but Murakami-san’s efforts are clearly designed to benefit Murakami-san over general shareholders, and Cosmo has finally explained the reasons publicly. Read the doc (Japanese).
At 1.0x book, lower refining margins vs earlier in the year, and difficulty for Murakami-san to force the issue, one must take more care here than one did 40% ago.

EOFLOW/Medtronic Tender: Closing Date Extended to 3 January 2024

The closing date of the Eoflow (294090 KS)/Medtronic Plc (MDT US) transaction has been extended from 25 October 2023 to 3 January 2024. All other terms are unchanged.
The bull view is that despite the preliminary injunction and share suspension, Medtronic’s move underscores its commitment to the transaction on current terms.
The bear view is that the extension was Medtronic’s best move as it retains option value should Insulet’s lawsuit start floundering in court and KRX reinstate trading in Eoflow shares.

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.

Medtronic’s M&A of Eoflow Timeline Postponed

On 25 October, Eoflow announced that the M&A of Eoflow by Medtronic has been postponed.
The closing date for Eoflow’s stock transfer agreement with Medtronic has now been changed to 3 January 2024.
Although we believe Medtronic will continue to pursue Eoflow, the M&A tender offer price could be lowered to about 26,000 won, which would be nearly 20% higher than current price.

EOFlow Situation: Latest Disclosure, Market Speculations, & Key Short-Term Focus

We must acknowledge that the acquisition contract has not been withdrawn, signifying that we have averted the worst-case scenario.
During the shareholders’ meeting on November 15th, it is crucial for us to pay attention to whether personnel from Medtronic are included in the list of new board candidates.
If that’s the case, we can infer that Medtronic intends to go through with this deal, regardless of the litigation issues in the United States.

LS Materials IPO Preview

LS Materials is getting ready to complete its IPO in Korea in late November. The IPO price range is from 4,400 won to 5,500 won per share.
According to the bankers’ valuation, the expected market cap after the IPO is from 298 billion won to 372 billion won.
LS Materials is one of the largest players globally in the large-size ultracapacitors, which stabilize power supply and are used to replace and supplement primary batteries and lithium-ion batteries.

Hollysys (HOLI US): MBO Proposal and Updates

Hollysys Automation Technologies (HOLI US) update notes a new MBO proposal at US$25 per share, a bidders shortlist in several weeks and an update on the special meeting.
The update suggests several potential bidders and enough shareholders with the required record date to convene the special meeting to appoint independent directors.
The MBO proposal, while potentially a delaying tactic, suggests that the Board are under pressure for a solution and is aiming for a friendly takeover.

EOFlow/Medtronic: Signs of Life

When EOFlow (294090 KS) was suspended on the 11th October, and ceased global sales, either the Medtronic (MDT US) deal was (largely) toast; or it was a tactical move.
I’m firmly in the latter camp. Insulet‘s lawsuit was expected. And completing the transaction enables the more financially and legally resource-rich MDT to become the party to the litigation.
The SPA between Jesse Kim and MDT was expected to complete on 25 October. That was not a hard date. It has now been pushed out to 3 January 2024.

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Oct 25

Most Read: Japan Post Bank, Celltrion Inc, Newcrest Mining, Eoflow , Kokusai Electric , Gs Yuasa Corp, Shinsung Delta Tech, Sam A Aluminum and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

October 2023 TOPIX Free Float Review – $22.6bn to Trade and JPB (7182) The Biggie
Kokusai Electric (6525 JP) IPO – Index Demand On The Follow
Celltrion Merger: Index Implications
Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price
Merger Arb Mondays (23 Oct) – Eoflow, Celltrion Healthcare, JSR, Origin, Lithium Power, Poly Culture
Kokusai Electric IPO: Trading Debut
Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades
Kokusai Electric IPO Trading – Decent Demand, Now for the Real Test
KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection

October 2023 TOPIX Free Float Review – $22.6bn to Trade and JPB (7182) The Biggie

The TOPIX October Free Float Weight Review details are out. This is the biggest FFW review of the year. This year, it’s $11.3bn a side.
As discussed in Japan Post Bank (7182) – The October TOPIX FFW Adjustment, JPB is the big buy. $2bn/23d of ADV. There is $2bn to buy of trading cos too.
There are lots of large names to trade in both directions. If you have interests to sell the buys and vice versa, it is good to know the flows.

Kokusai Electric (6525 JP) IPO – Index Demand On The Follow

Niche Japanese Semiconductor Production Equipment specialist Kokusai Electric (6525 JP) last Thursday announced the TSE approved its late October IPO (with indicative pricing, shares to be sold, and initial prospectus).
This insight looks at initial shareholder structure, selling group, post-IPO shareholder structure with index inclusion timing, and follow-on flow possibilities.
At ¥435bn indicative market cap, it will be the largest IPO in Japan since pre-covid, despite coming in a cycle trough. I expect it will be hot.

Celltrion Merger: Index Implications

Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) will merge later this year. Celltrion Pharm (068760 KS) has been left out for now; it could be merged next year.
For each share of Celltrion Healthcare (091990 KS) held, shareholders will receive 0.449262 shares of Celltrion Inc (068270 KS).
There will be implications for the Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) with funding flows and index replacements.

Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price

Newcrest Mining (NCM AU) saw its shareholder meeting vote through the Scheme, then on teh 18th, the Special Div went ex-.
Since then, as gold has rebounded sharply, Newmont Mining (NEM US) has underperformed peers and juniors (VanEck Gold Miners ETF/USA (GDX US)) since gold has spiked.
Thursday is the last day of trading and there is a LOT of NEM to trade.

Merger Arb Mondays (23 Oct) – Eoflow, Celltrion Healthcare, JSR, Origin, Lithium Power, Poly Culture

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), JSR Corp (4185 JP), Haitong International Securities Group (665 HK), Lithium Power International (LPI AU).
Lowest spreads – Healius (HLS AU), Pact Group Holdings (PGH AU), Origin Energy (ORG AU), T&K Toka Co Ltd (4636 JP), Kenedix Retail REIT (3453 JP), Chindata Group (CD US).

Kokusai Electric IPO: Trading Debut

Kokusai Electric (6525 JP) priced its IPO at JPY1,840 per share to raise secondary proceeds of US$723 million. The shares will start trading on 25 October.
We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Lower Price Range Is Reasonable.
The peers have modestly derated since the lowered IPO price range was announced on 10 October. However, the IPO price remains attractive. Our DCF valuation is JPY2,058.

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.

KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades

With the review period nearly complete, we see 15 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
There could be index changes even before the December rebalance if there are prolonged trading suspensions and stocks migrate from the KOSDAQ Market to the KOSPI Market.
The potential adds have sold off hard over the last six weeks, similar to the performance at the June rebalance.

Kokusai Electric IPO Trading – Decent Demand, Now for the Real Test

By Sumeet Singh

KKR raised around US$730m via selling a stake in Kokusai Electric’s (6525 JP) (KE) Japan IPO.
KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
In our previous notes we have looked at the company’s past performance, undertaken a peer comparison and looked at valuations. In this note, we talk about the trading dynamics.

KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection

KRX has amended the stock selection methodology for the KOSPI2 INDEX and KOSDQ150 INDEX and added ‘Expert Judgement’ as a criteria.
The qualitative and quantitative criteria and the detailed filtering standards will be described in the manual but will NOT be publicly disclosed.
There is no change from using full market cap to free float market cap in stock selection, so the stocks that could be added/deleted will be broadly same as forecasts.

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Oct 24

Most Read: Newcrest Mining, Persol Holdings, Kurita Water Industries, Celltrion Inc, Oriental Land, Great Wall Motor, Seoul Guarantee Insurance, Youngone Holdings, Shinsung Delta Tech and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price
Japan – Increase in Shorts on Some Interesting** Stocks
Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank
Celltrion Merger Swap Event: Trading Dynamics Post-Merger Approval
Oriental Land: Google Search Signals Potential Miss; Guidance Could Challenge Consensus Optimism
Quiddity A/H Premium Tracker (To Oct20): Volatility Up Further, Wide Spreads Even Wider. Messy²
Seoul Guarantee Insurance Corp IPO – Cancelled
KOSPI200 Index Rebalance Preview: The Tail End
KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades
Ohayo Japan | Nasdaq Snaps Losing Streak; More FDI for Japan’s Chip Sector

Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price

Newcrest Mining (NCM AU) saw its shareholder meeting vote through the Scheme, then on teh 18th, the Special Div went ex-.
Since then, as gold has rebounded sharply, Newmont Mining (NEM US) has underperformed peers and juniors (VanEck Gold Miners ETF/USA (GDX US)) since gold has spiked.
Thursday is the last day of trading and there is a LOT of NEM to trade.

Japan – Increase in Shorts on Some Interesting** Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, Kurita Water Industries, GMO Payment Gateway, Keio Corp and NGK Insulators have underperformed the Nikkei225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank

Light & Wonder (LNW US)/ Light & Wonder (LNW AU) replaced United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) last week.
Newcrest Mining (NCM AU) stops trading this week and should be replaced by Newmont Mining (NEM US) CDIs in the ASX indices.
Another week of ETF outflows for China with the largest outflows from trackers benchmarked to the CSI 1000 Index.

Celltrion Merger Swap Event: Trading Dynamics Post-Merger Approval

Celltrion Chairman Seo made a public statement, affirming that they are prepared to bear the entire cost, even if it exceeds the ₩1T ceiling, and proceed with the merger.
The relatively substantial cost risk associated with Celltrion Inc. due to the involvement of NPS is causing the merger swap spread to widen once more in comparison to Celltrion Healthcare.
If the prices persist above the appraisal rights exercise prices, the relative cost risk for Celltrion Inc. could escalate, leading to a significant widening of the swap spread.

Oriental Land: Google Search Signals Potential Miss; Guidance Could Challenge Consensus Optimism

By Oshadhi Kumarasiri

During 2QFY24, Tokyo Disneyland and Tokyo DisneySea both saw a QoQ decline in Google search interest.
This suggests to us that there might be an earnings miss when Oriental Land (4661 JP) reports its FQ2 results on October 30, 2023.
Additionally, there are potential downside risks to both FY24 and medium-term consensus projections following a revised FY24 guidance announcement.

Quiddity A/H Premium Tracker (To Oct20): Volatility Up Further, Wide Spreads Even Wider. Messy²

The Somewhat-Brand-Spanking New (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.
We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
The last 10wks (since the start of the new Tracker and Portfolio 11 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%, -68%.

Seoul Guarantee Insurance Corp IPO – Cancelled

Seoul Guarantee Insurance (031210 KS) stated today that it will cancel its IPO mainly due to low demand.
Despite the company’s emphasis on high dividends and high ROA of 5.8% in 2022 (5x average ROA of the domestic non-life insurance companies), many institutional investors emphasized on the negatives.
The major negatives include high interest rates, lack of growth potential, concerns about additional shares sale overhang, and unattractive valuations.

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.

KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades

With the review period nearly complete, we see 15 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
There could be index changes even before the December rebalance if there are prolonged trading suspensions and stocks migrate from the KOSDAQ Market to the KOSPI Market.
The potential adds have sold off hard over the last six weeks, similar to the performance at the June rebalance.

Ohayo Japan | Nasdaq Snaps Losing Streak; More FDI for Japan’s Chip Sector

Overseas: SPX -0.2% , Nasdaq +0.3%; Tech stocks moved higher after bond yields retreated from highs. Several big tech companies to report this week
Today: NKY Futs +0.1% v cash. JPY 149.7/$; Nidec’s results were OK, but not great – ADR down -5%
JapanX: Taiwan’s Powerchip Semiconductor’s investment in Japan, supported by government subsidies, aims to revive Japan’s semiconductor industry and diversify the global supply chain

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Oct 23

Most Read: Newcrest Mining, Giordano International, Vinda International, WH Group, Shinko Electric Industries, Kurita Water Industries, Persol Holdings, New World Development and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Newcrest-Newmont Merger: Fancy Index Shenanigans
Asian Dividend Gems: Giordano International
Vinda (3331 HK): Tanoto Sees The Wood
WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst
Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,
Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank
Japan – Increase in Shorts on Some Interesting** Stocks
NWD 17 HK: FY23 Results Update, to Reset and Transform, and a Beta Play if Rate Expectation Peaks
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Lithium Power, Vinda, Origin Energy, Liontown, Kenedix REITs
Ohayo Japan | Middle East Dominates; Japanese Companies Disposing Non-Core Real Estate

Newcrest-Newmont Merger: Fancy Index Shenanigans

Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun.
There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.

Asian Dividend Gems: Giordano International

Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits.
Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%.
We like the company’s high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x.

Vinda (3331 HK): Tanoto Sees The Wood

On the 27 April, Vinda (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership. See Essity Mulls Holding In Vinda (3331 HK).
That shook a variety of suitors out of the woodwork (so to speak) including (reportedly) Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, and DCP Capital.
The latest (alleged) interested party is the Tanoto family, currently holding a 7.03% stake, having first cleared 5% on the 26 September.

WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

By Steve Zhou, CFA

According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again.
WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E. Since 2016, the company has had an average PE of 11x.
The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited.

Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,

If Descente Ltd (8114 JP) earnings disappoints, buy the dip. Itochu Corp (8001 JP) is buying for the long-term.
MGM China Holdings (2282 HK) has gained market share in mass table market, VIP, and total revenue. Yet MGM’s FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.
If you had a J-REIT portfolio, Sankei Real Estate (2972 JP) would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.

Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank

Light & Wonder (LNW US)/ Light & Wonder (LNW AU) replaced United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) last week.
Newcrest Mining (NCM AU) stops trading this week and should be replaced by Newmont Mining (NEM US) CDIs in the ASX indices.
Another week of ETF outflows for China with the largest outflows from trackers benchmarked to the CSI 1000 Index.

Japan – Increase in Shorts on Some Interesting** Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, Kurita Water Industries, GMO Payment Gateway, Keio Corp and NGK Insulators have underperformed the Nikkei225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

NWD 17 HK: FY23 Results Update, to Reset and Transform, and a Beta Play if Rate Expectation Peaks

By Jacob Cheng

In this insight, we summarized NWD’s FY2023 results. We think the gearing and balance sheet, the biggest concern that market has, has been clearly addressed
NWD has announced disposal of its stake in NWS, and will have more corporate actions to come. The dividend expectation is reset
We view most of the negatives are priced in at current valuation. NWD is much better than a Chinese developer, and should not be trading at 0.19x PB

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Lithium Power, Vinda, Origin Energy, Liontown, Kenedix REITs

I tally 42 – 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 deal was discussed on Smartkarma this week:Lithium Power International (LPI AU)‘s Scheme. Vinda International (3331 HK) and Shinko Electric Industries (6967 JP) are in the cross hairs.
Key updates took place for: Origin Energy (ORG AU), Liontown Resources (LTR AU), Golden Eagle Energy (SMMT IJ) and Kenedix REITs.

Ohayo Japan | Middle East Dominates; Japanese Companies Disposing Non-Core Real Estate

Overseas: SPX -1.3% , Nasdaq -1.5%; Broad-based equity decline with all sectors in the red as concerns over Israel-Hamas conflict grew; airline stocks under pressure
Today: NKY Futs -0.8% v cash. JPY 149.9; Core inflation at 13-month low; Signs that the property market overheating. Daiichi Sankyo big payday for cancer drugs
JapanX: Japanese companies boost P/B ratios by selling non-core real estate assets, transforming corporate governance and efficiency in response to the TSE’s call for improved performance

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Oct 22

Most Read: Bharat Electronics, Cheng Shin Rubber Ind Co., Ltd., Li Auto , Astra International, China Unicom Hong Kong, Wuhan Jingce Electronic Group, Japan Post Bank, Liontown Resources, Giordano International, Kurita Water Industries and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

NIFTY50 Index Rebalance Preview: Two’s Company; Three’s A Crowd
Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics
HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
HSCEI Index Rebalance Preview: One Change; Capping Impact Increases
ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
Liontown Resources (LTR AU): State of Play
Asian Dividend Gems: Giordano International
Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank

NIFTY50 Index Rebalance Preview: Two’s Company; Three’s A Crowd

There should be two changes for the NIFTY Index (NIFTY INDEX) in March. That could increase to three, but that would take some big price moves from now to January.
Impact on the potential changes is pretty large at over 6 days of ADV to trade from passive trackers. The impact is over 11 days of delivery volume.
Inclusion of Avenue Supermarts Ltd (DMART IN) in the F&O segment before January could lead to another change.

Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics

The Philippines Stock Exchange PSEi Index (PCOMP INDEX) rebalance was implemented last week and there were interesting moves at the close on implementation day.
The focus this week will be on pre-positioning for a global index rebalance where the review period commences next week.
Units outstanding on iShares Emerging Markets (EMXC US) are at a new high while there continue to be redemptions in iShares Emerging Markets (EEM US).

HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December

With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
Capping changes will result in a one-way turnover of 2.16% and that will result in a round-trip trade of US$556m.
The impact of capping changes has doubled over the last month and there will be more changes from now till the official capping is done on 28 November.

WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS).

HSCEI Index Rebalance Preview: One Change; Capping Impact Increases

Zhongsheng Group (881 HK) is in deletion zone and could be deleted. China Unicom Hong Kong (762 HK) could be added to the index as the highest ranked non-index constituent.
Estimated one-way turnover at the rebalance is 2.14% resulting in a one-way trade of HK$1.38bn. Meituan (3690 HK), Alibaba Group (9988 HK) and Tencent (700 HK) will be capped higher.
China Unicom Hong Kong (762 HK) is supported on its 50/100 day moving averages and could move higher. Zhongsheng Group (881 HK) has been trading below its moving averages.

ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues

Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
Given stock selection uses liquidity as a major input, the impact of passive trading will be much larger on the deletions as compared to the additions.
The potential adds have outperformed the potential deletes, but relative performance has been drifting lower over the last few months. There are stocks that will have flows from other indices.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

Liontown Resources (LTR AU): State of Play

Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.

Asian Dividend Gems: Giordano International

Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits.
Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%.
We like the company’s high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x.

Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank

Light & Wonder (LNW US)/ Light & Wonder (LNW AU) replaced United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) last week.
Newcrest Mining (NCM AU) stops trading this week and should be replaced by Newmont Mining (NEM US) CDIs in the ASX indices.
Another week of ETF outflows for China with the largest outflows from trackers benchmarked to the CSI 1000 Index.

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Oct 21

Most Read: DISCO Corp, Shinko Electric Industries, Prudential , Eugene Technology, Liontown Resources, Kolmar Korea , Vinda International, WH Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
Shinko Electric (6967) Update – MitCorp In The Mix?
APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out
Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal
Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
Liontown Resources (LTR AU): State of Play
Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin
A Merger Share Swap Between Kolmar Korea and Yonwoo
Vinda (3331 HK): Tanoto Sees The Wood
WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

Shinko Electric (6967) Update – MitCorp In The Mix?

Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day.
This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.

APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out

By Alec Tseung

PICC P&C’s thesis has materialized and played out well this year, with the stock being HK’s best-performing Chinese insurer.
Samsung Life’s share price recovered slightly since our last update as LT Korean government bond yields further increased.
Prudential’s thesis is slowly being played out, with its P/BV discount to AIA having narrowed; but still a long way to go.

Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal

For the impending December rebalancing, the effective date is set for December 18th, while the ETF rebalancing trading will take place on December 15th.
Jusung Engineering and Eugene Technology are likely to be added, while Lake Materials and SFA Semicon are expected to exit the index.
Aside from constituent changes, Hansol Chemical is anticipated to significantly benefit from the passive impact as the primary beneficiary of the ceiling reversion.

Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake

Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP).
Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.

Liontown Resources (LTR AU): State of Play

Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.

Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin

Overseas: SPX -0.8% , Nasdaq -0.8%; Fed Chair still concerned about inflation; jobs data shows ongoing econ strength; Tesla -9%
Today: NKY Futs -0.5% v cash. JPY 149.8/$; Calbee to test biogas production; Disco expects weakness in demand to continue; Softbank to build data center in Hokkaido
JapanX: The accelerated phase-out of F-gases, though aiming to make heat pumps cleaner, may hinder the shift from fossil fuels. Daikin and the industry face challenges and need swift adaptation.

A Merger Share Swap Between Kolmar Korea and Yonwoo

On 19 October, Kolmar Korea announced that it will conduct a merger share swap with Yonwoo early next year to make it into a 100% wholly owned subsidiary.
We believe the merger share swap agreement between Kolmar Korea and Yonwoo is likely to have positive impact on both Kolmar Korea and Yonwoo.
After this share swap is completed, Yonwoo will be delisted. This merger is aimed at improving the inefficient governance structure caused by duplicate listings and improve management efficiency.

Vinda (3331 HK): Tanoto Sees The Wood

On the 27 April, Vinda (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership. See Essity Mulls Holding In Vinda (3331 HK).
That shook a variety of suitors out of the woodwork (so to speak) including (reportedly) Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, and DCP Capital.
The latest (alleged) interested party is the Tanoto family, currently holding a 7.03% stake, having first cleared 5% on the 26 September.

WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

By Steve Zhou, CFA

According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again.
WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E. Since 2016, the company has had an average PE of 11x.
The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited.

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Oct 20

Most Read: Zomato, Indusind Bank, Liontown Resources, Kenedix Office Investment Co, Eugene Technology, Sankei Real Estate, Golden Eagle Energy, ZJLD Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

India – Free Float Changes to Drive Passive Inflows
IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold
Liontown Resources Placement – While Discount Is Wide, It Is at a Premium to Its Pre-Takeover Price
Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)
Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal
Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan
Golden Eagle Energy: Share Sale Done. MTO Price Bumped
ZJLD Lock-Up – KKR’s US$680m Stake to Be Unlocked, Although the PE Could Opt to Wait
Liontown Resources (LTR AU): State of Play
Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin

India – Free Float Changes to Drive Passive Inflows

Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-September. There are a few companies with significant float changes from end-March and/or end-June.
The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
We find 9 stocks where there could be inflows with passive trackers needing to buy over 1 day of ADV on most stocks.

IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

Foreign investors sold ~5.7m shares of Indusind Bank (IIB IN) from July to September. That selling has pushed foreign room above the key 15% threshold.
With foreign room crossing 15%, passive trackers will need to buy a chunk of Indusind Bank (IIB IN) stock at the end of November.
There will be positioning on Indusind Bank (IIB IN) though it appears some of that was taken off in the last couple of days.

Liontown Resources Placement – While Discount Is Wide, It Is at a Premium to Its Pre-Takeover Price

By Clarence Chu

Liontown Resources (LTR AU) is looking to raise A$365m (US$230m) for capital expenditure and to plug its funding gap for the Kathleen Valley Lithium (KVL) project.
Together, the combined A$1.14bn equity/debt raising comes after Albemarle abandoned its A$6.6bn (US$4.2bn) acquisition bid for Liontown Resources earlier in the week.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)

A month ago I wrote there was still time, and room, to move on the Kenedix Merger.
Now there’s less time, but the situation and relationships are better understood.
Tracking Excess Volume during the period since the announcement is interesting. And it may tell you less than you think.

Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal

For the impending December rebalancing, the effective date is set for December 18th, while the ETF rebalancing trading will take place on December 15th.
Jusung Engineering and Eugene Technology are likely to be added, while Lake Materials and SFA Semicon are expected to exit the index.
Aside from constituent changes, Hansol Chemical is anticipated to significantly benefit from the passive impact as the primary beneficiary of the ceiling reversion.

Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan

On 16 October, the Asset Management Co of Sankei Real Estate (2972 JP) announced earnings, the execution of a Revival Plan, and said the sponsor, Sankei Building would buy more.
They’ll buy for up to 220 days starting sometime before Feb-end. Presumably after the Revival Plan transactions have been executed.
The REIT is cheap to peers. It is small to peers. It needs some reviving. But when a sponsor promises to buy, it pays to take a look.

Golden Eagle Energy: Share Sale Done. MTO Price Bumped

This transaction just keeps on giving. First, you received an additional dividend. Now the Offer price has been increased.
On the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a 58.65% stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
Geo shareholders approved the purchase on the October 13 and the acquisition was completed on the 18 October. This triggered an MTO, which has been revised upward to IDR 1,305.50.

ZJLD Lock-Up – KKR’s US$680m Stake to Be Unlocked, Although the PE Could Opt to Wait

By Clarence Chu

ZJLD Group (6979 HK) raised US$676m in its Hong Kong IPO in April 2023. Its six-month lockup will expire on 26th Oct 2023.
ZJLD is a Chinese liquor company producing baijiu. As per F&S, the firm ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Liontown Resources (LTR AU): State of Play

Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.

Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin

Overseas: SPX -0.8% , Nasdaq -0.8%; Fed Chair still concerned about inflation; jobs data shows ongoing econ strength; Tesla -9%
Today: NKY Futs -0.5% v cash. JPY 149.8/$; Calbee to test biogas production; Disco expects weakness in demand to continue; Softbank to build data center in Hokkaido
JapanX: The accelerated phase-out of F-gases, though aiming to make heat pumps cleaner, may hinder the shift from fossil fuels. Daikin and the industry face challenges and need swift adaptation.

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Oct 19

Most Read: DISCO Corp, Shinko Electric Industries, Qbe Insurance, Liontown Resources, Descente Ltd, Lithium Power International, Us Masters Residential Property Fund, Kenedix Office Investment Co, Indusind Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
Shinko Electric (6967) Update – MitCorp In The Mix?
Newcrest/Newmont & Potential S&P/ASX Changes
Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update
ANTA Sports Investor Day Targets DESCENTE (8114) For Growth
Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
Lithium Power (LPI AU): Cedelco’s Offer
US Masters (URF AU): Almost Too Good To Be True
Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)
IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

Shinko Electric (6967) Update – MitCorp In The Mix?

Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day.
This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.

Newcrest/Newmont & Potential S&P/ASX Changes

Newcrest Mining (NCM AU) shares stop trading after the close on 26 October and Newmont Mining (NEM US) CDIs will start trading from the open on 27 October.
Newmont Mining (NEM US) CDIs should replace Newcrest Mining (NCM AU) in the S&P/ASX indices from 27 October. But there could be index changes at the subsequent rebalances.
Based on the case of Block (SQ2 AU), we could see Newmont Mining (NEM US) CDIs deleted from the ASX20 Index in December and from the ASX50 Index in March/June.

Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update

Liontown Resources‘ Suspension from Quotation “pending the release of an announcement regarding the finalisation of funding arrangements associated with the Kathleen Valley Project” could last till the open 20 October.
Short interest continued to increase prior to the trading halt and passive selling will be higher following Hancock increasing its stake to 19.9%.
The immediate funding for Liontown Resources (LTR AU) could come from debt sources with an equity raise coming later this year or early next year.

ANTA Sports Investor Day Targets DESCENTE (8114) For Growth

Yesterday, Anta Sports Products (2020 HK) held its Investor Day in Beijing. They talked about Descente Ltd (8114 JP) and their plans.
The presentation made by the Descente China Chairman talked about the evolution of performance and the target for 2026, suggesting higher profit now and growth going forward than market expectations.
None of this changes my outlook for why Itochu Corp (8001 JP) is buying Descente shares in the market. And the stock is going up.

Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake

Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP).
Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.

Lithium Power (LPI AU): Cedelco’s Offer

Lithium Power International (LPI AU) has announced it has entered into a Scheme Implementation Deed with Chilean state miner Codelco, the world’s largest copper producer.
Codelco is offering LPI shareholders A$0.57/share, a whopping 119% premium to last close. LPI’s major shareholder, Minera Salar Blanco SpA with 28.25%, is supportive. As is LPI’s board.
The Scheme Meeting is expected to be held on the 23 January with implementation on the 8 February. Clean deal.

US Masters (URF AU): Almost Too Good To Be True

US Masters Residential Property Fund (URF AU), an ASX-listed real estate trust investing in single-family homes in gentrifying New York metropolitan neighbourhoods – what could go wrong?
Quite a lot, apparently. Shares are down bigly from the 2011 listing; the responsible entity faced ASIC-backed court proceedings for misleading clients; plus dissent emerged over appointing a new RE.
URF is gradually offloading its entire portfolio, and buying back shares, which are trading at 0.49x price-to-book. So, where’s the rub?

Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)

A month ago I wrote there was still time, and room, to move on the Kenedix Merger.
Now there’s less time, but the situation and relationships are better understood.
Tracking Excess Volume during the period since the announcement is interesting. And it may tell you less than you think.

IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold