Most Read

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

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.

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Oct 18

Most Read: DISCO Corp, Suzlon Energy, Ryoyo Electro, Taiwan Cement, Pan Ocean, Qbe Insurance, Golden Eagle Energy, Liontown Resources, J&T Global Express 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
India – Positioning on Some Interesting* Names
Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge
Taiwan Cement GDS – Momentum Hasn’t Been the Greatest, Although It Is Very Well Flagged
Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM
Newcrest/Newmont & Potential S&P/ASX Changes
Golden Eagle Energy: Last Day To Buy Cum-Divvie
Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update
J&T Global Express IPO: Peer Comparison and Valuation
Ohayo Japan | More US Tech Restrictions on China; Nidec & The Future of Urban Air Mobility

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.

India – Positioning on Some Interesting* Names

Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge

Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both “survived”. Now they are banding together to be a bigger independent low-margin electronics trader.

Taiwan Cement GDS – Momentum Hasn’t Been the Greatest, Although It Is Very Well Flagged

By Clarence Chu

Taiwan Cement (1101 TT) is looking to raise US$395m in its global depository share (GDSs) issuance. Included in the offering is a concurrent US$420m convertible bond issuance.
The deal is a relatively large one to process at 19.5 days of three months ADV. Recent momentum on the stock hasn’t been the greatest as well.
That being said, the deal is very well flagged, and short interest remains elevated as well.

Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM

On 17 October, Pan Ocean (028670 KS) announced that it will sell its 3.9 million shares (5.85% stake) in Hanjin KAL Corp (180640 KS) for about 163 billion won.
The main purpose of this stake sale is to secure more funds for Pan Ocean to potentially acquire HMM Co., Ltd. (011200 KS).
As evidenced by the recent increase in Baltic Dry Index, the potential expansion of the war in Israel could benefit major bulk shipping companies such as Pan Ocean.

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.

Golden Eagle Energy: Last Day To Buy Cum-Divvie

Back on the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
GEO shareholders have now approved the purchase of a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group, triggering an MTO at IDR1,255/share, which is subject to Indonesia’s OJK.
In addition, GEE announced a special/additional dividend, with a cum-entitlement today, the 17th of October.

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

By Shifara Samsudeen, ACMA, CGMA

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.

J&T Global Express IPO: Peer Comparison and Valuation

J&T Global Express (1519 HK) has announced the terms for its IPO. The company plans to issue 327m shares at HK$12 per share, which should raise proceeds of around US$501m.
Though profitability of the company’s China business has improved, SEA margins continue to decline, hence our analysis suggests that J&T may not be able to generate profits in the near-term.
Our SOTP valuation offers per share value of HK$9.48 per share which is at a 21% discount to the indicative IPO price suggesting J&T’s IPO is overvalued.

Ohayo Japan | More US Tech Restrictions on China; Nidec & The Future of Urban Air Mobility

By Mark Chadwick

Overseas: SPX flat , Nasdaq -0.3%; Treasury yields resumed rise on stronger-than-expected retail sales
Today: NKY Futs +0.3% v cash. JPY 249.8; Keisei Electric Rail attracts activist interest; SONY/Honda unveil new EV
JapanX: Nidec Powering the Future of Urban Air Mobility; perhaps a new growth driver to think about

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Oct 17

Most Read: CyberAgent Inc, Eoflow , Suzlon Energy, J&T Global Express, Hana Microelectronics, Hanwha Ocean, DISCO Corp, Astra International and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan – Increase in Shorts on Some Interesting* Stocks
EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
India – Positioning on Some Interesting* Names
J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines
Hana Microelectronics Placement – Stock Has Been Doing Well, Unclear if Deal Is Well Flagged
Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
J&T Global Express Pre-IPO, Part 6 | How We Could Potentially Get Closer To US$13 Bn Valuation
J&T Global Express IPO – Team Effort for Some Heavy Lifting
Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 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.

EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings

Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.

India – Positioning on Some Interesting* Names

Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines

J&T Global Express (1936374D CH) is looking to raise HK$3.92bn (US$501m) in its IPO by selling 326.55m shares at HK$12/share, valuing the company at HK$105.75bn (US$13.52bn).
J&T Global Express (1936374D CH) will not get Fast Entry to any indices but should be added to the HSCI in March. Inclusion to Southbound Stock Connect will take longer.
Inclusion in other indices will take longer with the highest probability of index inclusion in September 2024.

Hana Microelectronics Placement – Stock Has Been Doing Well, Unclear if Deal Is Well Flagged

Hana Microelectronics (HANA TB) aims to raise up to US$105m to finance expansion of Hana’s silicon carbide strategy including PMS (Power Master Semiconductor).
The deal scores well on our framework given the company’s strong recent performance and decent long term track record
In this note, we will talk about the deal dynamics.

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.

J&T Global Express Pre-IPO, Part 6 | How We Could Potentially Get Closer To US$13 Bn Valuation

By Daniel Hellberg

In this insight we consider what it would take to pull our valuation up closer to US$13 bn
Such a valuation would require solid revenue growth (+17-18% Y/Y or better), plus sustained progress on raising China and ‘Other’ EBITDA margins, which are currently negative
Even with these optimistic assumptions, J&T would trade at 20x EV/2025 Adj EBITDA & at historical EV/Revenue multiples far above more profitable Chinese express names

J&T Global Express IPO – Team Effort for Some Heavy Lifting

J&T Global Express, a global logistics service provider, is looking to raise about US$500m in its Hong Kong IPO.
As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 22.5% market share as per 2022 parcel volume.
We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we talk about valuations.

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.

WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS

By Charlotte van Tiddens, CFA

HDFC Bank (HDFCB IN) is the largest buy (XSOE) – estimated flow $44m. Grupo Financiero Banorte SAB d (GFNORTEO MF) is the 2nd largest buy – estimated flow $40m.
Wistron Corp (3231 TT) is the largest sell – estimated flow $68m. POSCO Holdings (005490 KS) is the 2nd largest sell – estimated flow $59m.
Our estimate for the total value of new constituent buys is $1.38bn. We expect deletions to the value of $1.41bn to be sold down across the 3 funds.

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Oct 16

Most Read: Liontown Resources, Allkem Ltd, CyberAgent Inc, Japan Post Bank, Eoflow , Tsi Holdings, Boss Resources, Light & Wonder and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Liontown Resources (LTR AU): Passive Selling on Lower Float
Liontown Warms To Albemarle’s Bump
Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye
Japan – Increase in Shorts on Some Interesting* Stocks
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
Last Week In Event SPACE: EOFlow, Fast Retailing, JMDC, Origin Energy
EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)
Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

Liontown Warms To Albemarle’s Bump

Back on the 28 March, Liontown Resources (LTR AU) rejected the third proposal of $2.50/share from Albemarle (ALB US), the world’s largest lithium producer, citing terms were opportunistic.
Then everything went quiet. There appeared to be an interested party building a stake ~$2.75/share, but nothing concrete emerged.
Now Albemarle has returned with a revised indicative proposal of $3.00/share – best and final. Due diligence has been granted. The board is supportive if terms are firmed.

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye

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

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 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: 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.

Last Week In Event SPACE: EOFlow, Fast Retailing, JMDC, Origin Energy

Should the nominated directors, to be voted on by EOFlow (294090 KS)‘s shareholders at the November EGM, include Medtronic Plc (MDT US) executives, then game on.
Fast Retailing (9983 JP) STILL has a Nikkei 225 problem, which means it probably has to underperform Nikkei 225 slightly between now and the Base Date (31 July 2024).
JMDC (4483 JP) has been one of the more annoying partial tenders out there. Even post-facto, it is tough to know what the disposition was. This is extraordinarily vexing.

EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings

Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.

TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors

In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one.
They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.

S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)

Light & Wonder (LNW AU) will replace United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
Invocare Ltd (IVC AU) is expected to stop trading after the close on 3 November and Boss Resources (BOE AU) is best placed to be the replacement.
There are stocks that are close on the heels of Boss Resources (BOE AU) and will compete for a place. Two of those could be added at the December rebalance.

Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say

Post-Close Friday it was announced that Light & Wonder (LNW AU) Chess Depositary Interests would replace United Malt Group Ltd (UMG AU) at the close on 17 October.
This was announced before US markets opened. Light & Wonder (LNW US) shares popped 5.65%, closing 5.8% through the Aussie line.
This is a possibly deceptive index add. I’d be quite careful.

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Oct 15

Most Read: Li Auto , China Unicom Hong Kong, China Galaxy Securities (H), Astra International, Wuhan Jingce Electronic Group, Nws Holdings, HDFC Bank, Light & Wonder , Allkem Ltd, Japan Post Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
HSCEI Index Rebalance Preview: One Change; Capping Impact Increases
WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues
NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains
WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade
S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG
Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

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.

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.

WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade

The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
The October rebalance will result in a one-way turnover of ~45% and in a one-way trade of US$1.24bn. There are ~300 stocks with over 1 day of ADV to trade.
With only 4 trading days to implementation, there could be large moves on stocks with large flows and impact over the next few days.

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).

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.

NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains

Accelerating the Offer timetable for NWS (659 HK) such that it closes before the dividend ex-date appeared stingy. But why pay dividends to shareholders that won’t hold the shares anymore?
Those concerns have been put to rest with the despatch of NWS’ Composite Doc and New World (17 HK)‘s Circular, guaranteeing all shareholders the dividend, no matter the Offer outcome.
The key risk now is NWD’s independent shareholder vote. On balance, this should get up.

WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade

The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state-owned enterprises.
The October rebalance will result in a one-way turnover of ~16% and in a one-way trade of US$329m. There are 16 stocks with over US$3m to trade.
HDFC Bank (HDFCB IN) will be added to the index while there will be selling in Taiwan Semiconductor (TSMC) (2330 TT).

S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG

Shareholders have approved United Malt Group Ltd (UMG AU)‘s acquisition by Malteries Soufflet and UMG is expected to stop trading after the close on 17 October.
United Malt Group Ltd (UMG AU) will be replaced by Light & Wonder (LNW AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
This is a surprise and there is unlikely to be a lot of pre-positioning on Light & Wonder (LNW AU). Buy Light & Wonder (LNW US) during US hours.

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye

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

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.

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Oct 14

Most Read: Shinko Electric Industries, Fast Retailing, Astra International, Eoflow , Nws Holdings, HDFC Bank, EcoPro Materials, Light & Wonder , Seven & I Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Shinko Electric (6967) – Waiting for a Package
Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
What EOflow Insiders Are Saying on the Current Situation & An Objective Interpretation of It
NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains
WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade
Major Revisions of the Corporate Governance Report Guidelines in Korea: To Reduce “Korea Discount”
Ecopro Materials: Reduces IPO Price Range
S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG
Seven & I: Unimpressive Results & Potential Investor Exodus Amidst Superstore Transformation

Shinko Electric (6967) – Waiting for a Package

Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop.
A “split price” takeover seems reasonable as a structure. I expect upside. Still.

Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem

Fast Retailing (9983 JP) today announced better than guided results, and 10% revenue growth, 18% OP growth to August 2024. NP is light, but still well higher than street consensus.
At 10.37% Nikkei 225 weight, it is still above the target for 31 July 2024. If it does not underperform Nikkei 225 between now and then, US$2bn to sell end-Sep24.
If people like the growthiness, that can be absorbed. But if the stock were to go up 10% vs Nikkei, there’d be US$2bn, then maybe another US$2bn to sell.

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).

What EOflow Insiders Are Saying on the Current Situation & An Objective Interpretation of It

They said that EOflow has made a strategic decision not to raise any objections to the court’s injunction to temporarily suspend the sale and marketing activities of EOPATCH.
They stated their commitment to making efforts to actively prove that they are not subject to KRX’s substantive delisting examination. Hence, they aim to resume trading from November 1st.
They subtly hinted at a degree of caution, suggesting that the final agreement with Medtronic might undergo slight modifications to align with the outcome of this preliminary injunction.

NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains

Accelerating the Offer timetable for NWS (659 HK) such that it closes before the dividend ex-date appeared stingy. But why pay dividends to shareholders that won’t hold the shares anymore?
Those concerns have been put to rest with the despatch of NWS’ Composite Doc and New World (17 HK)‘s Circular, guaranteeing all shareholders the dividend, no matter the Offer outcome.
The key risk now is NWD’s independent shareholder vote. On balance, this should get up.

WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade

The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state-owned enterprises.
The October rebalance will result in a one-way turnover of ~16% and in a one-way trade of US$329m. There are 16 stocks with over US$3m to trade.
HDFC Bank (HDFCB IN) will be added to the index while there will be selling in Taiwan Semiconductor (TSMC) (2330 TT).

Major Revisions of the Corporate Governance Report Guidelines in Korea: To Reduce “Korea Discount”

On 12 October, the Financial Services Commission (FSC) announced major Revisions of the Corporate Governance Report Guidelines, including improvement of dividend procedures and revisions of governance principles.
The major revisions of the Corporate Governance Report Guidelines in Korea should be catalysts for reducing “Korea Discount.”
These new Corporate Governance Report will recommend the KOSPI listed companies with assets of more than 500 billion won to comply with the new guidelines effective 2024.

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.

S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG

Shareholders have approved United Malt Group Ltd (UMG AU)‘s acquisition by Malteries Soufflet and UMG is expected to stop trading after the close on 17 October.
United Malt Group Ltd (UMG AU) will be replaced by Light & Wonder (LNW AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
This is a surprise and there is unlikely to be a lot of pre-positioning on Light & Wonder (LNW AU). Buy Light & Wonder (LNW US) during US hours.

Seven & I: Unimpressive Results & Potential Investor Exodus Amidst Superstore Transformation

By Oshadhi Kumarasiri

Seven & I Holdings (3382 JP)‘s FQ2 OP exceeded consensus by ¥2.0bn (1.3%), but with FH2 revenue guidance lowered by ¥95bn, the overall outlook appears discouraging.
The company’s shares fell by 5%, underperforming Topix by 3.8%, indicating investor concern about US growth and departing from activist proposals despite a ¥2.0bn earnings outperformance.
If overseas investors who supported ValueAct’s proposals begin to exit, Seven & I could face substantial downside risks in the near term.

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Oct 13

Most Read: Newcrest Mining, JMDC , China Galaxy Securities (H), Shinko Electric Industries, Posco DX, Astra International, Fast Retailing, Nws Holdings, Korea Stock Exchange Kospi Index, Zomato and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Newcrest-Newmont Merger: Fancy Index Shenanigans
JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)
WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade
Shinko Electric (6967) – Waiting for a Package
POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem
NWS Holding (659 HK): Offer Opens with NWD Vote on 2 November
Korea Finally Offers Reliable Data Channel on Companies with Improved Dividend Procedures
Zomato Lock-Up – A US$240m+ Softbank Linked Lockup Release

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.

JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)

Results for the Omron Corp (6645 JP) Partial Tender Offer for JMDC (4483 JP) are out.
The Pro-Ration was 51.63%, at the lower end of my initial estimate of 50-58% range, and at the higher end of my revised range (42-56%).
The pro-ration, the nature of the shapes (technical term) tendered, and what that suggests for Noritsu Koki’s position suggests the back end could be more squeezy than not.

WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade

The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
The October rebalance will result in a one-way turnover of ~45% and in a one-way trade of US$1.24bn. There are ~300 stocks with over 1 day of ADV to trade.
With only 4 trading days to implementation, there could be large moves on stocks with large flows and impact over the next few days.

Shinko Electric (6967) – Waiting for a Package

Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop.
A “split price” takeover seems reasonable as a structure. I expect upside. Still.

POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer

Posco DX (022100 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 in the next two months.
That means a deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) and inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX). But the timeline is important.

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).

Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem

Fast Retailing (9983 JP) today announced better than guided results, and 10% revenue growth, 18% OP growth to August 2024. NP is light, but still well higher than street consensus.
At 10.37% Nikkei 225 weight, it is still above the target for 31 July 2024. If it does not underperform Nikkei 225 between now and then, US$2bn to sell end-Sep24.
If people like the growthiness, that can be absorbed. But if the stock were to go up 10% vs Nikkei, there’d be US$2bn, then maybe another US$2bn to sell.

NWS Holding (659 HK): Offer Opens with NWD Vote on 2 November

Nws Holdings (659 HK)’s IFA opines that the conditional voluntary general offer from the Cheng family is fair and reasonable. The offer + 2H dividend is HK$9.46 per share.
The key condition is (majority vote) approval by independent NWD shareholders (EGM on 2 November). The timetable is designed such that the shareholders will also receive the NWS final dividend.
NWD has a high but declining AGM minority participation rate. Retail forums suggest support for the transaction. On balance, we believe that this deal gets up.

Korea Finally Offers Reliable Data Channel on Companies with Improved Dividend Procedures

The Obligatory Corporate Governance Report Disclosure System will stand as the only source for furnishing trustworthy data on the proportion of listed companies that have genuinely adopted enhanced dividend procedures.
From a dividend strategy perspective, the companies of primary interest for strategic trading are predominantly those falling under the scope of this disclosure obligation.
Next year, it’s anticipated that with dependable data, we will have the means to craft dividend strategies aimed at this specific group.

Zomato Lock-Up – A US$240m+ Softbank Linked Lockup Release

In Aug 2022, Zomato (ZOMATO IN) completed the acquisition of 91% of Blinkit’s outstanding shares via issuing its own shares. These shares were released from their lockup in Aug 2023.
Softbank then sold a part of its stake in Aug 2023, the rest of its stake will come out of lockup soon.
In this note, we will talk about the lock-up dynamics and recent updates.

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Oct 12

Most Read: Liontown Resources, Kenedix Office Investment Co, Li Auto , JMDC , Eoflow , Rakuten Bank , Kokusai Electric , Posco DX and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Liontown Resources (LTR AU): Passive Selling on Lower Float
Kenedix Merger: Significant Passive Inflows Expected in Three Weeks
HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)
EOFlow’s Suspension Is Not (All) Negative
Rakuten Bank IPO Lock-Up – Parent and Company Will Come Out of Lockup
EOFLOW/Medtronic Tender: On Life Support
Eoflow: Temporary Trading Suspension
Kokusai Electric IPO: Lower Price Range Is Reasonable
POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

Kenedix Merger: Significant Passive Inflows Expected in Three Weeks

The three-way merger of Kenedix Office Investment Co (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) will be implemented in less than 3 weeks.
With the market cap of the merged entity at US$4.85bn, there will be upgrades to indices with larger tracking assets and significant passive buying at the time of merger implementation.
All three stocks have outperformed their peers since merger announcement and over the last month and at least part of the upcoming passive flow is baked into the price.

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.

JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)

Results for the Omron Corp (6645 JP) Partial Tender Offer for JMDC (4483 JP) are out.
The Pro-Ration was 51.63%, at the lower end of my initial estimate of 50-58% range, and at the higher end of my revised range (42-56%).
The pro-ration, the nature of the shapes (technical term) tendered, and what that suggests for Noritsu Koki’s position suggests the back end could be more squeezy than not.

EOFlow’s Suspension Is Not (All) Negative

On the 6th of October, a US district court judge entered a preliminary injunction (PI) against EOFlow (294090 KS), pending a trial. This development should have been expected.
Less expected was the suspension of EOFlow shares today, and the cessation of sales globally.
The latter measure appears extreme, noting the PI addresses only sales in the US, which EOFlow is not permitted anyway, without FDA approval. There’s clearly more than meets the eye.

Rakuten Bank IPO Lock-Up – Parent and Company Will Come Out of Lockup

Rakuten Bank (5838 JP) (RB), the online banking arm of Rakuten Group (4755 JP), raised around US$630m in its Japan IPO. Its IPO linked lockup will expire soon.
RB is the largest internet bank in Japan, by number of accounts. As of Jun 23, it had 14.0m deposit accounts with a total deposit base of JPY9.4tn.
In this note, we will talk about the lock-up dynamics and updates since our last note.

EOFLOW/Medtronic Tender: On Life Support

In reaction to the preliminary injunction, Eoflow (294090 KS) shares were suspended as it is reviewing whether it is subject to a substantive review for KOSDAQ listing eligibility.
Medtronic Plc (MDT US) is in an unprecedented situation of potentially acquiring a company whose shares are suspended, has a preliminary injunction against it and exposure to possible liabilities.
Medtronic could have prevented this development by reaffirming its commitment to the deal. The transaction is on increasingly shaky grounds, which is reflected in the 38.2% gross spread.

Eoflow: Temporary Trading Suspension

On 10 October, the Korea Exchange announced a temporary suspension of trading of Eoflow (294090 KS) shares starting 11 October.
Eoflow decided at its board of directors meeting the previous day (10th) to suspend production and sales of Eoflow patches until the outcome of the lawsuit is resolved.
In this insight, we provide various scenario analysis including the worst case, best case, and in-between cases of the Eoflow M&A tender offer process.

Kokusai Electric IPO: Lower Price Range Is Reasonable

Kokusai Electric (6525 JP) has trimmed its IPO price from JPY1,890 to JPY1,830-1,840 per share to raise up to US$727 million. The IPO price will be determined on 16 October.
We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Valuation Insights.
Our base-case DCF valuation is JPY2,058 per share. Peers have modestly re-rated, and a lower IPO price range helps increase the IPO’s attractiveness.

POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer

Posco DX (022100 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 in the next two months.
That means a deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) and inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX). But the timeline is important.

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Oct 11

Most Read: Japan Post Bank, SK Telecom, Kokusai Electric , Nws Holdings, Origin Energy, Li Auto , Kenedix Office Investment Co 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
Korea – Positioning in Stocks That Could Have Global Passive Flows
Kokusai Electric IPO – Weaker Demand Than We Expected
NWS (659 HK): Pre-Cons Done. Now, About That Final Divvie …
Origin/Brookfield: ACCC Rubber Stamped. Now Shareholders Will Have Their Say
Kokusai Electric IPO – Not Wholly Convinced, One Needs to Look past the Cycle
TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights
HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
Kenedix Merger: Significant Passive Inflows Expected in Three Weeks
Origin Energy (ORG AU): ACCC Approves, Shareholders Justifiably Want a Bump

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.

Korea – Positioning in Stocks That Could Have Global Passive Flows

Posco DX (022100), Kum Yang (001570), SK Telecom (017670), Lotte Energy Materials (020150), Kakao Games (293490), Pan Ocean (028670), BGF retail (282330), Netmarble (251270) have been on investors/traders radars recently.
There could be liquidity events in some of the stocks next month as passive index trackers look to buy/sell the stocks.
Foreign investors have sold Lotte Energy Materials (020150 KS), Kakao Games (293490 KS), Pan Ocean (028670 KS) and Netmarble (251270 KS) while buying BGF retail (282330 KS).

Kokusai Electric IPO – Weaker Demand Than We Expected

By Mio Kato

Kokusai Electric announced its pricing range today, setting it rather tightly at ¥1,830-1,840.
This is slightly below the initial indicative price of ¥1,890 pointing to modest demand.
That is a rather more tepid response than we initially expected given that this is the first sizable offering in some time.

NWS (659 HK): Pre-Cons Done. Now, About That Final Divvie …

Back on the 26 June, Chow Tai Fook (CTFE) made a pre-conditional voluntary Offer for New World (17 HK)‘s 60.88%-held NWS (659 HK) at HK$9.15/share, a 22.2% premium to undisturbed.
The Cheng-family-backed CTFE and connected parties held 45.24% of NWD, therefore the parent was effectively injecting ~US$2.75bn of cash into NWD for its NWS stake.
The pre-cons are now done, with a 13 October despatch date for the Composite Document. Technically, this could be wrapped up before NWS’ final dividend ex-date. That’s worth exploring further.

Origin/Brookfield: ACCC Rubber Stamped. Now Shareholders Will Have Their Say

Brookfield Asset Management/MidOcean Energy’s tilt for Origin Energy (ORG AU), faced two major hurdles.
The first was ACCC approval. Not just over competition issues, but also the perceived/apparent public benefit from Brookfield’s future commitment to renewable generation. ACCC has now cleared the transaction.
The second is currying favour with shareholders, several of whom, including AustralianSuper (13.68% stake), reckon the Offer is substantially below long-term value. This needs a bump.

Kokusai Electric IPO – Not Wholly Convinced, One Needs to Look past the Cycle

KKR is looking to raise around US$730m via selling a stake in Kokusai Electric (6525 JP) (KE) in its 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 and undertook a peer comparison. In this note, we talk about valuations.

TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights

At the October rebalance, Free Float Weight (FFW) will be reduced on 284 stocks and increased on 458 stocks. 43 stocks will be removed from Phased Weight Reduction.
Estimated one-way turnover is 1.77% resulting in a one-way trade of ¥1.45tn. 364 stocks have over 4 days ADV to trade, 97 stocks have over 8 days ADV to trade.
Over the last 6 months, the stocks with inflows (>US$25m) have outperformed the stocks with outflows (>US$25m) with most of the outperformance coming in the last three months.

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.

Kenedix Merger: Significant Passive Inflows Expected in Three Weeks

The three-way merger of Kenedix Office Investment Co (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) will be implemented in less than 3 weeks.
With the market cap of the merged entity at US$4.85bn, there will be upgrades to indices with larger tracking assets and significant passive buying at the time of merger implementation.
All three stocks have outperformed their peers since merger announcement and over the last month and at least part of the upcoming passive flow is baked into the price.

Origin Energy (ORG AU): ACCC Approves, Shareholders Justifiably Want a Bump

The ACCC has approved Brookfield/EIG’s proposed acquisition of Origin Energy (ORG AU). The Brookfield/EIG offer is A$5.78 and US$2.19 per share, worth A$8.83 at the last close.
The bidders now face the challenge of convincing shareholders to accept the offer and avoid incurring ticking fees. The scheme booklet will be despatched in the coming weeks.
Several shareholders have justifiably argued that the offer is light. Our SoTP valuation is A$9.46 per share, 7.1% above the implied offer price of A$8.83.

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Oct 10

Most Read: Inageya Co Ltd, Liontown Resources, Japan Post Bank, HDFC Bank (ADR), Eoflow , Kokusai Electric , SK Telecom, EcoPro Materials, CELSYS, Daesang Corporation and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year
Liontown Resources (LTR AU): Passive Selling on Lower Float
October 2023 TOPIX Free Float Review – $22.6bn to Trade and JPB (7182) The Biggie
HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium
Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys
ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu
Korea – Positioning in Stocks That Could Have Global Passive Flows
Ecopro Materials IPO – Thoughts on Valuation – Needs a Margin of Safety
TOPIX Inclusions: Who Is Ready (Oct 2023)
Prime Target for Flow Trading Due to Low Pre-Exposure in December KOSPI 200 Rebalancing

Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year

Aeon Co Ltd (8267 JP) and Inageya Co Ltd (8182 JP) agreed in late April to prepare a plan so Aeon would buy 51% this year.
They would combine Inageya with 53+%-owned United Super Markets (3222 JP) aiming for a ¥1trln sales supermarket chain in Kanto. That is due end- calendar 2024.
There is a partial offer to buy 33+% of Inageya at a small premium, and inadequate price before merging next year. Cross-holders determine pro-ration.

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

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.

HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium

Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 59% and the HDFC Bank (ADR) (HDB US) premium to the local line has dropped to 7%.
HDFC Bank (HDFCB IN) has underperformed its peers and the local indices on expectations of lower NIMs and higher NPAs.
There will be passive buying in HDFC Bank in December and March. Further passive buying will require foreign room to increase above 25% which will first require foreign investor selling.

Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys

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 – Haitong International Securities Group (665 HK), 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), IMAX China Holding (1970 HK), BPLANT.
Lowest spreads – Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Seiko Pmc Corp (4963 JP).

ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu

Aequitas Reserach 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, Doosan Robotics (454910 KS) lived up to its hype, while JSW Infrastructure continued India’s strong run.
In the placement space, IDFC First Bank Limited (IDFCBK IN) launched its well flagged QIP, while CALB Group (3931 HK)‘s shareholders were released from their IPO lockup.

Korea – Positioning in Stocks That Could Have Global Passive Flows

Posco DX (022100), Kum Yang (001570), SK Telecom (017670), Lotte Energy Materials (020150), Kakao Games (293490), Pan Ocean (028670), BGF retail (282330), Netmarble (251270) have been on investors/traders radars recently.
There could be liquidity events in some of the stocks next month as passive index trackers look to buy/sell the stocks.
Foreign investors have sold Lotte Energy Materials (020150 KS), Kakao Games (293490 KS), Pan Ocean (028670 KS) and Netmarble (251270 KS) while buying BGF retail (282330 KS).

Ecopro Materials IPO – Thoughts on Valuation – Needs a Margin of Safety

By Ethan Aw

EcoPro Materials (ECO123 KS) is looking to raise up to US$500m in its Korean IPO.
Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries.
In our previous note, we covered the company’s performance and undertook a peer comparison. In this note, we will share our thoughts on valuation.

TOPIX Inclusions: Who Is Ready (Oct 2023)

By Janaghan Jeyakumar, CFA

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.
Since my last insight, CellSource (4880 JP) and Kasumigaseki Capital (3498 JP) have confirmed they will move to TSE Prime which means they will be included in TOPIX at end-November.
FP Partner (7388 JP) and I-NE (4933 JP) will get included in TOPIX at the end of October.

Prime Target for Flow Trading Due to Low Pre-Exposure in December KOSPI 200 Rebalancing