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• Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
• In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
• We estimate that the probability of Alibaba acquiring 11st is about 60-70%. 

• Four years after Itochu got to 40.0% of votes in Descente (8114) in a hostile Tender Offer, Descente partner ANTA, which supported Itochu at the time started selling its stake.
• A few months later, Itochu started buying shares of Descente in the market. As of 7 Sep, Itochu had bought Descente shares 81 days straight (9.7% of ADV).
• This begs the question: Is Itochu ensuring they maintain voting control as ANTA sells? Or are they buying to lift their stake prior to another bid?

• The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
• The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.

• It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.
• Brilliance China Automotive (1114 HK) had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.
• A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.

• Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
• Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
• Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.

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

• The Japan Post Holdings (6178 JP)/ Japan Post Bank (7182 JP) ratio looks more attractive as JPB climbs with other banks as the possibility of Offering-induced retail overhang increases. 
• The ACCC has until 28 September 2023 to make its decision on Origin Energy (ORG AU). Expect ACCC to be supportive – they haven’t built a strong “against” case.
• There should be more for the Kenedix REIT complex on a fundamental basis, a future equity capital raise accretion basis, and because of significant net buying for index purposes.

• 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), Symbio Holdings (SYM AU), Costa Group Holdings (CGC AU), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), JSR.
• Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Pacific Current (PAC AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP). 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, ARM’s IPO seems to have set the ball rolling for the traditionally busy year end across the region.
• In the placement space, finally a Hong Kong placement mangaed to hold up, even as a large Aussie one gave way.

• There could be two changes for the SET50 INDEX with JMT Network Services (JMT TB) and I-TAIL (ITC TB) replacing Srisawad Power (SAWAD TB) and Ngern Tid Lor (TIDLOR TB). 
• With no further inclusions on the Market Surveillance Measure list, Delta Electronics Thai (DELTA TB) should be safe at the December rebalance.
• There are a couple of stocks that are close to passing/failing the liquidity tests and that could result in further changes to the index.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Providers, Pranav Bhavsar and Nitin Mangal. They will be sharing with us their Top Stock Picks in India. From trends, current opportunities, and insights on their picks, join us as we get the full picture from Pranav and Nitin.

The webinar will be hosted on Wednesday, 12 July 2023, 17:00 SGT/HKT.

Pranav Bhavsar is the Founder of ASA Capital Management, focusing on research on consumer themes and companies operating in India or global companies that have significant exposure to India or the Indian economy.

Nitin Mangal is a SEBI registered Research Analyst with more than 10 years of experience in Indian equities. He is Pioneer of Corporate Governance and Accounting Research in Indian Market and has successfully developed a product for Institutional Investors named as “Analysis Beyond Consensus” during his association with Edelweiss Securities Ltd, Mumbai. 

• Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
• With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.

• 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 a touch below 1% and that will result in a round-trip trade of US$255m.
• The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

• Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
• Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
• Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

• The changes at the Nikkei 225 September rebalance were announced on 4 September. The rebalance of the HSI, HSCEI, HSTECH and HSCI was implemented on the same day.
• The changes to the MVIS indices were announced on 8 September and will be implemented at the close on 15 September. The S&P/ASX family will also rebalance on 15 September.
• After a month and a half of big inflows to onshore China ETFs, there were small outflows from a lot of ETFs during the week.

• The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
• We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
• There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.

• Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
• Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
• There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.

• The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
• We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
• One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

• Nine months ago I first wrote on Anycolor (5032 JP). I thought the guidance growth pattern and valuations remarkable. Results handily beat guidance. Now we’re in Year 2 of guidance.
• After the first full year listed, FY2024 guidance was for +30% in revenue to ¥33bn, and +35% growth in OP. For Q1, reported yesterday, actual results were +51% and +91%.
• The stock is popping this AM, but it is still cheap vs growth rates and margins. There are, notably, still “context issues” here. They merit some consideration (and investigation).

• We think by adopting the new strategy to unbind vehicle sales with battery swapping, NIO could broaden its customer base to non-Yangtze-Delta regions and regain price competitiveness.
• We upgrade to BUY and raise TP to US$ 10.5, due to 1) recovered growth outlook brought by widened customer base, more competitive pricing and intact model cycle
• And 2) smaller-than-feared margin pressure. Our TP implies 2x PS. 

• Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
• Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
• The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.

• Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities. 
• Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
• Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.

• The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore.
• New stimulus measures appear to be triggering FOMO on real estate stocks, but a foreshortened week, yet again, makes one wonder. There IS money being applied though.
• I expect more measures and more buying. I am not sure I would want to be short any Hs with a deep discount to the A the next few months.

• Toyota Group autoparts maker Aisin Seiki (7259 JP) today announced a new Medium-Term Plan. They plan to shift their business away from “entrusted” business, towards BEV, Brakes, and “Safe/Comfort Entry”
• They aim to grow revenues 25% from 2021 to 2025 and an additional 10-20% by 2030. 
• They also aim to improve investment and capital efficiency, and that’s where we can look at the interesting possibilities.

• In mid-June, three months ago yesterday, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov1.
• All three popped in price, and peaked three weeks later, both outright and vs Peers. Then it fell sharply back. 
• It is worth looking at the new Combined “KDX” entity on a pro-forma basis. There should be more to go.

• Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
• In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
• We estimate that the probability of Alibaba acquiring 11st is about 60-70%. 

• Considering the progress of the legislative process at this juncture, the effective date could be as early as the end of this year or, at the latest, early next year.
• Ilooda (164060 KS) will likely become the first case. A tender offer at ₩11,000 (a 30% premium to the current price) per share for 14%+1 share may greet us.
• There is sufficient value in monitoring the interaction between the offer structure and stock price movement in the context of the first application of a mandatory tender offer in Korea.

• Back on the 13 July, IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share. Terms have been declared final.
• The price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day, suggesting apparent news leakage.
• The Scheme Doc is out and independent shareholders get to vote on the transaction on the 10th October. This vote could – should – be close. Only for the brave.

• Tuhu Car (2007986D HK), a leading integrated online and offline platform for automotive service in China, has launched its HKEx IPO at a price range of HK$28.00-31.00 per share.
• In TUHU Car IPO: The Investment Case, we highlighted the key elements of the investment case. In this note, we present our forecasts and discuss valuation.
• Our valuation analysis suggests that Tuhu is reasonably priced at the IPO price range. We would participate in the IPO. 

• Nine months ago I first wrote on Anycolor (5032 JP). I thought the guidance growth pattern and valuations remarkable. Results handily beat guidance. Now we’re in Year 2 of guidance.
• After the first full year listed, FY2024 guidance was for +30% in revenue to ¥33bn, and +35% growth in OP. For Q1, reported yesterday, actual results were +51% and +91%.
• The stock is popping this AM, but it is still cheap vs growth rates and margins. There are, notably, still “context issues” here. They merit some consideration (and investigation).

• Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
• Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
• That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

• Last week I wrote about NTT’s Partial Offer for Marketing Consultant Intage (4326) – (with a spurious hyphen at the end). 
• In the last couple of days, there have apparently been a few blocks printed on the tape. I have received questions about pricing and pro-ration. 
• So here I provide a set of 11 possible pro-ration cases, and suggest ways for traders and investors to think about the risks and possibilities.

• The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
• We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
• One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

• Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
• T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
• The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.

• Softbank Group (9984 JP) raised around US$4.9bn via selling some of its stake in ARM Holdings (ARM US)‘ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our previous notes, we looked at the company’s past performance and valuation. In this note, we talk about the trading dynamics.

• ARM Holdings (ARM US) has priced its IPO at US$51.00 per ADS, at the top end of the price range. Softbank Group (9984 JP) will raise gross proceeds of US$4.9bn.
• We previously discussed the IPO in ARM Holdings IPO: The Bull Case, ARM Holdings IPO: The Bear Case and ARM Holdings IPO: Unattractive Price Range. 
• The ARM IPO is structurally set up for a first-day pop. Beyond the first-day euphoria, ARM will face the daunting task of delivering bullish estimates to justify the IPO price.

• In mid-June, three months ago yesterday, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov1.
• All three popped in price, and peaked three weeks later, both outright and vs Peers. Then it fell sharply back. 
• It is worth looking at the new Combined “KDX” entity on a pro-forma basis. There should be more to go.

• On the 26 July, Geo Energy Resources (GERL SP) announced an agreement to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
• Via an S&P, GEO intends to buy a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group for US$154.1mn.
• The completion of the S&P, which is subject to Indonesia’s OJK and Geo shareholder approval, will trigger an MTO at IDR 1,255/share.

• Toyota Group autoparts maker Aisin Seiki (7259 JP) today announced a new Medium-Term Plan. They plan to shift their business away from “entrusted” business, towards BEV, Brakes, and “Safe/Comfort Entry”
• They aim to grow revenues 25% from 2021 to 2025 and an additional 10-20% by 2030. 
• They also aim to improve investment and capital efficiency, and that’s where we can look at the interesting possibilities.

• IMAX China Holding (1970 HK)‘s scheme document is out, with the court meeting scheduled for 10 October. The IFA considers IMAX Corp (IMAX US)‘s HK$10.00 offer fair and reasonable.
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake. 
• A recovering box office, early indications of an effort to rally retail NO votes and a high minority participation rate in AGMs pose a risk. The risk/reward profile is unfavourable. 

• In March 2023, Japan Post Holdings (6178 JP) sold ¥1.1trln of shares in Japan Post Bank (7182 JP), lowering its stake considerably, raising float. There will be a TOPIX upweight. 
• In May, with earnings, they announced their intention to buy back ¥300bn of shares or up to 10% of shares out. Today, they announced the details. ¥300bn through March end.
• In a ¥300bn ToSTNeT-3 tomorrow, the govt will sell back ¥105.7bn. That leaves a residual worth examining. So we examine.

• 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 a touch below 1% and that will result in a round-trip trade of US$255m.
• The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

• Doosan Robotics (454910 KS) is looking to raise up to US$318m in its Korean IPO.
• Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
• In our previous notes, we assessed the company’s past performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we share our updated thoughts on valuation.

• Last year, 20% owner Dalton approached T&K Toka Co Ltd (4636 JP) for an MBO, but walked when questioned. Then in January bid ¥1300 to double their stake to 44%.
• They were not successful. The firm held a beauty contest. Bain won at ¥1400 despite ¥1300 getting no response and markets up big since. It’s possible not everyone was invited. 
• Since the Bain deal announcement, the stock has mostly traded at/through terms. Now we find out Dalton has been buying (now 23.77%). This increases the chances of a bump.

• Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
• Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
• There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.

• Nidec Corp (6594 JP) has had ambitions in machine tool space. They wanted to buy Takisawa Machine Tool (6121 JP) but Takisawa wouldn’t give them the time of day.
• So Nidec announced hostile intentions and a 60-day period to negotiate. That’s done, and today they announced a now-friendly deal. 
• This looks like an easy done deal. There is one major risk factor remaining, then another consideration when thinking about path. 

• After Sun Hung Kai Properties (16 HK) released its interim results, shares declined 12.7% intra-day this past Monday, touching a 14-year low, before closing down 9.5%. 
• The same day, the Kwok family increased their stake in the company, purchasing ~2.2mn shares for ~HK$175mn.  
• SHKP is currently trading a trailing P/B of 0.36x versus its five-year average of 0.54x, and the five-year average preceding Covid of 0.68x.

• On 13 September, SK Innovation announced that the subscription rate for the rights offering allocated to ESOA and existing shareholders was 87.66%.
• The rights offering price is 139,600 won, which is 12.7% lower than current price of 159,900 won. 
• There is likely to be a strong demand for the subscription of rights offering forfeited shares for the general investors scheduled to take place on 14 to 15 September.

• Youlchon Chemical’s CFD balance accounts for 3.54% of SO, with approximately 2x leverage trading. It is one of the few in the top CFD balance list that can be short-sold.
• Our primary concern should lie with the upcoming December rebalancing of the KOSPI 200 index. Youlchon Chemical finds itself perilously close to the borderline within the Materials sector.
• When proactive flow trading targeting KOSPI 200 is set to influence prices early October, we must remain vigilant regarding the potential trades aimed at exploiting a CFD balance squeeze.

• Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
• T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
• The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.

• In March 2023, Japan Post Holdings (6178 JP) sold ¥1.1trln of shares in Japan Post Bank (7182 JP), lowering its stake considerably, raising float. There will be a TOPIX upweight. 
• In May, with earnings, they announced their intention to buy back ¥300bn of shares or up to 10% of shares out. Today, they announced the details. ¥300bn through March end.
• In a ¥300bn ToSTNeT-3 tomorrow, the govt will sell back ¥105.7bn. That leaves a residual worth examining. So we examine.

• ‘Bidenomics’ investment subsidies aided the 7.7%QoQsaar growth in business investment in Q2CY23, delaying the onset of recession. Policy rate to stay near 5.5% until Q2CY24, thereby restraining growth until then.
• ECB and BoE face less pressure to raise rates amid easing headline inflation, so yield differentials will strengthen USD; the latter will be a drag on net exports in H2CY23.
• The spending restraints agreed in May’23 kick in from Oct’23, and will be a drag on aggregate demand from Q4CY23, the quarter a mild recession is likely to begin. 

• Back on the 27 June, art and culture play Poly Culture Group Corp H (3636 HK) announced a pre-conditional privatisation at HK$8.88 per H-share.
• This Offer from SOE Poly Group is by way of a Merger by Absorption, incorporating a Scheme-like vote. There is no tendering condition.
• The pre-cons have now been fulfilled. The Composite Document, including the H Share Class meeting/EGM date and IFA opinion, is expected to be despatched on or before the 30 September. 

• Changes to the S&P/ASX indices, REMX US, GDXJ US, MVA AU, MVW AU and other indices will be implemented at the close on Friday.
• There is over +/-A$5m to trade or +/-3x ADV to trade on nearly 100 stocks and will be a huge volume day for the stocks at the close.
• Use the volume on the buy and sell side to increase/reduce positions especially on the deletes where there will be liquidity to cover shorts on stocks that have dropped significantly.

• The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
• We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
• There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.

• Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
• Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
• Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

• Chosun Business Daily mentioned today that initial results of Doosan Robotics book building have been very strong. The current IPO price range is from 21,000 won to 26,000 won.
• There is a high probability that the IPO price will be set at 26,000 won or more and close to 30,000 won.
• Our base case valuation per share of Doosan Robotics is 42,826 won, which is 65% higher than the high end of the IPO valuation range.

• Innovent is actually not short of money, so the Placing this time looks “strange”.If Innovent is unable to deliver performance that matches expectations, investors would reconsider its future financing needs.
• Innovent is undergoing important transition from quantitative change to qualitative change as turning losses into profits is within reach. So, the “concept validation” of Innovent’s business model has been completed.
• Innovent decides to place the shares at this moment reflects that its stock price is already high. Based on our forecast, there could be limited upside room for share price.  

• News broke yesterday that Daniel Zhang is no longer leading Alibaba (ADR) (BABA US)‘s Cloud Business unit.
• The statement from Alibaba’s current chairman, in which he mentions that Zhang would “switch to a different approach and continue to fight alongside us at Alibaba” raises skepticism.
• We also think that the $1.0bn Alibaba committed to a technology fund could be seen as a form of compensation to ensure Daniel Zhang’s silence.

• 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 a touch below 1% and that will result in a round-trip trade of US$255m.
• The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

• In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
• Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed. 
• The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here. 

• On 5 September, JFE Holdings (5411 JP) saw an article out of a capital raising. It was confirmed later in the day. Huge volumes traded. The stock fell sharply.
• The offering supply/demand dynamics are…. complicated. The offering is to foreign instos. The net demand is probably mostly retail and index, and positioning is… also complicated.
• The EPS dilution is already accounted for. The fall against Nippon Steel pretty much does it after considering the discount expected. 

• There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
• Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
• There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

• 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), Costa Group Holdings (CGC AU), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), Origin Energy (ORG AU). 
• Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Liontown Resources (LTR AU), T&K Toka Co Ltd (4636 JP), Itochu Techno Solutions (4739 JP). 

• The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
• We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
• Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.

• Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
• With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.

• There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
• The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
• Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

• Innovent Biologics Inc (1801 HK) (IB) aims to raise around US$313m for R&D and marketing.
• The company has undertaken a number of deals in the past, with the overall results being mixed.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Skincare/Cosmetics company I-NE (4933 JP) on 31 August (¥2947) announced it would move to TSE Prime on 19 September, and announced a Secondary Offering by CEO Onishi-san to get there.
• There was no greenshoe provided. The stock popped. Then drifted back to ¥3025 and the Offering priced today at ¥2,934/share. 
• 75% went to Asian/European (non-US) offshore investors, and the rest to onshore institutions, which is unusual. But now we look to the TOPIX inclusion.

• The pre-condition relating to Poly Culture Group Corp H (3636 HK)’s privatisation offer from Poly Group at HK$8.88 per H Share has been fulfilled. 
• The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
• The offer’s 77.6% premium to the undisturbed price and no minimum acceptance condition will help completion. At the last close and for 1 November completion, the gross/annualised spread is 7.1%/64.3%.

• In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
• Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed. 
• The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here. 

• There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
• One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
• The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.

• There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
• Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
• There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Doosan Robotics (454910 KS), ARM Holdings (1822695D US), VNG (VinaGame) (VNG US), Integral Corporation (5842 JP) IPOs and Aquila Acquisition Corporation (7836 HK) de-SPAC.
• Event-Driven developments – JMDC (4483 JP), Intage Holdings (4326 JP), Mason Group Holdings (273 HK), Liontown Resources (LTR AU), Newcrest Mining (NCM AU), Orecorp Ltd (ORR AU). 

• There are no constituent changes for the index but there are float and capping changes that will be implemented at the close on 15 September.
• Estimated one-way turnover is 3.3% and the one-way trade is US$21.5m. There are eight stocks where passive trackers need to trade over 1 day of ADV.
• After large creations for Market Vectors Vietnam ETF (VNM US) at the start of the year, there has not been a lot of follow-on activity as the market moves higher.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, things are getting busy again with multiple deals live across the region, whic his a refreshing change from the slow start in the first half.
• There were only a few placement this week, but what the lacked in volume they made up for in size. 

• Back on the 3 July, United Malt Group Ltd (UMG AU) and Malteries Soufflet entered into a binding agreement of A$5.00/share, by way of a Scheme. 
• The Scheme Booklet has now been lodged with ASIC. UMG shareholders vote on the transaction on the 12 October, with implementation on the 15 November.
• The Offer remains subject to FIRB and other regulatory approvals. Malteries Soufflet and UMG are the second and fourth-largest maltsters in the world.

• There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
• The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
• Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

• The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
• We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
• Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.

• This is the brand spanking new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables and charts. We welcome feedback on how to make it more useful going forward.

• After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day. 
• Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
• A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

• JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.  
• The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
• Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate. 

• SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
• This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
• Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price

• The upcoming rebalance of the MVIS US Listed Semiconductor 25 Index will be implemented on 15 September. There are no constituent changes, but there are float and capping changes.
• The VanEck Vectors Semiconductor (SMH US) ETF tracks the index and has an AUM of US$9.7bn.
• Estimated one-way turnover is 5.9% resulting in a one-way trade of US$595m. The stocks are extremely liquid, the impact on the stock in terms of ADV to trade is small.

• As expected, Abacus Group (ABG AU) will be deleted from the MVIS Australia A-REIT Index at the close on 15 September.
• Abacus Group (ABG AU) will also be deleted from the S&P/ASX 200 (AS51 INDEX) on the same day, so this increases the sell flow on the stock.
• Estimated one-way turnover at the rebalance is 3.8% resulting in a one-way trade of A$23.8m. There are a few stocks with over 1x ADV to trade from passive trackers.

• The appraisal right prices of Celltrion Inc (068270 KS) is 150,813 won (2.2% higher than current price) and Celltrion Healthcare (091990 KS) is 67,251 won (1.9% higher than current price).
• Celltrion Inc has mentioned that the merger could be cancelled if the total amount of appraisal share purchase amount exceeds 1 trillion won. 
• Although some investors are likely to exercise their appraisal rights in this merger, we would attach a higher probability of this merger getting completed (80-90%+). 

• There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
• Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
• There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

• In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
• Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed. 
• The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here. 

• There are no constituent changes for the MVIS Australia Equal Weight Index at the September rebalance. JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) have avoided deletion.
• Float and capping changes will result in a one-way turnover of 3.5% and in a one-way trade of A$69m.
• There is a lot of short interest on stocks that will have passive buy/sell flows, but there will not be enough volume traded for shorts to use to reduce positions.

• There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
• One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
• The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.

• Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering. 
• ¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
• This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

• Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP). 
• Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%. 
• The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership. 

• Back on the 26 April, First Pacific (142 HK) and three other entities, proposed delisting Metro Pacific Investments (MPI PM) at PHP 4.63/share. This was subsequently bumped to PHP 5.20.
• A Special Stockholders’ Meeting was held on August 8, and MPI stakeholders approved all the resolutions. An SGM for independent First Pac shareholders will be held on the 24 August. 
• The Tender Offer is now open and closes on the 7 September, with (expected) settlement on 19 September – provided the Tender Offer delisting conditions are met.

• Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
• We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
• The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

• After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day. 
• Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
• A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

• Combustible tobacco is declining globally, but Japan Tobacco (2914 JP) is defying the odds by outperforming the industry significantly through capturing market share from competitors.
• Also in Heated Tobacco, Japan Tobacco is slowly but steadily capturing market share from IQOS and other heated tobacco makers.
• There will be no price hikes this year, but we think that there’s enough spillover from the price hikes in the past 3-4 years to maintain JT’s OP growth momentum.

• Aquila Acquisition Corporation (7836 HK) agreed to a De-SPAC transaction with ZG Group (formerly Zhaogang.com), the world’s largest digital platform for third-party steel transactions.
• ZG has a questionable business model, struggling to generate profits or underlying FCF. This dynamic suggests that ZG has not established a sustainable competitive advantage. 
• The negotiated value of ZG in the De-SPAC transaction is HK$10,004 million (US$1,277 million). Our valuation analysis suggests that this negotiated value is unrealistic.

• SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
• This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
• Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price

• JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.  
• The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
• Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate. 

• After being granted due diligence, Newmont (NEM US) firmed an all-scrip Offer on the 15 May for Newcrest (NCM AU) at 0.400 new Newmont shares for each Newcrest share held. 
• The Offer, by way of a Scheme, permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms. 
• The Scheme Booklet has now been lodged with ASIC. Newcrest shareholders vote on the transaction on the 13 October. The record date for the special dividend is the 19 October.