Most Read

The shareholders of Kenedix Office Investment (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) meet in a couple of weeks to vote on the merger.
The stocks are trading in line with the merger ratio and the initial spike following merger announcement has been followed by some selling.
The market cap of the combined entity should now be large enough for migration to indices with larger tracking assets bringing in large passive flows on merger completion.

EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks

Insulet Corp (PODD US) filed with the United States District Court a complaint for patent infringement against Eoflow (294090 KS), Flex (FLEX US), Luis Malave, Steven DiIanni, and Ian Welsford.
Insulet’s primary allegation is that Eoflow’s EOPatch device is built using Insulet’s proprietary trade secrets and infringes three Insulet US patents (‘741, ’883 and ‘950 patents).
The most likely scenarios are that Medtronic Plc (MDT US) and Insulet sign a licensing agreement (resulting in a possible tender offer price cut) or Medtronic walks.

Insulet Accuses EOFlow Of Stealing Trade Secrets

From the outset, EOFlow (294090 KS) has traded wide (~7% of average) to Medtronic Plc (MDT US)‘s Offer. An apparent delay in filing with Korean regulators formed one argument.
Now there’s a compelling reason. Key insulin pump competitor Insulet (PODD US) has filed a lawsuit accusing EOFlow of the misappropriation of trade secrets, patent infringement, and trademark dilution.
Singapore-Based Flex (FLEX US) and three ex-employees of Insulet are also defendants. This does not bode well for the transaction.

Summary of the Situation Regarding Insulet’s Lawsuit in the US Against Eoflow

This signifies the official commencement of a lawsuit against Eoflow in the United States, which has been considered one of the most significant risks for Eoflow.
Eoflow is externally saying that the aspect of patents claimed by Insulet is actually based on previously expired patents. Hence, Eoflow believes they can win this patent lawsuit.
This lawsuit emerged before the acquisition decision by Medtronic suggesting a need to consider trading the current spread based on the inference that the tender offer is still valid.

L’Occitane (973 HK): HK$35 Offer from the Controlling Shareholder?

According to Bloomberg, L’Occitane (973 HK) is set to receive a HK$35 per share privatisation offer from Reinold Geiger, the Chairman and the largest shareholder.
The rumoured price is attractive and represents an all-time high share price. Therefore, Acatis KVG, the shareholder with a blocking stake, would be supportive.
The rumoured price implies multiples at a discount to peer multiples, which explains Mr Geiger’s ambitions for a possible European listing to secure higher valuation multiples.

Amari Ni Mo… NTT (9432)

NTT reports a Q1 which looks like KDDI where the business looks like KDDI and a bit better than that where it doesn’t. Good. Not great.
But NTT announced a ¥200bn buyback. Again good. Not great.
And on Sunday, LDP politician Amari spoke on a Sunday news show about the possible govt selldown of NTT shares. 20yrs is a long time. So no overhang.

Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”

Insulet Corp (PODD US)’s lawsuit against Eoflow (294090 KS) caused a sharp decline in Eoflow’s share price today (down 10.7% to 24,950 won).
Insulet is accusing Eoflow of hiring several senior personnel that have helped Eoflow to develop a product that could take away market share from Insulet.
The most important factor may be Eoflow’s “special sauce” which is some kind of technology/mechanism that allows this 17% greater efficiency/convenience for the wearable EOPatch insulin device.

China to Finally Allow Group Tours to Korea and Japan?

In the past several days, there have been numerous new flow that the Chinese government is likely to allow group tours to South Korea and Japan in the coming days.
The group tours from China to South Korea which has been banned since March 2017, are expected to resume after six years, according to the Korean Embassy in China.
Nikkei Asia also reported on 9 August that the Chinese government is ready to allow group tours to Japan as early as this week.

InvoCare (IVC AU): SID Signed with TPG at A$12.7/Share

Invocare has entered into a scheme implementation deed with TPG at A$12.7/share. This is higher than the initial offer of A$12.65/share but lower than the revised offer of A$13/share.
There is an extra A$0.26/share in franking credits for Invocare Ltd (IVC AU) shareholders that can use them.
Passives will need to sell nearly 11m shares of Invocare Ltd (IVC AU) on the last trading day and there will be an adhoc inclusion to the S&P/ASX 200 Index.

Kyoden (6881 JP) MBO – An Small, Easy, Illiquid, Light But Not Horribly Unfair Done Deal at ¥600

Today, the personal holding company of Kyoden Co Ltd (6881 JP) founder Hashimoto-san announced a Tender Offer to take the company private.
Together with his company, he owns 64.75%. He only needs 1.93% to tender. The combination of Shokochukin, SMBC, and Yokohama Bank get him over the line.
This is small, illiquid, and will trade tight, but it’s a done deal.

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Aug 09

Most Read: ROHM Co Ltd, Samsung Electronics Pref Shares, Bank of Kyoto, Lasertec Corp, Kenedix Office Investment Co, Toshiba Corp, Zomato, Eoflow and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JPX Nikkei 400 Index Rebalance: Some Big Impact Names
Samsung Electronics: Prefs Need to Catch Up
JIP Tender Offer for Toshiba (6502) Finally Here
Toshiba – The Tender Arrives
Bank of Kyoto (8369) – Too Far Too Fast
2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow
Kenedix Merger: Big Passive Inflows on the Cards
Toshiba (6502) Tender Offer – Kioxia Optionality
Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release
EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks

JPX Nikkei 400 Index Rebalance: Some Big Impact Names

There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.

Samsung Electronics: Prefs Need to Catch Up

Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.

JIP Tender Offer for Toshiba (6502) Finally Here

The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.

Toshiba – The Tender Arrives

By Mio Kato

At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
The question is whether there is any room for a small hike in the price as alluded to by the Chairman.

Bank of Kyoto (8369) – Too Far Too Fast

Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising. On a static equity-portfolio discount measure, it has outperformed regional banks.
On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.

2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow

The Tenth Annual JPX Nikkei 400 Index Review was announced on Monday 7 August. There are 38 Inclusions, 36 Deletions. They are mostly in line with Janaghan Jeyakumar, CFA‘s predictions.
The BIG SELL is T&D Holdings (8795 JP), which surprised me. The top BUY is ROHM Co Ltd (6963 JP) which was not on the Quiddity Leaderboard.
Otherwise, the ADDs and DELETEs are 1.8-2.0 days of ADV, there are several NEW CAPs and some RECAPS among LARGE CAPS

Kenedix Merger: Big Passive Inflows on the Cards

The shareholders of Kenedix Office Investment (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) meet in a couple of weeks to vote on the merger.
The stocks are trading in line with the merger ratio and the initial spike following merger announcement has been followed by some selling.
The market cap of the combined entity should now be large enough for migration to indices with larger tracking assets bringing in large passive flows on merger completion.

Toshiba (6502) Tender Offer – Kioxia Optionality

Yesterday, JIP finally announced its Tender Offer for Toshiba Corp (6502 JP) as discussed in JIP Tender Offer for Toshiba (6502) Finally Here
I got a few questions this morning on the earnings call comments from Chairman Watanabe regarding what might happen if a Kioxia Transaction were announced mid-JIP Tender.
My assumption before, during, and after, is that the Board wants this deal done. And doesn’t really want to take any responsibility for pushing any more.

Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release

By Sumeet Singh

In Aug 2022, Zomato completed the acquisition of Blinkit’s outstanding shares via issuing its own shares. These issued shares will come up for lockup release on 10th Aug 2023.
Zomato is one of two leading food delivery app operators in India. Its acquisition of Blinkit marked its foray into the instant grocery segment.
In this note, we will talk about the lock-up dynamics and recent updates.

EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks

Insulet Corp (PODD US) filed with the United States District Court a complaint for patent infringement against Eoflow (294090 KS), Flex (FLEX US), Luis Malave, Steven DiIanni, and Ian Welsford.
Insulet’s primary allegation is that Eoflow’s EOPatch device is built using Insulet’s proprietary trade secrets and infringes three Insulet US patents (‘741, ’883 and ‘950 patents).
The most likely scenarios are that Medtronic Plc (MDT US) and Insulet sign a licensing agreement (resulting in a possible tender offer price cut) or Medtronic walks.

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Aug 08

Most Read: Kum Yang, NGK Insulators, Toshiba Corp, Mercari , ROHM Co Ltd, Bank of Kyoto, Samsung Electronics Pref Shares, Estia Health, CELSYS and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
Japan – Increase in Shorts on Some Interesting Stocks
JIP Tender Offer for Toshiba (6502) Finally Here
Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
JPX Nikkei 400 Index Rebalance: Some Big Impact Names
Bank of Kyoto (8369) – Too Far Too Fast
Toshiba – The Tender Arrives
Samsung Electronics: Prefs Need to Catch Up
Estia & Bain Enter Into Scheme Agreement
TOPIX Inclusions: Who Is Ready (Aug 2023)

Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX

Ecopro Co Ltd, Kum Yang, Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX have all rallied recently and could find their way into global passive portfolios.
There could be liquidity events in some of the stocks as early as the end of the month and there is pre-positioning on a lot of the stocks.
Retail investors have been big buyers in Ecopro Co and Kum Yang while foreign investors have been buyers in Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX.

Japan – Increase in Shorts on Some Interesting Stocks

Nisshin Seifun Group, Oji Holdings, Nippon Shinyaku, CyberAgent Inc, NGK Insulators, Lixil Group and Sharp Corp have all underperformed the Nikkei 225 (NKY INDEX) over the last 3-4 months.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has started to increase and there could be more pre-positioning yet to come over the next few weeks.

JIP Tender Offer for Toshiba (6502) Finally Here

The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.

Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding

The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.

JPX Nikkei 400 Index Rebalance: Some Big Impact Names

There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.

Bank of Kyoto (8369) – Too Far Too Fast

Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising. On a static equity-portfolio discount measure, it has outperformed regional banks.
On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.

Toshiba – The Tender Arrives

By Mio Kato

At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
The question is whether there is any room for a small hike in the price as alluded to by the Chairman.

Samsung Electronics: Prefs Need to Catch Up

Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.

Estia & Bain Enter Into Scheme Agreement

After its initial bid of $3.00/share was rejected by Estia Health (EHE AU), Bain returned on the 7 June with a $3.20/share non-binding proposal and was granted exclusive due diligence.
Estia and Bain Capital have now entered into a Scheme Implementation Agreement at A$3.20/share, a 50% premium to undisturbed.
A shareholder meeting is expected to be held in November with implementation expected prior to the end of 2023.

TOPIX Inclusions: Who Is Ready (Aug 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.
Plus Alpha Consulting (4071 JP) will be included in TOPIX at the end of August 2023 and so far the stock has performed negatively as expected (see link).
Our long-term TOPIX pre-event name CELSYS (3663 JP) has seen its share price decline sharply in the last few weeks which raises some important questions.

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Aug 07

Most Read: S.F. Holding, SK Inc, Kum Yang, NGK Insulators, Mercari , Nippon Yusen Kk, JSR Corp, Toshiba Corp, Yaizu Suisankagaku Industry and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

SF Holding (002352 CH): H-Share Listing & Index Implications
Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
Japan – Increase in Shorts on Some Interesting Stocks
Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ
Merger Arb Mondays (07 Aug) – JSR, ITOCHU, Allkem, Origin, Symbio, Pacific Current, United Malt, MPI
Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI
Ohayo Japan| SPX -2.3%WoW; Buffett Buying UST; NUGGET:Motorcycle Electrification – Honda Roars Ahead
Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer

SF Holding (002352 CH): H-Share Listing & Index Implications

S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc

In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.

Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX

Ecopro Co Ltd, Kum Yang, Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX have all rallied recently and could find their way into global passive portfolios.
There could be liquidity events in some of the stocks as early as the end of the month and there is pre-positioning on a lot of the stocks.
Retail investors have been big buyers in Ecopro Co and Kum Yang while foreign investors have been buyers in Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX.

Japan – Increase in Shorts on Some Interesting Stocks

Nisshin Seifun Group, Oji Holdings, Nippon Shinyaku, CyberAgent Inc, NGK Insulators, Lixil Group and Sharp Corp have all underperformed the Nikkei 225 (NKY INDEX) over the last 3-4 months.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has started to increase and there could be more pre-positioning yet to come over the next few weeks.

Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding

The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.

Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ

This may get squeezy after Nippon Yusen Kk (9101 JP) announced a ¥200bn over 9mos. Do not be short. Be long.
On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
Remain bullish Kawasaki Kisen Kaisha (9107 JP) vs TOPIX, especially near-term. But this is a much less exciting and squeeze-able opportunity than before,

Merger Arb Mondays (07 Aug) – JSR, ITOCHU, Allkem, Origin, Symbio, Pacific Current, United Malt, MPI

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), Chindata Group (CD US), Estia Health (EHE AU), Invocare Ltd (IVC AU), ENM Holdings (128 HK), Eoflow (294090 KS), JSR Corp (4185 JP).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Penguin International (PBS SP), Itochu Techno Solutions (4739 JP), Oishi Group PCL (OISHI TB), Kenedix Retail REIT (3453 JP).

Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI

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 – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
Event-Driven developments – E Guardian Inc (6050 JP), Itochu Techno Solutions (4739 JP), Toshiba Corp (6502 JP), Symbio Holdings (SYM AU), Metro Pacific Investments Co (MPI PM).

Ohayo Japan| SPX -2.3%WoW; Buffett Buying UST; NUGGET:Motorcycle Electrification – Honda Roars Ahead

By Mark Chadwick

OVERSEAS. SPX500 fell on Friday, and closed -2.3%WoW; July jobs report showed cooling in the labor market; Apple -4.8% weighed on market sentiment; Reports that Buffet buying short dated UST.
JAPAN. NKY Futures -0.8% vs Cash; USDJPY 141.8; Strong JP earning season so far- NP +20%YoY; Investors favor Japan> China; Oasis’s Fischer says still more to be done with Governance.
NUGGET. Honda is ahead of their motorcycle electrification strategy vs Japanese competitors. With the #1 global share and 2.7 trillion yen in sales, they CANNOT afford to be left behind.

Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer

Yaizu Suisankagaku Industry (2812 JP)/YSK has recommended J-STAR’s tender offer of JPY1,137 per share, a 35.0% premium to the undisturbed price (4 August).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
YSK is cash rich, and the offer is below book value. The tender offer is a reasonable alternative in challenging trading conditions that have slashed operating margin targets.

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Aug 06

Most Read: Lasertec Corp, Zydus Lifesciences Ltd, MOG Digitech Holdings , Nice Information Service Co, Piotech , Water Oasis, SK Inc, Tokyo Stock Exchange Tokyo Price Index Topix, Mercari and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT
KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023
Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
Increasing Attention to the Role Played by Individuals in the Rising Trend of Stock Ownership
Japan Weekly | Stocks Down, Bonds up as BoJ Tightens; What Moved
Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented

Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.

Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT

The changes to the LQ45/IDX30 were announced last week and will be implemented Monday. The PSE also announced that there would be no changes for the PCOMP INDEX in August.
There are a bunch of review cutoffs on Monday, most notably for the Nikkei 225 (NKY INDEX), STAR50 INDEX, the NIFTY family of indices and the KRX New Deal indices.
There were inflows to China focused ETFs and outflows from Taiwan and Korea focused ETFs during the week.

KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)

The KRX has approved Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Board to the KOSPI Board. The transfer could take place in the next two weeks.
Hydro Lithium (101670 KS) was the highest ranked non-constituent from the Industrials sector at the June rebalance and could replace Nice Information Service (030190 KS) in the KOSDAQ 150 Index.
Nice Information Service Co (030190 KS) has no chance of inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and will not be short sell eligible post section transfer.

STAR50 Index Rebalance Preview: Potential Changes Playing Catchup

The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023

By Sameer Taneja

We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
We expand our list coverage into Multi Bintang Indonesia (MLBI IJ), Delta Djakarta (DLTA IJ), and Sheng Siong (SSG SP) as quality high ROCE names worth looking at.

Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc

In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.

Increasing Attention to the Role Played by Individuals in the Rising Trend of Stock Ownership

By Aki Matsumoto

The percentage of stockholdings by individuals will continue rising. Their tendency to buy-on-decline will continue to serve as a cushion in times of falling stocks as well as voting behavior.
Now that the BOJ’s ETF purchases have subsided, an increase in trust bank stock holdings is not expected. A limited increase in pension assets is also expected.
The reduction in cross-shareholdings has reduced the shareholding ratio of corporations to 19.6%. Meanwhile, corporations repurchased total of 5,790.7 billion yen in FY2022, indicating that share repurchases have taken root.

Japan Weekly | Stocks Down, Bonds up as BoJ Tightens; What Moved

By Mark Chadwick

A cautious BoJ has begun to tighten monetary policy, allowing bond yields to rise to 1%
Even Toyota ( a famous laggard) is improving its Corporate Governance – selling off Y250b of its KDDI stock holdings
For every two stocks that went up last week, three fell. It is all earnings related at the moment

Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding

The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.

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Aug 05

Most Read: Lasertec Corp, Nippon Yusen Kk, E Guardian Inc, S.F. Holding, KT&G Corporation, Korea Stock Exchange KOSPI 200, PCCW Ltd, NIFTY Index, SK Inc, Fadu and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
Nippon Yusen (9101) BIG Buyback Announced
SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer
SF Holding (002352 CH): H-Share Listing & Index Implications
KT&G: First Shares Cancellation in 14 Years
Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns
PCCW’s Stub Ops Spill More Red Ink
EQD | NIFTY Index WEEKLY Correction May Be Ending
Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
Fadu IPO Trading – Strong Subscription Rates Compared to Recent Korean IPOs

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

Nippon Yusen (9101) BIG Buyback Announced

In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May.
There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended.
Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move.

SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer

Today, Change Inc (3962 JP) (30%-owned by SBI Holdings (8473 JP)) announced a Tender Offer to buy 32-36.9% of E-Guardian, followed by a third-party placement to get them to 45-49%.
Small cap E-Guardian does internet services support, ad processing, cyber security (their fastest growing segment) and top line has been growing.
The partial offer is big enough to matter, and up 50%. It is worth a look for people who like small cap special sits.

SF Holding (002352 CH): H-Share Listing & Index Implications

S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

KT&G: First Shares Cancellation in 14 Years

KT&G announced that it will buy back 3.47 million shares (2.5% of outstanding shares) and cancel them. This would be the first share cancellation for KT&G in 14 years.
If the company’s DPS is 5,200 won for 2023 fiscal year, this would represent dividend yield of 6.2% at current prices.
Although we have a positive view on KT&G’s share buyback and cancellation of 3.47 million shares, the company could do much more to improve its shareholder returns to its shareholders.

Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns

Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.

PCCW’s Stub Ops Spill More Red Ink

Net of HKT Ltd (6823 HK), PCCW Ltd (8 HK) recorded negative EBITDA of HK$378mn in the 1H23.
This is the largest six-month negative EBITDA figure since the EBITDA loss of HK$427mn in 2H22, and the third largest in the past decade.
PCCWs current discount to NAV is at an unsustainable 5%.

EQD | NIFTY Index WEEKLY Correction May Be Ending

By Nico Rosti

The NIFTY Index has been falling for 2 weeks and is reaching mildly OVERSOLD territory. If this was a retracement during the main rally, it may be time to BUY.
The Market Reversal Matrix’s shows a bullish pattern, the time+price combined probability of success for LONG trades from current prices, after 2 weeks down, is >66%.
Price area to go LONG: 19400 to 18792, you can go LONG this week and also next week, if down (CC=-3).

Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc

In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.

Fadu IPO Trading – Strong Subscription Rates Compared to Recent Korean IPOs

By Ethan Aw

Fadu (440110 KS) raised US$151m in its Korean IPO, after the deal was priced at KRW31,000/share, the top end of its IPO price range.
Fadu is a South Korean fabless semiconductor maker mainly engaged in flash storage technology innovation. Its core products are Enterprise Solid State Drive (SSD) and Enterprise SSDs.
In this note, we will talk about the demand for the deal and other trading dynamics.

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Aug 04

Most Read: Lasertec Corp, Nintendo, Itochu Techno Solutions, E Guardian Inc, Nippon Yusen Kk, Kawasaki Kisen Kaisha, S.F. Holding, Toshiba Corp, Takara Holdings, Korea Stock Exchange KOSPI 200 and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
Nintendo (7974) | Game Over for Switch
Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps
SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer
Nippon Yusen (9101) BIG Buyback Announced
KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue
SF Holding (002352 CH): H-Share Listing & Index Implications
Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach
StubWorld: Takara Holdings Trading “Rich”
Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

Nintendo (7974) | Game Over for Switch

By Mark Chadwick

Nintendo reported operating profit of 190b yen (-8% YoY), falling far short of Street expectations
The Nintendo Switch is now a six-year old console and demand is exhausted. A normalization of chip/supply chain issues benefits the newer PS5
Our thesis is that the hardware cycle has peaked and that the share price will head lower in tandem with the dwindling top line

Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps

Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities.
The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.

SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer

Today, Change Inc (3962 JP) (30%-owned by SBI Holdings (8473 JP)) announced a Tender Offer to buy 32-36.9% of E-Guardian, followed by a third-party placement to get them to 45-49%.
Small cap E-Guardian does internet services support, ad processing, cyber security (their fastest growing segment) and top line has been growing.
The partial offer is big enough to matter, and up 50%. It is worth a look for people who like small cap special sits.

Nippon Yusen (9101) BIG Buyback Announced

In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May.
There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended.
Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move.

KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue

Today, Kawasaki Kisen Kaisha (9107 JP) announced Q1 earnings. As expected, net was WAY down on weak container business. But the company revised up H1 and Full-Year.
KLINE increased its FY2023 payout, upping its expected buyback plan from ¥50bn to ¥60bn. This is still cheap at 8.5x and 0.7x book, and there is non-container growth.
The structure of the buyback deserves attention. It may deserve a very short-term trade. The buyback construct has the possibility of “fun and games.”

SF Holding (002352 CH): H-Share Listing & Index Implications

S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness.

StubWorld: Takara Holdings Trading “Rich”

On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
Preceding my comments on Takara are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns

Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.

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✓ Company Analytics and News
✓ Events & Webinars

Aug 03

Most Read: Lasertec Corp, NARI Technology Co Ltd A, Itochu Techno Solutions, Sekisui Jushi, Ecopro BM , Water Oasis, Kawasaki Kisen Kaisha, E Guardian Inc, CapitaLand Ascott Trust and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
Offshore China ETFs Rebalance Preview: Two Changes in September
Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps
Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder
Insiders Selling at Ecopro BM and Kum Yang
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023
ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer
KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue
E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer
Capitaland Ascott Trust – Another One to Add to Its Latest Spree of Acquisitions

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

Offshore China ETFs Rebalance Preview: Two Changes in September

As of 1 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (2822 HK) in September.
There should be over 1x ADV to buy on NARI Technology Co Ltd A (600406 CH) and over 1x ADV to sell on Shaanxi Coal Industry (601225 CH).
There are a few stocks bunched around similar market caps among the potential adds and there could be changes to the list over the next few weeks.

Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps

Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities.
The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.

Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder

In April, Sekisui Jushi (4212 JP) announced lackluster earnings and unsurprising guidance after a year marked by higher costs. It also announced a small (2.5%) buyback, likely for cross-holdings.
Yesterday, the company announced Q1 results, and a revision to their buyback programme (to buy 20.2% of shares out). This morning their 22+% (#1) shareholder Sekisui Chemical sold 18%.
Forward PER dropped nearly 20%. The stock is still outrageously cash/securities-rich and if “re-levered” to zero net leverage would get a high 20s ROE. Hmmm…

Insiders Selling at Ecopro BM and Kum Yang

Ecopro BM (247540 KS) and Kum Yang (001570 KS)’s shares are down 2.5% and 4.5%, respectively today, driven by news of insiders at these companies selling their shares.
It is estimated that the total amount of Ecopro BM shares sold by insiders and related parties was about 20 billion won in July by more than 12 insiders/related parties.
We are increasingly concerned about insiders selling at Ecopro BM and Kum Yang. Coupled with lofty valuations, we think there is a higher probability of downside risk on these names.

Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023

By Sameer Taneja

We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
We expand our list coverage into Multi Bintang Indonesia (MLBI IJ), Delta Djakarta (DLTA IJ), and Sheng Siong (SSG SP) as quality high ROCE names worth looking at.

ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer

Itochu Techno Solutions (4739 JP) has recommended Itochu Corp (8001 JP)’s tender offer of JPY4,325 per share, an 18.7% premium to the undisturbed price (1 August).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 5.43% ownership ratio.
The minimum acceptance condition requires a 14% minority acceptance rate. This is doable as the tender price is attractive and equals the 20-year share price high.

KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue

Today, Kawasaki Kisen Kaisha (9107 JP) announced Q1 earnings. As expected, net was WAY down on weak container business. But the company revised up H1 and Full-Year.
KLINE increased its FY2023 payout, upping its expected buyback plan from ¥50bn to ¥60bn. This is still cheap at 8.5x and 0.7x book, and there is non-container growth.
The structure of the buyback deserves attention. It may deserve a very short-term trade. The buyback construct has the possibility of “fun and games.”

E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer

E Guardian Inc (6050 JP) has announced a partial tender offer and third-party allotment with Change Inc (3962 JP). CHANGE will subscribe for 1.5 million shares at JPY2,099 per share.
The tender offer is for a minimum of 3.7 million and a maximum of 4.3 million shares at JPY3,000 per share, a 42.9% premium to the undisturbed price.
The tender offer is reasonable. The minimum acceptance condition requires a 37% minority acceptance rate. A 100% minority participation rate implies a minimum proration is 42.39%.

Capitaland Ascott Trust – Another One to Add to Its Latest Spree of Acquisitions

By Clarence Chu

CapitaLand Ascott Trust (CLAS SP) is looking to raise around S$200m from its primary follow-on. Included in the deal is another S$100m preferential offering to existing shareholders.
Proceeds will be used towards acquiring three new properties, and for asset enhancement initiatives.
The deal would be a relatively large one for the REIT to digest, at 31.6 days of three month ADV.

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✓ Company Analytics and News
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Aug 02

Most Read: Lasertec Corp, JS Global Lifestyle , Zydus Lifesciences Ltd, Nice Information Service Co, Sekisui Jushi, Ecopro BM , NARI Technology Co Ltd A, Symbio Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
JAPAN PASSIVE: Who Owns What 2023?
JS Global (1691 HK)’s SharkNinja Spin-Off
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)
Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder
Insiders Selling at Ecopro BM and Kum Yang
Offshore China ETFs Rebalance Preview: Two Changes in September
Superloop/Symbio’s Indicative Merger
Symbio (SYM AU): Superloop’s Indicative Offer

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

JAPAN PASSIVE: Who Owns What 2023?

The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each.
Even if you do not “play” index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan.

JS Global (1691 HK)’s SharkNinja Spin-Off

Back on the 23 February, household appliance maker JS Global Lifestyle (1691 HK) proposed spinning off SharkNinja’s ex-Asia Pac ops in the U.S.
This spin-off would be undertaken as a distribution in-specie, creating a parallel listing structure for SharkNinja and the remaining operations.
Shareholders of JSG will vote on the separate listing at the EGM on the 26 June, with the last day cum-entitlement on the 27 June.

NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented

Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.

KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)

The KRX has approved Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Board to the KOSPI Board. The transfer could take place in the next two weeks.
Hydro Lithium (101670 KS) was the highest ranked non-constituent from the Industrials sector at the June rebalance and could replace Nice Information Service (030190 KS) in the KOSDAQ 150 Index.
Nice Information Service Co (030190 KS) has no chance of inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and will not be short sell eligible post section transfer.

Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder

In April, Sekisui Jushi (4212 JP) announced lackluster earnings and unsurprising guidance after a year marked by higher costs. It also announced a small (2.5%) buyback, likely for cross-holdings.
Yesterday, the company announced Q1 results, and a revision to their buyback programme (to buy 20.2% of shares out). This morning their 22+% (#1) shareholder Sekisui Chemical sold 18%.
Forward PER dropped nearly 20%. The stock is still outrageously cash/securities-rich and if “re-levered” to zero net leverage would get a high 20s ROE. Hmmm…

Insiders Selling at Ecopro BM and Kum Yang

Ecopro BM (247540 KS) and Kum Yang (001570 KS)’s shares are down 2.5% and 4.5%, respectively today, driven by news of insiders at these companies selling their shares.
It is estimated that the total amount of Ecopro BM shares sold by insiders and related parties was about 20 billion won in July by more than 12 insiders/related parties.
We are increasingly concerned about insiders selling at Ecopro BM and Kum Yang. Coupled with lofty valuations, we think there is a higher probability of downside risk on these names.

Offshore China ETFs Rebalance Preview: Two Changes in September

As of 1 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (2822 HK) in September.
There should be over 1x ADV to buy on NARI Technology Co Ltd A (600406 CH) and over 1x ADV to sell on Shaanxi Coal Industry (601225 CH).
There are a few stocks bunched around similar market caps among the potential adds and there could be changes to the list over the next few weeks.

Superloop/Symbio’s Indicative Merger

Broadband provider Superloop Ltd (SLC AU) has made an indicative Offer, by way of a Scheme, for cloud communication software outfit Symbio Holdings (SYM AU).
Under the proposal, Symbio shareholders would receive A$1.425 (cash) and 2.14 new Superloop shares for each Symbio share held, for an implied price of A$2.85/share, a 20% premium to undisturbed.
A four-week period of reciprocal exclusivity has been agreed to further progress the proposal.

Symbio (SYM AU): Superloop’s Indicative Offer

Symbio Holdings (SYM AU) has disclosed a non-binding indicative proposal from Superloop Ltd (SLC AU) at A$1.425 cash per share and 2.14 SLC shares per SYM share.
The implied offer price of A$2.85 per share is a 19.7% premium to the undisturbed price of A$2.38 per share. A 4-week reciprocal exclusivity period starts on 1 August.
The offer is not close to being a knockout bid. Superloop states that it will progress the transaction on “a disciplined basis“, suggesting some risk towards a binding proposal.

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✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Aug 01

Most Read: Ecopro Co Ltd, Wisdom Marine Lines, Zydus Lifesciences Ltd, Lasertec Corp, OCI Holdings , Piotech , OCI Co, CJ CGV Co Ltd, Macquarie Korea Infra Fund and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Korea – A Look at Ecopro, Kumyang & JYP Entertainment
Yuanta ETFs Rebalance Preview: Soaring Stocks, Rising Shorts; AI Beats Shipping
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
JAPAN PASSIVE: Who Owns What 2023?
OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co
End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023
Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won

Korea – A Look at Ecopro, Kumyang & JYP Entertainment

We take a look at Ecopro Co Ltd (086520 KS), Kum Yang (001570 KS) and Jyp Entertainment (035900 KS) since they appear to be on investor radars.
Foreign investors have been buyers while retail have been sellers in Ecopro Co and Kum Yang over the last month, while foreign investors have continued to buy Jyp Entertainment.
Short interest on all stocks has dropped over the last month, though there has been a recent tick up in shorts on Jyp Entertainment (035900 KS).

Yuanta ETFs Rebalance Preview: Soaring Stocks, Rising Shorts; AI Beats Shipping

Using data from the close on 19 July, there could be 5 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 2 deletions for the Yuanta/P-Shares Taiwan Dividend Plus ETF.
Stocks that are expected to benefit from the AI revolution could gain ETF inclusion while shipping stocks are the ones expected to be deleted from the ETF.
There has been a huge increase in shorts on some of the potential inclusions and on most of the potential deletions. That will affect how stocks trade near term.

NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented

Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.

JAPAN PASSIVE: Who Owns What 2023?

The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each.
Even if you do not “play” index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan.

OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn’t finalized.
Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won’t plummet dangerously below 1.
Additionally, the likelihood of OCI Holdings’ swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.

STAR50 Index Rebalance Preview: Potential Changes Playing Catchup

The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co

On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS).
The tender offer price of OCI Co is 139,000 won. The method of this tender offer is to issue new common shares of OCI Holdings.
In the short term (one month), we expect OCI Co’s shares to outperform OCI Holdings shares. This deal is structured to mainly benefit the OCI Group’s insiders.

End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023

We discuss the end of the mandatory lock-up periods for 40 stocks in Korea in August 2023, among which 2 are in KOSPI and 38 are in KOSDAQ.
These 40 stocks on average could be subject to further selling pressures in August and could underperform relative to the market.
Among these 40 stocks, the top five market cap stocks include HK inno.N, PhilEnergy, CJ CGV Co Ltd, Sure Soft Tech, and CanariaBio.

Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won