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On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.

Sanrio (8136 JP): The Current Playbook

Since the announcement of the US$840 million secondary offering, Sanrio (8136 JP)’s shares have been down 3.9% from the undisturbed price of JPY5,160 per share (26 November).
It is instructive to look at recent large Japanese placements to understand the potential trading pattern. So far, Sanrio’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 10 December. The average large Japanese placement tends to generate positive returns.

NEC Networks & System (1973 JP): Oasis Stake Could Be a Headache for NEC

Oasis has become a substantial shareholder of Nec Networks & System Integr (1973 JP), representing 13.2 million shares or an 8.83% ownership ratio.
Oasis has not commented on its intentions, but its stake signifies two possibilities – the start of an activist campaign to secure a bump or a play on appraisal rights.
A bump while possible is not a certainty. NEC is likely to wait to see to if Oasis increases its stake to a level which threatens its offer.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: 15 Changes, 44% Turnover, US$4.8bn Trade, BIG Impact

There are 8 adds and 7 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December. We had a 100% hit rate on our forecasts.
Estimated one-way turnover is 22.1% resulting in a one-way trade of TWD 78.8bn (US$2.4bn). There are 16 stocks with over 5 days of ADV to trade.
There has been a big increase in short interest on some of the deletions and there could be some short covering the stocks closer to implementation date.

Select Sector Indices and S&P Equal Weight Rebalance: US$16bn Trade; More Buying for APO and WDAY

Constituent changes to the S&P 500 INDEX and capping changes will result in a round-trip trade of US$15.9bn across the Select Sector indices and the S&P500 Equal Weight Index.
The Select Sector index trackers and S&P 500 Equal Weight trackers will need to buy Apollo Global Management and Workday, adding to the buying from S&P 500 INDEX trackers.
The flows will change over the next week as stock prices move around and final capping is done after the close on 13 December.

CPMC Holdings (906 HK): Steady Nerves Required

ORG Technology Co., Ltd. A (002701 CH)’s offer for CPMC Holdings (906 HK) has one remaining precondition: SAFE approval.
Mr Wei’s irrevocable was terminated. Nevertheless, as a seller, he will accept the offer, as the shares trade below the offer price, and there is no competing offer.
The precondition long stop date is 6 January, sufficient time to satisfy the precondition. It would be highly unusual to secure MOFCOM and NDRC approval but not SAFE approval.

S&P500/400/600 Index Rebalance: Apollo Global, Workday Added to SPX; AppLovin Misses Out

There are 2 changes for the S&P 500 INDEX, 2 changes for the S&P Midcap400 Index and 6 changes for the S&P SmallCap600 Index at the December rebalance.
Apollo Global and Workday will have large flows from S&P 500 INDEX trackers while AppLovin misses out. The SPX adds will have large inflows from the Select Sector index trackers too.
The outright adds are up a lot in the after-hours and there could be further upside over the next couple of weeks as positioning ramps up.

Flow Dynamics from NPS Exercising Appraisal Rights on Doosan Merger

If stocks close above the appraisal prices on the 10th, NPS will support the merger; otherwise, they’ll abstain to secure their appraisal rights.
Due to cancellation risk hitting the ceiling, NPS will likely exercise half its position and start buybacks after the results.
With both stocks heavily weighted in KOSPI 200, NPS is likely to opt for a tight buyback window, boosting chances for upward price action on Doosan’s shares in that period.

Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?

The Sanrio (8136 JP) placement is likely to be priced today. With the stock 8.8% lower from undisturbed, expect a small discount to today’s close.
The stock has traded as expected over the last 9 trading days – a sharp drop followed by a strong upward move and then profit taking.
We expect there will be strong interest in the placement and oversubscription could lead to upside from here. Shorts have increased and will look to cover into the placement.

CNBM (3323 HK)’s Buyback Ups Parent’s Stake >50%

China National Building Material (3323 HK) (CNBM), a leading PRC building materials company, is offering to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
CNBM’s parent – the CNBM Parent Concert Group – will not participate in the tender, therefore elevating its stake to 50.01% of total shares from 45.02% currently.
That % increase necessitates a whitewash waiver so as to not make a mandatory general Offer.

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Dec 09

Most Read: HKBN Ltd, Kokusai Electric , De Grey Mining, Clarity Pharmaceuticals Ltd, Suntec REIT, Rakuten, Mitsubishi Logisnext Co., Ltd., Sanrio, Paradigm Biopharmaceuticals and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet
Quiddity Leaderboard Mar25 Nikkei 225 Rebal: 2 IN, 2 OUT, $5.5bn+ Fastie to Sell, $7bn a Side
Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?
Northern Star’s A$5bn Tilt for De Grey (DEG AU)
S&P/ASX Index Rebalance (Dec 2024): CAR, Clarity Pharma Added; Dexus, Spark Deleted
Suntec REIT (SUN SP): Tang’s Obligatory Offer. But … Is ESR A Seller?
Rakuten (4755 JP) – Trying To Goose The Stock Price Before Year-End or Mobile Sub Numbers for 2025?
Mitsubishi Logisnext (7105 JP): Mitsubishi Heavy Industries (7011 JP) Seeks to Exit
Sanrio (8136 JP): The Current Playbook
Paradigm Biopharmaceuticals (PAR AU): Fund Raising Amidst Pipeline Progress Raises Conviction

Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet

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: Lifestyle China (2136 HK), Arcadium Lithium (ALTM US), Shanghai Henlius Biotech (2696 HK), ESR Group (1821 HK), Get Nice Financial Group Ltd (1469 HK), Canvest.
Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Capitol Health (CAJ AU), Elematec Corp (2715 JP).

Quiddity Leaderboard Mar25 Nikkei 225 Rebal: 2 IN, 2 OUT, $5.5bn+ Fastie to Sell, $7bn a Side

The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I still see 2 IN and 2 OUT for the Mar25 Nikkei225 Rebal.
There is also a DOUBLE-capping event for Fast Retailing which on 8% outperformance could become a TRIPLE-capping event. For now, the trade is shaping up to be US$7bn a side.
There is still a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. Longer-term, the TOPIX Methodology Rejig is an interesting problem set.

Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?

A Nikkei article this morning several hours pre-open said that Mitsubishi Heavy Industries (7011 JP) was preparing to sell its listed forklift subsidiary Mitsubishi Logisnext Co., Ltd. (7105 JP).
The story says “Investors had been pressuring Mitsubishi Heavy to spin off or delist Logisnext” and we know the TSE dislikes dual listings. I would have expected a buy-in but…
There are a number of reasons why a buyer could find this asset attractive. I suggest reading all the way through and the tone of the Conclusions.

Northern Star’s A$5bn Tilt for De Grey (DEG AU)

De Grey Mining (DEG AU), which boasts one of Australia’s largest undeveloped gold projects, has announced a merger, by way of Scheme, with Northern Star Resources (NST AU).
Northern Star is offering 0.119 new shares for every De Grey share, and will hold ~80.1% of the combined entity, with De Grey shareholders the remaining ~19.9%.
Terms back out an implied price of A$2.08/share, or a ~37% premium to last close. This Offer has the unanimous backing of both boards.

S&P/ASX Index Rebalance (Dec 2024): CAR, Clarity Pharma Added; Dexus, Spark Deleted

CAR Group (CAR AU) replaces Dexus Property (DXS AU) in the S&P/ASX50 Index and Clarity Pharmaceuticals Ltd (CU6 AU) replaces Spark New Zealand (SPK AU) in the S&P/ASX200 (AS51 INDEX).
Dexus Property and Spark New Zealand were deleted from a global index a couple of weeks ago, so this will heap further pressure and increase the real float of the stocks.
There has been an increase in cumulative excess volume for all changes, but positioning in some stocks may continue post the announcement.

Suntec REIT (SUN SP): Tang’s Obligatory Offer. But … Is ESR A Seller?

Gordan Tang (& his wife Celine) acquired 2.14% in Suntec REIT (SUN SP), lifting their stake to 31.45% from 29.31%, triggering a MGO.
The Offer Price is $1.16/share against a recent close of $1.17. The Offer will be conditional on a 50% acceptance hurdle. That’s it. This is purely a technical Offer.
Share popped 7% on the news, and closed up ~5%. This appears unwarranted. Tang is not going to take Suntec private. But ESR Group (1821 HK) may be exiting.

Rakuten (4755 JP) – Trying To Goose The Stock Price Before Year-End or Mobile Sub Numbers for 2025?

Today, Rakuten (4755 JP) announced a new shareholder benefit (株主優待) program today, to reward shareholders as of end-December 2024. The stated goal? To “thank shareholders”…
…And provide more people with the opportunity to try out the benefits of Rakuten Mobile, with 1yr free of a 30GB/mo mobile plan. There are conditions, but it’s juicy.
Last year’s 3mo plan was given with one day of notice. This year’s larger full-year govt gets 3+wks. They are juicing the sub numbers for 2025.

Mitsubishi Logisnext (7105 JP): Mitsubishi Heavy Industries (7011 JP) Seeks to Exit

Mitsubishi Logisnext Co., Ltd. (7105 JP) shares rose 26% after the Nikkei reported that Mitsubishi Heavy Industries (7011 JP) is contemplating selling its 64.5% stake.
Logisnext confirmed the sale process. In a fair process, minorities should receive the tender offer price plus the proportionate share of Mitsubishi Heavy Industries’ TOB tax benefits.
Despite the rise in share price, Logisnext trades at a discount to peer multiples. At an offer of JPY2,000, Logisnext would trade in line with median peer multiples.

Sanrio (8136 JP): The Current Playbook

Since the announcement of the US$840 million secondary offering, Sanrio (8136 JP)’s shares have been down 3.9% from the undisturbed price of JPY5,160 per share (26 November).
It is instructive to look at recent large Japanese placements to understand the potential trading pattern. So far, Sanrio’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 10 December. The average large Japanese placement tends to generate positive returns.

Paradigm Biopharmaceuticals (PAR AU): Fund Raising Amidst Pipeline Progress Raises Conviction

By Tina Banerjee

Paradigm Biopharmaceuticals (PAR AU) has requested a trading halt to the ASX pending an announcement in relation to a capital raising. Normal trading will resume on Monday, December 9, 2024.
Assuming quarterly cash burn rate of A$7M, Paradigm’s cash balance should provide a runway through mid-Q3FY25. The company is in a dire need to raise fund.
With lead drug being in late-stage trial and having huge market potential, Paradigm seems to be an attractive biotech investment opportunity. Recently, optimism is growing surrounding Paradigm’s lead drug candidate.

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Dec 08

Most Read: Phison Electronics, Auckland Intl Airport, Kadokawa Dwango, Nexchip Semiconductor , Varun Beverages , Mitsubishi Logisnext Co., Ltd., Yang Ming Marine Transport, Korea Zinc, SGX Rubber Future TSR20 and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform
Auckland Airport (AIA NZ) Placement: Potential Index Flows
Kadokawa (9468 JP): Take Profits as a Sony Privatisation Rumours Surface
CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds
Nifty Next50 Index Rebalance Preview: Big Capping Flows in December; Methodology Change Coming?
Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?
What Is the Real Purpose of President Yoon’s Martial Law – To Reveal Election Fraud?
Taiwan Top 50 ETF Rebalance: Big Buying in Yang Ming Marine (2609 TT) In Two Weeks
Flow Trading Setup Triggered by Korea Zinc’s 21%p Float Rate Cut in KOSPI 200
Balancing The Scales: EUDR’s Evolving Impact On The Rubber Market

TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform

The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.

Auckland Airport (AIA NZ) Placement: Potential Index Flows

Auckland City Council is looking to sell 163.23m shares of Auckland Intl Airport (AIA NZ) in a clean-up trade. This is big at NZ$1.3bn and 64 days of ADV.
The placement was expected by the market and the stock has run up despite that. The stock is in a trading halt and should open lower.
There will be passive buying at the time of settlement of the placement shares and that will mop up around 15% of the offering.

Kadokawa (9468 JP): Take Profits as a Sony Privatisation Rumours Surface

Kadokawa Dwango (9468 JP) shares rose 16% after Reuters reported that Sony Corp (6758 JP) is in talks to acquire it. Kadokawa confirmed an initial letter of intent.
The privatisation interest is unsurprising as Kadokawa’s publishing arm, acclaimed intellectual properties, and positioning in the anime industry would be attractive to Sony.
The upside is limited as the last close reflects a significant takeover premium. There is a risk if a binding proposal emerges, it could be takeunder like Bain/T-Gaia.

CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index, and we estimate one-way turnover of 1.7% resulting in a round-trip trade of CNY 570m (US$79m).
Nexchip Semiconductor (688249 CH) and United Nova Technology (688469 CH) are adds to other indices as well and the impact on the stocks will be a lot higher.

Nifty Next50 Index Rebalance Preview: Big Capping Flows in December; Methodology Change Coming?

Following the introduction of 45 stocks in the F&O segment from 29 November, there will be big capping changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in December.
We estimate one-way turnover of 21.9% leading to a one-way trade of INR 75bn (US$881m). There are 25 stocks with over 1x ADV to trade.
There could be changes to the index methodology announced in the next few months and that could result in the deletion of a couple of constituents in March.

Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?

A Nikkei article this morning several hours pre-open said that Mitsubishi Heavy Industries (7011 JP) was preparing to sell its listed forklift subsidiary Mitsubishi Logisnext Co., Ltd. (7105 JP).
The story says “Investors had been pressuring Mitsubishi Heavy to spin off or delist Logisnext” and we know the TSE dislikes dual listings. I would have expected a buy-in but…
There are a number of reasons why a buyer could find this asset attractive. I suggest reading all the way through and the tone of the Conclusions.

What Is the Real Purpose of President Yoon’s Martial Law – To Reveal Election Fraud?

By Douglas Kim

One of the most important questions about the martial law three days ago is why did President Yoon send special forces (297) to the National Election Commission?
President Yoon may have ordered troops to be deployed to the NEC to get to the bottom of the election fraud since all the important election servers are stored there.
It is EXTREMELY DIFFICULT to prove an election fraud. Even if President Yoon declares a war on election frauds, he must have extraordinary pieces of data to back this up.

Taiwan Top 50 ETF Rebalance: Big Buying in Yang Ming Marine (2609 TT) In Two Weeks

Yang Ming Marine Transport (2609 TT) will replace Airtac International (1590 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the close of trading on 20 December.
Yang Ming Marine Transport (2609 TT) will also be added to the Yuanta/P-shares Dividend Plus ETF in December, so there will be increased flow and impact from the passive buying.
There has been an increase in cumulative excess volume in Yang Ming Marine Transport (2609 TT) but there is a similar trend in other stocks from the sector.

Flow Trading Setup Triggered by Korea Zinc’s 21%p Float Rate Cut in KOSPI 200

Korea Zinc’s free float is dropping from 52% to 31%, a 21%p cut.
Despite rising volume, retail still dominates. With this trend continuing, the 80,000-share sell volume is unlikely to get buried without triggering noticeable price moves.
Ahead of big one-day flow events, shorts are loaded, causing a dip. On rebalance day, traders buy back, triggering a bounce. This event is likely to follow the same pattern.

Balancing The Scales: EUDR’s Evolving Impact On The Rubber Market

By Vinod Nedumudy

FAQ and guidance documents bring clarity
Synthetic rubber out of the purview of EUDR
Allows for rubber suppliers in countries like Vietnam and Indonesia to catch up

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Dec 07

Most Read: Teco Electric & Machinery, Goodman Group, Meituan, Seven & I Holdings, Varun Beverages , Cromwell Property, Mitsubishi Logisnext Co., Ltd., Hua Nan Financial Holdings Co Ltd., AppLovin , Hotel Property Investments and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes
Goodman Group (GMG AU) Placement: Limited Index Flows
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)
Seven & I Holdings (3382 JP): The MBO Is Starting to Shape Up
Nifty Next50 Index Rebalance Preview: Big Capping Flows in December; Methodology Change Coming?
Cromwell Prop (CMW AU): ESR Exit Post-Privatization?
Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?
Quiddity TDIV/50/100 Dec 24 Results: 100% Hit Rate; 20x+ ADV for Many Names; US$2.3bn One-Way
S&P500 December 2024 Forecast (Final): Flipping the COIN
Hotel Properties (HPI AU): Charter Hall Declares Offer Unconditional

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes

There are now new changes forecast for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.

Goodman Group (GMG AU) Placement: Limited Index Flows

China Investment Corp owns 7.84% of Goodman Group (GMG AU) and is looking to sell 50.4m shares (2.64% of shares out) at a price range of A$37.55-37.6/share, a tiny discount.
Goodman Group (GMG AU) has run away from its peers over the last couple of years and there could be a move lower in the stock following the placement.
There will be limited passive buying in the short-term coinciding with the placement. There will be some more passive buying in February.

HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)

The December rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$26.14bn (US$3.4bn).
Alibaba, Tencent, Midea Group, Kuaishou Technology, NIO, HSBC Holdings and New Oriental Education & Techn are the largest buys. Meituan, Xiaomi, JD.com, AIA Group and NetEase are the largest sells.

Seven & I Holdings (3382 JP): The MBO Is Starting to Shape Up

On 4 December, Bloomberg reported that the Seven & I Holdings (3382 JP) MBO is set to include plans for a US Assets IPO to raise more than JPY1 trillion.
The MBO faces two immediate challenges: securing financing and the Board’s approval. The US Assets IPO would help alleviate both these issues.
The potential market cap of US Assets is around US$24 billion, or 53% of 7&i’s market cap. The US Assets IPO should also encourage Couche-Tard to persist with its offer.

Nifty Next50 Index Rebalance Preview: Big Capping Flows in December; Methodology Change Coming?

Following the introduction of 45 stocks in the F&O segment from 29 November, there will be big capping changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in December.
We estimate one-way turnover of 21.9% leading to a one-way trade of INR 75bn (US$881m). There are 25 stocks with over 1x ADV to trade.
There could be changes to the index methodology announced in the next few months and that could result in the deletion of a couple of constituents in March.

Cromwell Prop (CMW AU): ESR Exit Post-Privatization?

Back in August 2021, ESR Group (1821 HK) acquired unlisted ARA Asset Management for US$5.2bn. This was discussed in ESR Cayman (1821 HK) Takes Out ARA Asset Management.
Included in the transaction (completed early-2022) was ARA’s ~30.7% stake in office play Cromwell Property (CMW AU).
ESR has in the past said Cromwell was a non-core holding. With ESR now expected to be privatized by Warburg/Starwood, does this accelerate the narrative?

Mitsubishi Logisnext (7105) – The Next Target in Logistics Space?

A Nikkei article this morning several hours pre-open said that Mitsubishi Heavy Industries (7011 JP) was preparing to sell its listed forklift subsidiary Mitsubishi Logisnext Co., Ltd. (7105 JP).
The story says “Investors had been pressuring Mitsubishi Heavy to spin off or delist Logisnext” and we know the TSE dislikes dual listings. I would have expected a buy-in but…
There are a number of reasons why a buyer could find this asset attractive. I suggest reading all the way through and the tone of the Conclusions.

Quiddity TDIV/50/100 Dec 24 Results: 100% Hit Rate; 20x+ ADV for Many Names; US$2.3bn One-Way

By Janaghan Jeyakumar, CFA

The index changes for the T50/100 index family and the TDIV index were confirmed after market close on Friday 6th December 2024.
There will be one ADD/DEL for T50, five ADDs/DELs for T100, and 8 ADDs/7 DELs for TDIV. All of these are perfectly in line with our final expectations.
In this insight, we take a look at Quiddity’s final flow expectations for the December 2024 index rebal event and potential trade ideas based on the flow dynamics.

S&P500 December 2024 Forecast (Final): Flipping the COIN

By Dimitris Ioannidis

Coinbase Global (COIN US) can be the unexpected addition by transition because of a high liquidity score and a close distance below the estimated transition threshold.
Lennox International (LII US) is the main candidate for addition by migration due to having the highest average mcap score and passing eligibility metrics.
Illumina Inc (ILMN US) has a muted conviction for addition because of ineligible earnings and a recent deletion from the index.

Hotel Properties (HPI AU): Charter Hall Declares Offer Unconditional

Declaring its Offer unconditional was always a possibility as Hotel Property Investments (HPI AU) board continues to reject terms. The alternative was a likely deal fail.
Charter Halls currently has 31.37%, including 6.66% via the acceptance facility. That facility has now closed following this unconditional statement.
It will be challenging for Charter Hall to clear 50% without board support. But IF they get 50%+, expect the board to change their mind and recommend shareholders accept terms.

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Dec 06

Most Read: Seven & I Holdings, Kakao Corp, Ecopro BM , ESR Group , Kioxia Holdings , Apollo Global Management , HKBN Ltd, Greatview Aseptic Packaging, NIO and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal
Latest Scoop on President Yoon’s Impeachment Motion and How to Play It in the Market
Ecopro BM (247540 KS): Index Implications as KOSPI Transfer Nears
ESR (1821 HK): HK$13.00/Share Offer
Kioxia IPO: Peer Comparison and Valuation
Seven & I Holdings (3382 JP): The MBO Is Starting to Shape Up
Quiddity Leaderboard S&P 500 Dec 24 Rebal – Final Predictions
HKBN (1310 HK): Just How Likely Is An I Squared Offer?
GAPack (468 HK): No Further Progress On Co-Founder’s Offer. That’s Good For XJF
2025 High Conviction: Short NIO (NIO US/9866 HK)

7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal

A Bloomberg article late in the trading session today said the Seven & I Holdings (3382 JP) MBO proposal by Ito family scion Ito Junro includes a US assets IPO.
The idea? IPO proceeds would help pay down MBO debt to Japanese banks. Seven & i would retain a stake. This is not dissimilar to Berkshire Hathaway buying a stake.
But more directly, this leads us back to 7&I (3382) – What If… A Modest Proposal. Possible strategic mistake by Ito-san here. ACT should act on this.

Latest Scoop on President Yoon’s Impeachment Motion and How to Play It in the Market

The key point is Saturday—watch if eight ruling party lawmakers defect. Hahn Dong-hoon may push for an early election, with 15 loyalists backing him, so it’s definitely possible.
I’d bet on the ruling party leader pivoting, accepting impeachment, and pushing for an early election. Time to scout beneficiaries and set up an aggressive trading play.
Short-Term, I’m eyeing Kakao affiliates, under-the-radar IT stocks, and those likely to benefit from corporate governance changes. Low birth rate-related sectors are also set for strong upside.

Ecopro BM (247540 KS): Index Implications as KOSPI Transfer Nears

Eight months after shareholders approved the transfer from the KOSDAQ to the KOSPI market, Ecopro BM (247540 KS) has submitted the application for section transfer to the KRX.
Given historical precedent, the transfer could take place in February. Ecopro BM‘s deletion will mean an inclusion to the KOSDAQ150 Index to maintain the number of index constituents at 150.
Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index leading to passive selling and some short covering. Then will come the inclusion to the KOSPI 200 Index.

ESR (1821 HK): HK$13.00/Share Offer

By Shifara Samsudeen, ACMA, CGMA

HK$13.00/Share (deemed final). That’s the key takeaway here as the Starwood/Warburg Pincus Consortium (finally) tables a firm offer, by way of a pre-conditional Scheme.
Pre-Conditions are extensive, with a long stop date of the 4th September 2025.
HK$13.00 is below prior expectations of a HK$14+ handle. But with irrevocables of 30.79% of the register (and 51.24% of Scheme shares), this is done. A scrip option is afforded.

Kioxia IPO: Peer Comparison and Valuation

Kioxia has announced the terms for its IPO, and plans to raise $730m through issuing new shares as well as offer by existing shareholders, at a market capitalisation of $819bn.
Kioxia Holdings (285A JP) ‘s earnings have been volatile and margins have trailed compared to peers Micron and SK Hynix. Earnings are approaching a new peak.
Kioxia’s implied valuation multiples are at a deep discount to peer multiples, suggesting there is significant upside to the indicative IPO price range.

Seven & I Holdings (3382 JP): The MBO Is Starting to Shape Up

On 4 December, Bloomberg reported that the Seven & I Holdings (3382 JP) MBO is set to include plans for a US Assets IPO to raise more than JPY1 trillion.
The MBO faces two immediate challenges: securing financing and the Board’s approval. The US Assets IPO would help alleviate both these issues.
The potential market cap of US Assets is around US$24 billion, or 53% of 7&i’s market cap. The US Assets IPO should also encourage Couche-Tard to persist with its offer.

Quiddity Leaderboard S&P 500 Dec 24 Rebal – Final Predictions

The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
The rankings used for the December 2024 index rebal event will be based on yesterday’s (4th December 2024) opening prices. Announcement date will be
Inside we take a final look at the potential ADDs and DELs leading the rankings for the upcoming review.

HKBN (1310 HK): Just How Likely Is An I Squared Offer?

Two hours before China Mobile’s pre-conditional voluntary Offer announcement on the 2 December, HKBN Ltd (1310 HK) flagged a possible separate Offer from I Squared Asia-backed HGC Global Communication (HGC).
No price was mentioned, although HKBN and I Squared “are in discussions on the terms of the proposal (including the price).” The media is reporting a HK$5-HK$6/share price range.
Apart from anti-competition concerns via a HKBN/HGC tie-in; would HGC even get approval from the powers that be to proceed with a merger?

GAPack (468 HK): No Further Progress On Co-Founder’s Offer. That’s Good For XJF

In Greatview Aseptic Packaging (468 HK) (GAPack)’s monthly update, there is no update.
No further progress on the management Offer. Four months and counting. In the meantime, Shandong Xinjufeng Technology (301296 CH) (XJF) secured SAMR approval; and the appointment of two friendly directors.
IF (and when) XJF’s Offer becomes open to acceptance and the IFA is supportive, management should back the Offer if their own Offer is unlikely to materialise.

2025 High Conviction: Short NIO (NIO US/9866 HK)

NIO (NIO US) is a Chinese premium electric vehicle manufacturer listed across three exchanges.
NIO will likely struggle to reignite its growth with its three-brand strategy in a fiercely competitive market. Its promise to reach breakeven in 2026 is likely to be broken.
NIO’s valuation is stretched as it trades at a material premium to median Chinese EV peers’ EV/Sales and growth-adjusted EV/Sales multiples.

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Dec 05

Most Read: Hamamatsu Photonics Kk, Sanrio, Goodman Group, Seven & I Holdings, Auckland Intl Airport, Kakao Corp, ESR Group , Ecopro BM and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
Sanrio (8136 JP) – Kitty Behaving Badly
Goodman Group (GMG AU) Placement: Limited Index Flows
7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal
Auckland Airport (AIA NZ) Placement: Potential Index Flows
Latest Scoop on President Yoon’s Impeachment Motion and How to Play It in the Market
ESR Group (1821 HK): Consortium’s Scheme Cash/Scrip Privatisation Offer
Ecopro BM (247540 KS): Index Implications as KOSPI Transfer Nears
Auckland Airport Placement – NZ$1.3bn (US$770m) Cleanup Sale Will Remove the Overhang
ESR (1821 HK): HK$13.00/Share Offer

Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding

Today after the close we got news that after a year-plus of Hamamatsu Photonics Kk (6965 JP)‘s sliding stock price, Toyota Motor (7203 JP) is selling their 5+% stake.
The offering is standard. Probably prices 9 Sep 2024. HP’s amended buyback program and probable index upweights offset most of the offering size over the next several months.
So investors have to decide whether they want to catch the falling knife.

Sanrio (8136 JP) – Kitty Behaving Badly

Sanrio (8136 JP) announced a deal last week which I discussed in Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon. Next day it fell sharply.
There was shorting involved, and since then the stock has rallied 18% to clear the undisturbed price which itself was an all-time high, up 5% in the previous two days.
There is some LO buying, some HF covering, but a LOT of day-traders. In five days the stock has traded 903% of its Maximum Real World Float. That’s a lot.

Goodman Group (GMG AU) Placement: Limited Index Flows

China Investment Corp owns 7.84% of Goodman Group (GMG AU) and is looking to sell 50.4m shares (2.64% of shares out) at a price range of A$37.55-37.6/share, a tiny discount.
Goodman Group (GMG AU) has run away from its peers over the last couple of years and there could be a move lower in the stock following the placement.
There will be limited passive buying in the short-term coinciding with the placement. There will be some more passive buying in February.

7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal

A Bloomberg article late in the trading session today said the Seven & I Holdings (3382 JP) MBO proposal by Ito family scion Ito Junro includes a US assets IPO.
The idea? IPO proceeds would help pay down MBO debt to Japanese banks. Seven & i would retain a stake. This is not dissimilar to Berkshire Hathaway buying a stake.
But more directly, this leads us back to 7&I (3382) – What If… A Modest Proposal. Possible strategic mistake by Ito-san here. ACT should act on this.

Auckland Airport (AIA NZ) Placement: Potential Index Flows

Auckland City Council is looking to sell 163.23m shares of Auckland Intl Airport (AIA NZ) in a clean-up trade. This is big at NZ$1.3bn and 64 days of ADV.
The placement was expected by the market and the stock has run up despite that. The stock is in a trading halt and should open lower.
There will be passive buying at the time of settlement of the placement shares and that will mop up around 15% of the offering.

Latest Scoop on President Yoon’s Impeachment Motion and How to Play It in the Market

The key point is Saturday—watch if eight ruling party lawmakers defect. Hahn Dong-hoon may push for an early election, with 15 loyalists backing him, so it’s definitely possible.
I’d bet on the ruling party leader pivoting, accepting impeachment, and pushing for an early election. Time to scout beneficiaries and set up an aggressive trading play.
Short-Term, I’m eyeing Kakao affiliates, under-the-radar IT stocks, and those likely to benefit from corporate governance changes. Low birth rate-related sectors are also set for strong upside.

ESR Group (1821 HK): Consortium’s Scheme Cash/Scrip Privatisation Offer

ESR Group (1821 HK)’s preconditional scheme offer from the consortium is either cash (HK$13.00), scrip or a combination of cash/scrip. The offer is final.
The precondition relates to several regulatory approvals. The precondition satisfaction does not carry the same risk as the China Traditional Chinese Medicine (570 HK) deal break.
The irrevocable (31.03% of outstanding shares) ensure that shareholders with blocking or close to blocking stakes are supportive. This is a done deal, with timing the key risk.

Ecopro BM (247540 KS): Index Implications as KOSPI Transfer Nears

Eight months after shareholders approved the transfer from the KOSDAQ to the KOSPI market, Ecopro BM (247540 KS) has submitted the application for section transfer to the KRX.
Given historical precedent, the transfer could take place in February. Ecopro BM‘s deletion will mean an inclusion to the KOSDAQ150 Index to maintain the number of index constituents at 150.
Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index leading to passive selling and some short covering. Then will come the inclusion to the KOSPI 200 Index.

Auckland Airport Placement – NZ$1.3bn (US$770m) Cleanup Sale Will Remove the Overhang

By Clarence Chu

Auckland Council is looking to raise NZ$1.3bn (US$772m) from selling its entire stake in Auckland Intl Airport (AIA NZ).
Overall, the selldown will be a large one for the stock to digest at 10% of shares outstanding and 62 days of three month ADV.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

ESR (1821 HK): HK$13.00/Share Offer

HK$13.00/Share (deemed final). That’s the key takeaway here as the Starwood/Warburg Pincus Consortium (finally) tables a firm offer, by way of a pre-conditional Scheme.
Pre-Conditions are extensive, with a long stop date of the 4th September 2025.
HK$13.00 is below prior expectations of a HK$14+ handle. But with irrevocables of 30.79% of the register (and 51.24% of Scheme shares), this is done. A scrip option is afforded.

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Dec 04

Most Read: Kioxia Holdings , Korea Stock Exchange Kospi Index, Sanrio, Phison Electronics, Persistent Systems, Goodman Group, HKBN Ltd, Meituan, Auckland Intl Airport and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float
Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?
Sanrio (8136 JP) – Kitty Behaving Badly
TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform
NIFTY200 Momentum30 Index Rebalance Preview: 65% One-Way Turnover and US$1.6bn Trade
Goodman Group (GMG AU) Placement: Limited Index Flows
Goodman Group Placement – Large Shareholder Looking to Raise US$1.2bn but Discount Is Tight
HKBN (1310 HK): China Mobile’s “Fair” Tendering Offer
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)
Auckland Airport (AIA NZ) Placement: Potential Index Flows

Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

Kioxia Holdings (285A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 18 December.
At the mid-point of the IPO price range of JPY 1390-1520/share, Kioxia Holdings (285A JP) will be valued at JPY 784bn (US$5.24bn).
TOPIX inclusion will take place in January while inclusion in global indices is likely to take place in May and June. Selling stock to increase float will be an overhang.

Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?

Martial law has been declared 11 times since 1945, but this is the first since Korea’s post-‘90 democratization.
The Martial Law Command’s first proclamation blocks parliament, raising legal questions about its constitutionality and making any immediate attempt to end martial law uncertain.
Defense and telecom stocks could outperform short-term due to martial law, making them strong trading targets to watch.

Sanrio (8136 JP) – Kitty Behaving Badly

Sanrio (8136 JP) announced a deal last week which I discussed in Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon. Next day it fell sharply.
There was shorting involved, and since then the stock has rallied 18% to clear the undisturbed price which itself was an all-time high, up 5% in the previous two days.
There is some LO buying, some HF covering, but a LOT of day-traders. In five days the stock has traded 903% of its Maximum Real World Float. That’s a lot.

TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform

The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.

NIFTY200 Momentum30 Index Rebalance Preview: 65% One-Way Turnover and US$1.6bn Trade

There could be 19 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 30 December. There are some stocks from the new F&O inclusions.
If all changes are on expected lines, one-way turnover is estimated at 65.2% and that will result in a one-way trade of INR 71bn (US$837m).
The potential inclusions have outperformed the potential deletions since the start of July. The pace picked up over the last month as we neared the end of the review period.

Goodman Group (GMG AU) Placement: Limited Index Flows

China Investment Corp owns 7.84% of Goodman Group (GMG AU) and is looking to sell 50.4m shares (2.64% of shares out) at a price range of A$37.55-37.6/share, a tiny discount.
Goodman Group (GMG AU) has run away from its peers over the last couple of years and there could be a move lower in the stock following the placement.
There will be limited passive buying in the short-term coinciding with the placement. There will be some more passive buying in February.

Goodman Group Placement – Large Shareholder Looking to Raise US$1.2bn but Discount Is Tight

By Sumeet Singh

CIC is looking to raise around US$1.2bn, via selling around 2.6% of its stake in Goodman Group (GMG AU) , via a block trade.
Goodman’s shares have performed exceptionally well over the past year, driven by its pivot towards data centers.
In this note, we will talk about the placement and run the deal through our ECM framework.

HKBN (1310 HK): China Mobile’s “Fair” Tendering Offer

China Mobile (941 HK) was a logical suitor for HKBN Ltd (1310 HK). A non-PRC (or government-affiliated) corporation taking over a media/broadband/telco in Hong Kong is probably a non-starter.
China Mobile has a made a pre-conditional voluntary Offer at HK$5.23/share, a 40.97% premium to undisturbed. The price is final.
Pre-Cons are the usual suspects (NDRC, Mofcom & SASAC). The Offer itself conditional on a 50% acceptance hurdle, with 24.96% in the bag. The intention is to maintain HKBN’s listing.

HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)

The December rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$26.14bn (US$3.4bn).
Alibaba, Tencent, Midea Group, Kuaishou Technology, NIO, HSBC Holdings and New Oriental Education & Techn are the largest buys. Meituan, Xiaomi, JD.com, AIA Group and NetEase are the largest sells.

Auckland Airport (AIA NZ) Placement: Potential Index Flows

Auckland City Council is looking to sell 163.23m shares of Auckland Intl Airport (AIA NZ) in a clean-up trade. This is big at NZ$1.3bn and 64 days of ADV.
The placement was expected by the market and the stock has run up despite that. The stock is in a trading halt and should open lower.
There will be passive buying at the time of settlement of the placement shares and that will mop up around 15% of the offering.

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Dec 03

Most Read: Seven & I Holdings, Sieyuan Electric Co Ltd A, Northern Star Resources, HKBN Ltd, TSE Tokyo Price Index TOPIX, Jiangsu Hoperun Software, Kioxia Holdings , Hwatsing Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

7 & I (3382) – York Holdings Sale Process, Timeline, Nuances
CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade
Northern Star (NST AU) To Acquire De Grey Mining (DEG AU): Offer Details & Index Flow
HKBN (1310 HK): China Mobile’s Half-Baked Preconditional VGO
Circumstances and GPIF Noises Could Mean Higher Equity Allocations In March 2025
ChiNext/ChiNext 50 Index Rebalance: US$1.7bn Round-Trip Trade
Kioxia (285A JP) IPO: Valuation Insights
CNI Semiconductor Chips Index Rebalance: One Change with Big Flow
Kioxia IPO – Should Price at the Top, Though Peers Are Still Correcting
Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

7 & I (3382) – York Holdings Sale Process, Timeline, Nuances

The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness

CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade

There are 16 changes for the CSI 300 Index, 50 changes for the CSI 500 Index and 100 changes for the CSI1000 Index that will be implemented on 13 December.
There are 257 unique names that are adds or deletes and the round-trip trade across all 3 indices is close to US$9bn.
Stocks with the largest inflows and impact have outperformed stocks with the largest outflows and impact over the last few weeks. That could continue for the next couple of weeks.

Northern Star (NST AU) To Acquire De Grey Mining (DEG AU): Offer Details & Index Flow

Northern Star Resources (NST AU) has agreed to acquire De Grey Mining (DEG AU) by way of a Scheme of Arrangement in an all-stock deal.
De Grey Mining (DEG AU) shareholders will receive 0.119 Northern Star Resources (NST AU) shares for each De Grey share held. That implies a 37.1% premium to the last close.
There will be passive buying in Northern Star Resources (NST AU) at the time of merger completion, though there could be selling from some existing De Grey Mining (DEG) shareholders.

HKBN (1310 HK): China Mobile’s Half-Baked Preconditional VGO

HKBN Ltd (1310 HK)‘s preconditional voluntary conditional offer from China Mobile (941 HK) is HK$5.23. Including the HK$0.165 dividend, the total offer is HK$5.395, an 11.0% premium to last close.
The offer seems rushed and a reaction to a potential competing offer from I Squared. The lack of privatisation through a scheme and MBK’s irrevocable suggest the offer is light.
An unattractive offer, a lengthy precondition long-stop date and the irrevocable competing offer clause invite I Squared to enter the fray.

Circumstances and GPIF Noises Could Mean Higher Equity Allocations In March 2025

A Bloomberg article mid-day suggested Japan’s Ministry of Health, Labour and Welfare proposed a new “wage growth +1.9%” (vs 1.7% now) return bogey for the US$1.7trln Government Pension Investment Fund.
The GPIF is conducting its quinquennial review to assess markets, long-term prospects, correlations, etc, to set a CAPM asset allocation mix to meet the bogey.
The combination of higher USDJPY, Japan inflation, wider valuation spreads, and the prospect of higher yen rates suggests the review might result in lower yen bond allocs, higher equity allocs.

ChiNext/ChiNext 50 Index Rebalance: US$1.7bn Round-Trip Trade

There are 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index at the December rebalance.
We correctly forecast 4/7 and 7/7 for the Chinext Index adds/deletes and were 3/5 and 5/5 for the Chinext50 Index adds/deletes.
Based on the estimated passive tracking AUM, the round-trip trade across both indices is estimated to be CNY 12.24bn (US$1.69bn).

Kioxia (285A JP) IPO: Valuation Insights

Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$727 million.
We previously discussed the IPO in Kioxia (285A JP) IPO: The Bull Case and Kioxia (285A JP) IPO: The Bear Case.
Our valuation analysis suggests that the IPO price range of JPY1,390-1,520 per share is attractive. Therefore, we would participate in the IPO.

CNI Semiconductor Chips Index Rebalance: One Change with Big Flow

There is 1 change for the CNI Semiconductor Chips Index that will be implemented at the close on 13 December.
Passive trackers are estimated to buy 0.9x ADV in Hwatsing Technology (688120 CH) and sell 0.5x ADV in StarPower Semiconductor (603290 CH).
The add has outperformed the delete, but not by a lot. There could be more outperformance over the next couple of weeks.

Kioxia IPO – Should Price at the Top, Though Peers Are Still Correcting

By Sumeet Singh

Kioxia Holdings (285A JP) is aiming to raise around US$840m (including over-allocation) in its Japan IPO.
It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

Kioxia Holdings (285A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 18 December.
At the mid-point of the IPO price range of JPY 1390-1520/share, Kioxia Holdings (285A JP) will be valued at JPY 784bn (US$5.24bn).
TOPIX inclusion will take place in January while inclusion in global indices is likely to take place in May and June. Selling stock to increase float will be an overhang.

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Dec 02

Most Read: Korea Zinc, Sieyuan Electric Co Ltd A, Hainan Jinpan Smart Technology, Cloud Village, Seres Group , Shanxi Xinghuacun Fen Wine Factory Co, Seven & I Holdings, Inner Mongolia Furui Medical Scie, Kioxia Holdings , Espressif Systems Shanghai and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades
CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade
STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100
KWEB Index Rebalance: 1 Add & 4 Deletes in December
SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade
CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows
7 & I (3382) – York Holdings Sale Process, Timeline, Nuances
CSI Medical Service Index Rebalance: Three Changes; Brutal Underperformance Could Reverse
Kioxia (285A JP) IPO: The Bear Case
STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade

Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades

Lee Bok-hyun, head of the Financial Supervisory Service, unexpectedly voiced concerns about MBK winning Korea Zinc’s management battle, catching everyone off guard.
The key question is how Michael ByungJu Kim will handle government pressure, with MBK possibly aligning with the opposition if the Democratic Party pushes for commercial law reform.
Korea Zinc now becomes a proxy war over governance reform. Watch MBK’s political stance, as it could drive the stock higher, especially if Michael teams up with the opposition.

CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade

There are 16 changes for the CSI 300 Index, 50 changes for the CSI 500 Index and 100 changes for the CSI1000 Index that will be implemented on 13 December.
There are 257 unique names that are adds or deletes and the round-trip trade across all 3 indices is close to US$9bn.
Stocks with the largest inflows and impact have outperformed stocks with the largest outflows and impact over the last few weeks. That could continue for the next couple of weeks.

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100

As forecast, there are no changes for the SSE STAR50 (STAR50 INDEX) in December while there are 4 changes for the STAR100 Index.
There will be big outflows for Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) due to SSE STAR50 (STAR50 INDEX) capping. There will be selling from other index trackers too.
Hainan Jinpan Smart Technology (688676 CH) had been ignored by the index committee at the September rebalance, so this inclusion in the STAR100 Index could come as a surprise.

KWEB Index Rebalance: 1 Add & 4 Deletes in December

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 13 December.
Cloud Village (9899 HK) is an add while Lufax Holding (LU US), Ping An Healthcare and Technology (1833 HK), ZX (9890 HK) and YSB (9885 HK) are deletes.
The deletions of Ping An Healthcare (1833 HK), ZX (9890 HK) and YSB (9885 HK) were forecast and there will be positioning in the stocks. Lufax was a close delete.

SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade

There are 5 changes for the SSE50 Index (SSE50 INDEX) and 18 changes for the SSE180 Index that will be implemented at the close on 13 December.
Seres Group (601127 CH) is an add to both indices, plus the CSI 300 Index, and passive trackers will need to buy over US$900m of the stock.
The adds have outperformed the deletes with a lot of the outperformance coming in the last couple of months. Trim positions in the expected adds/deletes and build positions in surprises.

CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows

There is 1 add/ 2 deletions for the CSI Alcoholic Drink Index and no constituent changes for the CSI Liquor Index.
The largest flows arise as a result of capping of constituents to 15% of the index weight. Impact on the stocks varies from 0.2-0.6 days of ADV.
WeiLong Grape Wine outperformed the deletes in early October, but the deletes moved higher and closed the gap. The gap has started to open up again in the last week.

7 & I (3382) – York Holdings Sale Process, Timeline, Nuances

The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness

CSI Medical Service Index Rebalance: Three Changes; Brutal Underperformance Could Reverse

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index and we estimate passive buying of 0.7-1.4x ADV in the adds and selling of between 0.2-1x ADV in the deletes.
Trade performance has been horrible as the adds have moved sideways over the last two months and the deletes have skyrocketed – that could change in the next two weeks.

Kioxia (285A JP) IPO: The Bear Case

Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$740 million.
In Kioxia (285A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on unrealistic long-term financial model assumptions, market share losses, high customer concentration risk, volatile gross margin due to JV and weak FCF profile.

STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index and we estimate passive buying of 0.3-0.65x ADV in the adds and selling of between 0.4-0.6x ADV in the deletes.
On average, the adds to the index have outperformed the deletes over the last 5 weeks with the adds moving higher and the deletes trending lows.

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Dec 01

Most Read: Teco Electric & Machinery, Hulic Co Ltd, Lynas Corp Ltd, Hainan Jinpan Smart Technology, Alibaba Group Holding , Dai Nippon Printing, Cloud Village, Sichuan Biokin Pharmaceutical, WealthNavi and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes
Hulic Co (3003 JP) Placement: One Big Price Drop Could Lead to Another
MV Australia Equal Weight Index Rebalance Preview: 1 Close Add & 3 Deletions
STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100
Japan Funds: Extreme Stocks
Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal
Dai Nippon Placement – Share Buyback Should Aid Deal Performance
KWEB Index Rebalance: 1 Add & 4 Deletes in December
Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade
WealthNavi (7342 JP): MUFG (8306 JP)’s Opportunistic Tender Offer

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes

There are now new changes forecast for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.

Hulic Co (3003 JP) Placement: One Big Price Drop Could Lead to Another

Overnight, Hulic Co Ltd (3003 JP) announced a placement of 85.37m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 12.8m shares.
There will be limited passive buying in the short-term and the number of shares offered is a very large percentage of real float of the stock.
A price drop of 20% or more puts Hulic Co Ltd (3003 JP) at risk of deletion from a global index and could lead to a further price drop.

MV Australia Equal Weight Index Rebalance Preview: 1 Close Add & 3 Deletions

With 4 days left to review cutoff, there is 1 close add and 3 potential deletions for the MV Australia Equal Weight Index at the December rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.6% and a round-trip trade of A$243m.
The final list of inclusions/exclusions will depend on price movements till Friday and whether the index provider makes any significant changes to the free float of stocks in the universe.

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100

As forecast, there are no changes for the SSE STAR50 (STAR50 INDEX) in December while there are 4 changes for the STAR100 Index.
There will be big outflows for Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) due to SSE STAR50 (STAR50 INDEX) capping. There will be selling from other index trackers too.
Hainan Jinpan Smart Technology (688676 CH) had been ignored by the index committee at the September rebalance, so this inclusion in the STAR100 Index could come as a surprise.

Japan Funds: Extreme Stocks

By Steven Holden

We screen for Japanese companies at the extreme ends of their positioning or momentum ranges among active Japan equity funds.
Low Positioning coupled with Negative Momentum: Nissan Motor Corp and Misumi Group
High Positioning coupled with High Momentum: ASICS Corp and Kyushu Railway

Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal

In this insight, we present the flows to buy and sell for each of the top 6 Hang Seng Index Family indices based on estimated tracking AUM.
The indices: Hang Seng Index (HSI), HS Tech Index (HSTECH), HS China Enterprise Index (HSCEI), HS HK Biotech (HSHKBIO), HS Internet & Infotech (HSIII), and HS Healthcare Index (HSHCI).
By Quiddity calculations based on prices of 29 November’s close, there is one-way flow across these six indices of HK$15,894,690,433.49 to trade on 6 December. Roughly speaking.

Dai Nippon Placement – Share Buyback Should Aid Deal Performance

By Clarence Chu

A group of shareholders are looking to raise US$214m from selling their respective stakes in Dai Nippon Printing (7912 JP).
While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

KWEB Index Rebalance: 1 Add & 4 Deletes in December

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 13 December.
Cloud Village (9899 HK) is an add while Lufax Holding (LU US), Ping An Healthcare and Technology (1833 HK), ZX (9890 HK) and YSB (9885 HK) are deletes.
The deletions of Ping An Healthcare (1833 HK), ZX (9890 HK) and YSB (9885 HK) were forecast and there will be positioning in the stocks. Lufax was a close delete.

Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade

By Janaghan Jeyakumar, CFA

The December 2024 index review results for China’s CSI 300 and CSI 500 indices were announced after market close on Friday 29th November 2024.
There will be 16 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.
The CSI 300 and CSI 500 index rebal events could trigger US$4.5bn and US$3.8bn in one-way flows respectively.

WealthNavi (7342 JP): MUFG (8306 JP)’s Opportunistic Tender Offer