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• Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
• We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
• There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.

• We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
• The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
• We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

• Three shareholders of Socionext (6526 JP) aim to raise around US$1.4bn via selling all of their shares in Socionext.
• We have covered the background of the deal in our earlier note, Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains.
• In this note, we talk about the updates and look at the performance of some of the past Japan deals.

• Hang Seng has announced the conclusions of the market consultation. Primary-listed foreign stocks will be eligible for inclusion in the HSI INDEX and HSTECH INDEX from the December rebalance.
• The coming week has the rebalances for the NIFTY Index, Nifty Next 50 Index, Nifty Bank Index and SENSEX Index as a result of the HDFC Limited/ HDFC Bank merger.
• There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and outflows from Hang Seng H Share Index ETF (2828 HK) during the week.

• Global semiconductor sales amounted to $40.7 billion in May’23. This represented an increase of 1.7% MoM and a 21.1% decline on a year-ago basis
• Samsung pre-announces Q2’23 sales and operating profit slightly down sequentially
• HMB3 standard launched. SK Hynix wins a critical HMB3 design win at NVIDIA

• China’s regulators on Friday imposed Ant Financial Services Group (6688 HK) with a fine of RMB 7.12bn. A day later, Ant Group unveiled a share buyback program worth $6bn.
• The last time media created a positive narrative around Ant Group was in January 2023 when Jack Ma relinquished control of the company.
• However, the media excitement was short-lived as Alibaba Group Holding (9988 HK)‘s share price quickly resumed a downward trend after rising by around 22%.

• OVERSEAS.  SPX -0.3% and down WoW; Weak Payrolls numbers lead to fall in US 2Yr to 4.95%, USD weakness;  This week – packed schedule with CPI; Watch Bank earnings
• JAPAN. NKY Futs flat vs Cash; USDJPY 142.2, on weaker US payrolls;   JP companies struggle to lift ROE due to expanding Equity Base (=more buybacks?); Kishida to reshuffle cabinet
• NUGGET. Heat Pumps – A Big Deal for Daikin(6367)/Melco(6503).  A large addressable, and growing market, and great for the environment. Yes, you should get excited!

• 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), ENM Holdings (128 HK), Chindata Group (CD US), Estia Health (EHE AU), Poly Culture Group Corp H (3636 HK), Costa Group Holdings (CGC AU).
• Lowest spreads – Healius (HLS AU), Hailan Holdings (2278 HK), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Oishi Group PCL (OISHI TB), Yachiyo Industry (7298 JP), Penguin. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Tryt Inc (9164 JP) announced a somewhat reasonable pricing range, while Fadu (440110 KS) looks to open up the Korean market for larger IPOs again.
• On the placement front,  Socionext (6526 JP) found itself in the eye of a storm after its stupendous 6x increase since listing.

• The Nikkei has recently launched two new equity indices for investors that are focused on dividends.
• We highlight some similarities and differences with the well-known US S&P 500 Dividend Aristocrats Index
• We carry out a quick and simple screen of the Nikkei constituents to find the best dividend stocks to buy

• Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
• Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
• I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

• Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
• We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
• There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.

• We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
• The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
• We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

• Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
• The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
• With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

• Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
• We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last five months, though there is some near-term underperformance.

• Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
• The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.

• Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
• The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.

• Japanese stocks headed lower this week, tracking weaker US stocks. 
• With a bout of profit-taking, we are also seeing some rotation out of high-valuation, strong momentum stocks into “cheap” laggards. 
• Marine transportation stocks the big winners this week. Investors love those high dividends and low PBs

• Our base case valuation of ALT is 33,365 won per share, which represents 63% higher than the high end of the IPO price range of 20,500 won.
• We estimate the company to generate sales of 69.7 billion won (up 57.3% YoY) in 2023 and 92.2 billion won (up 32.3% YoY) in 2024.
• ALT’s main business is in the testing of non-memory semiconductor value chain products including Display Drive IC, CMOS image sensor, and Power Management IC.

• Hang Seng has announced the conclusions of the market consultation. Primary-listed foreign stocks will be eligible for inclusion in the HSI INDEX and HSTECH INDEX from the December rebalance.
• The coming week has the rebalances for the NIFTY Index, Nifty Next 50 Index, Nifty Bank Index and SENSEX Index as a result of the HDFC Limited/ HDFC Bank merger.
• There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and outflows from Hang Seng H Share Index ETF (2828 HK) during the week.

• Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
• Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
• I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

• We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
• The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
• We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

• Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
• Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
• The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
• With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

• S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
• SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
• The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.
• Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September. 

• The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
• These five stocks including Samsung Heavy Industries Pref, SK Networks Pref,  DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.   
• Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today. 

• Hyundai G.F. Holdings will conduct a tender offer to Hyundai Green Food and Hyundai Dept Store shareholders. The tendering period is August 11-September 1.
• The target volume is 10,125,700 (Hyundai Green Food) and 4,669,556 (Hyundai Dept Store), corresponding to 29.89% and 19.95% of the outstanding shares, respectively.
• We should approach this event trading with caution, taking into account the risk of an unhedged setup while monitoring the potential widening of the spread opening during the tendering period.

• The Korean government announced today that it will allow a fourth telco in Korea in order to reduce the oligopoly structure dominated by the three existing telcos.
• This decision to allow another telco in Korea will have a major negative impact on the existing three telcos in Korea.
• On a relative basis, we think that this could have a worse impact than LG Uplus as compared to SK Telecom due to greater price sensitivity of LG Uplus’ customers.

• We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Jul 7th based on HKEx daily reports.
• In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), AIA (1299 HK), Kuaishou Technology (1024 HK).
• In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), AIA (1299 HK), CK Asset (1113 HK).

• Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
• Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
• I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

• Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
• Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• Socionext (6526 JP) announced a pure secondary offering of 12.6 million or 37.50% of outstanding shares. At the last close, the placement is worth JPY277 billion (US$1.9 billion)
• The selling shareholders’ primary motivation for exiting their shareholding is to capitalise on the extraordinary share price. Socionext shares are up 6x from the IPO price of JPY3,650 per share.
• We think looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 11 to 13 July (likely 11 July).

• Every now and then, you get a tender offer proposal which is truly offensive. This is one. 
• Yes, existing ICE-related autoparts makers are under the cosh as they face down obsolesence induced by competition from EVs. Fuel tank makers like Yachiyo are at risk. 
• But this bid started at <0.3x book, and ended at <0.5x book, despite significant net financial assets and lots of unrecognised DTAs. 

• The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
• These five stocks including Samsung Heavy Industries Pref, SK Networks Pref,  DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.   
• Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today. 

• In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
• The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.
• Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September. 

• Yesterday, Rakuten Group (4755 JP) announced that its consolidated subsidiary, Rakuten Securities, has applied for a listing on the Tokyo Stock Exchange.
• Rakuten Securities has long-term growth potential through leveraging Rakuten’s ecosystem for steady securities account growth and exploring cross-selling opportunities for related services.
• While the business seems promising, there may be concerns regarding its valuation, given its previous high trailing PE of 43.0x.

• Following HDFC Limited (HDFC IN)‘s delisting, JSW Steel Ltd (JSTL IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) at the close on 12 July.
• The change was largely expected, but passive trackers need to buy over 5 days of ADV and nearly 12 days of delivery volume of JSW Steel Ltd (JSTL IN) .
• The HDFC Limited (HDFC IN) delisting could help Wipro Ltd (WPRO IN) in avoiding deletion from the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) in December.

• Tryt Inc (9164 JP) has disclosed a revised IPO price range of JPY1,100-1,300 per share, which is -32% to -20% below the IPO reference price of JPY1,620 per share.
• We previously discussed the IPO in TRYT IPO: The Bull Case, TRYT IPO: The Bear Case and TRYT IPO: Valuation Insights. 
• Our analysis suggests that Tryt remains unattractively valued at the revised IPO price range. Also, market sentiment on the sector has weakened. We would pass on the IPO.

• Hyundai G.F. Holdings will conduct a tender offer to Hyundai Green Food and Hyundai Dept Store shareholders. The tendering period is August 11-September 1.
• The target volume is 10,125,700 (Hyundai Green Food) and 4,669,556 (Hyundai Dept Store), corresponding to 29.89% and 19.95% of the outstanding shares, respectively.
• We should approach this event trading with caution, taking into account the risk of an unhedged setup while monitoring the potential widening of the spread opening during the tendering period.

• Socionext (6526 JP) was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup will expire on 9th Apr 2023.
• Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation in 2015.
• Coming up for six-month lockup expiry are the Development Bank of Japan, Fujitsu and Panasonic, the trio had each trimmed their respective stakes in the IPO.

• We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
• The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
• We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

• Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
• Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
• I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

• HDFC Limited (HDFC IN) will stop trading at the close on 12 July and will be deleted from all indices at the close on that day.
• As expected, LTIMindtree (LTIM IN) will be added to the NIFTY Index while Jindal Steel & Power (JSP IN) will be added to the NSE Nifty Next 50 Index.
• Importantly, HDFC Limited (HDFC IN)‘s foreign shareholding has dropped over the quarter ended 30 June and that has index implications for future passive flows to HDFC Bank (HDFCB IN). 

• Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
• Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• Every now and then, you get a tender offer proposal which is truly offensive. This is one. 
• Yes, existing ICE-related autoparts makers are under the cosh as they face down obsolesence induced by competition from EVs. Fuel tank makers like Yachiyo are at risk. 
• But this bid started at <0.3x book, and ended at <0.5x book, despite significant net financial assets and lots of unrecognised DTAs. 

• Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
• The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.

• Socionext (6526 JP) announced a pure secondary offering of 12.6 million or 37.50% of outstanding shares. At the last close, the placement is worth JPY277 billion (US$1.9 billion)
• The selling shareholders’ primary motivation for exiting their shareholding is to capitalise on the extraordinary share price. Socionext shares are up 6x from the IPO price of JPY3,650 per share.
• We think looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 11 to 13 July (likely 11 July).

• Tryt Inc (9164 JP) is looking to raise up to US$360m in its Japan IPO.
• Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• In this note, we will revisit our earnings assumptions and share our thoughts on valuation at the final price range.

• It is highly probable that SP trading will increase after July 31st, as this will provide a more conducive environment for the seamless rollover of large positions.
• Considering the actual impact on the market, we may have to pay more attention to the potential surge in trading volume for single-stock futures SP.
• We see a rise in aggressive position setups in event trading, including rights offerings. This may lead to a more substantial price impact by increasing the intensity of such trading.

• Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
• The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
• With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

• S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
• SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
• The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.

• We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
• The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
• We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

• Costa Group Holdings (CGC AU) listed in 2015 when Paine & Partners sold 40% of its stake in the company.
• Paine Schwartz Partners bought a 13.84% stake last year, increased it in March, and has now made an offer to buy out the remaining shares at A$3.5/share in cash.
• Short interest was over nearly 11 days of ADV to cover and short covering could take the stock higher sooner. This is a buy here.

• Seven weeks ago, Marubeni Corp (8002 JP) and Secom Co Ltd (9735 JP) announced a joint deal to acquire the rest of ARTERIA Networks Corp (4423 JP). 
• As I wrote in the previous piece, the premium was good, but the price was not great. The Board rejected the price, then agreed when the bidders wouldn’t go further.  
• Now we have a deal and the Tender Offer starts 5 July. It was cheap to start. It’s still too cheap. But this one is tough to block.

• HDFC Limited (HDFC IN) will stop trading at the close on 12 July and will be deleted from all indices at the close on that day.
• As expected, LTIMindtree (LTIM IN) will be added to the NIFTY Index while Jindal Steel & Power (JSP IN) will be added to the NSE Nifty Next 50 Index.
• Importantly, HDFC Limited (HDFC IN)‘s foreign shareholding has dropped over the quarter ended 30 June and that has index implications for future passive flows to HDFC Bank (HDFCB IN). 

• The Nikkei has an article today with details of an interview with new Toyo Construction (1890 JP) Chairman Yoshida and President Obayashi. There will be a 2-3 month governance review.
• It will review decision-making process, “profit management” (利益管理), and business investment decisions (事業への投資判断).  Chairman Yoshida had a quote on neutrality on a YFO proposal. My wording there was carefully chosen.
• The President also said they expect ongoing synergies with Infroneer, and will maintain MTMP/Mitsui OSK Partnership management plans. Their words were chosen carefully too. 

• Rakuten Group (4755 JP), having experienced an 80% decline in value over the last 8 years, now emerges as an enticing prospect for value investors.
• The combined fair value of Rakuten’s Cards, Bank, and Mobile businesses now surpasses 100% of the company’s market capitalization.
• Rakuten Ichiba, valued at ¥600bn, appears significantly undervalued when compared to ZOZO Inc (3092 JP) and MonotaRO Co Ltd (3064 JP), which hold approximately 2.0x Rakuten Ichiba’s valuation.

• OVERSEAS. US out for Independence Day – not a lot to report; European Stocks gain, and volumes 1/3 of normal;  META to Launch “Thread”, to compete with Twitter
• JAPAN. NKY Futs -0.8% vs Cash; USDJPY 144.5; NKY -1% as JP succumbs to profit taking; Toyota to cut Solid State battery costs by 50%; Rakuten to list Securities biz
• NUGGET.  Lawson – if management can execute on their MTP, the stock is super cheap. Potential growth, Yield, Take out play ?

For our next Corporate Webinar we are glad to welcome IREIT Global’s CEO, Louis d’Estienne d’Orves.

In the upcoming webinar, Louis will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Jesus Rodriguez Aguilar. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Thursday, 6 July 2023, 17:00 SGT.

About IREIT Global

IREIT Global, which was listed on 13 August 2014, is the first Singapore-listed real estate investment trust with the investment strategy of principally investing, directly or indirectly, in a portfolio of income-producing real estate in Europe which is used primarily for office, retail and industrial (including logistics) purposes, as well as real estate-related assets. IREIT Global’s current portfolio comprises five freehold office properties in Germany, five freehold office properties in Spain and 27 freehold retail properties in France.

IREIT Global is managed by IREIT Global Group Pte. Ltd., which is jointly owned by Tikehau Capital and City Developments Limited. Tikehau Capital is global alternative asset management group listed in France, while City Developments Limited is a leading global real estate company listed in Singapore.

• There could be 25 inclusions, including many new listings, to the Hang Seng Composite Index (HSCI) in September. Another 6 stocks are close adds on liquidity and market cap.
• We see 19 potential deletes and 2 close deletes on market cap, 5 potential deletes on prolonged trading suspension, and 2 close deletes on liquidity.
• There are 8 potential deletions where holdings via Stock Connect are more than 20% of shares outstanding. There could be some unwinding of positions over the next couple of months.

• In April 2022, after long prep and considerable public comment as to desires and design, the TSE launched its new market segments designed to encourage governance and foreign investment.
• At the time, the TSE wanted to showcase Japan’s best blue chips. In March, JPX announced JPX Prime 150, designed to make visible
• In March 2023, JPX announced JPX Prime 150, to “make visible the leading Japanese companies that are estimated to create value.” Ambitious? Yes. Fated to fail? Probably. Badly constructed?  Definitely. 

• The review period for a bunch of indices ended last week though the announcement of the changes will take 4-6 weeks.
• There are no rebalance implementations in the coming week though focus will move to the implementation of the HDFC Limited/ HDFC Bank merger and index changes the following week.
• There were big inflows to China focused ETF with a lot of money going into Semiconductor and Chip focused ETFs.

• Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
• We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last five months, though there is some near-term underperformance.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety. 
• Post the interim results, we provide short updates on each company and links to our latest work on them. 
• 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).

• Alibaba’s new chairman decides to provide logistics service to outside customers.
• We believe Alibaba is following JD Logistics, as both companies have large retailer bases.
• We suggest buying JD Logistics the role model instead of Alibaba the follower.

• Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
• The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
• With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

• Back on the 28 March, United Malt Group Ltd (UMG AU) entered into a NBIO with Malteries Soufflet at an Offer Price of $5.00/share, a 45.3% premium to undisturbed.
• After a lengthy due diligence process, the two companies have now entered into a binding agreement of A$5.00/share, by way of a Scheme. UMG’s board has unanimously recommended the bid.
• The Offer is subject to FIRB and other regulatory approvals. Malteries Soufflet and UMG are the second and fourth-largest maltsters in the world.

• Fadu is getting ready to complete its IPO in Korea in August. Fadu is one of the most highly anticipated IPOs in Korea in 2023. 
• The expected market cap at the top end of the IPO price range is 1.6 trillion won. The IPO price range is from 26,000 won to 31,000 won.
• Fadu is a system semiconductor fabless company specializing in data centers.

For our next Corporate Webinar we are glad to welcome IREIT Global’s CEO, Louis d’Estienne d’Orves.

In the upcoming webinar, Louis will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Jesus Rodriguez Aguilar. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Thursday, 6 July 2023, 17:00 SGT.

About IREIT Global

IREIT Global, which was listed on 13 August 2014, is the first Singapore-listed real estate investment trust with the investment strategy of principally investing, directly or indirectly, in a portfolio of income-producing real estate in Europe which is used primarily for office, retail and industrial (including logistics) purposes, as well as real estate-related assets. IREIT Global’s current portfolio comprises five freehold office properties in Germany, five freehold office properties in Spain and 27 freehold retail properties in France.

IREIT Global is managed by IREIT Global Group Pte. Ltd., which is jointly owned by Tikehau Capital and City Developments Limited. Tikehau Capital is global alternative asset management group listed in France, while City Developments Limited is a leading global real estate company listed in Singapore.

• In April 2022, after long prep and considerable public comment as to desires and design, the TSE launched its new market segments designed to encourage governance and foreign investment.
• At the time, the TSE wanted to showcase Japan’s best blue chips. In March, JPX announced JPX Prime 150, designed to make visible
• In March 2023, JPX announced JPX Prime 150, to “make visible the leading Japanese companies that are estimated to create value.” Ambitious? Yes. Fated to fail? Probably. Badly constructed?  Definitely. 

• The review period for a bunch of indices ended last week though the announcement of the changes will take 4-6 weeks.
• There are no rebalance implementations in the coming week though focus will move to the implementation of the HDFC Limited/ HDFC Bank merger and index changes the following week.
• There were big inflows to China focused ETF with a lot of money going into Semiconductor and Chip focused ETFs.

• The Naspers (NPN SJ) / Prosus (PRX NA) circularity was too complex. Lots of people hated it. It was actually easier than most thought, but optically was difficult to reconcile. 
• Swire Pacific (19 HK) was a clear buy: there is no justification for assigning a similar discount for cash from the US Coke ops as you would to unlisted ops
• A residual NTT (9432 JP) individual small-holder shareholding tenure reward does not get split 25:1 when the stock gets split 25:1. It doesn’t mean much, but it’s an interesting artefact. 

• There could be 25 inclusions, including many new listings, to the Hang Seng Composite Index (HSCI) in September. Another 6 stocks are close adds on liquidity and market cap.
• We see 19 potential deletes and 2 close deletes on market cap, 5 potential deletes on prolonged trading suspension, and 2 close deletes on liquidity.
• There are 8 potential deletions where holdings via Stock Connect are more than 20% of shares outstanding. There could be some unwinding of positions over the next couple of months.

• In my piece Yamauchi Family Office Buys More Toyo; Toyo Claims More Malfeasance, ISS Supports YFO I said I thought YFO would lose, but it would be close.
• I thought it hinged on the shape of the register. It turns out it did. And it turns out they won, and it was close. Analysis is presented.
• What next? The new board takes its seats and may entertain a new takeover offer. I could see a buyout price a fair bit higher than here. 

• Rise into late June/early July cycle peak on track with scope to overshoot after the 4th of July break (then expect a more volatile mid-July period). Reducing on strength.
• SPX kissed our 4,500 target with an overshoot projection at 4,547. Recent long from 4,470.
• Top Asia longs: NKY, Taiwan and India. Top shorts have been HSI and Kospi 200 (heavy bias to add on upticks). July will usher in a more volatile phase.

• The latest update will feature the addition of 25 single stock futures, as well as five single stock options from KOSPI. Eight single stock futures will be removed.
• The selection will now take place twice a year, in March and September. Also, the selection requirement includes being included in the KOSPI 200 and KOSDAQ Global.
• The shortened selection cycle and the significant potential for the change range to vary based on index review results can indeed have a notable impact.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, Tryt Inc (9164 JP) will announce its price range in the coming week, while Kelun Biotech tries to break the US$100m+ deal silence in HK. 
• On the placement front, even Singapore joined in the placement action this week, with only HK deal remaining absent over the past month.

• Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
• We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last five months, though there is some near-term underperformance.

• The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We take another stab at identifying potential inclusions and exclusions.
• There will be a big impact on the potential index changes. Fast Retailing (9983 JP)‘s index weight could be capped and there will be a big funding trade. 
• There are many things to watch out for that could affect the impact on the inclusions, including stock splits among potential adds and stepwise inclusion of stocks in the index.

• There were a couple of ad hoc rebalances in Korea last week for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) and KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY). 
• Coming Friday will mark the end of the review period for the next rebalance of the HSI, HSCEI, HSTECH, HSCI, LQ45, PCOMP as well as the SET50 June implementation.
• With Japan indices moving higher, the largest inflows went into ETFs tracking the Nikkei 225 (NKY INDEX) and other local/global indices.

• Nearly a third of the way through the review period, we see 12 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the December rebalance.
• There could be one change to the index in July/August following Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Market to the KOSPI Market.
• The potential adds have outperformed the potential deletes over the last few months and there could be further outperformance as we go through the review period.

• The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
• Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
• The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.

• An interview with Deepak Parekh set a bunch of stocks on fire. Then came the HDFC Bank (HDFCB IN) exchange announcement that said the dates were still tentative.
• Indications are that the merger could be effective 1 July and HDFC Limited (HDFC IN)‘s last trading day would be 13 July.
• The merger will have an impact on both HDFC stocks and on other stocks that could be added to the NIFTY Index, NIFTYJR INDEX and SENSEX Index.

• With a couple of trading days to the end of the review period, we do not forecast any changes for the Philippines Stock Exchange PSEi Index (PCOMP INDEX) in August. 
• However, there could be an ad hoc change if Metro Pacific Investments Co (MPI PM) is delisted. The stock now trades above the tender offer price.
• Bloomberry Resorts (BLOOM PM) is the highest ranked non-constituent and the stock has started to move higher again, likely driven in part by potential index inclusion.

• We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in July 2023, among which 6 are in KOSPI and 35 are in KOSDAQ.
• These 41 stocks on average could be subject to further selling pressures in June and could underperform relative to the market. 
• Among these 41 stocks, the top five market cap stocks include Lunit, Sungeel Hitech, KG Mobility, Enchem, and E&D Co. 

• New HDFC Bank appears to have far better returns and credit metrics that large Asian peers
• Pro-Forma amalgamation puts HDFC Bank as 2nd largest bank in Asia Pacific in market cap 
• Comparably large banks in Asia are concentrated in China, where credit metrics are opaque

• The Naspers (NPN SJ) / Prosus (PRX NA) circularity was too complex. Lots of people hated it. It was actually easier than most thought, but optically was difficult to reconcile. 
• Swire Pacific (19 HK) was a clear buy: there is no justification for assigning a similar discount for cash from the US Coke ops as you would to unlisted ops
• A residual NTT (9432 JP) individual small-holder shareholding tenure reward does not get split 25:1 when the stock gets split 25:1. It doesn’t mean much, but it’s an interesting artefact. 

• The review period for a bunch of indices ended last week though the announcement of the changes will take 4-6 weeks.
• There are no rebalance implementations in the coming week though focus will move to the implementation of the HDFC Limited/ HDFC Bank merger and index changes the following week.
• There were big inflows to China focused ETF with a lot of money going into Semiconductor and Chip focused ETFs.

• Dali Foods Group (3799 HK) disclosed a scheme privatisation offer from the founder at HK$3.75 per share, a 37.9% premium to the undisturbed price (HK$2.72 on 20 June).
• Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake. 
• The price is final. While the offer price is unattractive compared to peer multiples and historical share prices, this looks like a done deal. 

• Late last night (27 June), Dali Foods Group (3799 HK) a leading branded F&B play, announced a privatisation Offer by way of a Scheme from its founder/chairman/CEO Xu Shihui.
• The cancellation price, which has been declared final, is HK$3.75/share, is a respectable 37.87% premium to undisturbed, but… 
• Xu and concert parties control 88.89%, with disinterested shareholders holding 11.11%, therefore a blocking stake at the Scheme meeting is just 1.11% of shares out. 

• Delta Electronics Thai (DELTA TB) has been added to the Market Surveillance Measure List twice in the last few months. That increases the probability of index deletion in December.
• Given the big turnover every time Delta Electronics is added to and deleted from the index, there could be another go at weighting the SET50 Index by free-float market cap.
• Deletion from the index will have a big impact on Delta Electronics Thai (DELTA TB) and the passive selling could help narrow the gap with Delta Electronics (2308 TT).

• Last night, Swire Pacific announced it planned to sell its US Coca Cola Distribution business to its parent company. That means a Circular, an IFA Opinion, and an EGM.
• I expect a September EGM and the Special Div to follow in Q4. While I find the price low, I expect the deal to be approved by Swire shareholders.
• This deal has an effect on the Swire B/A ratio. Some may get it. Some may not. Makes sense to be ready. Swire A is cheap. Swire B is cheaper.

• We see 7 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 9 stocks from SmallCap to MidCap, and 10 stocks from MidCap to SmallCap.
• The expected migrations from SmallCap to MidCap have outperformed the other migrations and some stocks have seen large price moves over the last couple of weeks.
• Active managers would have started realigning their portfolios and that could continue for a couple of weeks. Unwind long positions into strength.

For our next Corporate Webinar we are glad to welcome IREIT Global’s CEO, Louis d’Estienne d’Orves.

In the upcoming webinar, Louis will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Jesus Rodriguez Aguilar. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Thursday, 6 July 2023, 17:00 SGT.

About IREIT Global

IREIT Global, which was listed on 13 August 2014, is the first Singapore-listed real estate investment trust with the investment strategy of principally investing, directly or indirectly, in a portfolio of income-producing real estate in Europe which is used primarily for office, retail and industrial (including logistics) purposes, as well as real estate-related assets. IREIT Global’s current portfolio comprises five freehold office properties in Germany, five freehold office properties in Spain and 27 freehold retail properties in France.

IREIT Global is managed by IREIT Global Group Pte. Ltd., which is jointly owned by Tikehau Capital and City Developments Limited. Tikehau Capital is global alternative asset management group listed in France, while City Developments Limited is a leading global real estate company listed in Singapore.

• Redox (RDX AU), a chemical and ingredients distributor, raised around US$270m in its Australia IPO. The stock will begin to trade on 3rd July 2023.
• In 2022 it was ranked as the largest chemicals and ingredients distributor in Australia, as well as the 13th largest in the Asia Pacific region and the 35th largest worldwide
• We have looked at the company’s past performance in our previous note, in this note we will talk about the updates since then and the trading dynamics.

• We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in July 2023, among which 6 are in KOSPI and 35 are in KOSDAQ.
• These 41 stocks on average could be subject to further selling pressures in June and could underperform relative to the market. 
• Among these 41 stocks, the top five market cap stocks include Lunit, Sungeel Hitech, KG Mobility, Enchem, and E&D Co. 

• Tryt Inc (9164 JP) is looking to raise about US$460m in its Japan IPO.
• Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
• We have looked at the company’s past performance and track record against peers in our earlier notes. In this note, we will discuss our thoughts on valuation.

• The JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted (capped) market-value-weighted index composed of 400 constituents.
• A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
• Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to be announced in early August 2023 based on trading data as of end-June 2023.