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• The June rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading today.
• There are a couple of deletions and one inclusion. Plus there will be capping changes on the other stocks, but the impact of those changes is not large.
• The stocks have already been moving in the right direction during the day and the pre-positions could be flipped to the ETF at the close.

• The changes to the MVIS Global Junior Gold Miners Index (MVGDXJ) were announced on 9 June and will be implemented at the close on 16 June.
• Though there are no constituent changes, changes to free floats and capping factors will result in an estimated one-way turnover of 6.26% and in a one-way trade of US$251m.
• The largest passive inflows will be in Alamos Gold (AGI US), Kinross Gold Corp (KGC US), Endeavour Mining (EDV CN), B2Gold Corp (BTG US) and Centerra Gold (CG CN). 

• There are 3 inclusions for the MVIS Global Rare Earth/Strategic Metals Index at the June rebalance. Plus there are free float and capping changes.
• One way turnover is estimated at 10.6% and will result in a one-way trade of US$66m. There are a few stocks with over 0.5 days of ADV to trade.
• Yunnan Chihong Zinc&Germanium Co, Ltd. (600497 CH) was not added to the index while ioneer Ltd (INR AU) has avoided deletion in June.

• The changes for the KOSPI2 INDEX, KOSDAQ150 Index, CSI300 Index, STAR50 INDEX and a bunch of other onshore China indices were implemented last week.
• The coming week has a lot of rebalance implementations on Friday with the S&P/ASX family and the MVIS family, among others.
• AUM for the Yuanta/P-shares Taiwan Top 50 ETF (0050 TT) has continued to increase with big inflows in the last week.

• The upcoming rebalance of the MVIS US Listed Semiconductor 25 Index will be implemented on 16 June. There are no constituent changes, but there are float and capping changes.
• The VanEck Vectors Semiconductor (SMH US) ETF tracks the index and has an AUM of US$9.26bn.
• Estimated one-way turnover is 3.9% resulting in a one-way trade of US$358m. The stocks are extremely liquid, the impact on the stock in terms of ADV to trade is small.

• In this insight, we take a look at the potential index changes and the resultant capping flows for the HSTECH Index in September 2023.
• Based on the latest available data, I see two ADDs and two DELs. 
• For the September 2023 rebalance, I expect one-way capping flows to be around US$234mn.

• OVERSEAS. SPX Closed +0.1% on Friday/WoW +0.4% confirming Bull Market; Fed Decision this week – Market See Pause; TESLA +4.1% Seals Deal with GM on its Super Chargers
• JAPAN. NKY Futs flat vs Cash;  Japan Continues to focus on AGMs; Record number Proposals submitted to 90 companies; Buybacks to hit record in 2023 say SMBC Nikko
• NUGGET. Kyocera: ISS  recommended AGM vote doomed but there is good news…

• TSMC is back to an 11.8% ADR premium after dropping to 8%… potentially another good Long/Short point.
• UMC has flipped to a -0.6% ADR discount, from a 5.6% Premium. If the discount ticks slightly more negative then a good setup level will open up.
• ASE, ChipMOS, and CHT spreads have also experienced significant swings since our last dual-listings piece.

• In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI in September 2023.
• Based on the latest available data, I expect two ADDs and two DELs for HSCEI in the September 2023 Rebalance.
• I estimate one-way flow to be US$276mn. Only the two ADDs and two DELs involved in the index changes are likely to have more than one day to trade. 

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Amman Mineral Internasional (1416286D IJ), Tata Technologies (TATATECH IN), JD Industrials (2231713D CH) IPOs.
• Event-Driven developments – Toshiba Corp (6502 JP), Chindata Group (CD US), Eoflow (294090 KS), Inner Mongolia Yitai Coal Company Ltd (3948 HK), Estia Health (EHE AU), Origin Energy (ORG AU). 

• Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
• We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
• There are 11 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.

• The review period for the June rebalance ended on 31 May. Announcement of the changes will be made on 9 June with implementation at the close on 16 June.
• There could be 3 or 4 A-share additions due to their inclusion in Northbound Stock Connect. That in turn expands the index universe and could result in 2-3 deletions.
• If there are 4 adds and 2 deletes at the June rebalance, estimated one-way turnover at the rebalance will be 13.4% and will result in a one-way trade of US$81m.

• It was a busy week with index rebalance implementations and announcements of index changes.
• The coming week has the KOSPI200 and KOSDAQ150 rebalancing on Thursday and a bunch of onshore China indices rebalancing on Friday.
• There were big inflows to China ETFs during the week while the largest inflows went to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF.

• The June rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading today.
• There are a couple of deletions and one inclusion. Plus there will be capping changes on the other stocks, but the impact of those changes is not large.
• The stocks have already been moving in the right direction during the day and the pre-positions could be flipped to the ETF at the close.

• The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Large stock price moves mean no changes for the BBIG Index currently.
• Douzone Bizon (012510 KS) has flipped from a passive sell to a passive buy over the last month and the stock could move higher from here.

• WSTS updates global semiconductor FY2023 forecast to reflect a 10% YoY decline
• TSMC’s May revenue jumps 19.4% MoM reflecting the generative AI-driven surge in orders from NVIDIA
• Intel plumbs new depths with a ridiculous IDC SAM analysis

• In this insight, we provide details of the Lutronic tender offer M&A by Hahn & Company.
• We believe that Hahn & Co is likely to successfully complete this M&A tender offer of Lutronic. 
• In our view, most of the shareholders of Lutronic are likely to tender their shares, given the sharp share price appreciation and reasonable tender offer premium. 

• HDFC Ltd will merge into HDFC Bank perhaps within some weeks
• Amalgamation presumed benefits are a long list: scale, cross-sell, funding, loan mix, etc
• Improvements in total funding costs may be immediate and significant, beyond expectations 

• The changes to the MVIS Global Junior Gold Miners Index (MVGDXJ) were announced on 9 June and will be implemented at the close on 16 June.
• Though there are no constituent changes, changes to free floats and capping factors will result in an estimated one-way turnover of 6.26% and in a one-way trade of US$251m.
• The largest passive inflows will be in Alamos Gold (AGI US), Kinross Gold Corp (KGC US), Endeavour Mining (EDV CN), B2Gold Corp (BTG US) and Centerra Gold (CG CN). 

• The changes for the KOSPI2 INDEX, KOSDAQ150 Index, CSI300 Index, STAR50 INDEX and a bunch of other onshore China indices were implemented last week.
• The coming week has a lot of rebalance implementations on Friday with the S&P/ASX family and the MVIS family, among others.
• AUM for the Yuanta/P-shares Taiwan Top 50 ETF (0050 TT) has continued to increase with big inflows in the last week.

• The June rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading today.
• There are a couple of deletions and one inclusion. Plus there will be capping changes on the other stocks, but the impact of those changes is not large.
• The stocks have already been moving in the right direction during the day and the pre-positions could be flipped to the ETF at the close.

• The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Large stock price moves mean no changes for the BBIG Index currently.
• Douzone Bizon (012510 KS) has flipped from a passive sell to a passive buy over the last month and the stock could move higher from here.

• Toshiba announced today that its board had shifted stance on JIP’s upcoming tender and would recommend shareholders tender. 
• The special committee will review its opinion on the tender offer and based on that the company will offer another opinion when the tender commences. 
• Despite peers rising 13-30% since April an offer price increase still looks unlikely.

• Positive surprises in profitability during Q1 2023 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization efforts.
• In our opinion, robust growth in GMV is fundamentally essential to reverse the long-term downward trend of the Chinese e-commerce sector.
• Chinese e-commerce sector no longer discloses GMV, but Express delivery volume indicates a 20% decline in parcel volumes compared to 2021, potentially reflecting a decrease in GMV.

• In March, when the JIP Offer for Toshiba Corp (6502 JP) was announced, the Toshiba Board supported the Offer but declined, at the time, to recommend it to shareholders. 
• “[The price] has clearly not reached the level at which it is possible to recommend to general shareholders that they tender their shares at this time.” That was then.
• 10 weeks later and the Board has a Revised Opinion. It has recommended the Offer for reasons which smack of resignation rather than appropriate deliberation. Investors beware.

• Toshiba Corp (6502 JP) Board now recommends shareholders accept Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share. The Board also effectively rules out a bump.
• The Board unconvincingly recommends the offer in part on the premise that the IFA’s DCF valuation is unrealistic due to punchy forecasts and positive feedback from stakeholders.  
• The Board fails to consider that the peers have materially re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers’ multiples.

• Retail investors hold the majority of shares at 60%, and they may be interested in participating in the second tender offer based on their accumulated learning effect.
• Based on the observed behavior of Hahn & Co, it’s unlikely that they will walk away from the delisting plan.
• We need to consider going long on the potential upward adjustment of the second tendering price. This play can be viewed as a call option with a floor at ₩36,700.

• CPPIB aims to raise around US$750m via selling a 1.6% stake in Kotak Mahindra Bank (KMB IN). 
• This is not the first time that CPPIB will be selling down some of its stake, the previous deal held up well.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Allied (373 HK) took Allied Properties (H.K.) (56 HK) private in 2020, followed by SHK Hong Kong Industries (666 HK) in 2021. Now it’s Tian An China (28 HK)‘s turn.
• Preceding my comments on Tian An and AGL are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• In this insight, we provide details of the Lutronic tender offer M&A by Hahn & Company.
• We believe that Hahn & Co is likely to successfully complete this M&A tender offer of Lutronic. 
• In our view, most of the shareholders of Lutronic are likely to tender their shares, given the sharp share price appreciation and reasonable tender offer premium. 

• The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Large stock price moves mean no changes for the BBIG Index currently.
• Douzone Bizon (012510 KS) has flipped from a passive sell to a passive buy over the last month and the stock could move higher from here.

• The Kishida administration is looking for funding sources for its two big objectives – 1) raising the birthrate, 2) raising defense spending by 60% in 5yrs to 2% of GDP.
• The second is not new. It was in an “order” PM Kishida gave to FinMin Suzuki and MinDef Hamada last November. They need ¥48trln by end 2027. 
• Yesterday, in an LDP meeting, the idea of changing the NTT Law so the government could sell more NTT shares was mooted. It’s worth thinking about.

• Toshiba announced today that its board had shifted stance on JIP’s upcoming tender and would recommend shareholders tender. 
• The special committee will review its opinion on the tender offer and based on that the company will offer another opinion when the tender commences. 
• Despite peers rising 13-30% since April an offer price increase still looks unlikely.

• We see 8 stocks moving from MidCap to LargeCap, 9 stocks moving from LargeCap to MidCap, 9 stocks from SmallCap to MidCap, and 10 stocks from MidCap to SmallCap.
• Following a strong listing, Mankind Pharma (6596876Z IN) should be added to the Large Cap segment of the market in July.
• The expected migrations from SmallCap to MidCap have outperformed the other migrations by a huge margin over the last couple of months and there could be profit taking ahead.

• Chinese data centre outfit Chindata (CD US) has no end of alleged suitors, rumoured to include SOE-backed China Merchants, GDS (GDS US), PE outfit PAG, and EQT (EQT SS)-backed EdgeConneX.
• Now Bain Capital, Chindata’s largest shareholder with 42.17% (and 87.39% of the voting power) has made a non-binding proposal of $8/share per ADS, a 33% premium to last close.
• Chindata’s board has made no decision on the proposal. It’s hardly a knockout Offer. But the key question is whether Bain will get regular approval to take Chindata private. 

• Positive surprises in profitability during Q1 2023 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization efforts.
• In our opinion, robust growth in GMV is fundamentally essential to reverse the long-term downward trend of the Chinese e-commerce sector.
• Chinese e-commerce sector no longer discloses GMV, but Express delivery volume indicates a 20% decline in parcel volumes compared to 2021, potentially reflecting a decrease in GMV.

• Toshiba Corp (6502 JP) Board now recommends shareholders accept Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share. The Board also effectively rules out a bump.
• The Board unconvincingly recommends the offer in part on the premise that the IFA’s DCF valuation is unrealistic due to punchy forecasts and positive feedback from stakeholders.  
• The Board fails to consider that the peers have materially re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers’ multiples.

• In March, when the JIP Offer for Toshiba Corp (6502 JP) was announced, the Toshiba Board supported the Offer but declined, at the time, to recommend it to shareholders. 
• “[The price] has clearly not reached the level at which it is possible to recommend to general shareholders that they tender their shares at this time.” That was then.
• 10 weeks later and the Board has a Revised Opinion. It has recommended the Offer for reasons which smack of resignation rather than appropriate deliberation. Investors beware.

• Amman Mineral Internasional (1416286D IJ) is offering 7.288bn shares in its IPO at a price range of IDR 1650-1775/share to raise between US$808-870m and valuing the company between US$8.08-8.7bn.
• The stock will not get fast entry to global indices or local Indonesia indices (IDX30 Index/ LQ45 Index/ IDX80 Index).
• With listing planned for 5 July, the earliest index inclusion will be in December and there are no near-term passive flows expected for the stock.

• Redox (RDX AU), a chemical and ingredients distributor, is looking to raise around US$270m in its Australia IPO. 
• 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.
• In this note, we undertake a quick peer comaprison and talk about valuations.

• Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
• We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
• There are 11 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.

• Tencent has been busy distributing shares in some of its investments over the past two years, with JD.com’s distribution announced in 2021 and Meituan’s in 2022.
• In our earlier note in 2022, Tencent Investee Selldown – The US$120bn Global Overhang, we had looked at its overall investment portfolio.
• With two of its large investments spun-out, we now re-look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how. 

• Infratil Ltd (IFT NZ) is acquiring Brookfield Asset Management Lt (BAM US)‘s 49.95% stake in One NZ for NZ$1.8bn. This will be partly funded through a NZ$850m placement.
• There will be a NZ$750m underwritten placement at NZ$9.2/share (an 8.9% discount to the last close) and a retail offering of NZ$100m.
• There will be passive buying from index trackers post the completion of the placement and the settlement of the shares and that will remove some of the overhang.

In this next installment of our #webinar Wednesdays, we welcome Smartkarma Insight Provider, Nicolas Van Broekhoven, as he shares his thoughts and insights on three different small cap stock ideas. From Hong Kong to Canada, tune in as Nicolas delves deeper into stock ideas from across the globe.

The webinar will be hosted on Wednesday, 14 June 2023, 17:00 SGT/HKT.

Nicolas Van Broekhoven was on the buyside for 15 years, and most recently at a medium-sized boutique asset management firm. Having grown up in Europe, attending university in the US and living in Singapore for the last 7 years, this has given him a broad scope on the world and investing in general. He considers himself as a generalist investor with a preference for small and mid-cap companies and special situations. However, a large cap that has gone temporarily out of favor might also pique his interest. His style of investing could be categorized as more of value investor, rather than growth at any cost. Learning from Charlie Munger on the importance of quality of a company has been of tremendous value over the years. Nicolas likes businesses with real earnings, cash flows, dividends, book value and insider ownership.

• Chindata Group (CD US) disclosed a preliminary non-binding proposal from Bain Capital at US$8.00 per ADS, a 27.4% premium to the undisturbed price of US$6.28 per ADS.
• For privatisation to succeed, shareholders representing two-thirds of the shares present and voting need to approve the deal. The offeror represents 87.39% of the total voting power. 
• While the offer is unattractive, Bain Capital’s voting rights ensure that the vote will pass. The key risks are regulatory approvals and timing. 

• Infratil Ltd (IFT NZ) aims to raise around US$456m (NZ$750m) via an institutional placement.
• Proceeds from the placement will be used to acquire the remaining stake on One New Zealand from Brookfields.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• After consumer electronics retailer Challenger Technologies (CHLG SP) announced a voluntary unconditional cash offer of S$0.56/share on the 30 May, it has closed through terms every day. 
• At a 3.1% and 4.3% to undisturbed and one-month VWAP, the Offer was low-balled. The Offeror (Dymon Asia and Challenger’s CEO Loo Leong Thye) have now bumped to S$0.60/share. 
• The price has been declared final. It is still only a 9.1% premium to undisturbed. But it is a lifetime high. 

• We see 8 stocks moving from MidCap to LargeCap, 9 stocks moving from LargeCap to MidCap, 9 stocks from SmallCap to MidCap, and 10 stocks from MidCap to SmallCap.
• Following a strong listing, Mankind Pharma (6596876Z IN) should be added to the Large Cap segment of the market in July.
• The expected migrations from SmallCap to MidCap have outperformed the other migrations by a huge margin over the last couple of months and there could be profit taking ahead.

• Estia Health (EHE AU) has received a revised non-binding indicative proposal from Bain Capital at A$3.20 per share, a 6.7% premium to the previously rejected offer of A$3.00 per share.
• The revised offer is attractive in comparison to historical share prices and multiples. The offer is also attractive in comparison to the Japara Healthcare (JHC AU) precedent transaction.   
• Bain has been granted exclusive due diligence. Bain’s reengagement suggests a committed bidder. Expect a binding offer. At the last close, the gross spread is 10.3%.

• On the 23 March, aged care provider Estia Health (EHE AU) announced Bain Capital’s $3.00/share non-binding proposal. 12 days later, Estia rejected this indicative Offer. 
• Bain has returned with a A$3.20/share proposal, inclusive of a fully franked dividend up to A$0.12/share. A process deed has been entered into, and exclusive due diligence has been granted. 
• Trading at a gross spread of 10.7% with an indicative completion in early 4Q23.

• Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
• We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
• There are 11 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.

• The Nikkei 225 Sep 2023 review has 2 months left of data collection. That means the rankings are quasi-fixed. So then the question is what to do with them.
• There is a consultation in progress. You still have one week to respond, but that doesn’t change the names. 
• The top inclusion is the big one in dollar terms but low in liquidity. The next two are likely to be consumer names, and much more impactful. 

• The abolition of the foreign investor registration system was approved in a Cabinet meeting. They will be promulgated on June 13th and implemented starting December 14th of this year.
• This change is not just about reducing administrative tasks, as it also eliminates the reporting obligations of foreign investors, thereby reducing their position exposure risk.
• This could improve event outcome and price prediction accuracy. Therefore, it is crucial to keep a close eye on event trading when this measure takes effect in December.

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• Zuiko Corp (6279 JP), Anycolor (5032 JP), and Lifedrink (2585 JP) will have TOPIX Inclusion events at the end of June (Zuiko) or July 2023 (the other two).
• One of our pre-event TOPIX Inclusion candidates CELSYS (3663 JP) has experienced sharp price moves over the last few weeks.

• Media reports indicate that Austal Ltd (ASB AU) is in the crosshairs of investors looking to take the company private.
• In an announcement, Austal Ltd (ASB AU) said it is regularly involved in discussion with strategic parties to create value for shareholders.
• The recent large contract from the US Navy, potentially more contracts in the pipeline and a weak AUD could result in investors paying up to take the company private.

• On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
• Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
• In this note, we will talk about some of the company’s investments and how the overall Holdco would look post restructuring.

• Back on the 9 May, Inner Mongolia Yitai Coal Company Ltd (3948 HK) announced an H-share buyback at HK$17.50/share.
• With no pre-conditions attached to this hybrid Scheme/Tender Offer, my expectation was this could be wrapped up by mid-August. 
• The dispatch of the Offer Document yesterday evening indicates even this timeline was conservative, with payment potentially occurring in the third week of July.

• Infratil Ltd (IFT NZ) is acquiring Brookfield Asset Management Lt (BAM US)‘s 49.95% stake in One NZ for NZ$1.8bn. This will be partly funded through a NZ$850m placement.
• There will be a NZ$750m underwritten placement at NZ$9.2/share (an 8.9% discount to the last close) and a retail offering of NZ$100m.
• There will be passive buying from index trackers post the completion of the placement and the settlement of the shares and that will remove some of the overhang.

• Late March, SOE-backed power play China Resources Power Holdings Co Ltd. (836 HK) announced it intends to spin off its energy unit via an A-share listing. 
• Shares gained 4.9% on the news – gains which were promptly given back over the ensuing fortnight.
• Renewable energy profits have been the driving force behind CRP’s bottom line strength the last two years. But how best to assign a value to the remaining loss-making thermal ops? 

• On 1 June, Lifedrink (2585 JP), which listed in early 2022, announced it would move to TSE Prime in late June, leading to a TOPIX inclusion in late July. 
• The offset to that was an announcement of an offering, whereby the PE Fund which brought the company to market would sell up to 3.87mm shares, effectively doubling float. 
• The offering is larger than the TOPIX inclusion. The stock fell the next day, rebounded, then rebounded 11% Monday. Now it’s up more and hit a lifetime closing high.

• Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
• We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
• There are 11 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.

• Anycolor (5032 JP) IPOed a year ago, rose several-fold, saw the underwriting broker offer a huge target price, then it fell. There was an offering. And then the murders began.*
• The offering in January, discussed here, created overhang, and the stock fell sharply in the next 6 weeks. Blowout earnings came in mid-March. Along with a TSE Prime transfer application.
• Now we have the Prime promotion on 8 June, which leads to a TOPIX inclusion on 28 July. 

• It was a busy week with index rebalance implementations and announcements of index changes.
• The coming week has the KOSPI200 and KOSDAQ150 rebalancing on Thursday and a bunch of onshore China indices rebalancing on Friday.
• There were big inflows to China ETFs during the week while the largest inflows went to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF.

• In this insight, we take a look at the final ADDs/DELs for the TDIV, T50, and T100 Indices for the June 2023 Rebalance.
• Across these three indices there will be 18 changes and 15 of them were in line with expectations.
• Our updated flow expectations show that there could be US$1.1bn one-way flow in the June 2023 rebalance.

• The late Nexon founder Kim Jung-Ju’s family recently paid nearly 4.7 trillion won worth of inheritance taxes to the Korean government by handing over 29.3% stake (paid-in-kind) in NXC Corp.
• We view this handing over the 29.3% stake to the Korean government to be positive overall on Nexon in the near term.
• However, we do not expect this could bring about change in controlling ownership of the Nexon Group in the near term to result in re-rating of the Nexon Group shares. 

• Fashion wear retailer ENM Holdings (128 HK) has received a delisting Offer from major shareholder, Chinachem.
• The Scheme consideration of HK$0.58 is a 24.7% premium to last close, although shares popped 24% prior to suspension. 
• The Offer price is final. There is probably enough here for the Offer to get up. But there is potentially significant value to be unlocked from recent land rezoning. 

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• Zuiko Corp (6279 JP), Anycolor (5032 JP), and Lifedrink (2585 JP) will have TOPIX Inclusion events at the end of June (Zuiko) or July 2023 (the other two).
• One of our pre-event TOPIX Inclusion candidates CELSYS (3663 JP) has experienced sharp price moves over the last few weeks.

• Inner Mongolia Yitai Coal Company Ltd (3948 HK)‘s H Share buyback offer at HK$17.50 per H Share is open. The H class meeting is on 30 June.  
• The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There is a 90% minimum acceptance condition.  
• The de-rating of the peers, likely supportive substantial H Shareholders and no major retail opposition should help hit the 90% threshold. At the last close, the gross/annualised spread is 4.7%/23.9%.   

• OVERSEAS. US Rally Pauses as weak(er) Services ISM brings recession risk reminder; MS Big Bearish Call on SPX; Apple unveils Game Changing VR Headset ; Crypto Worries -Binance CEO Charged
• JAPAN. NKY Futs -0.3% vs Cash; Expect a pull back today given US pause, overbought markets, and stronger yen;  MS Bullish Call on Japan; Panasonic expands Battery production for TESLA
• NUGGET. Data Centers – Demand set to Explode with AI: Next Growth Driver for an Already undervalued Kansai Electric ?

• Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
• The shares are trading wide to terms due to key risks – regulatory approvals and the minimum acceptance condition (Medtronic owns 53.02% of the post-SSA outstanding shares).
• The regulatory approvals should be forthcoming due to minimum competition issues. The minimum acceptance condition requires a minority acceptance rate of 15.7%, which is achievable due to an attractive offer.

• I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article last year shows.
• The general gist of the idea is that retail investors in Australia will take gains on things which run up in price, or get taken over, then look for losses.
• Below I present a study using data from 2012-2022 of how a basket portfolio trade might work.

• It was a busy week with index rebalance implementations and announcements of index changes.
• The coming week has the KOSPI200 and KOSDAQ150 rebalancing on Thursday and a bunch of onshore China indices rebalancing on Friday.
• There were big inflows to China ETFs during the week while the largest inflows went to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF.

• Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
• We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
• There are 11 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.

• As reported by a local news outlet (YTN), the Korean government will soon list the NXC stake on Onbid, the government’s online auction system (www.onbid.co.kr).
• If the right buyer acquires the 30% stake in NXC, the family members may also sell their stake, leading to an unexpected price impact for Nexon (3659 JP).
• Timing is critical, and the Korean government must aim to list the stake on Onbid as soon as possible, given its current revenue shortfall issue.

• Australian tax-loss selling is a thing. Retail investors will take gains on things that run up in price, or get taken over, then look for losses.
• The China Conch Venture Holdings (586 HK) / Anhui Conch Cement (600585 CH) ratio is at an all-time low. The implied stub is re-testing its all-time low.
• Historically, Canon (7751 JP)‘s buybacks are aggressive. It may pay to observe market data to see when they are done. It may also pay to look at peer outperformance cycles. 

• In this insight, we take a look at the final ADDs/DELs for the TDIV, T50, and T100 Indices for the June 2023 Rebalance.
• Across these three indices there will be 18 changes and 15 of them were in line with expectations.
• Our updated flow expectations show that there could be US$1.1bn one-way flow in the June 2023 rebalance.

• The late Nexon founder Kim Jung-Ju’s family recently paid nearly 4.7 trillion won worth of inheritance taxes to the Korean government by handing over 29.3% stake (paid-in-kind) in NXC Corp.
• We view this handing over the 29.3% stake to the Korean government to be positive overall on Nexon in the near term.
• However, we do not expect this could bring about change in controlling ownership of the Nexon Group in the near term to result in re-rating of the Nexon Group shares. 

• Enm Holdings (128 HK) announced a privatisation offer from Chime Corporation at HK$0.58 per scheme share, a 54.7% premium to the undisturbed price of HK$0.375 per share (24 May). 
• The key condition is the scheme be approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). No shareholder holds a blocking stake. The offer price is final.
• Detractors will argue the offer is low due to ENM’s net cash (75% of the market cap). However, the offer is reasonable compared to historical multiples and share prices. 

• We summarise the latest spreads and newsflow of merger arb situations covered by us 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), United Malt Group Ltd (UMG AU), Estia Health (EHE AU), HKBN Ltd (1310 HK), Hailan Holdings (2278 HK).
• Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Challenger Technologies (CHLG SP), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Newcrest Mining (NCM AU). 

• OVERSEAS.  US Equities Soar on Debt Resolution and Payrolls; Markets continue to price in Fed Pause; Leaks about China Property stimulus support sentiment; Saudi Arabia slashes oil output.
• JAPAN. NKY Futs +1.4% vs Cash;  JP bid to continue after US Rally; Inflation pushing households to stocks; Japan prioritizes hydrogen; Companies face a raft of proposals at June AGMs
• NUGGET. Where Nvidia Goes, Advantest Follows; Advantest now simply just a proxy on Nvidia’s share price

• There are 6 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 June.
• All the inclusions are also additions to the CSI 500 Index and the passive flows will come from multiple trackers.
• The adds have outperformed the deletes over the last couple of weeks and there could be further outperformance over the next two weeks.

• There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 9 June.
• The inclusions will also be added to other indices over the next couple of weeks and there will be inflows from multiple index trackers.
• The adds have outperformed and with 9 trading days to implementation of the changes and the inclusions also being added to other indices, there could be further outperformance near-term.

• The review period for the June rebalance ended on 31 May. Announcement of the changes will be made on 9 June with implementation at the close on 16 June.
• There could be 3 or 4 A-share additions due to their inclusion in Northbound Stock Connect. That in turn expands the index universe and could result in 2-3 deletions.
• If there are 4 adds and 2 deletes at the June rebalance, estimated one-way turnover at the rebalance will be 13.4% and will result in a one-way trade of US$81m.

• I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article last year shows.
• The general gist of the idea is that retail investors in Australia will take gains on things which run up in price, or get taken over, then look for losses.
• Below I present a study using data from 2012-2022 of how a basket portfolio trade might work.

• There will be 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 June.
• One-Way turnover for the Chinext Price Index is estimated at 3.17% while the one-way turnover for the ChiNext50 Index is 6.61%. The one-way trade across both indices is CNY 2.72bn.
• The adds have outperformed the deletes by a huge margin over the last 3 months and there could be profit taking into implementation.

• NSE Indices have started a market consultation on dropping stocks that are not a part of the Futures & Options segment from the Nifty Next 50 Index (NIFTYJR INDEX). 
• This will be done in two phases with a weight reduction for non-F&O stocks in June and deletion from the index in September.
• That will result in 11 inclusions to the Nifty Next 50 Index (NIFTYJR INDEX) in September and bring in a lot of flow to the stocks.

• As reported by a local news outlet (YTN), the Korean government will soon list the NXC stake on Onbid, the government’s online auction system (www.onbid.co.kr).
• If the right buyer acquires the 30% stake in NXC, the family members may also sell their stake, leading to an unexpected price impact for Nexon (3659 JP).
• Timing is critical, and the Korean government must aim to list the stake on Onbid as soon as possible, given its current revenue shortfall issue.

• In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in May 2023.
• We provide a list of 25 stocks in the Korean stock market that have announced share buyback programs in May 2023.
• The top five market cap stocks that have announced share repurchases include Hyundai Elevator, DGB Financial, Com2Us, Miwon Commercial, and Jeisys Medical.

• Australian tax-loss selling is a thing. Retail investors will take gains on things that run up in price, or get taken over, then look for losses.
• The China Conch Venture Holdings (586 HK) / Anhui Conch Cement (600585 CH) ratio is at an all-time low. The implied stub is re-testing its all-time low.
• Historically, Canon (7751 JP)‘s buybacks are aggressive. It may pay to observe market data to see when they are done. It may also pay to look at peer outperformance cycles. 

• It was a busy week with index rebalance implementations and announcements of index changes.
• The coming week has the KOSPI200 and KOSDAQ150 rebalancing on Thursday and a bunch of onshore China indices rebalancing on Friday.
• There were big inflows to China ETFs during the week while the largest inflows went to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF.

• There are 6 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 June.
• All the inclusions are also additions to the CSI 500 Index and the passive flows will come from multiple trackers.
• The adds have outperformed the deletes over the last couple of weeks and there could be further outperformance over the next two weeks.

• There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 9 June.
• The inclusions will also be added to other indices over the next couple of weeks and there will be inflows from multiple index trackers.
• The adds have outperformed and with 9 trading days to implementation of the changes and the inclusions also being added to other indices, there could be further outperformance near-term.

• I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article last year shows.
• The general gist of the idea is that retail investors in Australia will take gains on things which run up in price, or get taken over, then look for losses.
• Below I present a study using data from 2012-2022 of how a basket portfolio trade might work.

• The review period for the June rebalance ended on 31 May. Announcement of the changes will be made on 9 June with implementation at the close on 16 June.
• There could be 3 or 4 A-share additions due to their inclusion in Northbound Stock Connect. That in turn expands the index universe and could result in 2-3 deletions.
• If there are 4 adds and 2 deletes at the June rebalance, estimated one-way turnover at the rebalance will be 13.4% and will result in a one-way trade of US$81m.

• Anycolor (5032 JP) IPOed a year ago, rose several-fold, saw the underwriting broker offer a huge target price, then it fell. There was an offering. And then the murders began.*
• The offering in January, discussed here, created overhang, and the stock fell sharply in the next 6 weeks. Blowout earnings came in mid-March. Along with a TSE Prime transfer application.
• Now we have the Prime promotion on 8 June, which leads to a TOPIX inclusion on 28 July. 

• There will be 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 June.
• One-Way turnover for the Chinext Price Index is estimated at 3.17% while the one-way turnover for the ChiNext50 Index is 6.61%. The one-way trade across both indices is CNY 2.72bn.
• The adds have outperformed the deletes by a huge margin over the last 3 months and there could be profit taking into implementation.

• Back on the 25 May, healthcare company Medtronic Plc (MDT US) announced it had entered into a set of definitive agreements to acquire EOFlow (294090 KS).
• Via a three-step process – SPAs, issuance of new shares, and a Tender Offer – Medtronic will seek majority control, together with a view to delisting EOFlow.
• Completion is expected in 4Q23. Regulatory approvals –  domestic and foreign – form part of the conditions. Trading wide to terms. 

• The June 2023 regular rebalance index changes for the SE600 index and the EURSTX index were announced after the close yesterday.
• There are 8 ADDs/DELs for the SE600 index and 3 ADDs and 2 DELs for the EURSTX index.
• In this insight, we take a closer look at our final index flow expectations for June 2023.

• Last week, shareholders of Seven & I Holdings (3382 JP) rejected all four of the board nominees proposed by ValueAct.
• ValueAct, seeing their higher vote count as a modest success, sent a letter to Seven & I, requesting a resumption of discussions despite the failed attempt to remove senior leadership.
• We think the company is unlikely to seriously consider Value Act’s proposals any longer, indicating the end of the investor activism campaign.

• FEMSA has placed c.€3.3 billion of Heineken NV (HEIA NA) and Heineken Holding NV (HEIO NA) shares and tap €250 million of existing 2026 Exchangeable bonds. The placement removes a major overhang.
• The holding structure (equivalence 1 HEIO NA ~ 1 HEIA NO) allows the Heineken family to control the second largest brewer worldwide, with just a 27.3% economic interest (post-FEMSA’s placement).
• The discount has tightened to 15.8%, still above the 10.4% average of the last ten years, and rather large considering such a simple structure.