Most Read

With two weeks left to the cutoff, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
Apart from the adds/deletes, there will also be capping and funding flows that will lead to an estimated one-way turnover of 13.5% and a one-way trade of US$886m.
There are 9 stocks with at least 5 days ADV to trade from passive trackers and another 12 stocks that have at least 1 day ADV to trade.

CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions

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.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Changes Afoot

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.

Tax-Loss Selling in Australia – Brief Historical Analysis And A Trade Basket

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.

Anycolor (5032 JP) – Moving to Prime Next Week, TOPIX Inclusion Next Month

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.

SET50 Index Rebalance Preview: Should Be Two Changes in June

With the review period complete, we see Thai Life Insurance (TLI TB) and WHA Corp Pcl (WHA TB) being added to the SET 50 Index in June.
Jaymart PCL (JMART TB) is a certain deletion from the index while the second deletion will be determined on the criteria used for liquidity or on market cap.
JMT Network Services (JMT TB) was deleted from the MSCI Thailand index yesterday and could be deleted from the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) next.

End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2023

We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in June 2023, among which 6 are in KOSPI and 39 are in KOSDAQ.
These 45 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
Among these 45 stocks, the top five market cap stocks include Won Tech, Voronoi, Zinus, Bionote, and NanoTIM.

(Mostly) Asia M&A, May 2023: Allkem / Livent, InvoCare, Golden Eagle, Yita Coal, Shinsei Bank

For the month of May, 8 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$15bn.
The average premium for the new deals announced (or first discussed) in May was 32%.
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Hanjin Kal: Fight For Control Amid FTC Regulatory Concerns of Korean Air & Asiana Airlines Merger

There is a relatively high probability (70-80%+) that the FTCs in Europe and the United States will officially block the merger between Korean Air and Asiana Airlines in 2H 2023.
This could result in the Korea Development Bank (KDB) selling its 10.58% stake in Hanjin KAL Corp which could result in a fight for the control of Hanjin Kal.
Our NAV analysis of Hanjin Kal suggests NAV of 3.8 trillion won or implied target price of 57,259 won per share, representing 13% upside from current levels.

JD.com: Three Key Controversies

By Wium Malan, CFA

Despite a recovery in Chinese retail sales, JD.com’s revenue growth slow-down has accelerated, losing market share to disruptive online competitors amidst ramped-up pricing pressure.
Margin progression remains on track as JD.com refocuses on its core operations, optimizing its product mix and sales channels to improve operating efficiency.
JD.com trades on only a 4.1x Dec-23f PE multiple when excluding its net cash balance sheet and associates at book value.

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Jun 01

Most Read: Cambricon Technologies Corp, Relia Inc, Empyrean Technology, HSBC Holdings, Eoflow, Liontown Resources, Hyundai Energy Solutions, Yashili International Holdings, Bionote and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions
Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)
Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Changes Afoot
Yashili (1230 HK): Scheme Doc Out. 23 June Court Meeting
Flow Trading Opportunities Brought by the AI Rally: KRX Semicon Rebalancing in September
Yashili (1230 HK): Scheme Vote on 23 June
End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2023

CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions

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.

Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons

In mid-January this year, Mitsui & Co Ltd (8031 JP) announced it would buy out minorities in Relia Inc (4708 JP) (longtime known as Moshi Moshi), a BPO/RPA/AI services company.
I said the deal was too cheap, with 44% upside to the midpoint of Target Advisor’s DCF fair value range. Investors needed to exercise their cowbell to get more.
Since then, TOPIX has returned ~15%, A peer basket 16%, H2 was possibly kitchen-sinked, but no Mar-2024 forecasts were provided. The Tender starts tomorrow. Noise is still warranted.

ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes

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.

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)

The June rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest inflows will be on Meituan (3690 HK), JD.com (9618 HK), Zijin Mining (2899 HK), Baidu (9888 HK), Trip.com (9961 HK) and JD Logistics (2618 HK).
The largest outflows will be on HSBC Holdings (5 HK), Li Auto (2015 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and NetEase (9999 HK).

Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow

In this insight, we provide the details of Medtronic’s M&A and tender offer for Eoflow.
Currently, Eoflow is trading at 28,050 won which is 6.5% lower than the tender offer price of 30,000 won.
Eoflow’s share price is currently comfortably below 30,000 won and we believe this deal has 95-98%+ probability of getting completed within the current M&A framework.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Changes Afoot

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.

Yashili (1230 HK): Scheme Doc Out. 23 June Court Meeting

At long last, Yashili International Holdings (1230 HK) has dispatched the Scheme Document.
The Court Meeting and EGM will be held on the 23 June. The IFA says the Offer is fair. At a ~160% premium to undisturbed, it certainly is.
Assuming the transaction gets up, payment will occur on or before the 13 July.

Flow Trading Opportunities Brought by the AI Rally: KRX Semicon Rebalancing in September

KRX Semicon has experienced a considerable increase in AUM due to the recent AI rally. Two ETFs tracking SEMICON have a combined AUM of ₩0.6T.
The following five stocks are screened as potential additions: ITM Semiconductor, Hyundai Energy Solutions, TEMC, Fine Semitech, and AT Technology.
While it may not be a major flow event, it still presents a trading opportunity worth considering, especially in September, which is relatively less eventful in terms of flows.

Yashili (1230 HK): Scheme Vote on 23 June

The Yashili International Holdings (1230 HK) scheme document is out with the court meeting scheduled for 23 June. The IFA considers the HK$1.20 per share offer to be fair and reasonable.
Key conditions include approval by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). The shareholder with a blocking stake should be supportive.
This is a done deal. At the last close and for the 13 July payment, the gross and annualised spread is 1.7% and 15.3%, respectively.

End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2023

We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in June 2023, among which 6 are in KOSPI and 39 are in KOSDAQ.
These 45 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
Among these 45 stocks, the top five market cap stocks include Won Tech, Voronoi, Zinus, Bionote, and NanoTIM.

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May 31

Most Read: Rakuten, Cambricon Technologies Corp, Relia Inc, Empyrean Technology, Sam Chun Dang Pharm, HSBC Holdings, Eoflow, BYD, Polycab India , JD Industrials and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index
CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions
Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes
Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)
Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow
BYD Company: Moves to Top Auto Holding in EM
NIFTY NEXT 50 Index Market Consultation: Non-F&O Stocks Could Be Dropped
JD Industrials Pre-IPO – Initial Thoughts on Valuation

Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index

The index announcements regarding the the changes to indices following the Rakuten (4755 JP) offering have been a bit weird.
Some of that may have to do with timing. Some is just weird
The result is that there is less to buy this week than I previously expected, and the buying gets dragged out longer.

CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions

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.

Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons

In mid-January this year, Mitsui & Co Ltd (8031 JP) announced it would buy out minorities in Relia Inc (4708 JP) (longtime known as Moshi Moshi), a BPO/RPA/AI services company.
I said the deal was too cheap, with 44% upside to the midpoint of Target Advisor’s DCF fair value range. Investors needed to exercise their cowbell to get more.
Since then, TOPIX has returned ~15%, A peer basket 16%, H2 was possibly kitchen-sinked, but no Mar-2024 forecasts were provided. The Tender starts tomorrow. Noise is still warranted.

ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes

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.

Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea

It’s crucial to note that margin balances from CFDs will also be disclosed through each brokerage’s Home Trading System (HTS), providing insight into the risk of margin call-triggered covering trades.
It has been challenging to discern which are being targeted for illegal trading operations using CFDs. The disclosure of CFD margin balances can be an indicator to address this issue.
This may lead to a short-term selling spiral on suspected stocks, where illegal trading forces rush to liquidate their positions, and additional selling pressure targeting such activities exacerbates the situation.

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)

The June rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest inflows will be on Meituan (3690 HK), JD.com (9618 HK), Zijin Mining (2899 HK), Baidu (9888 HK), Trip.com (9961 HK) and JD Logistics (2618 HK).
The largest outflows will be on HSBC Holdings (5 HK), Li Auto (2015 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and NetEase (9999 HK).

Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow

In this insight, we provide the details of Medtronic’s M&A and tender offer for Eoflow.
Currently, Eoflow is trading at 28,050 won which is 6.5% lower than the tender offer price of 30,000 won.
Eoflow’s share price is currently comfortably below 30,000 won and we believe this deal has 95-98%+ probability of getting completed within the current M&A framework.

BYD Company: Moves to Top Auto Holding in EM

By Steven Holden

Investment levels in BYD Company Limited H Shares have reached record highs among active Emerging Market funds.
On a fund level, between 10/31/2022 and 04/30/2023, 22 funds opened new positions in BYD, led by Vontobel MTX Sustainable (+2.4%) and Putnam Emerging Markets (+1.95%).
BYD has risen up the ranks to become the most widely held and largest weight in the autos sector, surpassing Kia Corp and Mahindra & Mahindra over the last 2-years.

NIFTY NEXT 50 Index Market Consultation: Non-F&O Stocks Could Be Dropped

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.

JD Industrials Pre-IPO – Initial Thoughts on Valuation

By Sumeet Singh

JD Industrials is looking to raise about US$1bn in its upcoming HK IPO.
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
We have looked at the company background and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.

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May 30

Most Read: China Merchants Energy A, Piotech, Golden Eagle Retail, Rakuten, Canon Inc, Taiwan Semiconductor (TSMC) – ADR, Anhui Conch Cement, Relia Inc, Cambricon Technologies Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance: 9 Changes as Discretion Used
CSI500 Index Rebalance: Adds Starting to Outperform
CES China Semiconductor Chips Index Rebalance: Six Changes in June
Golden Eagle (3308 HK): Wang Family Delisting Offer
Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index
Assessing the Canon Buyback and Follow-On Performance
Taiwan Dual-Listings: ADR Premiums Surge to Near All-Time Highs on ‘Nvidia-Rally’
StubWorld: China Conch Trades Cheap. As Does Anhui
Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions

CSI300 Index Rebalance: 9 Changes as Discretion Used

There are 9 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
While nearly all the changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used discretion.
The Energy sector is the biggest gainer in terms of index spots, while the Consumer Discretionary and Health Care sectors lose two index spots each.

CSI500 Index Rebalance: Adds Starting to Outperform

There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 June.
One way turnover at the rebalance is estimated at 9.45% leading to a one-way trade of CNY 5.93bn. The IT and Industrials sectors gain the most index spots.
8 adds to the CSI 500 Index are deletes from the CSI 300 Index while 3 deletes from the CSI 500 Index are adds to the CSI 300 Index.

CES China Semiconductor Chips Index Rebalance: Six Changes in June

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.

Golden Eagle (3308 HK): Wang Family Delisting Offer

PRC department store play Golden Eagle (3308 HK) has announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close. The price is final.
The Offeror is the Wang family, Together with concert parties, they control 80.29%. 7.18% of the remaining 19.71% of the disinterested stakeholders have given an irrevocable.
Apart from shareholder approval, there are no key regulatory approvals to be obtained.

Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index

The index announcements regarding the the changes to indices following the Rakuten (4755 JP) offering have been a bit weird.
Some of that may have to do with timing. Some is just weird
The result is that there is less to buy this week than I previously expected, and the buying gets dragged out longer.

Assessing the Canon Buyback and Follow-On Performance

10 days ago Canon Inc (7751 JP) announced its 18th ¥50bn buyback in 15yrs. They have a pattern, both in execution and outperformance.
Historically, they are reasonably aggressive. It may pay to observe market data to see when they are done. It may also pay to look at peer outperformance cycles.
Here I look at both – buyback cycle performance and cycle outperformance. Good so far, and now I see a tactical trade but it’s not overwhelming.

Taiwan Dual-Listings: ADR Premiums Surge to Near All-Time Highs on ‘Nvidia-Rally’

By Vincent Fernando, CFA

The semiconductor stock rally in the U.S. caused by Nvidia’s monster results and guidance last week has caused multiple ADR premiums to surge to near all-time highs.
TSMC and UMC’s ADR premiums don’t appear sustainable given their trading history.
Telecom CHT wasn’t affected by the Nvidia rally and now has one of the lowest ADR discounts in its history.

StubWorld: China Conch Trades Cheap. As Does Anhui

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.
Preceding my comments on China Conch/Anhui 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%.

Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons

In mid-January this year, Mitsui & Co Ltd (8031 JP) announced it would buy out minorities in Relia Inc (4708 JP) (longtime known as Moshi Moshi), a BPO/RPA/AI services company.
I said the deal was too cheap, with 44% upside to the midpoint of Target Advisor’s DCF fair value range. Investors needed to exercise their cowbell to get more.
Since then, TOPIX has returned ~15%, A peer basket 16%, H2 was possibly kitchen-sinked, but no Mar-2024 forecasts were provided. The Tender starts tomorrow. Noise is still warranted.

CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions

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.

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✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 29

Most Read: NVIDIA Corp, China Merchants Energy A, AVIC (Chengdu) UAS Co Ltd, Anhui Conch Cement, Golden Eagle Retail, Japan Post Holdings, Piotech, Canon Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

US Debt Ceiling Raise Tells Us Gold Is Going Up… It Must Be Part Of Every Portfolio
NVIDIA. Yikes! Have We Missed The Boat?
CSI300 Index Rebalance: 9 Changes as Discretion Used
STAR50 Index Rebalance: Two Changes in June (As Expected)
SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
Golden Eagle Retail (3308 HK): Controlling Family’s Privatisation Offer at HK$6.88
Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post
CES China Semiconductor Chips Index Rebalance: Six Changes in June
Assessing the Canon Buyback and Follow-On Performance
CSI500 Index Rebalance: Adds Starting to Outperform

US Debt Ceiling Raise Tells Us Gold Is Going Up… It Must Be Part Of Every Portfolio

By Michael J. Howell

US debt ceiling agreement warns again about upcoming monetary inflation. Gold (and crypto) is a great hedge against monetary inflation, but less good against cost inflation
US debt problem demands near double-digit annual growth in Fed balance sheet over next decade… QE is not dead!
Gold could easily test US$3000/ oz. Bitcoin could do even better! Buy into any near-term weakness

NVIDIA. Yikes! Have We Missed The Boat?

By William Keating

Q1’23 revenues of $7.19 billion, down 13% from a year ago but up 19% sequentially and ~10% higher than the guided midpoint.
Current quarter outlook for revenues of $11 billion, a ~55% sequential increase, sparked mayhem in the markets and sent NVIDIA’s stock soaring over 24% in after hours trading
Don’t go chasing waterfalls, there are many other ways to rise with the tide

CSI300 Index Rebalance: 9 Changes as Discretion Used

There are 9 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
While nearly all the changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used discretion.
The Energy sector is the biggest gainer in terms of index spots, while the Consumer Discretionary and Health Care sectors lose two index spots each.

STAR50 Index Rebalance: Two Changes in June (As Expected)

The index committee has used a 6-month minimum listing history and that results in two changes. This is the first rebalance with less than 5 changes at a review.
One way turnover is estimated at 1.03% and will result in a one-way trade of CNY 1,025m. Given the adds are new listings, there will be some reverse funding flow.
There appears to be little pre-positioning on the adds while there is a bigger buildup on the deletes.

SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains

There are 5 changes for the SSE50 Index that will be implemented at the close on 9 June. There is over 1x ADV to sell on a few deletions.
We estimate a one-way turnover of 5.3% at the June rebalance leading to a one-way trade of CNY 3.84bn. Index arb activity could add to the impact on the stocks.
The adds outperformed the deletes from February to April but have given up a lot of the outperformance over the last month.

Golden Eagle Retail (3308 HK): Controlling Family’s Privatisation Offer at HK$6.88

Golden Eagle Retail (3308 HK) disclosed a scheme privatisation offer from the controlling family at HK$6.88 per share, a 40.4% premium to the undisturbed price (HK$4.90 on 22 May).
Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The shareholder with a blocking stake has provided an irrevocable.
The offer price is final. The offer is reasonable particularly as the sentiment on the department store sector remains weak. This looks like a done deal.

Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post

Rakuten Bank (5838 JP)‘s TOPIX inclusion is this week. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.
Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific Airways (293 HK) tackles alleged language bias by flight attendants.
Understanding real money demand on the Rakuten (4755 JP) story is key. If there is any, that makes deal overhang smaller than it looks.

CES China Semiconductor Chips Index Rebalance: Six Changes in June

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.

Assessing the Canon Buyback and Follow-On Performance

10 days ago Canon Inc (7751 JP) announced its 18th ¥50bn buyback in 15yrs. They have a pattern, both in execution and outperformance.
Historically, they are reasonably aggressive. It may pay to observe market data to see when they are done. It may also pay to look at peer outperformance cycles.
Here I look at both – buyback cycle performance and cycle outperformance. Good so far, and now I see a tactical trade but it’s not overwhelming.

CSI500 Index Rebalance: Adds Starting to Outperform

There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 June.
One way turnover at the rebalance is estimated at 9.45% leading to a one-way trade of CNY 5.93bn. The IT and Industrials sectors gain the most index spots.
8 adds to the CSI 500 Index are deletes from the CSI 300 Index while 3 deletes from the CSI 500 Index are adds to the CSI 300 Index.

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May 28

Most Read: Kum Yang, Youlchon Chemical, Canon Inc, Advantest Corp, AVIC (Chengdu) UAS Co Ltd, Eoflow, Anhui Conch Cement, CRRC Corp Ltd A, China Merchants Energy A and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KOSPI200 Index Rebalance: Two Sets of Changes
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start
Advantest (6857) | Key Beneficiary of AI Tailwinds
STAR50 Index Rebalance: Two Changes in June (As Expected)
EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation
SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
Japan Weekly | Advantest, Ibiden, Kawasaki Heavy, SK Kaken, NCHD
SSE180 Index Rebalance: Small Impact but Not Widely Tracked
CSI300 Index Rebalance: 9 Changes as Discretion Used

KOSPI200 Index Rebalance: Two Sets of Changes

There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.

KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill

Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.

Canon Buyback – 18th in a Row at the Same Size, But This Time With a Running Head Start

Canon has conducted 18 buybacks in the last 15 years. Every single one has been the same size. And the parameter-setting and how they are executed is… particular.
For those with Canon to execute, using the information about patterns may be helpful.
For those interested in a trade, there may be one here.

Advantest (6857) | Key Beneficiary of AI Tailwinds

By Mark Chadwick

Advantest is a market leader in semiconductor testing and will be a major beneficiary of a multi-year AI tailwind
Catalyst: News flow around new AI applications, increased investment dollars flowing into the space and visible acceleration in Nvidia’s data centre GPU growth
Market concern over near-term correction in semiconductor market is giving investors an opportunity to buy Advantest at a 15% discount to its intrinsic value

STAR50 Index Rebalance: Two Changes in June (As Expected)

The index committee has used a 6-month minimum listing history and that results in two changes. This is the first rebalance with less than 5 changes at a review.
One way turnover is estimated at 1.03% and will result in a one-way trade of CNY 1,025m. Given the adds are new listings, there will be some reverse funding flow.
There appears to be little pre-positioning on the adds while there is a bigger buildup on the deletes.

EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation

The likelihood of the merger review not being approved appears to be low. Additionally, the purchase of only 3.8M additional shares is required, leading to a negligible cancellation risk.
It is particularly noteworthy that the offering price of ₩30,000, targeting minority shareholders, may be adjusted upward depending on future share price increases.
While there is a potential allocation risk, as Medtronic aims to delist the company, they are unlikely to lower the target quantity in the tender offer to a risky level.

SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains

There are 5 changes for the SSE50 Index that will be implemented at the close on 9 June. There is over 1x ADV to sell on a few deletions.
We estimate a one-way turnover of 5.3% at the June rebalance leading to a one-way trade of CNY 3.84bn. Index arb activity could add to the impact on the stocks.
The adds outperformed the deletes from February to April but have given up a lot of the outperformance over the last month.

Japan Weekly | Advantest, Ibiden, Kawasaki Heavy, SK Kaken, NCHD

By Mark Chadwick

It was a relatively quiet week for the broader index. However, there was a big sector shift towards tech and AI winners.
Japanese Heavy Equipment makers have technologies that will be in demand for decades. KHI trades below book.
As we head into AGM season, we take a look at interesting activist campaigns.

SSE180 Index Rebalance: Small Impact but Not Widely Tracked

There are 18 changes for the SSE180 Index that will be implemented at the close of trading on 9 June.
The impact on the stocks is small but this is not a widely tracked index, so there could still be opportunities for some high risk/reward basket trades.
With Northbound Stock Connect eligibility no longer drawing on the SSE180 Index constituents, the index could lose relevance over time.

CSI300 Index Rebalance: 9 Changes as Discretion Used

There are 9 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
While nearly all the changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used discretion.
The Energy sector is the biggest gainer in terms of index spots, while the Consumer Discretionary and Health Care sectors lose two index spots each.

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May 27

Most Read: Kum Yang, AMP Ltd, Stockland, Youlchon Chemical, Rakuten Bank , LTIMindtree, NVIDIA Corp, Hong Kong Hang Seng Index, Eoflow, ISC Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KOSPI200 Index Rebalance: Two Sets of Changes
MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes
MVIS Australia A-REITs Index Rebalance Preview: Capping Changes & Flows
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow
HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications
Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
EQD | Asian Derivative YTD Range Trade Ideas
EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation
ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity

KOSPI200 Index Rebalance: Two Sets of Changes

There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.

MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes

There are unlikely to be any inclusions to the index in June while there are three stocks that are close to the deletion threshold.
Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of over 4% and a one-way trade of A$78m.
Short interest on AMP Ltd (AMP AU) has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.

MVIS Australia A-REITs Index Rebalance Preview: Capping Changes & Flows

We do not expect any constituent changes in June (that could change though!). The only flows are likely to be from capping the constituents at 10% of the index weight.
Capping changes will lead to a one-way turnover of 2.15% resulting in a one-way trade of A$14m. There are two stocks with over A$5m to trade.
Stockland (SGP AU) will be the most affected stock with passive trackers needing to sell over 1 day of ADV. The stock has run up and shorts are increasing.

KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill

Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.

Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow

SBI Sumishin Net Bank (7163 JP) and Rakuten Bank (5838 JP) listed over the last couple of months and the stocks will be added to various indices over the year.
First up, Rakuten Bank (5838 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 30 May.
Then both stocks will be added to other global indices between August and December bringing in passive flows and helping support the stock.

HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications

Media reports indicate that the HDFC Bank (HDFCB IN) merger with HDFC Limited (HDFC IN) is expected to complete in 4-5 weeks.
There will be inclusions to the NIFTY Index, Nifty Next 50 Index and S&P BSE SENSEX Index and capping changes to the Nifty Bank Index apart from changes to global indices.
While the impact on the merging entities is not big, there will be fairly large flows on some stocks that are index inclusions or affected by capping changes.

Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play

By Vincent Fernando, CFA

Nvidia’s results and guidance sparked a massive rally in the shares, marking one of the largest single-day increases in market cap in U.S. stock market history.
The company sees a multi-year growth cycle of data center upgrades ahead. Key supply chain partners TSMC and ASML are rising as well.
Wiwynn in Taiwan should be a key winner. We also highlight a potential wildcard smallcap AI play that we will investigate further.

EQD | Asian Derivative YTD Range Trade Ideas

By Leon Gross

Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
Many Asian Indices have Tight Ranges, Flat Returns YTD, Options Expensive to the Range.
HSBC Holdings (5 HK) and Citic Ltd (267 HK) are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options

EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation

The likelihood of the merger review not being approved appears to be low. Additionally, the purchase of only 3.8M additional shares is required, leading to a negligible cancellation risk.
It is particularly noteworthy that the offering price of ₩30,000, targeting minority shareholders, may be adjusted upward depending on future share price increases.
While there is a potential allocation risk, as Medtronic aims to delist the company, they are unlikely to lower the target quantity in the tender offer to a risky level.

ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity

The possibility of SKC securing additional shares other than the planned 40% through a tender offer seems low. This is a basis for the recent short position build-up in ISC.
ISC began to experience an influx of short selling, leading to it being designated as an overheated short-selling stock, and short selling was restricted for one day on the 26th.
We need to pay attention to the potential disappointment in the market, which could lead to a sustained downward correction in the stock price.

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May 26

Most Read: Rakuten, Cosmo Energy Holdings, Rakuten Bank , Toyo Construction, LTIMindtree, NVIDIA Corp, Sam A Aluminum, Swire Pacific (A), FUJIFILM Holdings, Mapletree Industrial Trust and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote
Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications
Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
Early Targetable Names in KOSPI 200 December Rebalancing
StubWorld: Swire Drifts Lower As Cathay Faces Discrimination Claim
FUJIFILM (4901.T) Loving The Setup Here
Mapletree Industrial Trust Placement – Data Centre Exposure Still on the Rise

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand

The Rakuten (4755 JP) offering is producing interesting analysis. My read on the telecom side is that things are better (or less bad) than they were.
Longer-Term, I see the idea. Shorter-term, there will still be questions until there are not. However, there could be a lot of non-fundamental “I want this” demand in the offering.
Questions to ask yourself are: 1) how much will get placed with investors who want it 20+% lower than 15 May highs? 2) how many shorts will cover?

Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote

Cosmo Energy Holdings (5021 JP) and noted Japanese activist Yoshiaki Murakami and affiliates/companies have been duking it out for the better part of a year.
Now Cosmo is putting a Poison Pill to an AGM vote. And it has decided to not allow Murakami-san to vote his shares. Because he is an interested party.
INVESTORS NEED TO BE AWARE. This is the second time a company has sought to deny a shareholder its voting rights without legal basis. The last time the court agreed.

Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow

SBI Sumishin Net Bank (7163 JP) and Rakuten Bank (5838 JP) listed over the last couple of months and the stocks will be added to various indices over the year.
First up, Rakuten Bank (5838 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 30 May.
Then both stocks will be added to other global indices between August and December bringing in passive flows and helping support the stock.

Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals

Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.

HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications

Media reports indicate that the HDFC Bank (HDFCB IN) merger with HDFC Limited (HDFC IN) is expected to complete in 4-5 weeks.
There will be inclusions to the NIFTY Index, Nifty Next 50 Index and S&P BSE SENSEX Index and capping changes to the Nifty Bank Index apart from changes to global indices.
While the impact on the merging entities is not big, there will be fairly large flows on some stocks that are index inclusions or affected by capping changes.

Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play

By Vincent Fernando, CFA

Nvidia’s results and guidance sparked a massive rally in the shares, marking one of the largest single-day increases in market cap in U.S. stock market history.
The company sees a multi-year growth cycle of data center upgrades ahead. Key supply chain partners TSMC and ASML are rising as well.
Wiwynn in Taiwan should be a key winner. We also highlight a potential wildcard smallcap AI play that we will investigate further.

Early Targetable Names in KOSPI 200 December Rebalancing

Based on the average daily full market cap up until the last close, the following additions have been identified as high-probability candidates: Sam A Aluminum, Dentium, and Dongwon Industries.
Three constituents will likely leave as they rank at the bottom in descending order of full market cap among those failing the screening: Cuckoo Homesys, Zinus, and Hyundai Home Shopping.
Dongwon Industries seems to be the most attractive, but given the uncertainty surrounding its inclusion, it may be more appropriate to target Dentium.

StubWorld: Swire Drifts Lower As Cathay Faces Discrimination Claim

A double dose of StubWorld this week. Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific (293 HK) tackles alleged language bias by flight attendants.
Preceding my comments on Japan Post 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%.

FUJIFILM (4901.T) Loving The Setup Here

By William Keating

Q1’23 revenues of ¥764 billion, up 15% YoY and 2.6% QoQ
FY2022, revenues grew by 13.2% to ¥2,859 while net income grew by 3.9% to ¥219.4.
Electronic Materials set to grow from ¥180 billion in ’22 to ¥500 billion by ’30

Mapletree Industrial Trust Placement – Data Centre Exposure Still on the Rise

By Ethan Aw

Mapletree Industrial Trust (MINT SP) is looking to raise at least S$202m (US$150m) in its primary placement.
The proceeds will be used to partially fund its acquisition of a data centre asset in downtown Osaka, Japan, while the remainder will be funded by debt.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

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May 25

Most Read: Rakuten Bank , Rakuten, Youlchon Chemical, Japan Post Holdings, Dongkuk Steel Mill, JD Industrials, Toyo Construction, Dickson Concepts Intl, Thai Life Insurance and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten Bank – Big TOPIX Inclusion Next Week
Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
Rakuten (4755 JP): The Current Playbook
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
StubWorld: Japan Post Holdings Coming Up “Cheap”
KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
JD Industrials Pre-IPO – Peer Comparison
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV
Quiddity Leaderboard SET50 Jun 23: Final Expectations

Rakuten Bank – Big TOPIX Inclusion Next Week

Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand

The Rakuten (4755 JP) offering is producing interesting analysis. My read on the telecom side is that things are better (or less bad) than they were.
Longer-Term, I see the idea. Shorter-term, there will still be questions until there are not. However, there could be a lot of non-fundamental “I want this” demand in the offering.
Questions to ask yourself are: 1) how much will get placed with investors who want it 20+% lower than 15 May highs? 2) how many shorts will cover?

Rakuten (4755 JP): The Current Playbook

Since the announcement of the placement, Rakuten (4755 JP)’s shares are down -15.7% from the undisturbed price of JPY707 per share (12 May prior to press reports of the placement).
To understand how the shares will trade as the offer is launched, we think it is instructive to look at recent large Japanese placements. Pricing date is likely 24 May.
So far, Rakuten’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.

KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill

Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.

StubWorld: Japan Post Holdings Coming Up “Cheap”

At 0.3x, Japan Post Holdings (6178 JP) is top of the heap in terms of dollar “UpValue” to move to PBR 1.0x under Japan’s governance changes.
Preceding my comments on Japan Post 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%.

KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline

Applying the T+3 relisting date as the effective date will again lead to noteworthy changes to the timeline of rebalancing flow trading.
It seems unnecessary to concentrate shorting on the trading halt day for Dongkuk Steel. We should aim for price corrections driven by passive flows on the T+2 period before effective.
Despite the Dongkuk Steel shareholders’ approval on the 12th, Youlchon Chemical’s price experienced a significant decline. The ongoing risk of major shareholder stake sales appears to have overshadowed this event.

JD Industrials Pre-IPO – Peer Comparison

By Sumeet Singh

JD Industrials (JDI) is looking to raise about US$1bn in its upcoming HK IPO.
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
In this note, we will undertake a peer comparison versus domestic and international peers.

Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals

Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.

Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV

By Sameer Taneja

Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value).
The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value.
With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.

Quiddity Leaderboard SET50 Jun 23: Final Expectations

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in June 2023.
There are only few more days left for the base date and we believe there could be two ADDs/DELs for the SET 50 index.
The LONG Thai Life Insurance (TLI TB) – SHORT Bangkok Life Assurance (BLA TB) trade had a good spell of performance but now it might be time to rethink.

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May 24

Most Read: Rakuten, Rakuten Bank , Makalot Industrial, Youlchon Chemical, Lutronic Corp, Growatt Technology, Ferrotec Corp, Dongkuk Steel Mill and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten US$2.4bn Placement – Recent Updates and Comparison to past Deals
Rakuten Bank – Big TOPIX Inclusion Next Week
Quiddity Leaderboard TDIV Jun 23: Five Changes and US$922mn One-Way Flows
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares
Rakuten (4755 JP): The Current Playbook
Growatt Technology IPO: The Investment Case
Ferrotec. Accelerating Growth Across Multiple Niche Semi Segments
Ohayo Japan |SPX -1.1% as Equities Start to Heed Debt Risks; NUGGET: JP Autos- Painful EV Transition
KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline

Rakuten US$2.4bn Placement – Recent Updates and Comparison to past Deals

By Sumeet Singh

Rakuten (4755 JP) aims to raise up to US$2.4bn (JPY323bn) via a global offering.
We have covered various aspects of the deal in our earlier notes, see here and here.
In this note, we will talk about the updates since our last note, as well as the performance of some of the past large primary raises in Japan.

Rakuten Bank – Big TOPIX Inclusion Next Week

Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.

Quiddity Leaderboard TDIV Jun 23: Five Changes and US$922mn One-Way Flows

By Janaghan Jeyakumar, CFA

In this insight, we take a look at Quiddity’s flow expectations for the June 2023 index rebalance.
I currently see 5 ADDs/DELs. Some of these names are different from the ones I specified in my previous insight.
I have also discussed some long-short trading ideas involving names with significant flow implications.

KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill

Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.

Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares

Lutronic Corp and Jeisys Medical have considerably lower DTV in comparison to their float shares. It is highly probable that they have artificially increased their float shares.
Coincidentally, these two stocks are the ones that have experienced the most dramatic increase in borrow balance after the result announcement.
These two stocks are being targeted for short-selling from a post-event perspective because the market believes they will exhibit abnormal passive (price) impact due to their inflated float shares.

Rakuten (4755 JP): The Current Playbook

Since the announcement of the placement, Rakuten (4755 JP)’s shares are down -15.7% from the undisturbed price of JPY707 per share (12 May prior to press reports of the placement).
To understand how the shares will trade as the offer is launched, we think it is instructive to look at recent large Japanese placements. Pricing date is likely 24 May.
So far, Rakuten’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.

Growatt Technology IPO: The Investment Case

Growatt Technology (1833969D CH), a leading PV inverters manufacturer, is pre-marketing a US$400 million HKEx IPO, according to press reports.
We previously discussed the IPO in Growatt Technology IPO: Growing Watts, Growatt Technology IPO: The Bull Case and Growatt Technology IPO: The Bear Case.
The updated PHIP which disclosed the 2022 results and latest developments suggests that Growatt continues to deliver profitable and cash-generative growth.

Ferrotec. Accelerating Growth Across Multiple Niche Semi Segments

By William Keating

Delivered FY’23 net sales of ¥$211 billion, up 57.5% sequentially.
FY’23 operating profit of ¥35 billion was up 63% sequentially
Our favourite Japanese semi stock with a TTM P/E <5

Ohayo Japan |SPX -1.1% as Equities Start to Heed Debt Risks; NUGGET: JP Autos- Painful EV Transition

By Mark Chadwick

OVERSEAS. SPX Closed -1.1% as US Debt Default risks rise; Democrats and Republicans still far apart; STRONG US new home Sales; Boeing says Supply Chain Resolution will take Time
JAPAN. NKY Futs -0.9% vs Cash; Japan likely falls 2nd day ; JP Real Wages Fall most in 8 years; S&P Cuts Softbank’s Debt in deeper Junk – Company protests
NUGGET. Japanese Automaker face massive R&D and Capex spend for years to come as they transition to EVs. Free Cash Flow likely turn negative, and profits stagnate.

KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline