Most Read

Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
There are no major index events coming up this week as a lot of markets are shut on different days.
There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US).

LQ45 Index Rebalance Preview (July): Identifying Potential Changes

The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
Potential adds are Adaro Minerals (ADMR IJ), Bumi Resources Minerals (BRMS IJ), Panin Financial (PNLF IJ), Energi Mega Persada (ENRG IJ), Transcoal Pacific (TCPI IJ) and Pertamina Geothermal Energy (PGEO).
Potential deletions are Japfa Comfeed Indonesia (JPFA IJ), Indocement Tunggal Prakarsa (INTP IJ), Timah Persero (TINS IJ), Bank Tabungan Negara Persero (BBTN IJ) and Chandra Asri Petrochemical (TPIA IJ).

Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash

Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week.

Quiddity Jun23 HSTECH Flow Expectations Update: SHORT AAC Vs LONG Lenovo Might Be Interesting

By Janaghan Jeyakumar, CFA

In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSTECH Index in June 2023.
Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
Here are our latest flow expectations based on the current prices.

Giant Biogene IPO Lock-Up – US$1.7bn Lockup Release Will Increase Free Float by 14x

By Sumeet Singh

Giant Biogene raised around US$70m in its Hong Kong IPO, after having downsized the deal and priced it at the low-end. Its six-month lockup will expire soon.
GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Quiddity HSCEI Jun 23 Flow Expectations Update: Two Expected Changes, US$608mn One-Way Flow

By Janaghan Jeyakumar, CFA

In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSCEI Index in June 2023.
Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
Here are our latest flow expectations based on the current prices.

AAG Energy (2686 HK): AGM Results Suggest a Scheme Fail Was Inevitable

Aag Energy Holdings (2686 HK)’s latest AGM results show a strong dissent from minorities. The number of NO votes per resolution varied from 590.9-652.5 million or 17.40%-19.22% of outstanding shares.
The AGM voting shows that Xinjiang Xintai Natural Gas (603393 CH) will struggle to pass the scheme even if the record date is changed and some NO votes are invalidated.
The risk-reward profile remains unfavourable as the downside to a scheme fail (12.1% to 17.0% downside) is greater than the upside to a scheme pass (+12.1% to HK$1.85 offer).

JAPAN ACTIVISM: Murakami-San Goes Substantial on Arcland SHD (3085) Ahead of Merger Vote Record Date

Today, City index Eleventh, the corporate entity often used by noted activist Yoshiaki Murakami, announced (EDINET filing) they owned 1.756mm shares or 5.31% of Arcland Service (3085 JP)
In mid-April, Arclands Corporation (9842 JP) announced it would merge with 55%-owned restaurant subsidiary Arclands SHD. Murakami-owned 5+% of Arclands at the time. Then it sold 9842 and bought 3085.
This looks like a confusing set of moves. It is not as confusing when you think about it. He is setting up something for later.

Liontown: Counter-Bid All But Baked In

On the 28 March, lithium play Liontown Resources (LTR AU) rejected Albemarle Corp (ALB US)‘s third proposal of $2.50/share, citing the revised terms as opportunistic.
Since, that date, it’s been “crickets.” Preliminary due diligence was not provided to Albemarle. Liontown responded to media speculation today saying it has received no new takeover proposals.
Yet behind the scenes, an interested party has been building a stake, paying up to $2.75/share, 1.5% above the last close.

NIFTY100 Index Rebalance Preview: Double/Triple Whammy for Some Stocks

Halfway through the review period, we see 5 potential changes for the Nifty Next 50 Index (NIFTYJR INDEX)/ Nifty 100 Index (NSE100 INDEX) at the September rebalance.
All the potential adds are expected to migrate from MidCap to LargeCap at the AMFI June reclassification, while we expect two of the potential deletes to move the other way.
Of the potential deletes, one is a high probability deletion from the MSCI India Index at the May QCIR while there is another that is a lower probability deletion.

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May 02

Most Read: Bloomberry Resorts, Kunlun Tech, Kiwoom Securities, Adani Transmission, SBI Shinsei Bank, Daou Data Corp, Alibaba Group, Dongwon Industries, Hyundai Rotem Company, Bumi Resources Minerals Tbk and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline
MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends
2023 High Conviction Update – Shinsei Revises Up Profit Forecast – Now Ahead of Plan
Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
Alibaba Cloud: Faces Nationalization Threat, IPO Prospects Remain Dim
End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023
Contenders for MSCI Korea Inclusion in 2H 2023
LQ45 Index Rebalance Preview (July): Identifying Potential Changes

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot

Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.

Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC

Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
There are no major index events coming up this week as a lot of markets are shut on different days.
There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US).

We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline

The recent matched order operation’s ringleader called in local major broadcasting companies for an interview and claimed the sell orders through SG on Monday were not from their CFD accounts.
The trigger is Kiwoom Securities’ Chairman Kim, who created a continuous and rapid decline in stock prices and led to a vicious cycle of endless margin calls and covering orders.
Rather than fishing for a bottom for the eight stocks from this point on, it seems necessary to actively design positions aimed at Kiwoom Securities’ legal risk-induced stock price decline.

MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends

The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) ended 28 April. MSCI should select a day from week one.
The most changes are expected in China and there are a couple of stocks that could trigger the Extreme Price Increase thresholds.
Some stocks appear on the list of potential changes on certain days during the review period and their addition/deletion will depend on the day that MSCI chooses for computation.

2023 High Conviction Update – Shinsei Revises Up Profit Forecast – Now Ahead of Plan

A year ago, SBI Shinsei Bank (8303 JP)‘s new MTMP was to get from ¥35bn profit in FY22 to ¥70bn in FY24 including ¥55bn of organic profit, ¥15bn of synergies.
On Friday, SBI Shinsei announced FY22 would be ¥42bn instead of ¥35bn, despite higher interest rates. More aggressive lending and gains in subs were credited.
The MTMP calls for ¥70bn Profit in Mar-25 – ¥341 EPS so Friday’s close x 7.1x. The big picture takeout scenario remains intact and Real World Float is still small.

Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash

Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week.

Alibaba Cloud: Faces Nationalization Threat, IPO Prospects Remain Dim

By Oshadhi Kumarasiri

Alibaba (ADR) (BABA US) Cloud will cut prices for its elastic computing services using Arm and Intel-based chips by 15-20% and Nvidia’s V100 and T4 graphics processing units by 41-47%.
It seems like the company is trying to combat increasing competition in the only way it knows how, by further subsidizing its already-subsidized cloud services.
Price may not be the main reason for companies to avoid using Alibaba Group (9988 HK)‘s Cloud services. Government initiatives to nationalize the cloud-computing market could be a bigger factor.

End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023

We discuss the end of the mandatory lock-up periods for 46 stocks in Korea in May 2023, among which 4 are in KOSPI and 42 are in KOSDAQ.
These 46 stocks on average could be subject to further selling pressures in May and could underperform relative to the market.
Among these 46 stocks, the top 6 market cap stocks include KG Mobility, Dongwon Industries, Hugel, Yunsung F&C, Enchem, and Jeio.

Contenders for MSCI Korea Inclusion in 2H 2023

We have provided a list of 10 stocks that could be included in the MSCI Korea index in 2H 2023.
Among these 10 companies, the top five companies with the highest free float based market cap have greater probabilities of becoming included in the index, in our view.
The five companies include Jyp Entertainment (035900 KS), Hyundai Rotem Company (064350 KS), DB Hitek Co., Ltd. (000990 KS), Cs Wind Corp (112610 KS), and LS Corp (006260 KS).

LQ45 Index Rebalance Preview (July): Identifying Potential Changes

The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
Potential adds are Adaro Minerals (ADMR IJ), Bumi Resources Minerals (BRMS IJ), Panin Financial (PNLF IJ), Energi Mega Persada (ENRG IJ), Transcoal Pacific (TCPI IJ) and Pertamina Geothermal Energy (PGEO).
Potential deletions are Japfa Comfeed Indonesia (JPFA IJ), Indocement Tunggal Prakarsa (INTP IJ), Timah Persero (TINS IJ), Bank Tabungan Negara Persero (BBTN IJ) and Chandra Asri Petrochemical (TPIA IJ).

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May 01

Most Read: Bloomberry Resorts, Kansai Paint, Kunlun Tech, Bank of Kyoto, China Mobile, Posco Chemical Co Ltd, Daou Data Corp, Aag Energy Holdings, HKBN Ltd, Arcland Service and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux
Last Week in Event SPACE: China Mobile, Fast Retailing, Yuexiu Property, Vinda, Tokyo Gas
A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
Weekly Deals Digest (30 Apr) – AAG, HKBN, Blackmores, Lian Beng, Horizon Construction, Mankind
Merger Arb Mondays (01 May) – HKBN, AAG Energy, United Malt, Blackmores, Origin, Metro Pacific
(Mostly) Asia M&A, April 2023: Arcland Service, Lian Beng, Silk Laser, Breaker Resources, Blackmores

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot

Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.

Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come

Today after the close, Kansai Paint (4613 JP) announced it would sell 3 investment securities in the current quarter and would book a gain of “around ¥30bn.”
As discussed in Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows, Toyota’s sale of KP shares meant KP could sell Toyota shares. Now they will.
This is a set-up to another buyback, eventually to unwind more in-bound cross-holdings and to raise ROE.

Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC

Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
There are no major index events coming up this week as a lot of markets are shut on different days.
There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US).

JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux

Last year, Silchester International Investors wrote a series of letters to Bank of Kyoto management and then asked to put items on the AGM agenda. It lost.
A Bloomberg article last week suggests Silchester will ask for a ¥62 special div and a ¥5bn buyback this year. The Silchester letter is “due” by 30 April.
The Bank has already delivered most of the ask this year (¥3bn in upped div, and ¥5bn in buybacks). Silchester will lose. Expect no Conversion on the Road to Kasumigaseki.

Last Week in Event SPACE: China Mobile, Fast Retailing, Yuexiu Property, Vinda, Tokyo Gas

It is relatively low-hanging fruit to “further propel the renmimbi’s internationalisation” and for HKEX, it will “cement HK’s position as the premier offshore renmimbi financing center.”
The Conundrum: the more active investors decide they like Fast Retailing (9983 JP), the more there is to sell. That creates interesting opportunities.
Short Yuexiu Property (123 HK) now, or soon. The dynamics of this is that there WILL be selling when the rights come out.

A Noteworthy Long Short Setup: Ecopro BM & Posco Future M

Currently, the market cap of Ecopro BM surpassed Posco Future M. As a result, Ecopro BM is in a position to replace Posco Future M in the K-New Deal rebalancing.
They are direct peers with a high price cointegration. We should consider using the rebalancing event of this index as an inflection point from a Long Short pair trading perspective.
The likelihood of Ecopro BM being included in the Solactive Lithium Index in October could potentially increase the expected return of taking this Long Short position more preemptively.

Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash

Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week.

Weekly Deals Digest (30 Apr) – AAG, HKBN, Blackmores, Lian Beng, Horizon Construction, Mankind

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 – Yuexiu Property (123 HK) rights issue and ADICON Holdings Limited (ADI HK), Horizon Construction Development (1887128D HK), Mankind Pharma (6596876Z IN) IPOs.
Event-Driven developments – Blackmores Ltd (BKL AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK), HKBN Ltd (1310 HK), Metro Pacific Investments Co (MPI PM), Lian Beng.

Merger Arb Mondays (01 May) – HKBN, AAG Energy, United Malt, Blackmores, Origin, Metro Pacific

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), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK), HKBN Ltd (1310 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Mincor Resources NL (MCR AU), Pushpay Holdings (PPH NZ), Blackmores Ltd (BKL AU).

(Mostly) Asia M&A, April 2023: Arcland Service, Lian Beng, Silk Laser, Breaker Resources, Blackmores

For the month of April, 6 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
The average premium for the new deals announced (or first discussed) in April was 23%.
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.

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Apr 30

Most Read: Mntech Co Ltd, Shandong Zhongji Electrical Eqpnt, AVIC (Chengdu) UAS Co Ltd, Bloomberry Resorts, Beijing Kingsoft Office Software-A, Kansai Paint, Micron Technology, Posco Chemical Co Ltd, Kunlun Tech and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained
STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History
PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
SSE50 Index Rebalance Preview: Five Changes Coming Up in June
What Did Global Liquidity Do Last Week?
Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
Memory Monitor: SK Hynix & Samsung Losses & Conservative Guidance Indicate Two-Track Chip Recovery
A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.

ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained

With 1 trading day left in the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the last month. We’d be inclined to trim positions.

STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History

The review period for the June rebalance ends 28 April. We expect the changes to be announced 26 May with the implementation taking place after the close on 9 June.
Using a 12-month minimum listing history results in no index changes. Using a 6-month minimum listing history results in two changes – we think this is what will be used.
The potential adds have outperformed the potential deletes but both sets of stocks have underperformed the SSE STAR50 (STAR50 INDEX) and the CSI Smallcap 500 Index – Shanghai (SH000905 INDEX).

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot

Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.

SSE50 Index Rebalance Preview: Five Changes Coming Up in June

With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.

What Did Global Liquidity Do Last Week?

By Michael J. Howell

We exlore a new weekly time series on Global Liquidity. The data start in 2010 and reveal a strong leading relationship to World asset markets. This is confirmed statistically
Latest data show a US$5 trillion rise since the end-2022 and a US$10 trillion increase since the cycle low in late-October 2022. Further gains are bullish for asset prices
Behind expanding Global Liquidity is a strengthening World Shadow Monetary Base. This measures the collateral pool than can be levered up by credit providers. It is leading the way

Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come

Today after the close, Kansai Paint (4613 JP) announced it would sell 3 investment securities in the current quarter and would book a gain of “around ¥30bn.”
As discussed in Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows, Toyota’s sale of KP shares meant KP could sell Toyota shares. Now they will.
This is a set-up to another buyback, eventually to unwind more in-bound cross-holdings and to raise ROE.

Memory Monitor: SK Hynix & Samsung Losses & Conservative Guidance Indicate Two-Track Chip Recovery

By Vincent Fernando, CFA

SK Hynix and Samsung reported results in the last week, showing major losses for their memory businesses. More evidence of a ‘two-track recovery’ for different parts of the chip industry.
SK Hynix’s inventory situation worsened based on our analysis; Micron appears to be managing inventory moderately better than peers based on recent results.
Long Micron vs. Short Nanya Technology: Micron has continued to outperform Nanya Tech, as well as SK Hynix and Samsung.

A Noteworthy Long Short Setup: Ecopro BM & Posco Future M

Currently, the market cap of Ecopro BM surpassed Posco Future M. As a result, Ecopro BM is in a position to replace Posco Future M in the K-New Deal rebalancing.
They are direct peers with a high price cointegration. We should consider using the rebalancing event of this index as an inflection point from a Long Short pair trading perspective.
The likelihood of Ecopro BM being included in the Solactive Lithium Index in October could potentially increase the expected return of taking this Long Short position more preemptively.

Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC

Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
There are no major index events coming up this week as a lot of markets are shut on different days.
There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US).

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

Apr 29

Most Read: Bloomberry Resorts, Shandong Zhongji Electrical Eqpnt, Beijing Kingsoft Office Software-A, Aag Energy Holdings, Kiwoom Securities, Samchully, Metro Pacific Investments Co, Kansai Paint, Vinda International, Hokkoku Financial Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained
SSE50 Index Rebalance Preview: Five Changes Coming Up in June
AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote
We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline
Korea Investment & Securities’ Suspension of Credit Loans for Stock Purchases – The Trigger Event?
Metro Pacific Investments (MPI PM): PHP4.63 Delisting Tender Offer
Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
Essity Mulls Holding In Vinda (3331 HK)
Hokkoku Financial (7381) Earnings Report Delay But HUGE Buyback. Again.

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot

Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.

ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained

With 1 trading day left in the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the last month. We’d be inclined to trim positions.

SSE50 Index Rebalance Preview: Five Changes Coming Up in June

With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.

AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote

The 27 April vote was adjourned as Aag Energy Holdings (2686 HK) Board was notified by “certain beneficial owners indicating that their latest voting instructions were not duly processed.”
The meeting would not be adjourned if the YES vote was going to sail through. A delay helps the offeror as these owners will vote YES and deal fatigue sets in.
Risk-Reward is still unfavourable at the last close. The deal break fair value range is HK$1.37-1.45 per share, with 16.0%-11.0% downside. This compares to the 13.5% upside from the offer.

We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline

The recent matched order operation’s ringleader called in local major broadcasting companies for an interview and claimed the sell orders through SG on Monday were not from their CFD accounts.
The trigger is Kiwoom Securities’ Chairman Kim, who created a continuous and rapid decline in stock prices and led to a vicious cycle of endless margin calls and covering orders.
Rather than fishing for a bottom for the eight stocks from this point on, it seems necessary to actively design positions aimed at Kiwoom Securities’ legal risk-induced stock price decline.

Korea Investment & Securities’ Suspension of Credit Loans for Stock Purchases – The Trigger Event?

The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.
The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD.
As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150.

Metro Pacific Investments (MPI PM): PHP4.63 Delisting Tender Offer

Metro Pacific Investments Co (MPI PM) disclosed a voluntary delisting tender offer from a consortium at PHP4.63 per share, an 8.7% premium to the undisturbed price (26 April).
The offer is conditional on shareholder approval and meeting the threshold for voluntary delisting (95% of outstanding shares) or obtaining an exemptive relief from the PSE.
The shareholder approval and delisting threshold require around 73% and 86% acceptance rate, which is a risk as the offer is far from a knockout bid.

Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come

Today after the close, Kansai Paint (4613 JP) announced it would sell 3 investment securities in the current quarter and would book a gain of “around ¥30bn.”
As discussed in Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows, Toyota’s sale of KP shares meant KP could sell Toyota shares. Now they will.
This is a set-up to another buyback, eventually to unwind more in-bound cross-holdings and to raise ROE.

Essity Mulls Holding In Vinda (3331 HK)

Tissue-Maker Vinda International (3331 HK) closed down 6.4% yesterday, recovering from a 13.8% fall intra day.
Vinda said its 1Q23 operating profit declined 85.4% to HK$65mn. Vinda also announced its controlling shareholder Essity (ESSITYB SS) will commence a strategic review of its 51.59% ownership.
A long-term shareholder potentially seeking a possible divestment, shortly after a company announces poor results, is not a great look.

Hokkoku Financial (7381) Earnings Report Delay But HUGE Buyback. Again.

Yesterday Hokkoku Financial Holdings (7381 JP) came out with an odd decision to delay earnings from 28 April to 8 May. Volume traded.
Today, despite not reporting earnings, the Kanazawa-based regional bank announced a BIG buyback with subsequent share cancellation. This was not unexpected. They have an aggressive policy which started last year.
Hokkoku Bank policy introduced last year is special. It has worked. They are pursuing it. Expect more policy action like this as banks report.

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Apr 28

Most Read: Tokyo Gas, Seoul City Gas, Samsonite, Fast Retailing, Activision Blizzard, Beijing Kingsoft Office Software-A, Blackmores Ltd, Bloomberry Resorts, Yunsung F&C, Aag Energy Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Tokyo Gas (9531 JP) Mega Buyback Announced
A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea
HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time
Activision Blizzard – An Unsightly Mess
SSE50 Index Rebalance Preview: Five Changes Coming Up in June
Kirin Looks To Take Blackmores Private
PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion
AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote

Tokyo Gas (9531 JP) Mega Buyback Announced

Five days ago, Tokyo Gas (9531 JP) announced a revision to earnings for the year to 31 March 2023. Today they reported results, and announced March 2024 guidance.
The company also announced a buyback programme to spend up to ¥113 billion to repurchase up to 53mm shares (12.2% of TSO). ¥113 billion is a very specific number.
With the price where it is, ¥113bn is “only” 9.6% of shares out but this is very interesting indeed.

A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea

The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market.

HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies

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

The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time

Fast Retailing (9983 JP) announced Q2 earnings two weeks ago. Revenues were good. OP was good. And the company raised full-year forecasts for Sales, OP, Pre-tax, and Net Profit.
The stock popped sharply. It isn’t “cheap” but it is under-owned, actively. And revenues up 20%yoy is a very good look.
The Conundrum: the more active investors decide they like it, the more there is to sell. That creates interesting opportunities.

Activision Blizzard – An Unsightly Mess

By Mio Kato

Last night the CMA chose to block the merger between Microsoft and Activision Blizzard in the UK on the grounds that it would harm competition in cloud gaming.
The merits of that position are highly debatable in our view but that does not mean that the decision is bad for consumers.
It also does not mean that the decision is bad for Microsoft in our view.

SSE50 Index Rebalance Preview: Five Changes Coming Up in June

With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.

Kirin Looks To Take Blackmores Private

Japan’s Kirin Holdings (2503 JP) has proposed taking Aussie vitamin play Blackmores Ltd (BKL AU) private by way of a Scheme at A$95/share.
That’s a 23.7% premium to last close, and represents 23.1x LTM December 2022 EBITDA.
Irrevocables are 18% of shares out. This Scheme requires clearance from ACCC, FIRB – and China’s SAMR.

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot

Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.

One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion

Due to the matched order fraud incident in recent days, there has been a significant change in the KOSDAQ top 50 rankings, presenting a great opportunity for Yunsung F&C.
The estimated size of the passive inflow that it is likely to receive is approximately 0.5-0.8x ADTV for ETFs alone, and 1.2-1.5x when expanded to all passive funds.
We should note that the level of market exposure to inclusion possibility has been significantly low. Therefore, we can expect a significant price impact at the time of the announcement.

AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote

The 27 April vote was adjourned as Aag Energy Holdings (2686 HK) Board was notified by “certain beneficial owners indicating that their latest voting instructions were not duly processed.”
The meeting would not be adjourned if the YES vote was going to sail through. A delay helps the offeror as these owners will vote YES and deal fatigue sets in.
Risk-Reward is still unfavourable at the last close. The deal break fair value range is HK$1.37-1.45 per share, with 16.0%-11.0% downside. This compares to the 13.5% upside from the offer.

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Apr 27

Most Read: Mntech Co Ltd, HDFC Limited, Lutronic Corp, Tokyo Gas, Samsonite, Seoul City Gas, Zhejiang Century Huatong A, ZJLD Group, AVIC (Chengdu) UAS Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
HDFC/HDFC Bank Mega Merger: Index Implications as We Near Completion
KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)
Tokyo Gas (9531 JP) Mega Buyback Announced
HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea
CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion
ZJLD Group IPO Trading – Subscription Rates Better than Recent Large HK Deals
ZJLD Group IPO: Trading Debut
STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.

HDFC/HDFC Bank Mega Merger: Index Implications as We Near Completion

Foreign shareholding has dropped in HDFC Limited and increased in HDFC Bank – the net effect is an increase in foreign room to just north of 18%.
The merger is expected to complete in Q2/Q3 when there will be buying from MSCI trackers. There will be adhoc inclusions to the NIFTY, Nifty Next 50 and SENSEX indices.
HDFC Limited (HDFC IN) trades 1.39% below the merger ratio with HDFC Bank (HDFCB IN) and also at a lower price to book.

KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)

With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX).
There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.

Tokyo Gas (9531 JP) Mega Buyback Announced

Five days ago, Tokyo Gas (9531 JP) announced a revision to earnings for the year to 31 March 2023. Today they reported results, and announced March 2024 guidance.
The company also announced a buyback programme to spend up to ¥113 billion to repurchase up to 53mm shares (12.2% of TSO). ¥113 billion is a very specific number.
With the price where it is, ¥113bn is “only” 9.6% of shares out but this is very interesting indeed.

HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies

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

A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea

The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market.

CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.

ZJLD Group IPO Trading – Subscription Rates Better than Recent Large HK Deals

By Clarence Chu

ZJLD Group (ZJLD HK) raised around US$676m in its Hong Kong IPO.
ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
In this note, we will talk about the trading dynamics and valuation.

ZJLD Group IPO: Trading Debut

ZJLD Group (ZJLD HK) priced its IPO at HK$10.82 per share to raise net proceeds of HK$5.0 billion (US$636 million). The shares will start trading tomorrow.
We previously discussed the IPO in ZJLD Group IPO: The Bull Case, ZJLD Group IPO: The Bear Case and ZJLD Group IPO: Valuation Insights.
We expect a muted debut as A Share baijiu peers have derated since the release of the prospectus. The shares remain attractive at the IPO price.

STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History

The review period for the June rebalance ends 28 April. We expect the changes to be announced 26 May with the implementation taking place after the close on 9 June.
Using a 12-month minimum listing history results in no index changes. Using a 6-month minimum listing history results in two changes – we think this is what will be used.
The potential adds have outperformed the potential deletes but both sets of stocks have underperformed the SSE STAR50 (STAR50 INDEX) and the CSI Smallcap 500 Index – Shanghai (SH000905 INDEX).

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Apr 26

Most Read: Mntech Co Ltd, Youlchon Chemical, Zhejiang Huafeng Spandex A, JD Industrials, Aag Energy Holdings, Mankind Pharma, Lutronic Corp, CPF Global Food Solution, Zhejiang Century Huatong A and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
JD Industrials Pre-IPO – The Positives – Growing Fast and a Leader in Its Space
AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote
Mankind Pharma: IPO Details & Index Inclusion
KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)
CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry
CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.

KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks

With 4 trading days left in the review period, we see three potential changes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in June.
Kum Yang (001570 KS), Cosmochemical (005420 KS) and Youlchon Chemical (008730 KS) could replace Dongwon Industries (006040 KS), Hwaseung Enterprise (241590 KS) and Hyundai Home Shopping Network (057050 KS).
If approved by shareholders, the Dongkuk Steel Mill (001230 KS) split increases the probability of Youlchon Chemical (008730 KS) inclusion and Hyundai Home Shopping Network (057050 KS) could avoid deletion.

CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete

With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.

AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote

Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%.
The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp.
At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).

JD Industrials Pre-IPO – The Positives – Growing Fast and a Leader in Its Space

By Sumeet Singh

JD Industrials is looking to raise about US$1bn in its upcoming HK IPO.
JD Industrials (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 talk about the positive aspects of the deal.

AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote

We’re down to the pointy end of AAG Energy Holdings (2686 HK)‘s Scheme. And at a gross/annualised spread of 15.6%/318%, all is not well.
The uncertainty is not without substance. A derisory Offer, one that is rejected by a proxy advisor; together with a silent, large shareholder no one seems to know.
Shareholders go to the vote this Thursday, the 27th April. Currently trading 5% below the undisturbed price.

Mankind Pharma: IPO Details & Index Inclusion

Mankind Pharma (6596876Z IN) is looking to raise up to US$526m in its IPO by selling 40.06m shares at a price range of INR 1026 to INR 1080 per share.
The company has allocated 12.02m shares to anchor investors at INR 1080/share. That list includes marquee names and the lock-up reduces near-term float.
The IPO opens on 25 April and will close on 27 April. Shares are expected to start trading on 9 May and there are no near-term index inclusions expected.

KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)

With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX).
There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.

CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry

By Ethan Aw

CPF Global Food Solution (2247162D TB) is looking to raise around US$1bn in its upcoming Thailand IPO.
CPF Global Food Solution (CPFGS) is a subsidiary of CP Foods Group, offering food products and services to food operators and consumers locally and internationally.
In this note, we talk about the positive aspects of the deal.

CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.

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Apr 25

Most Read: China Mobile, Yuexiu Property, Tong Hsing Electronic Industries Ltd, Doubleugames Co, Ltd., Meituan, Aag Energy Holdings, Youlchon Chemical, Rakuten Bank , Zhejiang Huafeng Spandex A, Kcc Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Another Reason To Like China Mobile (941 HK)
Yuexiu Property (123 HK) Rights Offering
Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta
Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch
Meituan (3690 HK): Delivery Workers on Strike
AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
Rakuten Bank (5838 JP): Premium Growth Neobank Still Trading at Attractive Valuations
CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

Another Reason To Like China Mobile (941 HK)

In March, the HK Secretary for Financial Services announced a waiver of stamp duty on dual counter trading market making. In November, the Govt of HK gazetted a bill.
HKEX launched plans in December. 9 large HK names announced in March they’d apply (Tencent, Kuaishou, Geely, BOC, Anta, AIA, China Resources Beer, Bidu, HKEX). Six more in April.
All the announcements are similar. But one on 21 April caught my eye because it is a big H/A with strong southbound support. That’s China Mobile (941 HK).

Yuexiu Property (123 HK) Rights Offering

On Thursday morning, Yuexiu Property (123 HK) halted trading in its shares and then later in the day announced a rights offering. Shares fell hard but gained back a little.
The rights offering lowers BVPS by about 11.3% so the current price is “about right” for the fundamentals if the price the day before the news was right.
There are, however, flow dynamics which are of interest. There almost always are.

Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta

The review period for the MSCI May QCIR started last week and there were ad hoc changes to the S&P/ASX family and the KOSDAQ 150 Index (KOSDQ150 INDEX).
The end of the coming week will mark the end of the review period for the upcoming rebalances for a bunch of indices with implementation scheduled in May and June.
There was inflow to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF for another week.

Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch

Two pairs of constituent changes marked in squares in INTERNET and GAME may offer meaningful trading opportunities: Seojin System IN / Ahnlab OUT and Com2us IN / Doubleugames OUT.
Along with TIGER ETF, stealth index funds follow these indices. So, constituent changes in INTERNET and GAME create a flow impact of 0.3~0.6x DTV, even not in the Top 3.
Also, INTERNET and GAME have less passive flow impact degradation risk due to momentum trading flows compared to BATTERY and BIO.

Meituan (3690 HK): Delivery Workers on Strike

By Ming Lu

Meituan’s delivery workers started a strike in Shanwei City of Guangdong Province.
Meituan called many of its delivery workers from other cities nearby as substitutes.
We believe the hard job market pushes Meituan to the very font line of industrial relation.

AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote

Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%.
The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp.
At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).

KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks

With 4 trading days left in the review period, we see three potential changes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in June.
Kum Yang (001570 KS), Cosmochemical (005420 KS) and Youlchon Chemical (008730 KS) could replace Dongwon Industries (006040 KS), Hwaseung Enterprise (241590 KS) and Hyundai Home Shopping Network (057050 KS).
If approved by shareholders, the Dongkuk Steel Mill (001230 KS) split increases the probability of Youlchon Chemical (008730 KS) inclusion and Hyundai Home Shopping Network (057050 KS) could avoid deletion.

Rakuten Bank (5838 JP): Premium Growth Neobank Still Trading at Attractive Valuations

By Victor Galliano

The sharp run-up in the share price since its IPO does not, in our view, mean that Rakuten Bank’s rally is done; there is further fundamental justification for a re-rating
Rakuten Bank trades on a LTM PE multiple of 14.4x, LTM PBV ratio of 1.6x and an ROE of 13.2%, which is the best return of our neobank peers
Relative to its peer group, Rakuten Bank has premium long-run growth prospects; conservatively estimating Rakuten Bank’s growth (8% pa), implies a PEG ratio in the range of 1.2x to 1.3x

CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete

With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.

KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

On 24 April, KCC Corp announced that it plans to IPO its subsidiary Momentive Performance Materials Inc. in the US stock market as early as 2023.
In 2021, KCC raised its stake in MOM Holding from 50% + 1 share to 60%. Momentive EBITDA increased from $300 million in 2018 to $450 million in 2022.
Our valuation of KCC Corp suggests an NAV of 3.1 trillion won (post 50% discount) or NAV per share of 347,633 won per share, representing 49% higher than current price.

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Apr 24

Most Read: Tong Hsing Electronic Industries Ltd, Yuexiu Property, China Mobile, Doubleugames Co, Ltd., LG Energy Solution, Yamada Denki, Aag Energy Holdings, Taiwan Semiconductor (TSMC) – ADR, Las Vegas Sands and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta
Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue
Yuexiu Property (123 HK) Rights Offering
Another Reason To Like China Mobile (941 HK)
Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch
Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain
Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction
Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo
Nvidia, TSMC, ASML Trading Monitor – TSMC & ASML Results Indicate Cycle Bottom 2Q23E for Leaders
Las Vegas Sands: Starting a Run as Macau Recovery Gains Speed. Up 23% YTD.

Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta

The review period for the MSCI May QCIR started last week and there were ad hoc changes to the S&P/ASX family and the KOSDAQ 150 Index (KOSDQ150 INDEX).
The end of the coming week will mark the end of the review period for the upcoming rebalances for a bunch of indices with implementation scheduled in May and June.
There was inflow to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF for another week.

Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue

Yuexiu Property (123 HK) will raise US$1.1bn through a rights offering – 30 rights shares for every 100 existing shares. The subscription price is HK$9.00, a 23.3% discount to TERP.
As Yuexiu is in no danger of breaching the three red lines, the rights issue is an opportunistic play on capitalising on the strong share price run.
Rights shares will be entitled to the final and special dividend announced on 15 March. Shares go ex-rights on 2 May and the rights start trading on 15 May.

Yuexiu Property (123 HK) Rights Offering

On Thursday morning, Yuexiu Property (123 HK) halted trading in its shares and then later in the day announced a rights offering. Shares fell hard but gained back a little.
The rights offering lowers BVPS by about 11.3% so the current price is “about right” for the fundamentals if the price the day before the news was right.
There are, however, flow dynamics which are of interest. There almost always are.

Another Reason To Like China Mobile (941 HK)

In March, the HK Secretary for Financial Services announced a waiver of stamp duty on dual counter trading market making. In November, the Govt of HK gazetted a bill.
HKEX launched plans in December. 9 large HK names announced in March they’d apply (Tencent, Kuaishou, Geely, BOC, Anta, AIA, China Resources Beer, Bidu, HKEX). Six more in April.
All the announcements are similar. But one on 21 April caught my eye because it is a big H/A with strong southbound support. That’s China Mobile (941 HK).

Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch

Two pairs of constituent changes marked in squares in INTERNET and GAME may offer meaningful trading opportunities: Seojin System IN / Ahnlab OUT and Com2us IN / Doubleugames OUT.
Along with TIGER ETF, stealth index funds follow these indices. So, constituent changes in INTERNET and GAME create a flow impact of 0.3~0.6x DTV, even not in the Top 3.
Also, INTERNET and GAME have less passive flow impact degradation risk due to momentum trading flows compared to BATTERY and BIO.

Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain

On 20 April, Chile’s government announced that it will be nationalizing the country’s lithium industry. Chile is the second largest producer of lithium in the world.
The nationalization of the lithium industry in Chile will likely have a long-term negative impact on the rechargeable batteries related companies in Korea.
This is mainly due to greater challenges of getting access to lithium at more affordable prices.

Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction

Yamada Denki (9831 JP) lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.
Genting Bhd (GENT MK)‘s implied stub and simple ratio (GENT/ Genting Singapore (GENS SP)) are currently at muti-year trough levels.
Buy Toyo Construction (1890 JP) <¥970. The proposed dividend could be in danger should YFO spill the board; but spilling the board to get better governance is a good thing.

Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo