Category

Daily Briefs

May 06
0

Daily Brief India: NIFTY Index, TBO Tek and more

By | Daily Briefs, India

In today’s briefing:

  • EQD / NSE Volatility Update / 29-Apr-24 to 03-May-24
  • TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation

EQD / NSE Volatility Update / 29-Apr-24 to 03-May-24

By Sankalp Singh

  • Implied Volatilities (IVs) have stabilized over the past few weeks & look to be in the early stages of an uptrend. 
  • Breakdown in Spot-Vol correlation – higher IVs at a time when Equity Indices are flirting with All-time-Highs.
  • Skew compression in BankNifty Options driven by call-buying on the break above 49000, further exacerbated by pre-election demand for June & July expiries. 

TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation

By Ethan Aw

  • TBO Tek (0395045D IN) is looking to raise approximately US$200m in its upcoming India IPO.
  • TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
  • In this note, we provide a summary of its RHP updates and share our quick thoughts on valuation.

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May 06
0

Daily Brief United States: ZEEKR, Hollysys Automation Technologies, Lam Research and more

By | Daily Briefs, United States

In today’s briefing:

  • ZEEKR (ZK US) IPO: Valuation Insights
  • Hollysys (HOLI US): Further Thoughts on the Widening Spread
  • LRCX. Mounting Tailwinds Bode Well For 2025 & Beyond

ZEEKR (ZK US) IPO: Valuation Insights

By Arun George

Hollysys (HOLI US): Further Thoughts on the Widening Spread

By Arun George

  • I have received several questions from readers on Ascendent’s binding proposal for Hollysys Automation Technologies (HOLI US) in the context of the current gross spread of 12.1%. 
  • The questions primarily concerned the Capital Forum article, NSR approvals, timelines, auditor resignation and deal break risks. 
  • Most of the questions concerned regulatory approval risk. The delay in closing is mainly procedural (government red tape) rather than an indication that regulators will block the deal. 

LRCX. Mounting Tailwinds Bode Well For 2025 & Beyond

By William Keating

  • Q124 revenues of $3.79 billion, pretty much flat sequentially both QoQ and YoY, and also marginally better than guidance.
  • Looking ahead, the company forecasted Q224 revenues $3.8 billion, i.e. flat QoQ. Still no full year 2024 outlook
  • Technology transitions such as GAA, Backside Power, molybdenum replacing tungsten & the rise of generative AI will all be growth drivers in 2025 & beyond 

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May 06
0

Daily Brief China: China Merchants Expressway Net, China Traditional Chinese Medicine, Tencent, Hang Seng China Enterprises Index, APT Medical , ICBC (H), Contemporary Amperex Technology (CATL), Shijiazhuang Yiling Pharmaceutical and more

By | China, Daily Briefs

In today’s briefing:

  • CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
  • Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri
  • HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold
  • HSCEI Dividend Futures: Sell the 2024/25 Steepener
  • CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
  • China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”
  • A/H Premium Tracker (To 3 May 2024):  Minimal Moves in 2-Day Week
  • Mainland Connect NORTHBOUND Flows (To 30-Apr/3-May 2024): Big Volumes, Low Net; As Will Play Catchup
  • China Healthcare Weekly (May.5) – Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived

By Brian Freitas

  • The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX). 
  • We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
  • The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.

Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri

By Arun George

HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold

By Travis Lundy

  • A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday. 
  • Net SOUTHBOUND buying was +HK6.0bn. Net buys every day and now 22 days straight, but buying still appears foreign-led price-taking action. 
  • The only big news this week in China/HK was probably the Politburo’s new stance of trying to do more for the mainland property market, concentrating on unsold homes. 

HSCEI Dividend Futures: Sell the 2024/25 Steepener

By Brian Freitas

  • The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.
  • The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.
  • Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.

CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes

By Brian Freitas

  • With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
  • We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
  • The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.

China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”

By Xinyao (Criss) Wang

  • Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM’s target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
  • At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the “confusion”.
  • According to regulatory requirements, it’s expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.

A/H Premium Tracker (To 3 May 2024):  Minimal Moves in 2-Day Week

By Travis Lundy

  • The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
  • SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
  • HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.

Mainland Connect NORTHBOUND Flows (To 30-Apr/3-May 2024): Big Volumes, Low Net; As Will Play Catchup

By Travis Lundy

  • The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
  • Last week saw NORTHBOUND net BUY RMB 2.3bn of A-shares on high gross low net volume in the two days. NORTHBOUND bought CATL, Shenzhen Mindray, some financials.
  • As outperformed Hs on Monday and Tuesday (when both were open), then Hs rocketed on Thursday and Friday. As will have to catch up early in the week.

China Healthcare Weekly (May.5) – Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma

By Xinyao (Criss) Wang

  • Due to the overvaluation of pharmaceutical companies in the primary market, only foreign markets are able to “digest” such high valuation. So, various promising drugs are acquired by foreign investors.
  • The field of RDC/RLT has attracted our attention, which could become the next hot area. Since nuclides are the most important bottleneck, domestic related enterprises will usher in opportunities.
  • Shijiazhuang Yiling Pharmaceutical’s performance would continue to be under pressure in 24H1 but would rebound in 24H2 after “destocking”. Valuation/share price have not yet bottomed out. Don’t rush to bottom-fish.

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May 06
0

Daily Brief Japan: Shinko Electric Industries, TORIDOLL Holdings Corporation, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update
  • Toridoll (3397): Restaurant Chain on a Lege
  • Shareholder Returns Will Increase over June AGM, but Will Companies Hold up with Sluggish ROE?

Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update

By Travis Lundy

  • When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
  • 15wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 8wks ago, recommended taking profits.
  • Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 3.6% wider than at narrowest, but gap risk has widened as Shinko outperforms, Ibiden.

Toridoll (3397): Restaurant Chain on a Lege

By Michael Allen

  • Macro trends for restaurant chains are all negative: Food prices rising faster than restaurant unit prices, part-time wages rising faster than full-time.
  • Toridoll’s same store sales resuming long-term underperformance trend that was broken only briefly during the pandemic.
  • Stock trades at 3x the market average PBR, despite merely average RoE. Technical support has broken down.

Shareholder Returns Will Increase over June AGM, but Will Companies Hold up with Sluggish ROE?

By Aki Matsumoto

  • In addition to too much cash on hand to begin with, ROE is expected to continue to grow at a sluggish pace, as shareholder returns are less than profit growth.
  • Given that we expect more companies to have stock price, P/B, and ROE on the agenda for the June AGM, more companies are expected to announce increases in shareholder returns.
  • However, ROE is unlikely to increase significantly. Shareholder returns are certainly too small, but a more serious problem is the inability to find growth investment opportunities.

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May 06
0

Daily Brief Quantitative Analysis: Value or Growth? Here’s an Analytical Framework and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • Value or Growth? Here’s an Analytical Framework
  • KRX Foreign Holding Weekly (May 3rd): Celltrion, Sk Hynix
  • TWSE Foreign Holding Weekly (May 3rd): TSMC, Hon Hai, Delta Elec, Yageo, Quanta Computer, Alchip
  • TWSE Short Interest Weekly (May 3rd): Asia Vital, Mediatek, Chung-Hsin

Value or Growth? Here’s an Analytical Framework

By Cam Hui

  • Should you buy value or growth stocks? We present an analytical framework for analyzing growth and value within a capital intensity context.
  • While growth has outperformed value for prolonged periods, we believe cyclically sensitive value stocks present outperformance opportunities over the medium term.
  • We recommend investors maintain an overweight position in value, a marketweight position in growth and an underweight position in defensive sectors.

KRX Foreign Holding Weekly (May 3rd): Celltrion, Sk Hynix

By Ke Yan, CFA, FRM

  • We analyzed the changes in foreign holdings of KRX Stocks as of May 3rd which has an aggregated holding worth USD529.7bn.
  • We estimate that foreign flows to be inflows of USD1,168mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
  • We highlight foreign changes in Celltrion (068270 KS), Sk Hynix (000660 KS).

TWSE Foreign Holding Weekly (May 3rd): TSMC, Hon Hai, Delta Elec, Yageo, Quanta Computer, Alchip

By Ke Yan, CFA, FRM

  • We analyzed the changes in foreign holdings of TWSE Stocks as of May 3rd which has an aggregated holding worth USD3,897.7bn.
  • We estimate that foreign flows to be inflows of USD3,975mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
  • We highlight foreign changes in TSMC, Hon Hai, Delta Elec, Yageo, Quanta Computer, Alchip Tech, King Yuan Elec, Wt, Accton Tech, Powertech.

TWSE Short Interest Weekly (May 3rd): Asia Vital, Mediatek, Chung-Hsin

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of TWSE Stocks as of May 3rd which has an aggregated short interest worth USD86.1bn.
  • We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
  • We highlight short interest changes in Asia Vital, Mediatek, Chung-Hsin.

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May 06
0

Daily Brief ESG: Shareholder Returns Will Increase over June AGM and more

By | Daily Briefs, ESG

In today’s briefing:

  • Shareholder Returns Will Increase over June AGM, but Will Companies Hold up with Sluggish ROE?

Shareholder Returns Will Increase over June AGM, but Will Companies Hold up with Sluggish ROE?

By Aki Matsumoto

  • In addition to too much cash on hand to begin with, ROE is expected to continue to grow at a sluggish pace, as shareholder returns are less than profit growth.
  • Given that we expect more companies to have stock price, P/B, and ROE on the agenda for the June AGM, more companies are expected to announce increases in shareholder returns.
  • However, ROE is unlikely to increase significantly. Shareholder returns are certainly too small, but a more serious problem is the inability to find growth investment opportunities.

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May 06
0

Daily Brief Thematic (Sector/Industry): HK Strategy: Where Are the Short-Term Opportunities? and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • HK Strategy: Where Are the Short-Term Opportunities?

HK Strategy: Where Are the Short-Term Opportunities?

By Osbert Tang, CFA

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May 06
0

Daily Brief ECM: ZEEKR (ZK US) IPO: Valuation Insights and more

By | Daily Briefs, ECM

In today’s briefing:

  • ZEEKR (ZK US) IPO: Valuation Insights
  • ECM Weekly (6th May 2024) – Aadhar, Indegene, TBO Tek, Super Hi, China Resources Bev, Honasa, Worley
  • TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation

ZEEKR (ZK US) IPO: Valuation Insights

By Arun George

ECM Weekly (6th May 2024) – Aadhar, Indegene, TBO Tek, Super Hi, China Resources Bev, Honasa, Worley

By Sumeet Singh

TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation

By Ethan Aw

  • TBO Tek (0395045D IN) is looking to raise approximately US$200m in its upcoming India IPO.
  • TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
  • In this note, we provide a summary of its RHP updates and share our quick thoughts on valuation.

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May 06
0

Daily Brief Event-Driven: Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update
  • CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
  • Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri
  • Addressing Areas of Confusion Surrounding the KOSPI 200 June Rebalancing
  • HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold
  • HSCEI Dividend Futures: Sell the 2024/25 Steepener
  • Hollysys (HOLI US): Further Thoughts on the Widening Spread
  • CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
  • China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”
  • A/H Premium Tracker (To 3 May 2024):  Minimal Moves in 2-Day Week

Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update

By Travis Lundy

  • When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
  • 15wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 8wks ago, recommended taking profits.
  • Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 3.6% wider than at narrowest, but gap risk has widened as Shinko outperforms, Ibiden.

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived

By Brian Freitas

  • The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX). 
  • We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
  • The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.

Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri

By Arun George

Addressing Areas of Confusion Surrounding the KOSPI 200 June Rebalancing

By Sanghyun Park

  • Ssangyong C&E will be excluded in June pre-delisting due to the float rate rule. Replacement will be chosen from the highest market cap existing constituents excluded in the June review.
  • Likely owing to the recent expansion of macro variables in the local market, a clear correlation between results and price impact is not observed even at the screening period’s conclusion.
  • There’s a chance of price impact closer to the effective date, suggesting potentially more effective basket trading. However, short instrument absence necessitates using market indices as hedges.

HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold

By Travis Lundy

  • A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday. 
  • Net SOUTHBOUND buying was +HK6.0bn. Net buys every day and now 22 days straight, but buying still appears foreign-led price-taking action. 
  • The only big news this week in China/HK was probably the Politburo’s new stance of trying to do more for the mainland property market, concentrating on unsold homes. 

HSCEI Dividend Futures: Sell the 2024/25 Steepener

By Brian Freitas

  • The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.
  • The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.
  • Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.

Hollysys (HOLI US): Further Thoughts on the Widening Spread

By Arun George

  • I have received several questions from readers on Ascendent’s binding proposal for Hollysys Automation Technologies (HOLI US) in the context of the current gross spread of 12.1%. 
  • The questions primarily concerned the Capital Forum article, NSR approvals, timelines, auditor resignation and deal break risks. 
  • Most of the questions concerned regulatory approval risk. The delay in closing is mainly procedural (government red tape) rather than an indication that regulators will block the deal. 

CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes

By Brian Freitas

  • With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
  • We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
  • The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.

China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”

By Xinyao (Criss) Wang

  • Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM’s target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
  • At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the “confusion”.
  • According to regulatory requirements, it’s expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.

A/H Premium Tracker (To 3 May 2024):  Minimal Moves in 2-Day Week

By Travis Lundy

  • The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
  • SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
  • HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.

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May 06
0

Most Read: Shinko Electric Industries, Marathon Digital Holdings, ZEEKR, China Merchants Expressway Net, China Traditional Chinese Medicine, Mini Kospi 200 Futures, Tencent, Hang Seng China Enterprises Index, Hollysys Automation Technologies, APT Medical and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update
  • S&P500 Index Rebalance: Bitcoin Miner Is a SPCY Add
  • ZEEKR (ZK US) IPO: Valuation Insights
  • CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
  • Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri
  • Addressing Areas of Confusion Surrounding the KOSPI 200 June Rebalancing
  • HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold
  • HSCEI Dividend Futures: Sell the 2024/25 Steepener
  • Hollysys (HOLI US): Further Thoughts on the Widening Spread
  • CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes

Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update

By Travis Lundy

  • When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
  • 15wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 8wks ago, recommended taking profits.
  • Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 3.6% wider than at narrowest, but gap risk has widened as Shinko outperforms, Ibiden.

S&P500 Index Rebalance: Bitcoin Miner Is a SPCY Add

By Brian Freitas

ZEEKR (ZK US) IPO: Valuation Insights

By Arun George

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived

By Brian Freitas

  • The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX). 
  • We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
  • The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.

Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri

By Arun George

Addressing Areas of Confusion Surrounding the KOSPI 200 June Rebalancing

By Sanghyun Park

  • Ssangyong C&E will be excluded in June pre-delisting due to the float rate rule. Replacement will be chosen from the highest market cap existing constituents excluded in the June review.
  • Likely owing to the recent expansion of macro variables in the local market, a clear correlation between results and price impact is not observed even at the screening period’s conclusion.
  • There’s a chance of price impact closer to the effective date, suggesting potentially more effective basket trading. However, short instrument absence necessitates using market indices as hedges.

HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold

By Travis Lundy

  • A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday. 
  • Net SOUTHBOUND buying was +HK6.0bn. Net buys every day and now 22 days straight, but buying still appears foreign-led price-taking action. 
  • The only big news this week in China/HK was probably the Politburo’s new stance of trying to do more for the mainland property market, concentrating on unsold homes. 

HSCEI Dividend Futures: Sell the 2024/25 Steepener

By Brian Freitas

  • The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.
  • The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.
  • Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.

Hollysys (HOLI US): Further Thoughts on the Widening Spread

By Arun George

  • I have received several questions from readers on Ascendent’s binding proposal for Hollysys Automation Technologies (HOLI US) in the context of the current gross spread of 12.1%. 
  • The questions primarily concerned the Capital Forum article, NSR approvals, timelines, auditor resignation and deal break risks. 
  • Most of the questions concerned regulatory approval risk. The delay in closing is mainly procedural (government red tape) rather than an indication that regulators will block the deal. 

CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes

By Brian Freitas

  • With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
  • We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
  • The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.

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