In today’s briefing:
- Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows
- STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
- Merger Arb Mondays (02 Sep) – Canvest, China TCM, GA Pack, CPMC, Shinko, Arvida, SilverLake
- CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer
- BYD Vs Tesla: 1H 2024 Updates
- HK Connect SOUTHBOUND Flows (To 30 Aug 2024); Weak Econ Data, But a Rebound in SB Net Buys
- ECM Weekly (2nd Sep 2024) – Midea, Terumo, Indigo, KIT, Kioxia, Bajaj Housing, Niva Bupa, Premier
- CR Beverage IPO: The Bull Case
- A/H Premium Tracker (To 30 Aug 2024): SB/NB Volumes Down, NB Net Now Impossible to Track
- Sinotrans (598 HK): Attracted by the Yield
Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows
- The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
- There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
- The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.
STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
- There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
- There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
- The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.
Merger Arb Mondays (02 Sep) – Canvest, China TCM, GA Pack, CPMC, Shinko, Arvida, SilverLake
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK).
- Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Alps Logistics (9055 JP).
CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer
- Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
- While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process.
- The return on Huarui Offer isn’t attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.
BYD Vs Tesla: 1H 2024 Updates
- Recap of 1H 24 on two of the largest and most influential EV makers; Tesla (TSLA US) and BYD (1211 HK) .
- BYD performance is superior to Tesla yet it trades at a discount to Tesla, notably 0.2x vs 3x PEG.
- BYD faces tailwinds in North America and the EU, but those are not its main destinations.
HK Connect SOUTHBOUND Flows (To 30 Aug 2024); Weak Econ Data, But a Rebound in SB Net Buys
- SOUTHBOUND was a net seller the prior week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
- This week, they reverted to net buying. Financials and Utilities were strong net buys. ETFs again a net sell. Total SOUTHBOUND volumes also picked up.
- SOEs, SOE Banks, Energy, Utilities, and finally Anta Sports Products (2020 HK) saw net buying after salutary earnings.
ECM Weekly (2nd Sep 2024) – Midea, Terumo, Indigo, KIT, Kioxia, Bajaj Housing, Niva Bupa, Premier
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, we looked at Kioxia Holdings (6600 JP), Bajaj Housing Finance (BHF IN) and Niva Bupa Health along with Premier Energies.
- Placement were flowing through again this week, mainly across India and Japan.
CR Beverage IPO: The Bull Case
- China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.
- CR Beverage has a product portfolio of 13 brands, including C’estbon, Zhi Ben Qing Run, Mi Shui Series, Holiday Series and Zuo Wei Cha Shi, comprising 56 SKUs.
- The bull case rests on a large TAM, a core business in good health, beverages providing the second growth leg, profitability, and strong cash conversion.
A/H Premium Tracker (To 30 Aug 2024): SB/NB Volumes Down, NB Net Now Impossible to Track
- Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes up, but not high.
- SOUTHBOUND rebounded cutting its weekly net sell streak at one. ETFs again a net sell. NORTHBOUND net data is not not released on a daily/weekly basis; only quarterly.
- As expected (with AH 20d Premia returns at multi-year highs 3wks ago), AH Premia fell slightly, narrow premia falling more than wide premia. I continue to expect more H-vs-A gains.
Sinotrans (598 HK): Attracted by the Yield
- Despite an 11% drop in profit in 1H24, Sinotrans (598 HK) has maintained interim DPS at Rmb0.145. This is a sign that the full-year dividend will stay intact, yielding 8.9%.
- The logistics segment has experienced pressure, but strategies are in place to boost revenue and reduce costs. Forwarding and e-commerce segments, meanwhile, are resilient.
- We were too early in turning bearish in 2023. With US rate heads lower, the near-term market focus is that it is a solid yield play.
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