In today’s briefing:
- Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying
- China Traditional Chinese Medicine (570 HK): Update Provides Fodder for Bulls and Bears
- Japan – Yet Another Big Round of Passive Selling Expected in August
- Recently Observed Market Flow Movements Related to Korea’s Value-Up Initiatives
- Legend Biotech (LEGN US): Takeover Interest – Possible but Tough to Pull Off
- SK Innovation and SK E&S to Discuss a Potential Merger on 17 July
- NatWest (NWG): Passive Push from UK Government
- Quiddity Leaderboard SSE50/180 Dec 24: US$1.6bn+ One-Way; Some Changes to Expectations.
- HK CEO & Director Dealings (15th Jul 2024): Zhongsheng, Jardine Matheson, FIT Hon Teng, Hon Hai
- CSI500 Index Rebalance Preview: 50 Changes; 11% Turnover; US$3.4bn Round-Trip Trade
Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying
- 15 shareholders are looking to sell between 73.9-85m shares (US$1.2bn-US$1.38bn) of ASICS Corp (7936 JP) in a secondary offering that will likely be priced on 23 July.
- ASICS Corp (7936 JP) has also announced a huge upward revision to its sales and profit forecasts with EPS expected to increase 61% from earlier estimates.
- Passive buying will be extremely limited in the short-term with the downward pressure offset to a large extent by the sales and earnings revisions.
China Traditional Chinese Medicine (570 HK): Update Provides Fodder for Bulls and Bears
- China Traditional Chinese Medicine (570 HK)’s monthly update provides ammunition to both the bulls and bears. Since falling on no news on 26 June, the spread has widened to 31.8%.
- The bull view is that while the timelines are delayed, the privatisation remains on track as the update shows ongoing progress in satisfying the pre-condition.
- The bear view is that progress remains glacial, as the consortium wants to withdraw from a binding offer by failing to satisfy the pre-condition before the long stop date.
Japan – Yet Another Big Round of Passive Selling Expected in August
- There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in August.
- The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
- Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.
Recently Observed Market Flow Movements Related to Korea’s Value-Up Initiatives
- Nine companies disclosed value-up plans, with four official and five pending disclosures. Initially, these announcements boosted stock prices, but long-term correlations were inconclusive. Yet, shareholder returns notably rose in H1.
- NPS increased stakes in three of the nine recently announced value-up companies. They share traits in value-up trading (large caps & low PBR), potentially guiding our strategy as NPS enters.
- BlackRock’s Hong Kong branch has recently engaged with six Korean asset management firms for potential entrustment of its Asian fund’s Korean investment portion, focusing on the value-up policy.
Legend Biotech (LEGN US): Takeover Interest – Possible but Tough to Pull Off
- Legend Biotech Corp (LEGN US) shares increased 12% on Friday as a Street Insider report claimed it received takeover interest and hired Centerview Partners to help review the offer.
- Genscript Biotech (1548 HK), the largest shareholder, shares rose 25%. Genscript responsded that it is not aware of any reasons for these share price movements and any inside information.
- The chances for an offer are low as the offeror would face several hurdles. Nevertheless, without an offer, the upcoming CARVYKTI commercial production in 2H24 will support the share price.
SK Innovation and SK E&S to Discuss a Potential Merger on 17 July
- SK Innovation (096770 KS) and SK E&S plan to hold a board meeting on 17 July to discuss the potential merger between the two companies.
- If this merger is successful, it would create the eighth largest company in Korea with a combined assets of 106 trillion won (US$77 billion).
- Although the merger ratio is not yet available, we believe that this potential merger could potentially benefit SK E&S and SK Inc but could be negative on SK Innovation.
NatWest (NWG): Passive Push from UK Government
- The UK government has more than halved its stake in NatWest Group (NWG LN) over the last two years reflecting an improving financial health for the lender.
- The UK government is a strategic shareholder and the selling is forecasted to cause a passive fund demand in the next two months across four indices.
- At close of 20 September 2024, the aggregate passive fund demand for NatWest Group (NWG LN) is currently estimated at 22.8m shares, $95.7m and 0.73 days of volume.
Quiddity Leaderboard SSE50/180 Dec 24: US$1.6bn+ One-Way; Some Changes to Expectations.
- SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
- In this insight, we take a look at the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
- There have been some changes to the SSE 180 expected ADDs/DELs lists since our last insight.
HK CEO & Director Dealings (15th Jul 2024): Zhongsheng, Jardine Matheson, FIT Hon Teng, Hon Hai
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
- The key stocks mentioned in this regular insight include: Zhongsheng Group (881 HK), Jardine Matheson Holdings (JM SP), FIT Hon Teng (6088 HK), and Hon Hai Precision Industry (2317 TT).
CSI500 Index Rebalance Preview: 50 Changes; 11% Turnover; US$3.4bn Round-Trip Trade
- With 70% of the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index at the close on 13 December.
- We estimate a one-way turnover of 11.3% at the rebalance resulting in a one-way trade of CNY12.08bn (US$1.7bn). The Information Technology and HealthCare sectors gain at the expense of Industrials.
- The potential adds have outperformed the potential deletes and the CSI Smallcap 500 Index (SH000905 INDEX) since the start of the year with the outperformance gradually picking up.
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