In today’s briefing:
- Bain Bids Bigger, Goes Hard on Fuji Soft (9749); I’ve Got 🍿🍿🍿
- S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up
- China ETF Inflows & Implications: YTD Inflows Nearing US$150bn
- Fuji Soft (9749 JP): Bain’s Better Late than Never Competing Offer
- Merger Arb Mondays (14 Oct) – Haitong/GJTA, GA Pack, Henlius, Canvest, Seven & I, Arcadium Lithium
- Quiddity Leaderboard HS Internet & IT: Dec 24 Flow Expectations and Mar 25 Expected ADDs/DELs
- EQD / NSE Vol Update / ++Vol-Of-Vol & Unstable Vol-Regime. Structural Changes Unfolding in Vol Mkts?
- EQD | Long Nifty 50 Vs. Short Nikkei 225 – A Relative Value Option Strategy with a Kicker
Bain Bids Bigger, Goes Hard on Fuji Soft (9749); I’ve Got 🍿🍿🍿
- As they had announced was their intention, Bain has made a binding offer for Fuji Soft Inc (9749 JP), bidding ¥9,450 against KKR’s ¥8,800. They aim to launch late October.
- There is no minimum and no maximum. The Founding Nozawa family had thrown their lot in with Bain not KKR and that 18.5% is tied up.
- There are conditions, and those are ALL-important. And I expect we see in the next week or so how coercive KKR’s “non-coercive” scheme change was. I’ve got 🍿🍿🍿.
S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up
- With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December.
- There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
- Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.
China ETF Inflows & Implications: YTD Inflows Nearing US$150bn
- Nearly US$140bn has flowed into mainland China listed ETFs year to date and there have been big creations in the last few weeks as stocks have surged.
- 97% of all inflows are in ETFs benchmarked to the CSI300, CSI1000, CSI500, SSE50, ChiNext and STAR50 indices. But over US$4bn has gone into other ETFs in the last week.
- The large ETF inflows over the last few weeks has led to index rebalance strategies underperforming in China. But that should reverse from now to rebalance implementation.
Fuji Soft (9749 JP): Bain’s Better Late than Never Competing Offer
- Bain’s pre-conditional tender offer for Fuji Soft Inc (9749 JP) is JPY9,450, a 7.4% premium to KKR’s JPY8,800 offer. There is no minimum or maximum acceptance condition.
- The preconditions relate to regulatory approval (Vietnam) and Board recommendation. Bain’s offer is designed to bring KKR to the negotiating table to find a solution to privatisation.
- KKR can 1) do nothing, 2) work with Bain on a solution, or 3) engage in a price war to prevent the satisfaction of Bain’s Board recommendation precondition.
Merger Arb Mondays (14 Oct) – Haitong/GJTA, GA Pack, Henlius, Canvest, Seven & I, Arcadium Lithium
- 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 Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
- Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP).
Quiddity Leaderboard HS Internet & IT: Dec 24 Flow Expectations and Mar 25 Expected ADDs/DELs
- The Hang Seng Internet & IT (HSIII) index represents the top 30 stocks related to internet and information technology businesses listed in Hong Kong (HKEX).
- In this insight, we take a look at our capping flow expectations for the December 2024 index rebal event.
- We have also presented our index change expectations for the next semiannual index review which will take place in March 2025.
EQD / NSE Vol Update / ++Vol-Of-Vol & Unstable Vol-Regime. Structural Changes Unfolding in Vol Mkts?
- Options Markets expected risk sentiment to deteriorate further – IVs were elevated. But lack of RV follow through caused sharp markdowns, especially for short-dated contracts.
- Increased Vol-of-vol has triggered multiple switches in Vol Regime Model – currently in “High & Down” vol-state. Multiple state-switches indicative of unfolding structural changes in Vol Markets.
- Smile looking overly compressed in Monthly & Quarterly contracts as OTM Strangles trade close to par with ATMs.
EQD | Long Nifty 50 Vs. Short Nikkei 225 – A Relative Value Option Strategy with a Kicker
- This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.
- The strategy performs well if the Nifty 50 rises and outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.
- Leverage increases both the strategy’s payoff and probability of success.
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