In today’s briefing:
- China: Huge ETF Inflows & Impact on Stocks
- Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus
- StubWorld: China Conch Plumbs New Lows
- KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
- Vingroup: VinFast’s Valuation Makes No Sense
- Seven & I: An Update on Investor Activism
- EQD | Nikkei 225 (NKY) Rising but for How Long?
- Quiddity Leaderboard ES50 Sep 23: US$1.3bn Flow for Ferrari Likely; Announcement Soon
- EQT/SUSE: Terms and Spread
China: Huge ETF Inflows & Impact on Stocks
- Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
- Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
- The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.
Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus
- HLB’s process of selecting a lead underwriter for the KOSPI listing has been witnessed in Yeouido.
- The price impact becomes most evident on the board approval date as the point at which this impact is most pronounced is substantially accelerated due to the market’s learning effect.
- There is a strong likelihood that HLB will have its board decision by mid-September, necessitating our preparation for a position setup targeting this timing.
StubWorld: China Conch Plumbs New Lows
- The China Conch Venture Holdings (586 HK)/ Anhui Conch Cement (600585 CH) ratio, and the implied stub, are now at all-time lows.
- Preceding my comments on China Conch/Anhui are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
- Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
- The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
- The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.
Vingroup: VinFast’s Valuation Makes No Sense
- VinFast (VFS US), the EV arm of Vietnamese conglomerate Vingroup Jsc (VIC VN), commenced trading on the 14 August. And promptly took off.
- VinFast’s current market cap is ~4x General Motors (GM US)‘s, twice that of Mercedes-Benz (MBG GR)‘s, and the second-largest pure-play EV-maker after Tesla (TSLA US).
- Vingroup’s holding in VinFast is worth 13x its market cap. This is not sustainable.
Seven & I: An Update on Investor Activism
- Sogo & Seibu’s labor union threatens strike if job protection talks stall. This emphasizes the number of considerations Seven & I Holdings (3382 JP) had to consider during changes.
- Had ValueAct shown more patience, they might have worked with Seven & I to improve the struggling Eto Yokado supermarkets business.
- Thus, ValueAct’s investor activism campaign seem unlikely to achieve a full restructuring of underperforming businesses at Seven & I.
EQD | Nikkei 225 (NKY) Rising but for How Long?
- Rebound on Nikkei 225 INDEX may not last for long, 2-3 weeks tops, it will encounter resistance no later than mid of September (most unfavorable month for stocks gains).
- Resistance levels to watch vary, depending on number of weeks up. For this week and the next, a new pullback could start from 32476 and 32817.
- If the index goes =>33000, it means it is rallying and will not correct into September, the rally then could last into October.
Quiddity Leaderboard ES50 Sep 23: US$1.3bn Flow for Ferrari Likely; Announcement Soon
- The ES50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
- The index changes will be confirmed after the close on 1st September 2023.
- In this insight, we take a final look the names leading the race to become ADDs/DELs for the upcoming index review.
EQT/SUSE: Terms and Spread
- EQT offers €16/share to delist SUSE (SUSE GR) (split into consideration and interim dividend) and merge it into a Luxembourg SA. On 24 August, EQT published the offer document.
- There will be no squeeze-out. The multiples offered (4.8x EV/NTM Fwd Revenue, 14x EV/Fwd NTM EBITDA, source: IBES) are generally consistent with European software companies.
- With the stock trading at a 3% gross spread, I see limited upside from here and no interloper risk. Annualised spread is 33.4%. Long and tender.
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