In today’s briefing:
- Fy23 GPIF Results and Portfolio Changes – Outlook for FY24
- Canvest Environmental (1381 HK): Possible Privatisation at HK$4.90
- Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA
- S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)
- HK Connect SOUTHBOUND Flows (To 5 Jul 2024); SOE Bank and SOE Petro-Energy Flows Dominate
- Shanghai Henlius Biotech Update (2696.HK) – The Story Behind Privatization
- Mainland Connect NORTHBOUND Flows (To 5 July 2024): Finance, Consumer, IT Sold, Utilities Bought
- STAR100 Index Rebalance Preview: Outright Adds Outperforming Outright Deletes
- Rex Minerals (RXM AU)’s Scheme With The Salim Group
- KOSDAQ150 Index Rebalance Preview: For Now, A Dozen Changes in December
Fy23 GPIF Results and Portfolio Changes – Outlook for FY24
- Last year, the GPIF as a whole returned 22.67% in yen terms. As a whole, GPIF outperformed its benchmarks by 0.04% after paying 0.02% in fees and costs.
- GPIF traded ¥30trln of assets – relatively high turnover for a fund which espouses very low turnover – but there’s a reason for that. There were also sharp active/passive moves.
- This year is the last year in the “cycle” of the “old” Policy Allocation Framework. A new one is likely to be introduced this year.
Canvest Environmental (1381 HK): Possible Privatisation at HK$4.90
- Grandblue Environment Co A (600323 CH) disclosed a potential pre-conditional privatisation of Canvest Environmental Protection Group (1381 HK) at HK$4.90 per share, a 20.7% premium to the last close price.
- Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake.
- While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk.
Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA
- 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), China Traditional Chinese Medicine (570 HK), A8 New Media (800 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK).
- Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Chilled & Frozen Logistics Holdings (9099 JP), Tatsuta Electric Wire & Cable (5809 JP), Kfc Holdings Japan (9873 JP).
S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)
- With all regulatory approvals received, the Scheme Meeting for Renesas Electronics (6723 JP)‘ acquisition of Altium Ltd (ALU AU) will take place on 12 July.
- If approved at the Scheme Meeting and at the Second Court Hearing, Altium Ltd (ALU AU) will stop trading from the close on 19 July.
- The replacements for Altium Ltd (ALU AU) in the ASX100/200 indices could be announced late this week with implementation at the close on 19 July.
HK Connect SOUTHBOUND Flows (To 5 Jul 2024); SOE Bank and SOE Petro-Energy Flows Dominate
- SOUTHBOUND was again a net buyer, for HK$10.9bn this week, on smallish two-way volumes. Banks were a big buy.
- The more I watch, the more I think the last few months have had serious national team buying of banks and energy, perhaps ahead of shareholder return policy changes.
- But valuations are acceptable. Flows are good. Policy changes are afoot. SOUTHBOUND may continue to see inflows – national team and otherwise.
Shanghai Henlius Biotech Update (2696.HK) – The Story Behind Privatization
- Fosun’s preferred arrangement for Henlius is to list the Company in A-shares.Since IPO in A-shares failed and Henlius has begun to generate profits, Fosun finally feels the need for privatization.
- Due to its “flaws”, undervaluation of Henlius in the Hong Kong stock market is difficult to fundamentally change. So, for conservative/cautious investors, Fosun’s one-time acquisition at a 30% premium is attractive.
- The Potential Share Alternative Offer seems a good option, but it is uncertain whether investors are still willing to believe in Fosun’s “good story” – the future re-listing is uncertain.
Mainland Connect NORTHBOUND Flows (To 5 July 2024): Finance, Consumer, IT Sold, Utilities Bought
- 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 SELL RMB 13.9bn of A-shares. NORTHBOUND bought utilities and raw materials and sold everything else, especially consumer names. Appliances remain on the sell side.
- It is notable that net flows as a percentage of value traded are clearly “short gamma”, which is to say, sector underperformers are being sold, not bought.
STAR100 Index Rebalance Preview: Outright Adds Outperforming Outright Deletes
- The review period for the September rebalance ends 30 July. We expect the changes to be announced 30 August with the implementation taking place after the close on 13 September.
- We forecast 6 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
- Excluding the migrations, the potential adds have outperformed the potential deletes since the start of the calendar year and there could be further outperformance over the next few weeks.
Rex Minerals (RXM AU)’s Scheme With The Salim Group
- Copper-Gold play Rex Minerals (RXM AU) has entered into a Scheme with MACH Australia.
- MACH, wholly-owned by Indonesia’s Salim Group, is offering A$0.47/share in cash, a 71% premium to last close and a decade-high.
- Rex shareholder approval and FIRB are the key conditions. Rex’s board is unanimously supportive. This Offer will tentatively complete late October.
KOSDAQ150 Index Rebalance Preview: For Now, A Dozen Changes in December
- With just over a third of the review period complete, there could be 12 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the December rebalance.
- Even with 12 potential changes, there is sector balance with over half the changes in the Information Technology sector. Passive trading impact varies from 0.04-4.1x ADV.
- The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index (KOSDQ150 INDEX) since the start of the year with a big move higher since mid-May.
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