In today’s briefing:
- Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted
- Merger Arb Mondays (21 Aug) – Costa, OreCorp, Sanei, T&K Toka, Celltrion, Eoflow, Golden Eagle
- Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material
- HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
- Week 2 of the Brand New and Extra Spiffy 🦄 H/A-Share Discount/Premium Weekly (As of 18 Aug 2023)
- Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote
- HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off
- Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%
- Weekly Deals Digest (20 Aug) – Celltrion, Sanei, T&K Toka, Costa, DDH1, Tesserent, VinFast
- HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way
Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted
- Sinopharm Group Co Ltd H (1099 HK) will be added to the Hang Seng Index (HSI INDEX) on 1 September while Country Garden Holdings Co (2007 HK) will be deleted.
- Both changes are a surprise, but the impact on Sinopharm Group Co Ltd H (1099 HK) will be much larger. Given the recent increase in shorts, there could be covering.
- Estimated one-way turnover is 1.9% leading to a one-way trade of HK$3.65bn. Capping will result in selling on Alibaba Group Holding (9988 HK), Tencent (700 HK) and HSBC (5 HK).
Merger Arb Mondays (21 Aug) – Costa, OreCorp, Sanei, T&K Toka, Celltrion, Eoflow, Golden Eagle
- 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 – 111 Inc (YI US), Symbio Holdings (SYM AU), ENM Holdings (128 HK), Eoflow (294090 KS), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), Costa Group.
- Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Celltrion Healthcare (091990 KS), Yaizu Suisankagaku Industry (2812 JP), Kenedix Retail REIT (3453 JP), Penguin International (PBS SP).
Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material
- Eoflow (294090 KS)’s shares rose 2.7% to 27,000 won on 18 August with 1.4 million shares traded, which was 5.7x higher than the previous three days of trading.
- The main reason for this was due to the local news flow on Eoflow’s US subsidiary’s (Nephria Bio) technology on the advanced material MXene.
- This news flow on MXene is likely to put further positive boost to Eoflow’s share price closer to the tender offer price (or at least limit further downside risk).
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
- As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
- Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
- Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.
Week 2 of the Brand New and Extra Spiffy 🦄 H/A-Share Discount/Premium Weekly (As of 18 Aug 2023)
- This is the Brand Spanking New and Improved and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see H/A relationships easily.
- We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations.
- We hope this new version serves readers even better. Improvements this week due to popular demand, and updated format. Further feedback is welcome/appreciated.
Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote
- Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
- The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk.
- The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote.
HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off
- On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
- Sinopharm Group Co Ltd H (1099 HK) is ADDED, Country Garden Holdings Co (2007 HK) – in no surprise, is deleted.
- I see HK$4bn a side to trade, and the only “compelling” trade by ADV here is Sinopharm, but correlations with a Peer Basket are low.
Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%
- The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
- East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE.
- AAC is a significant flow event, and worth looking at. There are a few odds and ends too.
Weekly Deals Digest (20 Aug) – Celltrion, Sanei, T&K Toka, Costa, DDH1, Tesserent, VinFast
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Vinfast (VFS US)‘s rollercoaster debut, Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN) and Lalatech Holdings Co Ltd (LALA HK) IPOs.
- Event-Driven developments – Celltrion Healthcare (091990 KS), Sanei Architecture Planning (3228 JP), T&K Toka Co Ltd (4636 JP), Costa Group Holdings (CGC AU), DDH1 (DDH AU), Tesserent Ltd (TNT AU).
HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way
- The HSCEI Review for Sep 2023 was announced on Friday 18 August. There is one ADD Trip.com Group (9961 HK) and one DELETE Country Garden Services (6098 HK).
- Neither of these two are a surprise. Neither are hugely impactful.
- There is about 2.5% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.
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