In today’s briefing:
- HK Connect SOUTHBOUND Flows (To 15 Nov 2024); Tech Bought, High-Div SOEs Sold or Ignored, Again
- China Healthcare Weekly (Nov.17) – TCM VBP New Updates, CR Boya Completes Acquisition of Green Cross
- Weekly Deals Digest (17 Nov) – Seven & I, Fuji Soft, Nishimoto, Macromill, CPMC, KEPCO, SF Holding
- FXI Rebalance Preview: One Change in December as Shorts Spike
- A/H Premium Tracker (To 15 Nov 2024): AH Premia Rise Sharply; Hs Shellacked Vs As In Most Sectors
- Fuji Soft (9749 JP): KKR Bumps to JPY9,451 as Bain Left High and Dry
- (Mostly) Asia-Pac M&A: Agro Kanesho, Nishimoto, Chita Kogyo, Macromill, Silk Logistics, Avarga, MAHB
- Last Week in Event SPACE: Seven & I, PA Gooddoctor, Nec Networks, Genscript/Legend, ASM PT, Hanwha
- China A50 ETFs Rebalance Preview: One Change to Close Out the Year
HK Connect SOUTHBOUND Flows (To 15 Nov 2024); Tech Bought, High-Div SOEs Sold or Ignored, Again
- SOUTHBOUND gross trading activity still high. Net buying very strong. 7 names traded more than US$1bn. Last week I said tech would continue to be bought. It was.
- The trend continues to net sales of ETFs and high div SOEs. Net buying is very, very broad-based. Tracker Fund of Hong Kong (2800 HK) is batted around like crazy.
- I expect HK-listed tech to continue getting bought. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US.
China Healthcare Weekly (Nov.17) – TCM VBP New Updates, CR Boya Completes Acquisition of Green Cross
- The new round of national TCM decoction pieces VBP has started. We think the overall price reduction would be relatively mild, and the impact on related TCM enterprises is limited.
- The NHSA will vigorously promote the expansion of TCM VBP, which is another challenge for TCM injections. But the impact on exclusive TCM varieties and innovative TCM injections is smaller.
- CR Boya has completed the acquisition of 100% equity of Green Cross and has included it in the scope of consolidated financial statements starting from November. Future M&As will continue.
Weekly Deals Digest (17 Nov) – Seven & I, Fuji Soft, Nishimoto, Macromill, CPMC, KEPCO, SF Holding
- 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: S.F. Holding (002352 CH) is premarketing an H Share listing to raise US$1.0-1.5 billion, Kansai Electric Power (9503 JP)‘s US$3.5 billion placement.
- Event-Driven developments: Seven & I Holdings (3382 JP), Fuji Soft Inc (9749 JP), Nishimoto (9260 JP), Macromill, Inc (3978 JP), Agro Kanesho (4955 JP), Renewable Japan (9522 JP), CPMC.
FXI Rebalance Preview: One Change in December as Shorts Spike
- With one trading day left in the review period, we expect one change with China Merchants Securities Co Ltd (H) (6099 HK) replacing Yankuang Energy Group (1171 HK) in December.
- Capping will result in selling for Meituan (3690 HK) and buying in Tencent (700 HK) and Alibaba Group Holding (9988 HK).
- Short interest has jumped on both stocks, but the increase is far higher in China Merchants Securities Co Ltd (H) (6099 HK) compared to Yankuang Energy Group (1171 HK).
A/H Premium Tracker (To 15 Nov 2024): AH Premia Rise Sharply; Hs Shellacked Vs As In Most Sectors
- Huge volumes continue to be traded on the mainland share markets. SOUTHBOUND volumes bounced, and net buying was both large and broad-based.
- Stocks in HK and mainland markets fell heavily with HK’s main indices down 6-7% and China’s blue chip indices down 3.3-3.6% (CSI 500 – 4.8%).
- Within H/A Pairs, after outperforming the HK/mainland spread for weeks, spreads got shellacked. Worst week in a long time (-3.7%), perhaps on the back of “disappointing” lack of stimulus measures.
Fuji Soft (9749 JP): KKR Bumps to JPY9,451 as Bain Left High and Dry
- KKR & Co (KKR US) has secured the Fuji Soft Inc (9749 JP) Board’s unanimous support by bumping its second tender offer to JPY9,451, a JPY1 premium to Bain’s JPY9,450 offer.
- The Board is claiming a “fiduciary duty” win as it has secured a higher offer from KKR but paradoxically signalling that it will not negotiate a bump from Bain.
- Bain will likely walk rather than try to win the Board’s support by revising terms. At the last close, the gross spread to KKR’s offer is 3.7%.
(Mostly) Asia-Pac M&A: Agro Kanesho, Nishimoto, Chita Kogyo, Macromill, Silk Logistics, Avarga, MAHB
- I tally 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Six new deals this week! TOs for Agro Kanesho (4955 JP), Nishimoto (9260 JP), Chita Kogyo (5993 JP), Macromill (3978 JP). Also Silk Logistics (SLH AU) and Avarga (AVARGA SP).
- Key updates took place on: Pacific Smiles (PSQ AU), ASMPT (522 HK), Nec Networks & System Integr (1973 JP), Seven & I (3382 JP), and Malaysia Airports Holdings (MAHB MK).
Last Week in Event SPACE: Seven & I, PA Gooddoctor, Nec Networks, Genscript/Legend, ASM PT, Hanwha
- There are people who’ll take profit in Seven & I (3382 JP) because of path dependency til year-end. It will drag out a while: buy the dips, trim on pops.
- Just like in Lufax Holding (6623 HK)‘s special dividend, expect Ping An to boost its holding in Ping An Healthcare and Technology (1833 HK) via the stealthy scrip dividend option.
- The landscape for Nec Networks & System Integr (1973 JP) has FULLY changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable.
China A50 ETFs Rebalance Preview: One Change to Close Out the Year
- The December review will use closing prices from 18 November to determine the list of stocks that will be included into and excluded from the ETFs.
- As of the close on 15 November, we see NAURA Technology Group (002371 CH) replacing Huaneng Lancang River Hydropow (600025 CH) in the ETFs.
- NAURA Technology has doubled in price this year, while Huaneng Lancang has corrected from its highs and could be deleted from the ETF in just one quarter.
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