In today’s briefing:
- HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
- What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS
- Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
- Merger Arb Mondays (19 Feb) – Outsourcing, JSR, Shinko, YSK, Vinda, Altium, Azure, Ansarada
- STTF Index Rebalance Preview: One High Probability Change in March
- Boral (BLD AU): Seven Group (SVW AU)’s Best & Final Offer
- Liquid Universe of European Ordinary and Preferred Shares: February‘24 Report
HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
- We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
- Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.
HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
- Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
- Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.
Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
- The Nikkei reports that Snow Peak Inc (7816 JP) is set to disclose a Bain-sponsored MBO this week “in the range of 1,200 yen per share.”
- Mergermarket first disclosed a potential MBO on Friday. Snow Peak responded that while it is true that we are considering going private, no decision has been made at this time.
- The rumoured JPY1,200 offer price is light vs historical trading ranges but attractive vs peer and historical multiples. The probability of an offer materialising is high.
What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS
- The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.
- Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.
- NPS’s role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.
Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
- Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
- There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.
Merger Arb Mondays (19 Feb) – Outsourcing, JSR, Shinko, YSK, Vinda, Altium, Azure, Ansarada
- 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 – Probiotec Ltd (PBP AU), Shinko Electric Industries (6967 JP), Genetron Holdings Ltd (GTH US), JSR Corp (4185 JP), Lithium Power International (LPI AU), Altium Ltd (ALU AU).
- Lowest spreads – Tietto Minerals Ltd (TIE AU), Pact Group Holdings (PGH AU), Orecorp Ltd (ORR AU), QV Equities Ltd (QVE AU), Yaizu Suisankagaku Industry (2812 JP).
STTF Index Rebalance Preview: One High Probability Change in March
- Emperador (EMI SP) fails the liquidity test and could be sold by the SPDR Straits Times Index ETF (STTF SP) in March.
- Emperador (EMP PM) will also be sold by global index trackers in March and the stock should remain under pressure for the next few weeks.
- Frasers Centrepoint Trust (FCT SP) is ranked ahead of CapitaLand Ascott Trust (CLAS SP) by 9% on full market cap and should be added to the ETF in March.
Boral (BLD AU): Seven Group (SVW AU)’s Best & Final Offer
- Seven Group Holdings (SVW AU) holds 71.59% in Boral Ltd (BLD AU) and is looking to acquire the remaining shares at A$6.05/share via a mix of SVW stock and cash.
- The offer consideration ratchets higher to A$6.15/share if SVW’s aggregate shareholding reaches 80% and to A$6.25/share if SVW’s aggregate shareholding reaches 90.6%.
- Seven Group Holdings (SVW AU) is an addition to a global index at the end of the month and a drop in the stock post inclusion will affect Boral Ltd.
Liquid Universe of European Ordinary and Preferred Shares: February‘24 Report
- Since mid-January, spreads have tightened, same as in December, across our European liquid universe of ordinary and preferred shares (13 have tightened, 6 widened).
- Recommended trades long preferred / short ordinary shares: Danieli, Grifols, Media-for-Europe, Sixt, Volkswagen.
- Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, SSAB Svenska Stal, Roche.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
