In today’s briefing:
- HSI Index Rebalance: No Changes & Further Delays to Reaching the 80 Member Target
- Toshiba (6502) – Funding Unsecured! (This Is Getting To Be a Habit)
- HSCI Index Rebalance: 35 Adds, 28 Deletes & Changes to Southbound Stock Connect
- HSCEI Index Rebalance: Xpeng (9868) Replaces China Feihe (6186); Li Auto (2015) Biggest Gainer
- Index Rebalance & ETF Flow Recap: KOSPI200, SET50, SMM SP, HSI, HSCI
- Last Week in Event SPACE: Japan Post, Origin Energy, SATS, China Renaissance, Sembcorp Marine
- Fujitec (6406 JP): Oasis Scores a Victory in a Tight EGM Vote
- Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications
- EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
- (Mostly) Asia-Pac Weekly Risk Arb Wrap: New Century Resource; AAG Energy; Jiangnan, Nitro, Pushpay
HSI Index Rebalance: No Changes & Further Delays to Reaching the 80 Member Target
- In a surprise, the Hang Seng index committee has decided not to make any changes to the Hong Kong Hang Seng Index (HSI INDEX) at the March rebalance.
- This further delays the timeline for the index to reach 80 constituents. The earliest we will reach the target now is June 2023 (a year later than targeted).
- Despite no changes to the index constituents, capping and float changes will lead to a one-way turnover of 2.61% resulting in a one-way trade of HK$5.1bn.
Toshiba (6502) – Funding Unsecured! (This Is Getting To Be a Habit)
- A Bloomberg article out Friday evening suggests the JIP Consortium funding plan submitted as the final package to Toshiba Corp (6502 JP) is no longer secure.
- Apparently Orix Corp (8591 JP), which with ROHM Co Ltd (6963 JP) was planning to invest equity and pref for total ¥300bn, wants to lower its investment to ¥200bn.
- Other equity tranche participants apparently want to reduce exposure as well.
HSCI Index Rebalance: 35 Adds, 28 Deletes & Changes to Southbound Stock Connect
- There are 35 adds and 28 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents up to 527.
- We expect 29 of the 35 inclusions to the HSCI will be added to Stock Connect, while 20 of the 28 HSCI deletions will be removed from Southbound Stock Connect.
- 19 stocks could be deleted from Stock Connect only since their average market cap has dropped below HK$5bn- unless the new threshold of HK$4bn is approved in the next week.
HSCEI Index Rebalance: Xpeng (9868) Replaces China Feihe (6186); Li Auto (2015) Biggest Gainer
- As expected, XPeng (9868 HK) replaces China Feihe (6186 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 10 March.
- Using prices from the close on 24 February, estimated one-way turnover is 3.28% and will result in a one-way trade of HK$2,162m at the close on 10 March.
- Short interest on XPeng (9868 HK), Li Auto (2015 HK), China Feihe (6186 HK) is quite high in terms of days of ADV to cover and in terms of float.
Index Rebalance & ETF Flow Recap: KOSPI200, SET50, SMM SP, HSI, HSCI
- The changes to the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX) were announced post market close on Friday.
- Busy start to the coming week with the MSCI implementation at the close on 28 February and a few announcements to other indices later in the week.
- There were outflows from Tracker Fund of Hong Kong Ltd (2800 HK) during the week taking the YTD outflows to over US$1bn.
Last Week in Event SPACE: Japan Post, Origin Energy, SATS, China Renaissance, Sembcorp Marine
- There is no good reason to buy Japan Post Bank (7182 JP)‘s dip until the offering. It’s unlikely to earn the ROE to deserve the PBR it has versus peers.
- Brookfield and EIG/MidOcean’s revised NBIO will garner Origin Energy (ORG AU) board support; however, the terms are weird and unfair to investors holding fewer than 100k shares.
- SATS (SATS SP) rights offer is not actually a surprise. Not at all. Passive funds will exercise.
Fujitec (6406 JP): Oasis Scores a Victory in a Tight EGM Vote
- At the Fujitec Co Ltd (6406 JP) EGM, Oasis successfully secured approval for four out of six candidates for outside directors. The tight vote shows that shareholders desire change.
- Oasis fell short of its nominations constituting up to two-thirds of the Board. However, Oasis-aligned directors will represent 67% of outside directors which still can drive meaningful change.
- The EGM results will spur optimism that Fujitec can close the performance gap with peers, resulting in a rerating. Fujitec remains attractive on a cash-adjusted P/E basis.
Dividend Record Date Changes Already in Progress in Korea: Trading Ramifications
- Notable names that have proposed amendments to their articles of association for changing the dividend record date at this year’s AGM include Hyundai Motor Group, POSCO Holdings, and Kakao Corp.
- There were skeptical views on how much response local big-name companies would show to Korea FSC’s plan. However, the response from large companies has been unexpectedly positive and aggressive.
- We should consider the possibility that the preferred stock premium of companies whose dividend visibility has improved through this may continue to improve compared to those that have not.
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
- Weekly summary of vol changes and moves across Global Markets
- Analysing ATM volatility and skew changes over the last 5 days
- We suggest a few trades to take advantage of the implied vol surfaces
(Mostly) Asia-Pac Weekly Risk Arb Wrap: New Century Resource; AAG Energy; Jiangnan, Nitro, Pushpay
- There are 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Three new deals was discussed on Smartkarma this past week: New Century Resources (NCZ AU)off-market Offer;AAG Energy Holdings’ (2686 HK) ‘s Scheme; and Jiangnan (1366 HK)‘s MBO.
- Key updates took place for: Nitro Software Ltd (NTO AU), Origin Energy (ORG AU), Pushpay Holdings (PPH NZ), Sembcorp Marine (SMM SP), and Boustead Projects (BOCJ SP).
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