In today’s briefing:
- HSI Index Rebalance: Yippee! Finally at 80!
- JAPAN BUYBACKS: A Very Big Week
- SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer
- A Crash in 2 More Korean Stocks Related to CFD Derivatives: Margin Calls Again
- EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- China Cooling?
- Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔
- HSCEI Index Rebalance: China Shenhua (1088 HK) Replaces Country Garden (2007 HK); Div Impact
- Last Week in Event SPACE: MitCorp, Jardine Matheson, Toshiba, Japanese Foreign Inflows
- (Mostly) Asia-Pac Weekly Risk Arb Wrap: Allkem/Livent, Yitai Coal, ARTERIA, St Barbara, AAG Energy
HSI Index Rebalance: Yippee! Finally at 80!
- The Hang Seng index committee has added four stocks to take the number of Hong Kong Hang Seng Index (HSI INDEX) constituents to 80. A year late, but we’re there!
- The next leg of the increase in the number of index constituents will take us up to 100. There is no timeline, so this should take a couple of years.
- Estimated one-way turnover is 2.93% leading to a one-way trade of HK$5.7bn (US$730m). All adds will have over 2x ADV to buy from passive trackers.
JAPAN BUYBACKS: A Very Big Week
- This past week, nearly 150 companies in Japan announced buyback programmes totalling ¥2.1trln. 3 Tenders, 26 ToSTNeT-3 buybacks (including at least 5 delayed starts).
- The median on-market buyback was 2.40% of shares, the average 2.9% (both measured as practical maxima at announcement. Median/Average % of ADV was 7.6/9.2%.
- My prediction that this will be a record year for stock buybacks still stands.
SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer
- SBI Shinsei Bank (8303 JP) has recommended SBI Holdings (8473 JP)’s tender offer of JPY2,800 per share, a 12.6% premium to the undisturbed price (11 May).
- There is no minimum acceptance condition. SBI and irrevocables from government entities represent 73.02% of voting rights, ensuring the implementation of tender squeeze-out procedures.
- The special committee failed to unanimously recommend the offer. Minorities will feel short-changed as the outcome is predetermined and the offer tends to favour the government shareholders.
A Crash in 2 More Korean Stocks Related to CFD Derivatives: Margin Calls Again
- In this insight, we discuss two stocks in Korea, Dong Yang P&F and Shindaeyang Paper, whose share prices declined sharply on 12 May.
- It appears that the main culprit behind their collapse in share price appears to be unwinding of the excessive leverage (especially CFD derivatives trading).
- Post the sharp decline in their share price for DYPNF and Shindeyang Paper on 12 May, further downside is likely on these stocks in the coming weeks.
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- China Cooling?
- 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
Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔
- The Nikkei Index team has been quite conscious of market impact since the April 2000 debacle. For a few years after, things were quieter. In 2005, Fast Retailing spurred introspection.
- Float was low and became lower. Selection behaviour changed. Now there is a new consultation where “technical listings” would stay in, and phased “stepwise” inclusion would reduce inclusion impact.
- The proposal increases subjectivity, reduces the attractiveness of bets, but otherwise increases the likelihood they will follow the other selection rules. It STILL does not solve the high weight problem.
HSCEI Index Rebalance: China Shenhua (1088 HK) Replaces Country Garden (2007 HK); Div Impact
- As expected, China Shenhua Energy Co H (1088 HK) replaces Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close 2 June.
- Using prices from the close on 12 May, estimated one-way turnover is 2.1% leading to a one-way trade of HK$1.3bn (US$170m).
- The change will lead to an increase in the fair value of the HSCEI 2023 Dividend Futures. We’d be sellers on a move higher towards 240 DIPS.
Last Week in Event SPACE: MitCorp, Jardine Matheson, Toshiba, Japanese Foreign Inflows
- Mitsubishi Corp (8058 JP)‘s ¥300bn buyback means 8+% of ADV every day from here to end-Dec 2023. Buy MitCorp vs trading houses with less of a buyback impact.
- Rumours abound of an MSCI up weight for Jardine Matheson Holdings (JM SP). It wasn’t a clear-cut situation. And nothing came of it.
- There are concerns about the stability of funding for JIP’s offer for Toshiba Corp (6502 JP) in the event that Kioxia (6600 JP)’s results collapse further.
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Allkem/Livent, Yitai Coal, ARTERIA, St Barbara, AAG Energy
- There are 39 – 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 were discussed on Smartkarma this past week: the Allkem (AKE AU)/Livent (LTHM US)‘s merger; Yitai Coal (3948 HK)‘s H-share buyback; Networks Corp (4423 JP)‘s tender offer.
- Key updates took place forSt Barbara Ltd (SBM AU), AAG Energy Holdings (2686 HK), and Toshiba Corp (6502 JP).
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