In today’s briefing:
- JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade
- Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
- Fuji Soft (9749 JP): A Rumoured KKR-Sponsored MBO
- JPX-Nikkei 400 Rebal Aug 2024 – 44 IN, 41 OUT, ¥500bn of Capping, Just Under ¥1trn to Trade
- China: Passive Selling Expected Later This Month
- EURO STOXX 50: Exclusion by Sector
- [JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure
- MSC Aug 24 Rebalance: South Africa Post-Election Tailwind? MRP, ARI Potential Adds
- CR Sanjiu (000999.CH) To Acquire Tasly Pharma (600535.CH) – SOEs Have High Enthusiasm for TCM Assets
JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade
- There are 44 adds/41 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
- Based on the adds, deletes and capping changes, we estimate one way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn).
- The adds have outperformed the deletes over the last year though that has been faded over the last couple of months. Breaking with history, there could be outperformance near-term.
Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
- In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
- The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
- Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.
Fuji Soft (9749 JP): A Rumoured KKR-Sponsored MBO
- Nikkei and Bloomberg report that Fuji Soft Inc (9749 JP) will be privatised through a KKR-sponsored MBO at a price just below JPY9,000, a 21.8% premium to the last close.
- The rumoured privatisation proposal is the culmination of a sale process initiated by 3D Investment Partners, the largest shareholder, in September 2023.
- The Board will meet tomorrow to discuss the proposal. The rumoured offer represents an all-time high and a knockout bid, suggesting a done deal if a binding proposal materialises.
JPX-Nikkei 400 Rebal Aug 2024 – 44 IN, 41 OUT, ¥500bn of Capping, Just Under ¥1trn to Trade
- Janaghan Jeyakumar, CFA who does the predictions for this index got 10/10 of his high conviction names, 8/10 of his medium conviction, and 50% of low conviction ADDs.
- This year, there are fewer caps but some big ones. Nearly ¥500bn of capping flow to sell.
- I see just over $6.3bn in buying and selling to be done. A half dozen names with both high ADV impact to buy and decent size.
China: Passive Selling Expected Later This Month
- The China equity markets have continued to trade lower with the CSI 300 Index outperforming other mainland indices as the National Team continues to pump money into ETFs tracking the index.
- We currently estimate selling of around US$1.39bn across 74 stocks listed on the mainland and in Hong Kong. There could be fewer deletions depending on the review date chosen.
- The potential deletes have dropped a lot since the start of the calendar year with big underperformance versus the HSCEI Index, CSI 300 Index and CSI Smallcap 500 Index.
EURO STOXX 50: Exclusion by Sector
- Cap Gemini SA (CAP FP) is estimated to be excluded from the selection list in the long-run due to being pushed way above 60% coverage in the Technology sector.
- Merck KGaA (MRK GR) switches between in and out of the selection list because it fluctuates close to the 60% coverage of the Health Care sector.
- Nokia OYJ (NOKIA FH) has a higher probability of deletion from SX5E if Merck KGaA (MRK GR) qualifies to the selection list. Forecasted passive fund supply is ~15 ADV.
[JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure
- Last year into early 2024, Fuji Soft Inc (9749 JP) – partially at the prodding of 3D Investment Partners – took in 4 subs and conducted a strategic review.
- In January, I explored the situation here suggesting the stock had run, FujiSoft needed to liquidate more assets, but a PE firm would look at a valuation of ¥600bn.
- Last night, the Nikkei reported that US PE Firm KKR planned to take Fuji Soft private with a TOB valued at ¥600bn. Limit up will take us to ¥560bn+.
MSC Aug 24 Rebalance: South Africa Post-Election Tailwind? MRP, ARI Potential Adds
- MSC indices are due for rebalancing in the closing auction on Friday the 30th of August. Constituent changes will be announced after the close next week Monday.
- In this note we flag Mr Price Group Ltd (MRP SJ) & African Rainbow Minerals (ARI SJ) as possible additions to the MSC SA index.
- Since our last discount update on the 22nd of July, Prosus has underperformed Naspers. The discount has widened by 1.7 percentage points to 39.6%.
CR Sanjiu (000999.CH) To Acquire Tasly Pharma (600535.CH) – SOEs Have High Enthusiasm for TCM Assets
- China Resources Sanjiu plans to acquire 28% stake in Tasly for RMB6.21 billion at RMB14.85/share. The acquisition of Tasly is in line with the strategic direction of 14th Five-Year Plan.
- China Resources is positioned as a leading enterprise in modern industrial chain of TCM by the SASAC.Due to policy support, TCM assets are more likely to be favored by SOEs.
- The deal is positive for Tasly, whose valuation has room to rise further, but the market seems “skeptical” about China Resources Sanjiu’s decision, leading to a lackluster share price reaction.
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