In today’s briefing:
- KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch
- Chilled & Frozen Logistics (9099 JP): Irrational Exuberance Takes Hold
- HK Connect SOUTHBOUND Flows (To 24 May 2024); Strong Bank Buying and Tech Selling Continues
- KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping
- A/H Premium Tracker (To 24 May 2024): HK Stocks Have a BAD Week and AH Premium Rebounds In
- What’s Still Concerning in the HLB Situation & HLB Life Science’s Stock Rights Trading Next Week
- Merger Arb Mondays (27 May) – L’Occitane, SciClone, GA Pack, KFC Japan, CF Logistics, Best World
- Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today
- KOSPI200 Index Rebalance: Index Committee Knows Best; Cosmo AM&T the Winner
- FXI Rebalance Preview: Cutoff Today; Two Changes Likely in June
KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch
- Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
- Finalized version similar to draft, with added content requested by listed companies, like R&D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry’s plan in July.
- KRX keeps a screening framework for the index akin to March’s criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.
Chilled & Frozen Logistics (9099 JP): Irrational Exuberance Takes Hold
- Chilled & Frozen Logistics Holdings (9099 JP) shares are trading 85.7% above AZ-Com Maruwa Holdings (9090 JP) JPY3,000 offer due to the disclosure of four counterbidders.
- The white knight “winning” bidder can secure the Board’s recommendation if it is the highest offer (likely well below the last close) and does not result in AZ-COM Maruwa-type dis-synergies.
- AZ-COM Maruwa would face the dilemma of bumping, particularly if the white knight bidder secures irrevocables and the Board presents a compelling case to support the white knight bidder.
HK Connect SOUTHBOUND Flows (To 24 May 2024); Strong Bank Buying and Tech Selling Continues
- SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
- Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
- No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.
KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping
- There are 13 inclusions and 13 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 13 June.
- For the second consecutive review, Fadu (440110 KS) and Shinsung DeltaTech (065350 KS) have been kept out of the index. Not sure what the index committee’s beef with them is.
- The adds have outperformed the deletes and the KOSDAQ150 since the start of the review period. This has been helped, in no small, part by the ban on short selling.
A/H Premium Tracker (To 24 May 2024): HK Stocks Have a BAD Week and AH Premium Rebounds In
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND’s buy streak continued this past week; every day was net positive. NORTHBOUND was net positive too. It is not clear how much is National Team buying. Much may be.
- AH Premia rebounded off multi-year lows, on average, this past week as Hang Seng and other HK indices fell sharply and A-shares did not fall as much.
What’s Still Concerning in the HLB Situation & HLB Life Science’s Stock Rights Trading Next Week
- HLB expects Jiangsu Hengrui to receive another CRL from the FDA, but specifics on CMC issues remain unclear. Due to the lack of clarity, it’s advisable to avoid trading HLB.
- HLB IR stated they’ll apply for KOSPI transfer listing after FDA approval when asked by local media, suggesting it’s currently not under consideration.
- We should instead consider short-term trading opportunities in HLB Life Science. Anticipate a surge in forfeited shares from Day 1, reminiscent of last year’s CJ CGV rights offer event.
Merger Arb Mondays (27 May) – L’Occitane, SciClone, GA Pack, KFC Japan, CF Logistics, Best World
- 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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK), China Traditional Chinese Medicine (570 HK).
- Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).
Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today
- Based on the close of 24 May, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) in June.
- COSCO SHIPPING (601919 CH), CRRC (601766 CH) and China National NuclearPower (601985 CH) could replace LONGi GreenEnergy (601012 CH), CSC Financial (601066 CH) and China Tourism Group DutyFree (601888 CH).
- There are a couple of stocks that are close adds and could become adds if they outperform higher ranked stocks in trading today.
KOSPI200 Index Rebalance: Index Committee Knows Best; Cosmo AM&T the Winner
- There will be 6 additions and 6 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance that will be implemented on 13 June.
- The index committee has used a boatload of discretion in the inclusion of CosmoAM&T (005070 KS) and the deletion of some of the stocks.
- The adds and deletes from the Information Technology sector will also have passive flow from the sector ETF and will increase the impact of the changes.
FXI Rebalance Preview: Cutoff Today; Two Changes Likely in June
- With a day to go in the review period, there could be 2 changes for the iShares China Large-Cap (FXI) (FXI US) in June.
- There should be more than 1x ADV to buy on one of the adds while there will be nearly 5x ADV to sell on one of the deletes.
- There will be positioning in all the potential changes but there appears to be higher interest in one of the potential adds and one of the potential deletes.
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