In today’s briefing:
- Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet
- Quiddity Leaderboard Mar25 Nikkei 225 Rebal: 2 IN, 2 OUT, $5.5bn+ Fastie to Sell, $7bn a Side
- S&P/ASX Index Rebalance (Dec 2024): CAR, Clarity Pharma Added; Dexus, Spark Deleted
- Suntec REIT (SUN SP): Tang’s Obligatory Offer. But … Is ESR A Seller?
- A/H Premium Tracker (To 6 Dec 2024): AH Premia Lower, Markets Up, Tech Weaker, Materials Up
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance: 15 Changes, 44% Turnover, US$4.8bn Trade, BIG Impact
- HK Connect SOUTHBOUND Flows (To 6 Dec 2024); SB Trading Volumes Up, US/China Trade Volleys Up Too
- China National Building Material (3323 HK): H Share Buyback Short Changes Minorities
- Potential Take Private of Worldline
- EQD / NSE NIFTY50 Vol Update / Vol Term-Structure Inverts as Front-End IVs Jump to 15.0%
Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet
- 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: Lifestyle China (2136 HK), Arcadium Lithium (ALTM US), Shanghai Henlius Biotech (2696 HK), ESR Group (1821 HK), Get Nice Financial Group Ltd (1469 HK), Canvest.
- Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Capitol Health (CAJ AU), Elematec Corp (2715 JP).
Quiddity Leaderboard Mar25 Nikkei 225 Rebal: 2 IN, 2 OUT, $5.5bn+ Fastie to Sell, $7bn a Side
- The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I still see 2 IN and 2 OUT for the Mar25 Nikkei225 Rebal.
- There is also a DOUBLE-capping event for Fast Retailing which on 8% outperformance could become a TRIPLE-capping event. For now, the trade is shaping up to be US$7bn a side.
- There is still a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. Longer-term, the TOPIX Methodology Rejig is an interesting problem set.
S&P/ASX Index Rebalance (Dec 2024): CAR, Clarity Pharma Added; Dexus, Spark Deleted
- CAR Group (CAR AU) replaces Dexus Property (DXS AU) in the S&P/ASX50 Index and Clarity Pharmaceuticals Ltd (CU6 AU) replaces Spark New Zealand (SPK AU) in the S&P/ASX200 (AS51 INDEX).
- Dexus Property and Spark New Zealand were deleted from a global index a couple of weeks ago, so this will heap further pressure and increase the real float of the stocks.
- There has been an increase in cumulative excess volume for all changes, but positioning in some stocks may continue post the announcement.
Suntec REIT (SUN SP): Tang’s Obligatory Offer. But … Is ESR A Seller?
- Gordan Tang (& his wife Celine) acquired 2.14% in Suntec REIT (SUN SP), lifting their stake to 31.45% from 29.31%, triggering a MGO.
- The Offer Price is $1.16/share against a recent close of $1.17. The Offer will be conditional on a 50% acceptance hurdle. That’s it. This is purely a technical Offer.
- Share popped 7% on the news, and closed up ~5%. This appears unwarranted. Tang is not going to take Suntec private. But ESR Group (1821 HK) may be exiting.
A/H Premium Tracker (To 6 Dec 2024): AH Premia Lower, Markets Up, Tech Weaker, Materials Up
- Mainland share market volumes continue to be better than HK and SOUTHBOUND volumes, but SB volumes rebounded, tech saw limited net buying, BABA was bought but other major tech sold.
- The first leg of China’s retaliatory acts against US trade measures appeared with export bans on gallium, germanium, antimony, graphite products, etc. These will not be lifted soon.
- China is also retaliating against the Phils, Vietnam, Taiwan and changing tack in Europe. The next couple of years threatens to be “interesting times.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: 15 Changes, 44% Turnover, US$4.8bn Trade, BIG Impact
- There are 8 adds and 7 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December. We had a 100% hit rate on our forecasts.
- Estimated one-way turnover is 22.1% resulting in a one-way trade of TWD 78.8bn (US$2.4bn). There are 16 stocks with over 5 days of ADV to trade.
- There has been a big increase in short interest on some of the deletions and there could be some short covering the stocks closer to implementation date.
HK Connect SOUTHBOUND Flows (To 6 Dec 2024); SB Trading Volumes Up, US/China Trade Volleys Up Too
- SOUTHBOUND gross trading activity rebounded about 20% this week vs the previous week. Net buying was a little lower but still strong. Market volumes overall in HK remain weak.
- Alibaba Group Holding (9988 HK) was again the top buy and EV names XPeng (9868 HK) and BYD (1211 HK) were bought, but tech as a whole was sold.
- I continue to expect HK-listed tech to see ongoing buying. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US.
China National Building Material (3323 HK): H Share Buyback Short Changes Minorities
- China National Building Material (3323 HK) has launched a conditional share buyback to acquire a maximum of 841.7 million H Shares (18.47% of H Shares) at HK$4.03.
- The share buyback seems designed to enable the CNBM parent company to bypass the creeper rule and squeeze the shorts.
- The buyback is unattractive and will leave minorities short-changed, weakening a stretched balance sheet. Nevertheless, while potentially tricky, the votes should pass.
Potential Take Private of Worldline
- Private Equity Interest: Worldline has attracted early-stage interest from private equity firms, including Bain Capital, driven by its discounted valuation and extensive market presence in Europe.
- Market Challenges: Worldline’s stock declined over 50% in 2024, with Q3 revenues dropping 1.1% organically, reflecting struggles in Merchant and Financial Services and the need to stabilize growth.
- Valuation and Takeover Potential: Worldline’s current valuation at 4.61x EV/EBITDA offers upside potential, with a €9.00/share target implying an 18.4% return, though profitability recovery remains uncertain.
EQD / NSE NIFTY50 Vol Update / Vol Term-Structure Inverts as Front-End IVs Jump to 15.0%
- Short-Date IVs reprice higher as active contract rolls over to 12.12.2024 expiry. Elevated risk-premia justified as contracts capture RBI rate decision & U.S. NFP event risks.
- Re-Pricing of front-end IVs has kicked Vol term-structure into Backwardation. Monthly & Quarterly IVs remain unchanged. Current Vol curve shape is at odds with improving sentiment in underlying Index.
- Strategic Implications: (1) Avoid Short Gamma exposure. (2) Continue allocation to Short Vega + Short Smile structures. (3) Look for Nifty50 trading range to stabilize as trigger for Skew harvesting.
💡 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
