In today’s briefing:
- Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
- Flow Developments to Watch as the Release of the Value-Up Index Approaches
- Swire Properties (1972 HK): Buyback to Offset Passive Selling
- Lineage (LINE): Year’s Biggest IPO Failed Fast-Entry. Addition Coming Soon.
- Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp
Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
- 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), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Asia Cement China (743 HK).
- Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).
Flow Developments to Watch as the Release of the Value-Up Index Approaches
- The plan is to select 20 large-cap companies from around 30 with value-up disclosures by late August, then gradually expand the index’s constituents.
- Investors seeking both dividends and value-up benefits must buy stocks individually, as ETFs lack tax advantages, potentially triggering fund shifts from dividend ETFs to value-up stocks.
- We can target stocks in dividend ETFs not making value-up disclosures, as they may face overhang risk during fund migration to the value-up index.
Swire Properties (1972 HK): Buyback to Offset Passive Selling
- Swire Properties (1972 HK) was trending lower on expectations of deletion from a global index in August. Short interest has jumped a lot over the last few months.
- The announcement of the buyback last week took the stock higher. The increased real float from the index deletion will be offset by the buyback.
- Swire Pacific (A) (19 HK)‘s ownership of Swire Properties (1972 HK) will increase from 82% to 83.5% following the buyback and cancellation of the shares. Privatisation at some point?
Lineage (LINE): Year’s Biggest IPO Failed Fast-Entry. Addition Coming Soon.
- Lineage (LINE US) , with an IPO market cap of ~$18bn failed the fast-entry threshold of both main global indices with the threshold being more than ~$28bn.
- Based on the listing date of 25 July 2024, its addition is forecasted for September 2024, December 2024 and February 2025 in US and Global indices.
- Lineage (LINE US) is expected to get added to the Top 1000 US companies index with forecasted demand of ~$340m and ~1.3 ADV at close of 20 September 2024.
Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp
- Using the last close, there could be one change for the Taiwan Top 50 ETF in September with Pharmaessentia Corp (6446 TT) replacing Nanya Technology (2408 TT).
- There is one other constituent that is close to deletion zone while there are a couple of non-constituents that could move into inclusion zone over the next couple of weeks.
- Short interest has been dropping in Pharmaessentia Corp (6446 TT) and increasing in Nanya Technology (2408 TT) over the last few weeks.
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