In today’s briefing:
- MSCI Wants a Consult on Adani Group – I’m Not Sure What They Can Do
- Clarifications About Osstem Implant Tender Event
- Korea No Longer Collects Foreigners’ Real-Time Trade Data & Potential Increase in Spoofing Attempts
- NIFTY100 Index Rebalance Preview: Big Impact & Could Increase Due to Capping
- Merger Arb Mondays (30 Jan) – Kanematsu, Toyo, O2Micro, Origin Energy, Warrego, Tyro, Norwest
- Quiddity Flow Expectations HSCEI Mar 23: One Change + Caps for Meituan, Alibaba, and Tencent
- S&P/ASX Index Rebalance Preview: High Impact Changes in March
MSCI Wants a Consult on Adani Group – I’m Not Sure What They Can Do
- The Adani Group listcos have been on a wild ride for the last few years, rising from 10x TTM EV/EBITDA in March 2020 to 60x at end-September 2022.
- Adani Group “business incubator’ Adani Enterprises (ADE IN) last fall indicated it might raise $2.4bn of equity and combined 6 co market cap is down $135bn since.
- A short seller report last week put the cat amongst the pigeons. Now MSCI is consulting investors about what it might do regarding Things.
Clarifications About Osstem Implant Tender Event
- The acquirer would cancel the deal unless at least 2.394M shares (15.4% of SO) were tendered. This is the minimum purchase quantity condition that will trigger a cancellation.
- If the minimum purchase volume is exceeded, will there be a pro rata allocation risk? The answer is no. The acquirer will purchase all the tendered shares
- The cancellation risk seems slim as only 15.4% of the SO should be tendered, which doesn’t seem to be a challenging target.
Korea No Longer Collects Foreigners’ Real-Time Trade Data & Potential Increase in Spoofing Attempts
- KRX (and Korea FSS) no longer collects foreign investors’ entire trade records in real time, as foreign investors are no longer traced based on their unique registration numbers.
- Foreign investors are likely to engage in more aggressive short-term trading. We need to be prepared for significant price volatility, mainly for small and mid-cap stocks.
- System changes for trade history management changes will be completed within the third quarter. So, we will likely witness new trading patterns from the fourth quarter of this year.
NIFTY100 Index Rebalance Preview: Big Impact & Could Increase Due to Capping
- There are 2 trading days left in the review period. We expect 5 changes at the rebalance that will be announced end-February and implemented at the close on 30 March.
- A lot of the stocks were AMFI migrations and Biocon Ltd (BIOS IN) is a potential deletion from the MSCI India Index at the February QCIR.
- The drop in the Adani Group stocks that are part of the index will result in passive inflows on the non-F&O constituents due to capping at 15% of index weight.
Merger Arb Mondays (30 Jan) – Kanematsu, Toyo, O2Micro, Origin Energy, Warrego, Tyro, Norwest
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Alliance Aviation Services (AQZ AU), Kanematsu Electronics (8096 JP), 21Vianet Group (VNET US), Golden Energy & Resources (GER SP), Origin Energy (ORG AU), 111 Inc (YI US).
- Lowest spreads – Essential Metals (ESS AU), Chip Eng Seng Corp (CHIP SP), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Conexio Corp (9422 JP), Nippon Steel Trading.
Quiddity Flow Expectations HSCEI Mar 23: One Change + Caps for Meituan, Alibaba, and Tencent
- In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng China Enterprises Index (HSCEI INDEX) in March 2023.
- According to our estimation, there could be one change for the HSCEI in March 2023 and there could be one-way index flows of US$440mn.
- The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.
S&P/ASX Index Rebalance Preview: High Impact Changes in March
- We currently see 1 change for the ASX20, 2 for the ASX100, 4 changes for the ASX 200 and 9 adds/ 6 deletes for the ASX300 Index in March.
- Passive trackers will need to trade over 3 days of ADV on 13 stocks, over 5 days of ADV on 9 stocks and over 10x ADV on 4 stocks.
- Shorts have been covering positions on stocks where there are expected to be passive inflows and increasing positions on stocks that are expected to have passive outflows.
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