In today’s briefing:
- Select Sector Indices and S&P Equal Weight Rebalance: US$16bn Trade; More Buying for APO and WDAY
- CPMC Holdings (906 HK): Steady Nerves Required
- S&P500/400/600 Index Rebalance: Apollo Global, Workday Added to SPX; AppLovin Misses Out
- Flow Dynamics from NPS Exercising Appraisal Rights on Doosan Merger
- Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?
- CNBM (3323 HK)’s Buyback Ups Parent’s Stake >50%
- S&P500 Dec24 Rebalance: APO and WDAY IN; QRVO and AMTM Demoted
- EQD | Nikkei Index Options Weekly – Dec 02 – 06
- Shanghai Fosun Pharmaceutical (2196.HK) – Performance Pain Points and Henlius’ Privatization Outlook
- EQD | Hong Kong Single Stock Options Weekly Dec 02 – 06
Select Sector Indices and S&P Equal Weight Rebalance: US$16bn Trade; More Buying for APO and WDAY
- Constituent changes to the S&P 500 INDEX and capping changes will result in a round-trip trade of US$15.9bn across the Select Sector indices and the S&P500 Equal Weight Index.
- The Select Sector index trackers and S&P 500 Equal Weight trackers will need to buy Apollo Global Management and Workday, adding to the buying from S&P 500 INDEX trackers.
- The flows will change over the next week as stock prices move around and final capping is done after the close on 13 December.
CPMC Holdings (906 HK): Steady Nerves Required
- ORG Technology Co., Ltd. A (002701 CH)’s offer for CPMC Holdings (906 HK) has one remaining precondition: SAFE approval.
- Mr Wei’s irrevocable was terminated. Nevertheless, as a seller, he will accept the offer, as the shares trade below the offer price, and there is no competing offer.
- The precondition long stop date is 6 January, sufficient time to satisfy the precondition. It would be highly unusual to secure MOFCOM and NDRC approval but not SAFE approval.
S&P500/400/600 Index Rebalance: Apollo Global, Workday Added to SPX; AppLovin Misses Out
- There are 2 changes for the S&P 500 INDEX, 2 changes for the S&P Midcap400 Index and 6 changes for the S&P SmallCap600 Index at the December rebalance.
- Apollo Global and Workday will have large flows from S&P 500 INDEX trackers while AppLovin misses out. The SPX adds will have large inflows from the Select Sector index trackers too.
- The outright adds are up a lot in the after-hours and there could be further upside over the next couple of weeks as positioning ramps up.
Flow Dynamics from NPS Exercising Appraisal Rights on Doosan Merger
- If stocks close above the appraisal prices on the 10th, NPS will support the merger; otherwise, they’ll abstain to secure their appraisal rights.
- Due to cancellation risk hitting the ceiling, NPS will likely exercise half its position and start buybacks after the results.
- With both stocks heavily weighted in KOSPI 200, NPS is likely to opt for a tight buyback window, boosting chances for upward price action on Doosan’s shares in that period.
Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?
- The Sanrio (8136 JP) placement is likely to be priced today. With the stock 8.8% lower from undisturbed, expect a small discount to today’s close.
- The stock has traded as expected over the last 9 trading days – a sharp drop followed by a strong upward move and then profit taking.
- We expect there will be strong interest in the placement and oversubscription could lead to upside from here. Shorts have increased and will look to cover into the placement.
CNBM (3323 HK)’s Buyback Ups Parent’s Stake >50%
- China National Building Material (3323 HK) (CNBM), a leading PRC building materials company, is offering to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
- CNBM’s parent – the CNBM Parent Concert Group – will not participate in the tender, therefore elevating its stake to 50.01% of total shares from 45.02% currently.
- That % increase necessitates a whitewash waiver so as to not make a mandatory general Offer.
S&P500 Dec24 Rebalance: APO and WDAY IN; QRVO and AMTM Demoted
- On Friday post-close, S&PDJI announced the changes to the S&P500, S&P MidCap400, and S&P SmallCap600 Indices. The S&P500 names will get added to/deleted from the S&P500 Equal-Weight Index too.
- Apollo Global Management (APO US) and Workday Inc Class A (WDAY US) are IN to the S&P500. Qorvo Inc (QRVO US) and Amentum Holdings (AMTM US) are demoted to SmallCap600.
- There is a theoretical quantity to trade, and an expected quantity to trade
EQD | Nikkei Index Options Weekly – Dec 02 – 06
- Price action has been mired in a sideways range since hitting these levels in Feb 2024. Implied’s have come full circle and are at the same levels they were in Feb.
- Option volumes over the past week look to be playing for a break above the sideways range of the last two months or a break below it.
- Skew is very steep with heavy Put volumes and open interest at levels under the current range.
Shanghai Fosun Pharmaceutical (2196.HK) – Performance Pain Points and Henlius’ Privatization Outlook
- Fosun Pharma is just “a platform” and its performance mainly relies on the contributions of subsidiaries. However, such investment-driven business model has led to the current performance difficulties.
- Although the motivation/underlying logic for Fosun Pharma to privatize Henlius are solid, we don’t know how this privatization ranks in terms of strategic significance of capital operations within Fosun’s system.
- If, for example, Fosun Pharma finds more important acquisitions/capital expenditures, the priority of Henlius’ privatization could fall. So, we think if it takes too long, there may be more uncertainties.
EQD | Hong Kong Single Stock Options Weekly Dec 02 – 06
- Strong price action across the market this week coupled with implied vols having caught down to historic vols has put a floor on implied vols.
- Tencent sees strong call buying in December 410 and 420 Calls with month end 400 strike Put buying for December and January.
- Cathay Pacific, +21% over past 3 weeks, HSBC, at 52-week high plus up 38% on the year and BABA, down 21% from Oct 02 high all active names.
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