In today’s briefing:
- Sep24 Nikkei 225 Rebal – 2 ADDs, 2 DELETEs Maybe, but Rebals Tougher, and Fastie+TEL Are the FUN
- StubWorld: Troubling Signs For NWD (17 HK)
- Interpreting Kumho Petro Chemical’s Unexpected Move to Cancel Treasury Shares
- CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
- Kumho Petrochemical – A Significant Shares Cancellation Announcement
- Emerging Markets Ex-China: Looking Back… And Forward
- Block Deal Sale of About 400 Billion Won of Shinhan Financial by EQT Partners
- Azure Minerals (AZS AU): Scheme Vote on 8 April
- Wiwynn GDRs Early Look – US$1.3bn Taiwan GDR Would Be Easily Digested
Sep24 Nikkei 225 Rebal – 2 ADDs, 2 DELETEs Maybe, but Rebals Tougher, and Fastie+TEL Are the FUN
- Now that the March 2024 Nikkei 225 Rebalance is decided, we have a model for the Sep 2024 Review. As previously discussed on Smartkarma, actual name changes get tough now.
- As of now, there should be two ADDs and two DELETEs. They might not occur. But there are two other situations which create interesting dynamics around big names.
- The dynamics of Fast Retailing and Tokyo Electron promise more fun than the actual name changes in September 2024. It impacts how you trade Nikkei vs TOPIX and tech internals.
StubWorld: Troubling Signs For NWD (17 HK)
- Despite the lifting of the “spicy” property cooling measures last week, New World Development (17 HK) has plumbed fresh P/B lows after a (very) brief respite.
- Preceding my comments on NWD are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Interpreting Kumho Petro Chemical’s Unexpected Move to Cancel Treasury Shares
- Kumho Petro Chemical (011780 KS) intends to retire 50% of its common shares, totaling 2,624,417 shares, starting from the 2024 fiscal year until the 2026 fiscal year.
- With the annual general meeting nearing, NPS hasn’t revealed its support, causing unease for Park Chan-gu. Considering NPS’s obligation to the Value-Up policy, cancellation seems inevitable for Park Chan-gu.
- Whether the battle persists hinges on NPS’s stance. If NPS backs Park Chan-gu, their stake surpassing 25% could deter the opposition’s financial strength. Conversely, NPS’s neutrality could escalate the battle.
CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
- With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
- We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
- The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.
Kumho Petrochemical – A Significant Shares Cancellation Announcement
- After the market close on 6 May, Kumho Petrochem announced a significant shares cancellation program which is likely to have a positive impact on its share price.
- The company announced that it will cancel 430 billion won worth of its common shares in the next three years, representing nearly 10.5% of its market cap.
- Park Chul Wan, nephew of Kumho Petrochem Chairman Park Chan Koo, has been very vocal about the need for Kumho Petrochem to improve its corporate governance in past several years.
Emerging Markets Ex-China: Looking Back… And Forward
- We first wrote about the iShares Emerging Markets ex-China (EMXC US) ETF 3 years ago when AUM was less than US$500m. AUM now stands at US$11bn.
- IShares Emerging Markets ex-China (EMXC US) has outperformed iShares Emerging Markets (EEM US) and iShares Emerging Markets Asia (EEMA US) with lower volatility and a lower drawdown.
- With the Chinese economy misfiring and markets under pressure, we could see a further shift in positioning away from China and that means inflows to other Emerging Markets.
Block Deal Sale of About 400 Billion Won of Shinhan Financial by EQT Partners
- EQT Partners announced that it is selling all of its remaining shares in Shinhan Financial for about 400 billion won in a block deal sale.
- The block deal sale price range is expected to be 43,776 won to 44,688 won, representing 2% to 4% discount to the closing price on 6 March (45,600 won).
- We would take the deal. The block deal discount is reasonable and Shinhan Financial continues to have attractive valuations and dividend yield despite recent share price appreciation.
Azure Minerals (AZS AU): Scheme Vote on 8 April
- The Azure Minerals (AZS AU) IE considers Sociedad Quimica y Minera de Chile (SQM US)/Hancock’s scheme and takeover offer fair and reasonable as it is above its A$2.03-2.93 valuation range.
- The scheme is conditional on FIRB approval, which should be forthcoming as Azure’s key asset (Andover) will be majority-owned by Australian entities.
- The scheme vote will get up due to irrevocables and retail support. At the last close and for the 18 April payment, the gross/annualised spread was 3.1%/29.2%.
Wiwynn GDRs Early Look – US$1.3bn Taiwan GDR Would Be Easily Digested
- Wiwynn Corp (6669 TT) is looking to raise up to US1.3bn in its upcoming global depository receipts (GDRs) offering.
- Wiwynn recently reported its board’s resolution to issue up to 17m new shares in the form of GDRs for purchasing overseas raw materials, debt repayment, investing overseas and others.
- Similar to previous GDR listings, the deal is a long drawn out process with the firm required to jump through a number of board/shareholder/regulatory approval loops.
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