In today’s briefing:
- Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update
- HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
- MSC May Rebalance: SA & China Net Sells, NPN, PRX & Tencent Sold Down on Buybacks
- StubWorld: What Now With Langham (1270 HK)?
- HSI/HSCEI/HSTECH June 2024 Rebal Final Re-Capping (Or Re-Re-Capping) Flows
- Northern Minerals (NMI AU): Chinese Investors Forced To Exit
- Quiddity ChiNext/ChiNext 50 Jun 24 Rebalance: ~US$700mn One-Way Flows; Thoughts on Surprises
- China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
- GS Retail: Equity Spin Off of Parnas Hotel and Freshmeat Subsidiaries
- MV Australia A-REITs Index Rebalance Preview: ASK May Be Deleted; HMC Close Add; Capping Changes
Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- Nearly 5mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 12wks ago, recommended taking profits.
- Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 2.6% wider than at narrowest. In May, gap risk narrowed as Shinko underperformed Ibiden.
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
- The June rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
- The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).
- Li Auto, Alibaba, NetEase, Zijin Mining, SenseTime and BYD Electronics are the largest buys while Tencent, Meituan, JD.com, Kuaishou Technology, Xiaomi and HSBC Holdings are the largest sells.
MSC May Rebalance: SA & China Net Sells, NPN, PRX & Tencent Sold Down on Buybacks
- MSC indices were rebalanced in the closing auction on Friday. Turnover for the day on the JSE was R41.9bn, R25bn traded in the closing auction (60%).
- Turnover at the February rebalance was R25.6bn. Most SA constituents were pushed lower in the closing auction and for the day, consistent with the downweighting of SA Inc.
- China was downweighted in the ACWI and EM indices for a second straight quarter, reducing the country weight in ACWI by 6bps to 2.69%.
StubWorld: What Now With Langham (1270 HK)?
- Unexpectantly, Great Eagle Holdings (41 HK) said it would not proceed with an Offer; and Hong Kong hotel-play Langham Hospitality (1270 HK) promptly cratered. But why the flip flop?
- Preceding my comments on GE, Langham and Champion REIT (2778 HK), 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%.
HSI/HSCEI/HSTECH June 2024 Rebal Final Re-Capping (Or Re-Re-Capping) Flows
- The HSI added BYD Electronics (285 HK) and deleted Country Garden Services (6098 HK). HSCEI added Zijin Mining Group Co Ltd H (2899 HK) deleted Xinyi Solar Holdings (968 HK)
- HSTECH had no changes, but lots of flow. The index team sets capping levels, then resets them a three days before the actual rebalancing. There were some capping/recapping changes.
- Below we offer tables showing all the changes and flows across the indices for each stock, ranked by Flows, ADV, and Ticker. And a spreadsheet with all the relevant data.
Northern Minerals (NMI AU): Chinese Investors Forced To Exit
- Back in February last year, the Aussie Treasurer prohibited Yuxiao Fund from buying an additional 9.92% in Northern Minerals (NTU AU) which would have increased its stake to 19.9%.
- On the 20th November 2023, Yuxiao sought the removal of Nicholas Curtis as director of the rare-metal play at an EGM; however Curtis resigned his post and the EGM cancelled.
- The Aussie Treasurer has now made orders requiring Yuxiao and four (deemed) associated investors to sell their holdings (~10.4% all-in) within 60 days.
Quiddity ChiNext/ChiNext 50 Jun 24 Rebalance: ~US$700mn One-Way Flows; Thoughts on Surprises
- The June 2024 index review results for the ChiNext and ChiNext 50 indices were announced yesterday.
- There will be seven changes for the ChiNext index and five changes for the ChiNext 50 index. Some of these names surprised us.
- In this insight, we take a look at our final flow expectations for the confirmed index changes and our thoughts on the selection process.
China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
- The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
- Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
- For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.
GS Retail: Equity Spin Off of Parnas Hotel and Freshmeat Subsidiaries
- On 3 June, GS Retail (007070 KS) announced that it will spin off Parnas Hotel and Freshmeat subsidiaries to simplify its business structure and enhance shareholder value.
- The company plans to create a new entity tentatively called Parnas Holdings which will include Parnas hotel and Freshmeat (a meat processing company).
- We have a positive view of GS Retail’s decision to conduct this equity spin off which simplifies the business structures and it could raise the valuation multiples of GS Retail.
MV Australia A-REITs Index Rebalance Preview: ASK May Be Deleted; HMC Close Add; Capping Changes
- The review period for the June rebalance ended last week. There could be one deletion from the index and a bunch of capping changes.
- There is one stock that is close to inclusion zone but may not make it in June.
- The expected index changes will lead to a one-way turnover of 2.5% resulting in a one-way trade of A$14m. That will increase if there is an inclusion.
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