In today’s briefing:
- S&P/ASX Index Rebalance Preview: Busy Rebalance With Lots of Changes Expected
- MSCI August 2022 Index Rebalance Preview: The Last QIR!
- Merged Lotte Confectionery: Nearly Guaranteed Early Bird for KOSPI 200 Inclusion
- Merger Arb Mondays (25 Jul) – DTAC/True, Ramsay Health, Link Admin, VNET, Alliance Aviation
- Amorepacific Stub: Reversion Trading on Current Diversion Ahead of 2Q Earnings Release
- Clear Road for Kinetic/Globalvia Consortium
S&P/ASX Index Rebalance Preview: Busy Rebalance With Lots of Changes Expected
- At the September rebalance, we expect changes to the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index. Announcement is on 2 September with implementation on 16 September.
- Potential adds/deletes with large flow and impact include Shopping Cntrs Austrls (SCP AU), Sayona Mining (SYA AU), Charter Hall Social Infrastructure REIT (CQE AU) and Capricorn Metals (CMM AU).
- Shorts have increased significantly on a few stocks over the last few weeks, indicating that there could be some pre-positioning on these stocks.
MSCI August 2022 Index Rebalance Preview: The Last QIR!
- We have completed days 1-5 in the review period for the MSCI August QIR. This is the last review that will use the current QIR methodology.
- Most changes are expected in China with the largest inflows on Gcl Poly Energy Holdings Limited (3800 HK), Tianqi Lithium (002466 CH) and Qinghai Salt Lake Industry (000792 CH).
- There are a few stocks that will have same way flows from the FTSE All-World and All-Cap trackers at the September SAIR.
Merged Lotte Confectionery: Nearly Guaranteed Early Bird for KOSPI 200 Inclusion
- Lotte Confectionery’s screening period for the upcoming rebalancing will be July 20 to October 31, with an increased number of listed shares resulting from the merger.
- To fail inclusion, it must fall below Hyundai Greenfood. There is a market cap gap of ₩300B, suggesting the possibility of inclusion in December is quite high.
- Lotte Confectionery may benefit from concentrated flow from an early stage, given that the outline of inclusion/exclusion candidates for the upcoming rebalancing is still relatively vague.
Merger Arb Mondays (25 Jul) – DTAC/True, Ramsay Health, Link Admin, VNET, Alliance Aviation
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU), Yashili International Holdings (1230 HK), True Corp.
- Lowest gross spreads are Excelpoint Technology (EXLP SP), Giordano International (709 HK), Frasers Hospitality Trust (FHT SP), MyDeal.com.au Ltd (MYD AU), Dongzheng Automotive Finance (2718 HK), Cocoaland Holdings (COLA MK).
Amorepacific Stub: Reversion Trading on Current Diversion Ahead of 2Q Earnings Release
- At last Friday’s close, the Amorepacific Group (002790 KS) stub deserves our attention as it is in a diversion at a -1.58σ on a 20D moving average.
- Recent valuation trends and institutional flows also do not show anything unusual. So the current diversion between them should be seen as a temporary distortion.
- Amorepacific reacts more sensitively than AmoreG in the event of a lower-than-expected result on the 2Q earnings release. So now may be the right entry time to target reversion trading.
Clear Road for Kinetic/Globalvia Consortium
- On 21 July, a disciplined Kelsian dropped out of race for Go-Ahead, and won’t be able to bid for six months therefore Kinetic/Globalvia consortium should be unrivaled in the takeover offer.
- At 7.7x EV/Fwd EBIT, consideration is below 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach, but the market is now pricing that the Kinetic/Globalvia consortium will complete the deal.
- Gross spread is 0.93% and the estimated annual return would be 6.84% assuming settlement on 14 September (see timeline). Long.
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