In today’s briefing:
- Taiwan Dividend+ Index Rebal Trades – Offsets Other Index Risk
- IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Monday
- Flashlight Capital Partners Goes Activist on KT&G
- Lifestyle International’s Court Meeting on 21 November
- DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!
- NIFTY Quiddity Leaderboard Mar 23: HDFC Merger, Pidilite, and Adani Power Leading the Race, and More
- SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop
- Elmo Software Enters a SID with K1 at A$4.85
- MergerTalk:Market Turbulence/Wide Spreads-Spotlight On MaxLinear’s Acquisition Of Silicon Motion
Taiwan Dividend+ Index Rebal Trades – Offsets Other Index Risk
- The FTSE Taiwan Dividend+ Index is a fabulously interesting index from an index prediction trading standpoint. Because it works off negative momentum, the bias risk is different from normal indices.
- And there is a turn. That turn is where what had been bad becomes good, becomes very good, then turns bad again.
- This insight proposes a basket to buy, and a basket to short, and if the basket to buy ends up not going in, it is a high quality problem.
IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Monday
- Float and capping changes will require passive trackers to sell Bank Central Asia (BBCA IJ) and Emtek (EMTK IJ) while buying GoTo (GOTO IJ) and Telekomunikasi Indonesia (TLKM IJ).
- There will be passive changes to other stocks too, though the impact is not material on most of the stocks.
- The passive buying on GoTo (GOTO IJ) on Monday offers an avenue to exit the stock ahead of the huge lock-up expiry on 30 November.
Flashlight Capital Partners Goes Activist on KT&G
- On 26 October, a Singaporean private equity firm called Flashlight Capital Partners started to go activist on KT&G demanding that the company spin-off its ginseng business to improve shareholder value.
- While a spin-off of the ginseng business is not likely near term, the company could buyback more shares and sell more non-core assets which could soothe Flashlight Capital Partners.
- Back in June 2022, we wrote a prescient insight called KT&G Is a Prime Candidate for Corporate Activism in Korea.
Lifestyle International’s Court Meeting on 21 November
- The Lifestyle International Holdings (1212 HK) scheme document is out with the court meeting scheduled for 21 November. The IFA considers the HK$5.00 offer to be fair and reasonable.
- Key conditions include approval by at least 75% of independent shareholders (<10% rejection). Headcount test not applicable. No shareholder holds a blocking stake.
- The offer is light but likely to succeed. At last close and for a 30 December payment, the gross and annualised spread to the offer is 9.6% and 65.7%, respectively.
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!
- In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
- Based on current rankings, Commerzbank AG (CBK GR) could move from MDAX to DAX and Puma SE (PUM GR) could move from DAX to MDAX.
- I also expect multiple changes for the MDAX and SDAX indices including the impact of the recently-listed Porsche AG (P911 GR).
NIFTY Quiddity Leaderboard Mar 23: HDFC Merger, Pidilite, and Adani Power Leading the Race, and More
- In this insight, we take a look at the potential ADDs/DELs for the NIFTY 50, 100, and 500 Indices in the run up to the March 2023 Rebalance.
- The completion of the HDFC Limited (HDFC IN) – HDFC Bank (HDFCB IN) merger is the most significant event that can trigger intra-review changes in the next few months.
- NIFTY Indices Limited also initiated a market consultation recently on the “treatment of merger/demerger in Nifty equity indices” and the outcome could have important index consequences for such intra-review changes.
SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop
- The review period nearly complete, we see 7 potential adds and 9 potential deletes at the December rebalance. However, there can be a maximum of 5 changes at a rebalance.
- We estimate a one-way turnover of 4.28% at the December rebalance leading to a one-way trade of CNY 3.42bn. Index arb activity could add to the impact on the stocks.
- The potential adds have dropped over the last month while the potential deletes have moved higher over the last couple of weeks.
Elmo Software Enters a SID with K1 at A$4.85
- Elmo Software (ELO AU) entered a scheme implementation deed (SID) with K1 at A$4.85 per share, a 100.4% premium to the undisturbed price.
- The key conditions are a shareholder and regulatory (FIRB & US antitrust) approvals. The scheme meeting is likely in early 1Q23.
- While not a knockout bid, it is attractive in the context of current conditions. Key shareholders will vote in favour. At the last close, the gross spread is 4.8%.
MergerTalk:Market Turbulence/Wide Spreads-Spotlight On MaxLinear’s Acquisition Of Silicon Motion
- Turbulent markets can widen merger spreads arbitrarily creating attractive arb opportunities with the potential for outsized IRRs
- Among the several live transactions indicating unusually high spreads, none looks more alluring than the prospective MaxLinear (MX US) acquisition of Silicon Motion (SIMO US) in the semiconductor sector
- The combination of an exceptionally wide spread driven by unsupported skepticism that the merger will not pass muster with China’s SAMR and historically low valuations make SIMO’s risk-reward profile enticing
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