In today’s briefing:
- Teijin (3401 JP): Alternative Play on the Potential Infocom Tender
- CSI Medical Service Index Rebalance: Adds Could Outperform Deletes in the Coming Week
- TIP Customized Taiwan Select High Dividend Index Rebalance: 13 Changes & US$5.2bn Round-Trip Trade
- STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability
- SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance
- Quiddity CSI 300/500 Jun 24 Rebalance: 92% Hit Rate; US$3.7 One-Way Flows
- CES China Semiconductor Chips Index Rebalance: Adding to Impact for Some Stocks
- Merger Arb Mondays (03 Jun) – China TCM, Huafa, GA Pack, SciClone, CF Logistics, Great Eastern
- Hanwha Ocean’s June 22 Release of a 1.68% Stake Grabs Local Market Attention
- Tax-Loss Selling in Australia 2024 – The May Basket (April Basket +2.3 to +6.3% Rtn)
Teijin (3401 JP): Alternative Play on the Potential Infocom Tender
- Blackstone (BX US) is widely reported to have agreed to acquire Teijin Ltd (3401 JP)’s 55% stake in Infocom Corp (4348 JP) at a valuation of JPY260 billion.
- If the valuation refers to market cap and Teijin shares its tax benefits, Teijin’s sale proceeds are around JPY128 billion, which is 42% of its market cap.
- However, since 9 May, Teijin shares have been flat vs. Infocom shares are up 63%. Teijin’s medium-term plan suggests that the Infocom proceeds could result in substantial share buybacks.
CSI Medical Service Index Rebalance: Adds Could Outperform Deletes in the Coming Week
- CSI announced the changes for the June rebalance after market close on 31 May and the changes will be effective after the close of trading on 14 June.
- There are 5 adds/deletes – we correctly forecasted 3 adds and all 5 deletes. Passives need to trade 0.5-3x ADV on the adds and 0.5-2.1x ADV on the deletes.
- With the index not very widely forecasted, the adds could outperform the deletes over the next week in a repeat of the performance at the December rebalance.
TIP Customized Taiwan Select High Dividend Index Rebalance: 13 Changes & US$5.2bn Round-Trip Trade
- There are 13 changes for the TIP Customized Taiwan Select High Dividend Index in June. The TIP Taiwan Select High Dividend ETF (00919 TW) has an AUM of US$6.4bn.
- One-Way turnover is estimated at 41% and that will result in a round-trip trade of TWD 168.8bn (US$5.2bn). There are 16 stocks that could have over 4x ADV to trade.
- The rebalance will be implemented over 8 trading days and the ETF has started trading the stocks last week.
STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability
- There are 3 changes for the SSE STAR50 (STAR50 INDEX) and 9 changes for the STAR100 Index. Implementation will take place at the close on 14 June.
- United Nova Technology (688469 CH) and Biwin Storage Technology (688525 CH) were not added at the March rebalance since they were consistently loss-making. But they have been added this time.
- United Nova Technology (688469 CH) had been trading poorly and then the stock dropped further after non-inclusion in March. That could change now with inclusion confirmed.
SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance
- There are 5 changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 14 June. There is over 1x ADV to trade on most stocks.
- The index committee has focused on sector balance with higher ranked stocks from the Financials sector ignored and lower ranked stocks from other sectors included.
- The adds have outperformed the deletes over the last 6 months and positioning (especially on the surprises) could lead to further upside for a long/short trade.
Quiddity CSI 300/500 Jun 24 Rebalance: 92% Hit Rate; US$3.7 One-Way Flows
- The June 2024 index review results for China’s CSI 300 and CSI 500 indices were announced after market close on Friday 31st May 2024.
- There will be 12 changes in CSI 300 and 50 changes in CSI 500 which could collectively cause one-way index flows of ~US$3.7bn during the June 2024 index rebal event.
- Compared to Quiddity’s final expectations, 114 out of the 124 index changes (both ways) were correct translating to a hit rate of 92%.
CES China Semiconductor Chips Index Rebalance: Adding to Impact for Some Stocks
- There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 14 June.
- Biwin Storage Technology Lt (688525 CH) and Beijing Yandong Microelectroni (688172 CH) are also inclusions to other indices too and the multiple flows will increase the impact on the stocks.
- The adds have underperformed the deletes. If things go the way of the December rebalance, a long adds/ short deletes trade could do well from now to implementation.
Merger Arb Mondays (03 Jun) – China TCM, Huafa, GA Pack, SciClone, CF Logistics, Great Eastern
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Chilled & Frozen Logistics Holdings (9099 JP), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK).
- Lowest spreads: Great Eastern Holdings (GE SP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Mimasu Semiconductor Industry (8155 JP), Kfc Holdings Japan (9873 JP), Alumina Ltd (AWC AU).
Hanwha Ocean’s June 22 Release of a 1.68% Stake Grabs Local Market Attention
- The June 22 lock-up release, involving a 1.68% stake by Eximbank, is drawing attention, with concerns these shares might hit the market immediately, impacting prices significantly.
- Eximbank is likely to sell its shares quickly post-lock-up, fueling speculation and potential market reactions, as their focus is on financial stability, not long-term holdings.
- The 1.68% block deal could significantly impact Hanwha Ocean’s price, similar to last year’s 6.4% drop after a smaller block deal announcement by the Korean Financial Services Commission.
Tax-Loss Selling in Australia 2024 – The May Basket (April Basket +2.3 to +6.3% Rtn)
- I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article from June 2022 shows.
- The general gist: retail investors in Australia will take gains on stocks which run up in price, or get taken over, then look for losses to offset.
- The portfolio worked well in April. Now we let April ride and add the May basket.
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