In today’s briefing:
- TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)
- Weiqiao Textile (2698 HK): Pre-Condition Satisfied as Prudence Edges Towards a Blocking Stake
- KOSPI Size Indices – The Outperformance Continues
- STTF Rebalance Preview: One Potential Change in March
- Quiddity Leaderboard F100/250 Mar 24: Intra-Review Replacements for NETW and LXI REIT
- A 140% Increase in Share Cancellations by Korean Companies from 2021 to 2023
- EQD | SPX DAILY LONG Reversal Probability Increasing
- Weiqiao Textile (2698 HK): Pre-Cons Done. Payment (Perhaps) Late March
- Naspers (NPN) X Prosus (PRX) Pairs Trade Opportunity as Naspers Comes Under Pressure
TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)
- Late last week, the TSE announced the changes in FFW for companies which have FY-end in the calendar Q2. Changes at 30 Jan close also include Phased Weighting Changes.
- There are two additions and 61 upweights (including net effect of PWR/PWIs). There are 456 down-weights with two-way flows of about US$1bn. There is a tiny funding trade.
- Visional (4194 JP) and Furuya Metal (7826 JP) are the two adds. Other large dollar upweights are Asahi Intecc (7747 JP) and Anycolor (5032 JP).
Weiqiao Textile (2698 HK): Pre-Condition Satisfied as Prudence Edges Towards a Blocking Stake
- Weiqiao Textile Co (2698 HK)’s offer pre-condition is satisfied. Prudence has increased its shareholding to 3.39% of the outstanding shares (9.79% of H Shares), marginally short of a blocking stake.
- The HK$3.50 offer has been declared final, which rules out a bump. Therefore, Prudence’s strategy could be to play the gross spread or to block the deal.
- The Shandong Luoxin Pharmaceutical (8058 HK) precedent supports the gross spread play view. However, unlike the precedent, Prudence is marginally short of a blocking stake in Weiqiao Textile.
KOSPI Size Indices – The Outperformance Continues
- The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
- We currently see 3 migrations from MidCap to LargeCap, 3 new adds to LargeCap, 6 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
- Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.
STTF Rebalance Preview: One Potential Change in March
- Emperador (EMI SP) currently fails the liquidity test and could be removed from the SPDR Straits Times Index ETF (STTF SP) in March.
- Frasers Centrepoint Trust (FCT SP) is currently the highest ranked non-constituent and could be added to the ETF. FCT has a 6% higher market cap compared to Olam (OLG SP).
- We estimate trackers will need to buy 5 days of ADV in Frasers Centrepoint Trust (FCT SP) and sell over 37 days of ADV in Emperador (EMI SP).
Quiddity Leaderboard F100/250 Mar 24: Intra-Review Replacements for NETW and LXI REIT
- In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the March 2024 index rebal event.
- Although I do not see any regular ADDs/DELs for the March 2024 rebalance, there might be one or two intra-review changes during the first quarter of 2024.
- These intra-review changes will be triggered by the completion of M&A events and it is important to know which names are leading the race to become intra-review ADDs.
A 140% Increase in Share Cancellations by Korean Companies from 2021 to 2023
- The total amount of share cancellations by Korean companies increased sharply in the past three years. Share cancellations of 6.1 trillion won in 2023 represented a 140% increase from 2021.
- Although the total amount of share cancellations of 6.1 trillion won in 2023 seems fairly large, this represented only 0.24% of total market caps of Korean companies.
- We also provide a list of seven Korean companies that have been targeted by activist investors to cancel more shares and improve corporate governance.
EQD | SPX DAILY LONG Reversal Probability Increasing
- The S&P 500 INDEX at the moment has lost its momentum and is pulling back towards the Q2 (4751) and Q3 (4713) support levels, where it would be DAILY OVERSOLD.
- A DAILY reversal could happen today or tomorrow from prices between 4750 and 4700.
- This trade is a quick scalp, the goal is to profit from a 1-bar reversal, after that we cannot predict the market direction, so caution is advised.
Weiqiao Textile (2698 HK): Pre-Cons Done. Payment (Perhaps) Late March
- Back on the 4th December, Weiqiao Textile Co (2698 HK) announced a pre-conditional privatisation at HK$3.50 per H-share, a chunky 104.68% premium to last close and around a six-year high
- Pre-Conditions – regulatory approval from NDRC, MoC and SAFE – have now been fulfilled. The Composite Doc is expected to be dispatched on or before the 24 January.
- This Offer is a Merger by Absorption incorporating a Scheme-like vote. There is no tendering condition. Prudence Investment Management, which has now built a 9.79% stake, will be supportive.
Naspers (NPN) X Prosus (PRX) Pairs Trade Opportunity as Naspers Comes Under Pressure
- Naspers (NPN SJ) has underperformed Prosus NV (PRX SJ) by 3.9% since the start of the year.
- This has widened Naspers’ discount to Prosus’ market value to 13.3% from 9.9%, a level last seen during July 2023.
- Opportunity to put on a pairs trade, long NPN short PRX as we believe the relative underperformance is overdone and a structural shift in the discount is underway.
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