In today’s briefing:
- Unexpected Inheritance Tax Rate Reduction Included in July Tax Reform: Impact on Value-Up Trading
- Merger Arb Mondays (17 Jun) – Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor
- MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$400m
- NASDAQ 100 Index Rebalance: Arm Holdings Replaces Sirius XM
- Great Eastern (GE SP): Inching Towards Suspension
- EQD / Weekly Vol Update / Positive Risk-Sentiment & Short Trading Week Put Pressure on IV Levels
- Liquid Universe of European Ordinary and Preferred Shares: June‘24 Report
Unexpected Inheritance Tax Rate Reduction Included in July Tax Reform: Impact on Value-Up Trading
- Senior Presidential Secretary said this morning that a tax reform, including reducing inheritance tax rates to the OECD average, will be disclosed in late July with the tax reform plan.
- Stocks sensitive to reduced inheritance tax, notably Hyundai Motor Group subsidiaries like Hyundai Glovis and Hyundai Motor, could see significant attention amid governance restructuring efforts under Chung Eui-sun.
- Retroactive application and its extent may impact markets, potentially affecting groups like Samsung, influencing diverse investment strategies based on specifics.
Merger Arb Mondays (17 Jun) – Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor
- 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), Fancl Corp (4921 JP), Asia Cement China (743 HK), Ansarada Group Ltd (AND AU).
- Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Alumina Ltd (AWC AU), Nagatanien Holdings (2899 JP).
MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$400m
- There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in June but there are a lot of float and capping changes.
- Estimated one-way turnover is 3.9% resulting in a round-trip trade of US$418m. There are 17 stocks with over 1x ADV to trade from passive trackers.
- The largest inflows are expected in Cia de Minas Buenaventura SAA (BVN US), Equinox Gold (EQX US) and Red 5 Ltd (RED AU).
NASDAQ 100 Index Rebalance: Arm Holdings Replaces Sirius XM
- ARM Holdings (ARM US) will replace Sirius Xm Holdings (SIRI US) in the Nasdaq-100 Stock Index (NDX INDEX) after the close of trading on 21 June.
- Passive trackers will need to buy just over US$500m of ARM Holdings (ARM US) while the estimated selling in Sirius Xm Holdings (SIRI US) is smaller.
- There could be passive selling in NVIDIA Corp (NVDA US), but this will be a lot smaller than the expected buying from the Technology Select Sector SPDR (XLK US) ETF.
Great Eastern (GE SP): Inching Towards Suspension
- Back on the 10th May, OCBC (OCBC SP) made a voluntary unconditional general Offer for the 11.56% in life/non-life insurer Great Eastern Holdings (GE SP) not held.
- At a 36.9% premium to last close, the S$25.60/share Offer Price appeared fair. Yet GE has consistently traded through terms, potentially as someone seeks to block delisting, and negotiate terms.
- OCBC has now declared terms final. The IFA says “not fair, but reasonable” – and recommends shareholders accept the Offer. GE will be suspended at the close of the Offer.
EQD / Weekly Vol Update / Positive Risk-Sentiment & Short Trading Week Put Pressure on IV Levels
- IVs move lower at an accelerated pace driven by holiday shortened week & risk-seeking sentiment.
- Vol-Regime has switched to “High & Down” state, projecting an elongated period of falling IV levels.
- Nifty50 Smile & Skew dynamics continue to compress. Vol term structure has moved from Backwardation to Contango in conjunction with falling IVs
Liquid Universe of European Ordinary and Preferred Shares: June‘24 Report
- Since mid-May, share-price spreads have not shown a clear trend across our European liquid universe of ordinary and preferred shares (9 have tightened, 7 widened, 1 remained at same level).
- Recommended trades long preferred / short ordinary shares: Atlas Copco, Grifols, Media-for-Europe, Sixt, Volkswagen.
- Recommended trades long ordinary / short preferred shares: Henkel, SSAB Svenska Stal.
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