Daily Brief Financials: Haitong Securities Co Ltd (H), NIFTY Index, IP Group PLC, Bell Financial, China Jinmao Holdings and more

• 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 Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
• Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP). 

• Options Markets expected risk sentiment to deteriorate further – IVs were elevated. But lack of RV follow through caused sharp markdowns, especially for short-dated contracts.  
• Increased Vol-of-vol has triggered multiple switches in Vol Regime Model – currently in “High & Down” vol-state. Multiple state-switches indicative of unfolding structural changes in Vol Markets.
• Smile looking overly compressed in Monthly & Quarterly contracts as OTM Strangles trade close to par with ATMs.

• This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.
• The strategy performs well if the Nifty 50 rises and outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.
• Leverage increases both the strategy’s payoff and probability of success.

IP Group’s realisation activity has picked up notably in the months leading up to the company’s interim results publication in September, encouraging the company to increase the current buyback programme by £10m to £30m. Subsequently, IP Group agreed to sell the AI-powered financial crime detection business Featurespace to Visa. The exit will result in £134m in realisation proceeds at a 70% uplift to end-2023 carrying value, part of which was recognised in the H124 results, translating in a broadly stable value of IP Group’s private holdings. The de-rating of listed Oxford Nanopore (ONT) was therefore the major driver behind IP Group’s 9% NAV fall in total return (TR) terms in H124 to 104.7p, though nearly half of the ONT share price fall was reversed post end-June 2024, assisted by its half-year trading update and the Novo Holdings investment.

• RaaS has published an update report on diversified financials company Bell Financial Group (ASX:BFG) on the back of supportive September 2024 metrics including ECM league tables, ASX volumes and equity markets performance.
• BFG is sitting fourth on the LSEG ECM league tables for the nine months to September 2024, raising $1.2b and on-track with RaaS forecasts (positive for Retail and Institutional).
• The ASX200 closed 6.3% higher at the end of September 2024 relative to June 2024, above implied RaaS assumptions for the full-year and positive for the Portfolio Administration Services (PAS) business and overall investor confidence.ASX transaction volumes continue to recover from a weak CY23, up 32% for the September quarter and positive for the Retail and Technology & Platforms divisions.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China Jinmao Holdings
• Yuexiu Property