In today’s briefing:
- Korea FSS Chief Calls for 10% Premium/Discount on Doosan Merger, Boosting Swap Spread to 30%
- NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow
- NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines
- CIMC Enric (3899 HK): Things Are Getting Better
Korea FSS Chief Calls for 10% Premium/Discount on Doosan Merger, Boosting Swap Spread to 30%
- FSS Governor Lee challenged the legality of the Robotics-Bobcat merger ratio, citing Article 176-5 of the Capital Markets Act, allowing a 10% premium or discount.
- Following the FSS Governor’s statements, Doosan must likely apply a 10% premium/discount to the Robotics-Bobcat merger, creating a 30% spread based on current stock prices.
- Doosan may still revise or cancel the merger, but the FSS Governor’s comments might boost Bobcat short-term. Given the uncertainty, aggressive trading is risky.
NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow
- There are 19 changes a side for the NIFTY Midcap 150 Index at the September rebalance. There are many stocks with same-way flows from passive trackers of other indices.
- Estimated one-way turnover is 9.8% resulting in a one-way trade of INR 8.2bn (US$98m). With US$40.1bn tracking the index actively, the impact on the stocks will be much larger.
- The adds have outperformed the deletes this year, though near-term performance has been meh. There was a similar trend in March and the adds could outperform nearer to implementation.
NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines
- There are 7 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that will be implemented at the close on 27 September. Changes are on expected lines.
- Estimated one-way turnover for the Nifty Next 50 Index (NIFTYJR INDEX) is 19.6% resulting in a one-way trade of INR 63.64bn (US$759m). Many stocks have over 1x ADV to trade.
- The adds have outperformed the deletes this year but there has been big underperformance over the last month as stocks expected to benefit from rural spending have rallied.
CIMC Enric (3899 HK): Things Are Getting Better
- CIMC Enric Holdings (3899 HK)‘s 1H24 result is below expectations, but the growth outlook is promising. Management also guided for a solid recovery in 2H24.
- Backlog and new orders rose 42.5% and 29.4%, respectively, with chemical and environmental orders rebounded sharply QoQ. The overall margin will be better in 2H24.
- Hydrogen revenue should reach Rmb1bn in FY24 (1H24: Rmb450m). New coke oven gas (COG) to hydrogen projects may generate Rmb10bn revenue by FY27, or 43% of FY23 revenue.
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