In today’s briefing:
- HSI, HSCEI, HSTECH: March Rebalance Flows Post Capping
- Toshiba – Privatisation Rebuttal and Then a Change in CEO…
- Nikkei 225 Change – Shinsei (8303) OUT, ORIX (8591) IN
- Nikkei 225 Index Rebalance: ORIX (8591) Replaces Shinsei Bank (8303)
- Nexon – Founder Kim Jung-Ju Passes, Raises Question if Nexon Deal Is Back In Play
- NBTC To Decide On True/DTAC Merger
- Lucid (LCID) – Is This a Lucid Investment Opportunity?
- FTSE All Cap Korea Rebalancing: VEA (Developed Ex-US All Cap)-Triggered Flow Estimations
- The Passing of Nexon Founder KJJ & Controlling Stake Sale Event 2.0
- Solus Advanced Materials: Announces Rights Offering Worth 240 Billion Won
HSI, HSCEI, HSTECH: March Rebalance Flows Post Capping
- The March rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
- The largest inflows will be on Alibaba Group (9988 HK), JD.com Inc. (9618 HK), Meituan (3690 HK), Nongfu Spring (9633 HK), Li Auto (2015 HK) and Lenovo (992 HK).
- The largest outflows will be on HSBC Holdings (5 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and Tongcheng-Elong Holdings Ltd (780 HK).
Toshiba – Privatisation Rebuttal and Then a Change in CEO…
- Yesterday Bloomberg published an interview with Toshiba CEO Satoshi Tsunakawa where he effectively said a privatisation was not going to happen.
- Today, Toshiba announced that Tsunakawa and his deputy, Mamoru Hatazawa would be resigning effective immediately.
- What an interesting coincidence… one which could make shorting Toshiba quite attractive.
Nikkei 225 Change – Shinsei (8303) OUT, ORIX (8591) IN
- The Nikkei Index team announced changes to the Nikkei 225 Average today after the close.
- Shinsei Bank (8303) is OUT and ORIX (8591) is IN based on the new rule changes effective with the new market structure in place at the TSE on 4 April.
- There is a special sit on Shinsei, and ORIX has several days to buy. It could be interesting.
Nikkei 225 Index Rebalance: ORIX (8591) Replaces Shinsei Bank (8303)
- Orix Corp (8591) replaces Shinsei Bank (8303) in the Nikkei 225 at the close of trading on 1 April due to Shinsei Bank not trading on the Prime Market.
- We estimate there will be passive buying of 27.5m shares on Orix Corp (8591 JP) while there will be selling of 2.75m shares on Shinsei Bank (8303 JP)
- There appears to be some pre-positioning on Orix Corp (8591 JP) – the stock could outperform heading into index inclusion.
Nexon – Founder Kim Jung-Ju Passes, Raises Question if Nexon Deal Is Back In Play
- The founder and former chairman and CEO of Nexon (3659 JP) passed away according to both Nexon and his holding company NXC. Both announced it late afternoon 1 March.
- NXC – the near-parent (47+% stake) of Nexon tried to sell Nexon/NXC in H1 2019 to no avail. Since then, profits have rebounded somewhat, and investments have multiplied.
- The estate may wish to sell Nexon shares, or its entire stake, at some point near-term.
NBTC To Decide On True/DTAC Merger
- Thailand’s Trade Competition Commission said that only the National Broadcasting and Telecommunications Commission has the authority to block the True Corp (TRUE TB) / Total Access Communication (DTAC TB) merger.
- At issue, the government appears to be stonewalling the transition of the NBTC board, potentially abetting the merger.
- Both True and DTAC are trading through their VTO terms, ignoring dividends.
Lucid (LCID) – Is This a Lucid Investment Opportunity?
- Big valuation and multiples despite on delivering its first care in 4Q21 (no revenues and burning free cash flow)
- Lofty delivery goals provided for 2022 and 2023….already disappointing investors
- Optimistic market share and ASP assumptions have been made by management
FTSE All Cap Korea Rebalancing: VEA (Developed Ex-US All Cap)-Triggered Flow Estimations
- The ETF that directly impacts the flow of Korean stocks within the FTSE indices is the Vanguard Developed Markets ETF (VEA), which tracks the FTSE Developed All Cap ex-US.
- The FTSE rebalancing impact on Korean stocks has shown a pattern of bringing additional flow in the same direction as the VEA-triggered flow.
- So, we may want to consider basket trading of those stocks with a more substantial level of passive impact x ADTV towards March 18.
The Passing of Nexon Founder KJJ & Controlling Stake Sale Event 2.0
- We should pay the most attention to what choices and decisions the bereaved family will make concerning the stakes and management rights of the deceased in NXC.
- This opens the possibility that the KJJ’s stake sale event in 2019 will happen again in the foreseeable future.
- Under these circumstances, there is a possibility that short-term momentum trading aimed at tender offers to minority shareholders following the sale of Nexon’s major shareholder stake will surge.
Solus Advanced Materials: Announces Rights Offering Worth 240 Billion Won
- Solus Advanced Materials announced that it will conduct a rights offering worth 240 billion won, representing 12.5% of its market cap.
- We have a positive view on the rights offering mainly due to more attractive discount relative to current share price (22%) and reasonable valuations.
- The company plans to increase its production capacity of battery copper foil from 24,000 tons by the end of 2021 to 132,000 tons by 2026.
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