In today’s briefing:
- MSCI May 2022 Index Rebalance Preview: Three Weeks to Start of Review Period
- KT (030200): MSCI Inclusion-Triggered Foreign Buying Flow Scenario
- JD.com (9618 HK): Passive Hang Seng Buying in June
- Jin Jiang Capital’s Offer Risk/Reward – Pre-Condition Satisfied
- IE Says Fair And Reasonable In CIMIC’s Target Statement
- NortonLifeLock/Avast: CMA In-Depth Investigation, Spread
- Hoban Construction Acquires a 17.4% Stake in HanjinKal
MSCI May 2022 Index Rebalance Preview: Three Weeks to Start of Review Period
- Given the market volatility, there have been quite a few changes to the potential inclusions and exclusions at the MSCI May SAIR, especially for China.
- There are now three weeks to the start of the review period and we see 40 potential inclusions and 49 potential deletions. Most of the expected changes are in China.
- The largest potential inclusions are Powerchip Semiconductor Manufacturing, Orient Overseas International, Pop Mart International, Eva Airways, China Airlines, Emtek, KT Corp, Sumber Alfaria Trijaya, Hyundai Heavy Industries and Xtep International.
KT (030200): MSCI Inclusion-Triggered Foreign Buying Flow Scenario
- If KT’s MSCI inclusion fails, a foreign buying of 3.25x ADTV will occur until this Thursday. If successful, a foreign inflow of 5.51x ADTV will be seen until end-May.
- I’d not consider SKT as a short-hedge instrument. It is questionable whether the extent and timing of SKT’s FTSE passive selling-triggered price correction will adequately serve as a short hedge.
- Instead, betting that the market preference for recession-proof industries does not change in the short term, I will use the KOSPI 200 futures as a short hedge instrument.
JD.com (9618 HK): Passive Hang Seng Buying in June
- JD.com Inc. (9618 HK) shares from the Tencent (700 HK) in-specie dividend settled on 25 March. That has increased the number of CCASS shares and the Hong Kong free float.
- Given the large trading volumes in JD.com Inc. (9618 HK) on 25 March and 28 March, we expect most of the forced selling from the ADR allotment is done.
- There will be selling in JD.com Inc. (9618 HK) from active investors and the overhang from the Prosus (PRX NA) holding. Buying from HSI/HSCEI trackers in June could help a bit.
Jin Jiang Capital’s Offer Risk/Reward – Pre-Condition Satisfied
- Shanghai Jin Jiang Capital Company Limited (2006 HK)’s privatisation offer from Jin Jiang International Holding is HK$3.10 per H share. The pre-condition was fulfilled on 28 March.
- The key conditions for the delisting will be approval by at least 75% of independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition.
- At last close and for a May end effective date (composite document despatched on 1 April), the gross and annualised spread to the offer is 4.7% and 32.1%, respectively.
IE Says Fair And Reasonable In CIMIC’s Target Statement
- On the 23 February, Actividades de Construcción y Servicios (ACS SM), via 52.3%-held Hochtief AG (HOT GR) offered $22/share for all CIMIC (CIM AU) shares it does not own.
- The Independent Expert (Grant Thornton) has assessed the Offer and concluded it to be fair and reasonable.
- The Offer is unconditional. The close of the Offer, unless extended, is the 11 April.
NortonLifeLock/Avast: CMA In-Depth Investigation, Spread
- The British competition regulator questions the acquisition of cybersecurity company Avast PLC (AVST LN) by NortonLifeLock (NLOK US). and refers the transaction for an in-depth phase 2 investigation.
- The combination would not hold more than c.31% of the UK antivirus market and probably less than 30% in malware protection. The CMA investigation should take 20-24 weeks.
- Deal closing could happen during Q4 2022. Spread on the majority cash option is 11.9%, spread on the majority stock option is 3.9%.
Hoban Construction Acquires a 17.4% Stake in HanjinKal
- On 28 March, it was reported that Hoban Construction will acquire a 17.43% stake in Hanjin KAL Corp (180640 KS) from KCGI becoming the second largest shareholder of the company.
- There are some further possibilities of Hoban Construction forming an alliance with Bando Construction later on which could make the shareholding structure of HanjinKal very interesting.
- There has been an increased increase in the travel/leisure related plays (including HanjinKal) with the opening up of travel and fewer COVID restrictions in some countries including in South Korea.
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