In today’s briefing:
- Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning
- [Quiddity Index Feb25] Nikkei 225 Mar Rebal: 2 or 3 IN, 2 or 3 OUT, ~$3bn 1-Way, 1 Squeeze.
- JIC Launches Shinko (6967) Deal At ¥5,920/Share
- Sony To Sell Down SRE Holdings (2980 JP) Block – AI-Related Growth Stock Should See Support
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
- CVC Extends Macromill (3978) Bid and Invites Two Funds To Reinvest – More Interesting Than You Think
- Base Food (2936 JP): Partial Tender Offer at JPY688
- Soundwill Holdings (878 HK): Privatisation Expected From The Controlling Family
- Tam Jai (2217 HK): Toridoll (3397 JP)’s Scheme Privatisation at HK$1.58
Alibaba (9988 HK): Results This Week; Over US$1bn Passive Selling in 3 Weeks
- Alibaba Group Holding (9988 HK) stock has rallied bigly over the last month and has gained 55% over that period.
- That has led to Alibaba‘s weight in the HSI INDEX, HSCEI INDEX, HSTECH INDEX and HSIII Index rising above the cap of 8%/12% and passives will sell on 7 March.
- We estimate passive trackers will need to sell US$1.2bn of stock due to capping. Shorts have been increasing, and quarterly results will be announced on 20 February.
Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning
- The changes to the Nikkei 225 (NKY INDEX) as part of the March rebalance should be announced in just over 2 weeks. We expect 2-3 changes at the review.
- The forecast adds have massively outperformed the forecast deletes and the Nikkei225 Index over every time period going back 3 months with the largest outperformance in the last month.
- Positioning appears to be stretched in one forecast add while there appears to be under positioning in a couple of the forecast deletes.
[Quiddity Index Feb25] Nikkei 225 Mar Rebal: 2 or 3 IN, 2 or 3 OUT, ~$3bn 1-Way, 1 Squeeze.
- The data observation period is done. No rank changes in the top candidates since mid-Jan. Capping for Fast Retailing (9983 JP) is confirmed.
- For me, it is 2 or 3 ADDs, depending. Kokusai Electric (6525 JP) is still tops. BayCurrent Consulting (6532 JP) second. Shift Inc (3697 JP) third.
- Kokusai is +26.7% in 5 weeks since I wrote bullishly, despite news/confirmation of getting the boot from a global index at end-Feb. Baycurrent is +39.7% (link). Now we count flows.
JIC Launches Shinko (6967) Deal At ¥5,920/Share
- Today quite late, the JIC Consortium announced the launch of the Shinko Electric Industries (6967 JP) Tender Offer expected “mid-February”. Price is still ¥5,920/share.
- This is basically going to be all arbs and passive now. And arbs gonna arb.
- Congrats if you bought the lows in late November early December. Great trade. Congrats if you bought the last delay dip. Now we can all go home.
Sony To Sell Down SRE Holdings (2980 JP) Block – AI-Related Growth Stock Should See Support
- SRE Holdings Corp (2980 JP) does a business in AI Cloud&Consulting for the real estate, finance, and Life & Healthcare business. Sony Corp (6758 JP) is selling a stake.
- The offering is for about US$50mm assuming a 10% discount today’s close. It is not clear how much this was expected but there is a decent-sized short position.
- The stock has its ups and downs, and recently decided it liked Q3 earnings and guidance. That bodes well for the offering.
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
- Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 March.
- With no constituent changes, one-way turnover will be 2.75% with 3 stocks being capped downward. This gives the index committee the opportunity to add more stocks without significantly increasing turnover.
- The return of the high and medium probability inclusions has matched the performance of the Hang Seng Index over the last few months, Shorts have climbed in some names.
CVC Extends Macromill (3978) Bid and Invites Two Funds To Reinvest – More Interesting Than You Think
- Today, the closing date of the Tender Offer for Macromill, Inc (3978 JP) by CVC saw the tender offer extended by an extra 10 days with new news.
- Price had been declared final. One very large shareholder had said they would not tender. Two more were negotiating. Those two will now tender and reinvest in the back end.
- This does not mean the tender offer is a done deal, but it is worth examining.
Base Food (2936 JP): Partial Tender Offer at JPY688
- Base Food (2936 JP) announced a partial tender offer from MBF Acceleration, the largest shareholder.
- The offer is for a maximum of 3.7 million shares (6.97% ownership ratio) at JPY688 per share, a 23.3% premium to the last close price.
- The offer has no minimum acceptance condition, and the price is reasonable. The estimated minimum proration is 21.43%.
Soundwill Holdings (878 HK): Privatisation Expected From The Controlling Family
- Small-Cap property developer Soundwill Holdings (878 HK) is currently suspended pursuant to the Takeovers Code
- Soundwill is controlled as to 74.97% by Grace Foo (ED), and her descendants, Wai Ling Chan (deputy chairman), and Hing Tat Chan (chairman).
- Soundwill is trading at a staggering 0.08x P/B, with the majority of its book value tied up in investment properties.
Tam Jai (2217 HK): Toridoll (3397 JP)’s Scheme Privatisation at HK$1.58
- Tam Jai International (2217 HK) announced a scheme privatisation offer from TORIDOLL Holdings Corporation (3397 JP) at HK$1.58 per share, a 75.6% premium to the last close price.
- The key condition is the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). No disinterested shareholder holds a blocking stake.
- The offer price is final. While 53% below the IPO price, the offer is attractive compared to peer multiples and historical trading ranges. This is a done deal.
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