In today’s briefing:
- Hong Kong: Where Have Shorts Been Building Up?
- KLCI Index Rebalance Preview: The Gloves Could Come Off
- Ramsay’s Overdue Update on the KKR Proposal
- JAFCO (8595) Down as Murakami Affiliates Sell the Pop on the Poison Pill, So Buy the Range Dip
- Ramsay Keeps Door Ajar After KKR’s “Meaningful Inferior” Offer
- Another Flow Event Coming: Samsung Life Converting Equity Index Funds into EMPs
- Mastercard Partnership with Binance: BNB Will Benefit from Network Effect
- MACA’s Target Statement Responds To Thiess’ Offer
- EURO STOXX 50 Quiddity Leaderboard: Two Potential ADDs with ~US$1bn Flows Each
- Chongqing Hongjiu Fruit IPO – Not Fully Convinced but Appears Cheap on the Low End
Hong Kong: Where Have Shorts Been Building Up?
- Short notional in Hong Kong is HK$439bn and has been falling over the last 18 months due to a drop in the market.
- In terms of short notional to issue market cap, the Information Technology, Materials, Health Care and Consumer Discretionary sectors are up there, with Communication Services, Real Estate the least shorted.
- Over the year, the largest shorts in terms of notional have been built on Xiaomi Corp, Meituan, JD.com, AIA Group Ltd, Postal Savings Bank of China, Orient Overseas, Techtronic Industries.
KLCI Index Rebalance Preview: The Gloves Could Come Off
- AMMB Holdings (AMM MK) and Ql Resources (QLG MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) at the December rebalance.
- One way turnover is estimated at 2.87% and the impact of passive flows is larger on the potential adds as compared to the potential deletes.
- Westports Holdings (WPRTS MK) is a close add and there could be changes over the next few months as we approach the end of the review period.
Ramsay’s Overdue Update on the KKR Proposal
- Ramsay Health Care (RHC AU) notes that discussions with KKR are ongoing, but the indicative proposal is held up by due diligence access to Ramsay Generale de Sante (GDS FP).
- KKR proposed an alternative proposal that the Board rejected as “meaningfully inferior.” KKR remains interested, and its shenanigans are likely a move to nudge down the price.
- At the last close, the risk/reward profile is favourable as the downside due to a deal break (-3% estimated decline) is lower than the upside (+20%) to the indicative proposal.
JAFCO (8595) Down as Murakami Affiliates Sell the Pop on the Poison Pill, So Buy the Range Dip
- Entities related to noted Japanese activist Yoshiaki Murakami had bought 11+%, suggested 15%, proposed 51%, and pestered Jafco Co Ltd (8595 JP) for an asset sale and super-large buyback.
- JAFCO decided to launch a poison pill process as a hostile takeover defence mechanism, with the Record Date at August month-end.
- The shares popped. I was bearish. It turns out Murakami affiliates sold the pop. And this starts the range trade.
Ramsay Keeps Door Ajar After KKR’s “Meaningful Inferior” Offer
- KKR has all-but-abandoned its A$88/share cash offer for Ramsay Health Care (RHC AU), Australia’s largest private hospital group.
- KKR’s alternative proposal involves $88/share for the 5,000 RHC shares, followed by A$78.20/cash + 0.22 Ramsay Generale de Sante (GDS FP) shares thereafter – or an indicative value of A$84.93/share.
- Despite announcing horrible annual results, Ramsay’s board considers the alternative proposal to be meaningfully inferior to the KKR’s indicative proposal of $88.00/share.
Another Flow Event Coming: Samsung Life Converting Equity Index Funds into EMPs
- Another notable flow event is coming in the Korean local market. Samsung Life is preparing to shift from an index fund-focused management to an ETF-centric one.
- Samsung Life’s conversion process will take 2-3 months. We need to secure guidelines on the conversion procedure, phased conversion volume, and the percentage of conversion to theme ETFs.
- This can, in some cases, produce significant short-term flow events, as Samsung Life may accelerate the transfer of funds to KODEX’s theme ETFs during the conversion process.
Mastercard Partnership with Binance: BNB Will Benefit from Network Effect
- The new Mastercard Binance debit card allows users to make purchases with selected cryptocurrencies in their Binance wallet and will first be rolled out in Argentina.
- BNB, the Binance native token, will benefit from network effect as adoption for the crypto card grows.
- Binance is expanding its payment strategy as a tool to drive user adoption and expand its ecosystem.
MACA’s Target Statement Responds To Thiess’ Offer
- On the 26th July, diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to the previous close.
- The Bidder’s Statement was dispatched on the 9 August. After rebuffing NRW Holdings (NWH AU)‘s non-binding proposal, MACA has now dispatched the Target Statement.
- The IE deems the Offer, which remains subject to FIRB and ACCC approvals, to be fair. The first closing date is the 12 September.
EURO STOXX 50 Quiddity Leaderboard: Two Potential ADDs with ~US$1bn Flows Each
- The EURO STOXX 50 Index is one of the most highly-watched indices in mainland Europe and the annual index review takes place in September.
- In Euro Stoxx 50 Quiddity Leaderboard for Sep 22: Eurozone’s Annual Big Impact Rebal Trades, we looked at the Potential ADDs/DELs and the historical performance of Rebalance Events.
- With less than a week left until the Reference date, we take a final look at the rankings in this insight.
Chongqing Hongjiu Fruit IPO – Not Fully Convinced but Appears Cheap on the Low End
- Chongqing Hongjiu Fruit (6689 HK) is looking to raise up to US$93m in its HK IPO.
- Chongqing Hongjiu Fruit (CHJF) is a multi-brand fresh fruit distributor in China with an end-to-end supply chain. They have 1.0% market share as China’s second largest fruit distributor
- CHJF had grown at an impressive rate even in the face of COVID-19. In this note, we will take a look at its valuations vs that of listed peers.
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