In today’s briefing:
- The Japan March-End Rebal and Dividend Trade
- SSE50 Index Rebalance Preview: Three Changes; Some Misses
- Schedule Info for Front-Running Korea Sector ETF Rebalancing Trades
- Hanwha Aerospace’s Monster Raise: Checking Key Angles
- Boss Maki Goes Hard on Base (4477) – Interesting Situation
- BoE Dove Beaten Into Submission
- Idemitsu (5019) – Buyback Announced, Executed, To Be Executed Again; Pressure & Timing
- Quiddity Leaderboard ChiNext & ChiNext 50 Jun25: US$1.4bn Total One-Way Flows; Basket Trade Idea
- Hanwha Aerospace: Rights Offering of 3.6 Trillion Won (Negative on Entire Korean Defense Sector)
- Dropsuite (DSE AU): Topline Selling Is A Buying Opportunity
The Japan March-End Rebal and Dividend Trade
- Every year it’s the same trade. But sometimes it is not. This year it is Thursday and Friday. Or not.
- The month-end and quarter-end bring big flows, or not, depending on how things have gone.
- Over the past 10 years or so, the two-day return on the March trade is pretty good. This year? Well read on!
SSE50 Index Rebalance Preview: Three Changes; Some Misses
- With nearly 90% of the review period complete, 2 non-constituents are in inclusion zone and 3 constituents are in deletion zone.
- We estimate one-way turnover of 4.7% at the June rebalance leading to a round-trip trade of CNY 16.4bn (US$2.27bn). Index arb balances will increase the impact on the stocks.
- The forecast adds have outperformed the forecast deletes over the last 6 months but there has been a retracement in returns over the last month.
Schedule Info for Front-Running Korea Sector ETF Rebalancing Trades
- Demand for less crowded rebalancing plays is rising, making off-the-radar flows more critical. A structured timeline is key to tracking and managing these setups efficiently.
- Key ETFs to watch are local sector names with solid AUM—about 20 names. But the trading approach isn’t one-size-fits-all.
- Stick to the schedule, track potential flow setups, and front-run by securing rebalance details early and positioning ahead of the crowd.
Hanwha Aerospace’s Monster Raise: Checking Key Angles
- Market sees this as an M&A play, not just de-leveraging. Sentiment’s split, and despite a tight discount, uncertainty on take-up could spark major dislocations in stock and rights.
- Hanwha’s ₩3.6T raise drops just a week after Samsung SDI’s ₩2T—₩5.5T back-to-back. Absorption looks brutal, setting up serious volatility and prime trading opps if liquidity tightens.
- The FSC fast-tracked this, flagging it instantly but also hinting approval. With regulator risk off, any cash market snapback tomorrow should stay in check.
Boss Maki Goes Hard on Base (4477) – Interesting Situation
- Melco Holdings (6676 JP) chairman Hiroyuki MAKI bought up a 14% stake in BASE Inc (4477 JP) in just under two weeks. It was done quite transparently. He announced daily.
- He wants to get to 30% in a Tender Offer. The method, approach, lack of transparency, and similarity to previous situations where he invested has the company wary.
- This looks like a Poison Pill case in the offing. It WAS a cheap stock. It is not expensive now. But it is not clear what the endgame is here.
BoE Dove Beaten Into Submission
- The BoE unsurprisingly held its policy rate at 4.5% in March, preserving its gradual easing path after resilient recent data. Only one MPC member dissented for a 25bp cut.
- Catherine Mann did not carry the extra 25bp of easing she supported from February to March. Her hyperactive vote relied on so little spurious evidence it was swiftly falsified.
- Core members emphasise the lack of a predetermined path, raising the hurdle to a May cut, but this remains the most likely outcome, even if it may require a rapid reversal.
Idemitsu (5019) – Buyback Announced, Executed, To Be Executed Again; Pressure & Timing
- In February, Idemitsu Kosan (5019 JP) announced a new buyback to start when the then-existing one had not yet been completed. This is a pattern the last few years.
- On Tuesday, Idemitsu announced the method. Shareholder structure means there is pressure here, and its major peer sees buyback pressure drop imminently.
- Be aware of tilts and timing, and what might come in May.
Quiddity Leaderboard ChiNext & ChiNext 50 Jun25: US$1.4bn Total One-Way Flows; Basket Trade Idea
- The ChiNext index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
- The ChiNext 50 index is a subset of the ChiNext index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
- We see 9 changes for the ChiNext index and 5 changes for the ChiNext 50 index in the next index rebal event in June 2025.
Hanwha Aerospace: Rights Offering of 3.6 Trillion Won (Negative on Entire Korean Defense Sector)
- Hanwha Aerospace (012450 KS) announced a rights offering capital raise of 3.6 trillion won (US$2.5 billion), which is the largest ever rights offering capital raise in Korea.
- We believe this capital raise is likely to result in higher concerns about shares dilution at Hanwha Aerospace and negatively impact its share price.
- It is also likely to have a significant negative impact on the entire Korean defense stocks, as it signals a top on this sector.
Dropsuite (DSE AU): Topline Selling Is A Buying Opportunity
- Back on the 28th January, Dropsuite Ltd (DSE AU), a backup, recovery and protection software company, entered into a Scheme Implementation Deed with Texas-based IT automation outfit NinjaOne.
- NinjaOne’s A$5.90/share Offer was a 34.1% premium to last close. The Offer has the backing of Dropsuite’s largest shareholder, Topline Capital (31%). Board & management hold a further 9%.
- Done & dusted no? Then Topline sold down to 19.7% on the 28th Jan, then 10.5% on the 28th Feb. The Takeover Panel now orders Topline to stop selling.
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