In today’s briefing:
- PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained
- SSE50 Index Rebalance Preview: Five Changes Coming Up in June
- AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote
- We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline
- Korea Investment & Securities’ Suspension of Credit Loans for Stock Purchases – The Trigger Event?
- Metro Pacific Investments (MPI PM): PHP4.63 Delisting Tender Offer
- Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
- Essity Mulls Holding In Vinda (3331 HK)
- Hokkoku Financial (7381) Earnings Report Delay But HUGE Buyback. Again.
PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
- However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
- At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Maintained
- With 1 trading day left in the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
- The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the last month. We’d be inclined to trim positions.
SSE50 Index Rebalance Preview: Five Changes Coming Up in June
- With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
- We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
- The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.
AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote
- The 27 April vote was adjourned as Aag Energy Holdings (2686 HK) Board was notified by “certain beneficial owners indicating that their latest voting instructions were not duly processed.”
- The meeting would not be adjourned if the YES vote was going to sail through. A delay helps the offeror as these owners will vote YES and deal fatigue sets in.
- Risk-Reward is still unfavourable at the last close. The deal break fair value range is HK$1.37-1.45 per share, with 16.0%-11.0% downside. This compares to the 13.5% upside from the offer.
We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline
- The recent matched order operation’s ringleader called in local major broadcasting companies for an interview and claimed the sell orders through SG on Monday were not from their CFD accounts.
- The trigger is Kiwoom Securities’ Chairman Kim, who created a continuous and rapid decline in stock prices and led to a vicious cycle of endless margin calls and covering orders.
- Rather than fishing for a bottom for the eight stocks from this point on, it seems necessary to actively design positions aimed at Kiwoom Securities’ legal risk-induced stock price decline.
Korea Investment & Securities’ Suspension of Credit Loans for Stock Purchases – The Trigger Event?
- The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.
- The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD.
- As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150.
Metro Pacific Investments (MPI PM): PHP4.63 Delisting Tender Offer
- Metro Pacific Investments Co (MPI PM) disclosed a voluntary delisting tender offer from a consortium at PHP4.63 per share, an 8.7% premium to the undisturbed price (26 April).
- The offer is conditional on shareholder approval and meeting the threshold for voluntary delisting (95% of outstanding shares) or obtaining an exemptive relief from the PSE.
- The shareholder approval and delisting threshold require around 73% and 86% acceptance rate, which is a risk as the offer is far from a knockout bid.
Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
- Today after the close, Kansai Paint (4613 JP) announced it would sell 3 investment securities in the current quarter and would book a gain of “around ¥30bn.”
- As discussed in Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows, Toyota’s sale of KP shares meant KP could sell Toyota shares. Now they will.
- This is a set-up to another buyback, eventually to unwind more in-bound cross-holdings and to raise ROE.
Essity Mulls Holding In Vinda (3331 HK)
- Tissue-Maker Vinda International (3331 HK) closed down 6.4% yesterday, recovering from a 13.8% fall intra day.
- Vinda said its 1Q23 operating profit declined 85.4% to HK$65mn. Vinda also announced its controlling shareholder Essity (ESSITYB SS) will commence a strategic review of its 51.59% ownership.
- A long-term shareholder potentially seeking a possible divestment, shortly after a company announces poor results, is not a great look.
Hokkoku Financial (7381) Earnings Report Delay But HUGE Buyback. Again.
- Yesterday Hokkoku Financial Holdings (7381 JP) came out with an odd decision to delay earnings from 28 April to 8 May. Volume traded.
- Today, despite not reporting earnings, the Kanazawa-based regional bank announced a BIG buyback with subsequent share cancellation. This was not unexpected. They have an aggressive policy which started last year.
- Hokkoku Bank policy introduced last year is special. It has worked. They are pursuing it. Expect more policy action like this as banks report.
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