In today’s briefing:
- HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
- 2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines
- CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
- SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
- Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering
- What Is NPS Buying & Selling?
- Futu Holdings: Cross-Border Broking In Crosshairs
- Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent
- HSI Index Rebalance Preview: Better Late Than Never?
- Warrego (WGO AU): Has MinRes Gatecrashed the Party?
HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
- We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
- We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines
- SBI Shinsei Bank (8303 JP) was my High Conviction reco in late 2020 for 2021 at ~¥1200/share. It was my High Conviction reco in late 2021 for 2022 at ¥1900/share.
- I did not get around to writing it in late December 2022, but on the first day of trading I offer Shinsei as a 2023 high conviction recommendation.
- What’s new? Not a lot, but Reading Between The Lines is still top drawer stuff.
CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
- Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
- We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
- The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.
SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
- A third of the way through the review period of the June rebalance, we see one potential index change with Adani Enterprises (ADE IN) replacing Wipro Ltd (WPRO IN).
- Adani Enterprises (ADE IN) could move lower in the short-term due to the public issue of shares but should find support from passive buying from local and global index trackers.
- Wipro Ltd (WPRO IN) has underperformed most of its peers by a wide margin over the last year and the passive selling could provide an entry point.
Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering
- On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.
- Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
- The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration.
What Is NPS Buying & Selling?
- In this insight, we discuss a list of 60 stocks in Korea where NPS recently added or reduced 1% or more stake (27 adds and 33 reduce).
- Among the stocks NPS increased its stake, many of them are clear beneficiaries of the end of zero COVID policies in China including Hotel Shilla, Amorepacific Corp, and GKL.
- Among the top market cap stocks where the NPS decreased its stake by 1% or more, they include Lg Innotek, Hyundai E&C, Hyundai Mipo, and Posco International.
Futu Holdings: Cross-Border Broking In Crosshairs
- Just one day ahead of its dual primary listing in Hong Kong, Futu Holdings Ltd (FUTU US) postponed its Listing by Introduction.
- According to the China Securities Regulatory Commission, Futu has been illegally operating cross-border securities trading without approval.
- Suitably, the share prices of Futu and UP Fintech (TIGR US), another online brokerage forced to quit accepting new onshore investors. It’s probably too premature to buy the dip.
Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent
- The SPA for China Hainan Rubber Industry (601118 CH) to acquire 36.00% of Halcyon Agri (HACL SP)’s outstanding shares from Sinochem International Corporation A (600500 CH) at US$0.315 is effective.
- Conditions precedent which relate to Chinese regulatory approvals should be satisfied shortly. Completion will trigger an MGO at US$0.315 or S$0.423 (US$/S$ rate fixed on the closing date).
- The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities acceptance rate. We think that this is achievable as the offer is attractive.
HSI Index Rebalance Preview: Better Late Than Never?
- There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
- We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
- All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.
Warrego (WGO AU): Has MinRes Gatecrashed the Party?
- The AFR reports that Mineral Resources (MIN AU) was the buyer of 15% of outstanding shares at A$0.35, 25.0% above Hancock and 4.5% above Strike Energy (STX AU)’s offer.
- MinRes’ move is motivated by the desire to have a say in the recent Perth Basin consolidation. It recently lobbed an all-scrip takeover offer for Norwest Energy NL (NWE AU).
- Warrego Energy (WGO AU)‘s three largest shareholders are now the three suitors. The emergence of MinRes (if confirmed) suggests that the takeover battle is far from done.
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