In today’s briefing:
- 7&I (3382) – MBO Off, SC “Engaging Constructively with ACT”, Skepticism Higher, Questions And More
- BYD (1211 HK) Placement: Continuing to Power Up
- Local Brokers Sound Off on 40% IPO Lock-Up—A Major Setup for Offshore Traders
- Seven & I Holdings (3382 JP): Shares Under Pressure as Rumours Swirl
- Keisei Railway (9009) Gets Bad Advice from Activists, Which Is Good for The Rest of US
- FnGuide Semiconductor Top10 Index Rebalance Preview: Big Moves Lead to Changes in Forecast
- HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$5.3bn of Flows Post Capping (Mar 2025)
- OneConnect Financial (6638 HK/OCFT US): Ping An’s Fair NBIO
- StubWorld: Cheung Kong’s Geopolitics
- KOSPI200 Index Adhoc Rebalance: Kumyang (001570 KS)’s Designation Opens Up an Index Spot
7&I (3382) – MBO Off, SC “Engaging Constructively with ACT”, Skepticism Higher, Questions And More
- The MBO is off. Itochu Corp (8001 JP) has apparently not been able to agree with Ito-san on board composition/representation and management control. That the MBO is off isn’t surprising.
- 7&i says they “continue to engage constructively with ACT and alternate proposals but news articles suggest that almost 6mos after proposing an NDA, ACT still haven’t had access to financials.
- The shares are off hard today to a level below where ACT’s first bid was considered “not even worth discussing”. There will be questions at the AGM and before.
BYD (1211 HK) Placement: Continuing to Power Up
- Overnight, BYD (1211 HK) has announced a placement of 118m shares at a price range of HK$333-345/share that could raise up to HK$40.7bn (US$5.2bn).
- The Pink Sheets listing for BYD (BYDDY.PK) closed at US$87.1/share and traded US$155m for the day. That close implies an open of HK$338.7/share for BYD, middle of the placement range.
- There will be passive buying from global index trackers later this week while buying from Hang Seng Index and Hang Seng China Enterprises Index trackers will come in April.
Local Brokers Sound Off on 40% IPO Lock-Up—A Major Setup for Offshore Traders
- This 40% rule will distort bookbuilding, force down-pricing, choke float post-listing, and amplify volatility.
- Offshore investors like us benefit most—cheap IPO pricing with no lock-up. Local brokers see this as a giveaway to foreign funds and pushed back hard last Friday.
- FSS won’t budge—40% lock-up is happening. If issues arise post-implementation, they might adjust later.
Seven & I Holdings (3382 JP): Shares Under Pressure as Rumours Swirl
- Seven & I Holdings (3382 JP) denied a Yomiuri article that the Board has decided not to accept an Alimentation Couche-Tard (ATD CN) bid in favour of the restructuring plan.
- Despite the Board’s assertions that it is still having constructive discussions with Couche-Tard, its actions suggest otherwise.
- Couche-Tard remains interested but faces increasing roadblocks. The valuation is undemanding but the news flow is unlikely to support a rerating in the near-term.
Keisei Railway (9009) Gets Bad Advice from Activists, Which Is Good for The Rest of US
- Activist investors, confusing market price with intrinsic value, have shot themselves in the foot by offering terrible advice to Keisei Railway’s management.
- When Keisei followed advice from the activist, selling just 1% of the shares of Oriental Land, Keisei’s share price collapsed, proving market price has nothing to do with intrinsic value.
- Keisei’s revenue growth and return on investment are stronger than most of its peers, and the crash in its stock price caused by activists might create an opportunity for others.
FnGuide Semiconductor Top10 Index Rebalance Preview: Big Moves Lead to Changes in Forecast
- With the averaging period for the April rebalance commencing today, we forecast 2 changes for the FnGuide Semiconductor Top10 Index at the upcoming rebalance.
- Based on the passive assets tracking the index, there will be between 0.65-1x ADV to buy in the adds and between 0.5-1.7x ADV to sell in the deletes.
- The big rally has taken Gemvax & Kael into inclusion zone while underperformance leads to ISC Co and Techwing dropping out of inclusion zone.
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$5.3bn of Flows Post Capping (Mar 2025)
- The March rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This leads to large flows.
- The gross round-trip trade across all stocks across the four indices is estimated at HK$41.1bn (US$5.3bn). The net round-trip trade is HK$37.3bn (US$4.8bn).
- Meituan , JD.com, Baidu, Horizon Robotics, ICBC, BeiGene, Kuaishou Technology and China Construction Bank are the largest buys. Alibaba, Xiaomi, HSBC, ZhongAn Online and Tencent are the largest sells.
OneConnect Financial (6638 HK/OCFT US): Ping An’s Fair NBIO
- Dual-Listed OneConnect Financial Technology (6638 HK/OCFT US), a digital retail banking/commercial banking/ digital insurance play, has announced a non-binding proposal from Ping An, OneConnect’s controlling shareholder with 32.12%.
- Ping An is offering, by way of a Scheme, HK$2.068/share, or US$7.98/ADS, a 72.33% premium to last close, and a 131.66% premium to the 30-day average. The price is final.
- What now? Back in OneConnect’s boards’ court whether to engage or not. Which they should. No competing Offer will emerge.
StubWorld: Cheung Kong’s Geopolitics
- CK Hutchison Holdings (1 HK) (CKH) is trading “cheap” as Panama’s Supreme Court agrees to consider a request to nullify CKH’s canal concessions.
- Preceding my comments on CKH, CK Infrastructure Holdings (1038 HK) (coming up cheap on my monitor), and Power Assets Holdings (6 HK) are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
KOSPI200 Index Adhoc Rebalance: Kumyang (001570 KS)’s Designation Opens Up an Index Spot
- Kum Yang (001570 KS)‘s designation as an Administrative Issue should result in the deletion of the stock from the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) later this week.
- Taekwang Industrial (003240 KS) could be added to the index as an ad hoc replacement. The stock was in line to be added to the index at the June rebalance.
- Miwon Specialty Chemical (268280 KS) ranked higher than Taekwang Industrial (003240 KS) at the December rebalance but appears to fail the liquidity screen.
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