In today’s briefing:
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
- Anycolor (5032 JP) – Moving to Prime Next Week, TOPIX Inclusion Next Month
- Index Rebalance & ETF Flow Recap: CSI300/500, Chinext, China Semi Chips, Nifty Next50, SET50, REMX
- Quiddity TDIV/50/100 Jun 23 Rebal: 15/18 as Expected; Some Surprises, US$1.1bn+ One Way
- Nexon Founder Family Hands Over 4.7 Trillion Won Worth of NXC to Korean Government
- ENM (128 HK): Chinachem Takeover
- TOPIX Inclusions: Who Is Ready (Jun 2023)
- Yitai Coal (3948 HK): Offer Open with H Share Class Meeting on 30 June
- Ohayo Japan|US Rally Pauses on Services ISM-Recession Fears?; NUGGET: KEPCO, AI, and Data Centers ?
- EOFLOW/Medtronic Tender: Risk/Reward Profile
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
- Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
- We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
- There are 11 potential deletions where holdings via Stock Connect are more than 20% of shares outstanding. There could be some unwinding of positions over the next couple of months.
Anycolor (5032 JP) – Moving to Prime Next Week, TOPIX Inclusion Next Month
- Anycolor (5032 JP) IPOed a year ago, rose several-fold, saw the underwriting broker offer a huge target price, then it fell. There was an offering. And then the murders began.*
- The offering in January, discussed here, created overhang, and the stock fell sharply in the next 6 weeks. Blowout earnings came in mid-March. Along with a TSE Prime transfer application.
- Now we have the Prime promotion on 8 June, which leads to a TOPIX inclusion on 28 July.
Index Rebalance & ETF Flow Recap: CSI300/500, Chinext, China Semi Chips, Nifty Next50, SET50, REMX
- It was a busy week with index rebalance implementations and announcements of index changes.
- The coming week has the KOSPI200 and KOSDAQ150 rebalancing on Thursday and a bunch of onshore China indices rebalancing on Friday.
- There were big inflows to China ETFs during the week while the largest inflows went to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF.
Quiddity TDIV/50/100 Jun 23 Rebal: 15/18 as Expected; Some Surprises, US$1.1bn+ One Way
- In this insight, we take a look at the final ADDs/DELs for the TDIV, T50, and T100 Indices for the June 2023 Rebalance.
- Across these three indices there will be 18 changes and 15 of them were in line with expectations.
- Our updated flow expectations show that there could be US$1.1bn one-way flow in the June 2023 rebalance.
Nexon Founder Family Hands Over 4.7 Trillion Won Worth of NXC to Korean Government
- The late Nexon founder Kim Jung-Ju’s family recently paid nearly 4.7 trillion won worth of inheritance taxes to the Korean government by handing over 29.3% stake (paid-in-kind) in NXC Corp.
- We view this handing over the 29.3% stake to the Korean government to be positive overall on Nexon in the near term.
- However, we do not expect this could bring about change in controlling ownership of the Nexon Group in the near term to result in re-rating of the Nexon Group shares.
ENM (128 HK): Chinachem Takeover
- Fashion wear retailer ENM Holdings (128 HK) has received a delisting Offer from major shareholder, Chinachem.
- The Scheme consideration of HK$0.58 is a 24.7% premium to last close, although shares popped 24% prior to suspension.
- The Offer price is final. There is probably enough here for the Offer to get up. But there is potentially significant value to be unlocked from recent land rezoning.
TOPIX Inclusions: Who Is Ready (Jun 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- Zuiko Corp (6279 JP), Anycolor (5032 JP), and Lifedrink (2585 JP) will have TOPIX Inclusion events at the end of June (Zuiko) or July 2023 (the other two).
- One of our pre-event TOPIX Inclusion candidates CELSYS (3663 JP) has experienced sharp price moves over the last few weeks.
Yitai Coal (3948 HK): Offer Open with H Share Class Meeting on 30 June
- Inner Mongolia Yitai Coal Company Ltd (3948 HK)‘s H Share buyback offer at HK$17.50 per H Share is open. The H class meeting is on 30 June.
- The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There is a 90% minimum acceptance condition.
- The de-rating of the peers, likely supportive substantial H Shareholders and no major retail opposition should help hit the 90% threshold. At the last close, the gross/annualised spread is 4.7%/23.9%.
Ohayo Japan|US Rally Pauses on Services ISM-Recession Fears?; NUGGET: KEPCO, AI, and Data Centers ?
- OVERSEAS. US Rally Pauses as weak(er) Services ISM brings recession risk reminder; MS Big Bearish Call on SPX; Apple unveils Game Changing VR Headset ; Crypto Worries -Binance CEO Charged
- JAPAN. NKY Futs -0.3% vs Cash; Expect a pull back today given US pause, overbought markets, and stronger yen; MS Bullish Call on Japan; Panasonic expands Battery production for TESLA
- NUGGET. Data Centers – Demand set to Explode with AI: Next Growth Driver for an Already undervalued Kansai Electric ?
EOFLOW/Medtronic Tender: Risk/Reward Profile
- Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
- The shares are trading wide to terms due to key risks – regulatory approvals and the minimum acceptance condition (Medtronic owns 53.02% of the post-SSA outstanding shares).
- The regulatory approvals should be forthcoming due to minimum competition issues. The minimum acceptance condition requires a minority acceptance rate of 15.7%, which is achievable due to an attractive offer.
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