In today’s briefing:
- S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up
- Scenario Analysis of Korea Zinc’s Share Buyback, Cancellation, and Tender Offer + NPS’s Five Options
- Clean Energy & Global Water ETFs: Changes for Asia & Impact
- China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price
- S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)
- TCM (570 HK): Likely Rush for The Exits As Deal Busts
- Fuji Soft (9749) Reiterates Support for KKR Tender#1, Recos Shareholders Wait, Ignores Nozawa Letter
- Japan Weekly | Insane AI Demand
- (Mostly) Asia-Pac M&A: GJS/Haitong, Fuji Soft, Bossini, Dyna-Mac, Beijing Capital Grand, TCM
- Allegro MicroSystems Inc.: Enhanced Product Portfolio With Focus on Automotive & E-mobility Applications Driving Our Bullishness! – Major Drivers
S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up
- With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December.
- There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
- Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.
Scenario Analysis of Korea Zinc’s Share Buyback, Cancellation, and Tender Offer + NPS’s Five Options
- We discuss the next steps in the fight for the control of Korea Zinc, after the completion of the tender offer by the MBK Partners and Young Poong alliance.
- After the tender offer, MBK and Young Poong’s stake in Korea Zinc increased from 33.13% to 38.47%, coming close to more than half of the voting rights.
- We continue to believe that at current stage, MBK/Young Poong alliance has the advantage in the fight for the control of Korea Zinc.
Clean Energy & Global Water ETFs: Changes for Asia & Impact
- There are 3 adds and 2 deletes for the iSharesGlobal Clean Energy ETF while there are 2 adds and 2 deletes for the iShares Global Water UCITS ETF.
- With US$5bn benchmarked to the iSharesGlobal Clean Energy and related ETFs, and US$3.5bn benchmarked to the iShares Global Water and related ETFs, there is multiple days of ADV to trade.
- We see a noticeable rise in cumulative excess volume over the last two trading sessions, so there will be positioning in the stocks.
China Traditional Chinese Medicine (570 HK): Disaster as Offer Lapses, Potential Deal Break Price
- Shockingly, the Sinopharm-led consortium’s offer for China Traditional Chinese Medicine (570 HK) has lapsed as the precondition long stop date has not been extended.
- This deal break caught many, including me, off guard. There are lessons to be learnt and questions to be asked.
- Shareholders will have a bruising Monday. Our analysis suggests a deal break price of around HK$3.44, a 10% downside to the last close.
S&P/NZX 50 Index Rebalance: Tower (TWR) Replaces Arvida (ARV)
- Arvida (ARV NZ) will be deleted from the S&P/NZX 50 Index following its acquisition by Stonepeak Alps BidCo. Tower Ltd (TWR NZ) will be added to the index.
- Passive NZX50 Index trackers will need to buy nearly 18m shares of Tower Ltd (TWR NZ) – that is over 26 days of ADV.
- There has been a lot of positioning in Tower Ltd (TWR NZ) since Stonepeak’s offer for Arvida (ARV NZ). There should be enough supply for the passive trackers.
TCM (570 HK): Likely Rush for The Exits As Deal Busts
- China Traditional Chinese Medicine (570 HK) (TCM) has been a frustrating deal, for a deal that shouldn’t be frustrating.
- As feared from its 16th October monthly update, the inability to secure investor group consents appears to have torpedoed the transaction. Will we eventually find out why this got stonewalled?
- This deal lapse changes the Hong Kong M&A landscape; if you can’t rely on SOE transactions to get up, what next? The immediate question now is downside support on Monday.
Fuji Soft (9749) Reiterates Support for KKR Tender#1, Recos Shareholders Wait, Ignores Nozawa Letter
- On Tuesday, Fuji Soft Inc (9749 JP) said they had received the legally-binding Bain proposal on 11 October, but noted they could not confirm founder Nozawa-san’s agreement or intentions.
- Founder Nozawa Hiroshi responded with a pair of impassioned letters Thursday criticising process, asking Fuji Soft to withdraw support for KKR, and switch to or allow the Bain Offer.
- Fuji Soft on Friday reiterated support for the KKR First Tender, but interestingly, saw a majority resolve to suggest common shareholders NOT tender because of the optionality.
Japan Weekly | Insane AI Demand
- U.S. stocks showed a “slightly bullish” trend this week, driven by stronger-than-expected September Retail Sales, which pushed the S&P 500 up 0.9%
- Japan’s stock market experienced a volatile week, with the Nikkei 225 Index declining 1.6% and the broader Topix Index down 0.6%
- ASML’s cautious guidance hit Japanese SPE Stocks, but AI-related chip demand remains “insane” according to TSMC
(Mostly) Asia-Pac M&A: GJS/Haitong, Fuji Soft, Bossini, Dyna-Mac, Beijing Capital Grand, TCM
- I tally 44 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- One new deals discussed this week: Bossini International (592 HK) low-balled scrip Offer from Viva Goods (933 HK). Beijing Capital Grand (1329 HK) also suspended due to the Takeovers code.
- Key updates took place on: GJS (2611 HK)/Haitong Securities (600837 CH), Fuji Soft Inc (9749 JP), Hotel Property Investments (HPI AU), TCM (570 HK) and Dyna Mac Holdings (DMHL SP)
Allegro MicroSystems Inc.: Enhanced Product Portfolio With Focus on Automotive & E-mobility Applications Driving Our Bullishness! – Major Drivers
- Allegro MicroSystems presented their first fiscal quarter 2025 results, positioning themselves within a competitive and challenging market environment.
- Positive indicators can be discerned from their performance, although there remain areas of concern which reflect broader market conditions and segment-specific issues.
- Starting with the positives, Allegro MicroSystems reported first-quarter sales of $167 million, which was above the midpoint of their guidance.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
