In today’s briefing:
- HSCEI Index Rebalance Preview: Could Be A BIG One
- SOHO China (410 HK): Blackstone Deal Potentially Back On As Pan Shiyi Goes “Altruistic”
- Nikkei 225 March 2023 Review Quiddity Leaderboard
- MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Couple of Potential Deletes
- Sea Ltd – Just About Doomed
- Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow
- KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops
- KRX K-New Deal Rebalancing: Official Results & Passive Flows
- DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger
- JMDC Offering – Smaller Than It Looks
HSCEI Index Rebalance Preview: Could Be A BIG One
- There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
- If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
- There is large short interest on quite a lot of stocks and will play an important role in the rebalance.
SOHO China (410 HK): Blackstone Deal Potentially Back On As Pan Shiyi Goes “Altruistic”
- Pan Shiyi and Pan Zhangxin – Chairman and CEO respectively of SOHO China (410 HK) – have tendered their resignations, with immediate effect.
- Both are resigning “to focus on supporting the arts and philanthropic pursuits“.
- That sounds like a “donation” is on the cards. And the Pans selling their stake in SOHO China would nicely fund that donation.
Nikkei 225 March 2023 Review Quiddity Leaderboard
- The Sep 2022 Nikkei 225 Annual Review has been announced. This was discussed in Nikkei 225 Review Results: Nidec, SMC, Hoya IN.
- That means we can make early predictions for the March 2023 rebalance to be announced in six months. One way turnover would be about 1.4%.
- The top three adds are Oriental Land, Renesas, and JAL. The top 3 sells would be Toyobo, Toho Zinc, and Nippon Sheet Glass. There are some dark horses here too.
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Couple of Potential Deletes
- Sierra Rutile Holdings (SRX AU) is a high probability delete from the index, while Australian Strategic Materials (ASM AU) is close to the deletion threshold.
- Sayona Mining (SYA AU) is the highest ranked non-constituent while Tianqi Lithium (9696 HK) only makes inclusion at the entire IPO raise.
- Deletion from the index will require passive trackers to sell over 5 days of ADV on Australian Strategic Materials (ASM AU).
Sea Ltd – Just About Doomed
- It was reported yesterday that Sea Ltd (SE US)‘s e-commerce arm “Shopee” has begun rescinding job offers.
- Having burnt around $2.0bn during the first six months of 2022 pursuing e-commerce and fintech growth aspirations, this seems like an extreme measure to ensure the company’s survival.
- With the gaming profitability fading, we are starting to think that even the extreme cost-cutting could be insufficient to overturn Sea’s e-commerce and fintech cash burn.
Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow
- Hitachi Transport System (9086 JP) has had a “long” wait to get its approvals, but EC and China are in, any remaining should be in shortly.
- Yesterday, as a footnote on the SG Holdings offering document, there was a comment about SG Holdings selling shares. This was likely more good corporate governance hygiene than warning.
- Shares are down this morning. I’d expect final approvals and launch quite soon. I would therefore look to buy the dip on flow – block or not.
KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops
- The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
- Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
- Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.
KRX K-New Deal Rebalancing: Official Results & Passive Flows
- KMW replaces AfreecaTV in BBIG. There is no constituent change for Battery and Bio. Seojin and Intellion replace NHN KCP and Danal in Internet. Nexon Games replaces Devsisters in Game.
- The effective date has been postponed to the 13th, and the ETF operators will conduct the rebalancing trading at the close tomorrow, the 8th.
- Regarding relative passive impact, KMW and AfreecaTV should receive the most attention, and this pattern is already appearing today.
DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger
- The Bangkok Post reports that the Thai regulator (NBTC) will propose ten remedial measures to approve the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
- The NBTC board is not expected to issue a final decision as it waits for an interpretation by the Council of State if it can approve or reject the merger.
- The current share price ratio is 9.511x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 9.2% and 10.7%, respectively.
JMDC Offering – Smaller Than It Looks
- In February 2022, Noritsu Koki (7744 JP) – longtime holder of JMDC Inc (4483 JP) – sold 2/3 of its holdings to Omron (6645). Omron made a US$1bn new bet.
- Shares fell after Q1 results, and then fell another 7% in 2 days after the company announced a primary offering for ¥22bn to international investors, ¥11bn to Omron.
- High PER but Fundamental Forecasts are up-and-to-the-right, and there is a surprising amount of flow mitigation from passive investor activity the next 3 months.
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