In today’s briefing:
- Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- Japan Post Holdings To Effectively “Re-IPO” Japan Post Bank (7182 JP)
- KOSPI200 Index Rebalance Preview: Changes in April & June
- Japan Post Bank Possible Placement – Here We Go Again with the US$9bn Overhang
- Techtronic Industries (669 HK): JR Puts Down That Tool
- Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
- Ihara Science (5999 JP) – Here Comes The Bumpitrage
- Techtronic Industries (669 HK): Forensic Analysis Viewpoint
- SPX Range Ahead of Next Leg Down
- Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment
Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
- FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
- Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.
Japan Post Holdings To Effectively “Re-IPO” Japan Post Bank (7182 JP)
- Overnight a Reuters article suggested Japan Post Holdings (6178 JP) had started talks to sell a near 30%) stake in Japan Post Bank (7182 JP), the first sale since IPO.
- A sale is designed with two aims: 1) the TSE requires a 35% tradable share ratio, and 2) JPH is supposed to lower holdings in JPB to <50% by 2025.
- This event may include a buyback, and has moving parts, and flows on the back end, but fundamentally a sale would effectively constitute a “re-IPO” of the shares.
KOSPI200 Index Rebalance Preview: Changes in April & June
- Samyang Foods (003230 KS) will replace Hyundai Greenfood (005440 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 12 April.
- We expect DGB Financial Group (139130 KS) will replace Meritz Securities (008560 KS) in early April.
- Then we expect another 3 changes at the regular rebalance in June. The potential adds have moved sharply higher recently and there are flows from other index trackers too.
Japan Post Bank Possible Placement – Here We Go Again with the US$9bn Overhang
- Japan Post Holdings (6178 JP) is looking to trim its stake in Japan Post Bank (7182 JP) by a third, as per Reuters.
- The deal would be worth around US$9bn and could come as soon as next month.
- In this note, we talk about the news and take an early look at the possible selldown.
Techtronic Industries (669 HK): JR Puts Down That Tool
- Jehoshaphat Research (JR) argues the case that Techtronic Industries (669 HK) has been engaged in “snowballing” to maintain margin growth.
- JR flags TTI is the only public company in the world (with over $1bn in revenues) exhibiting positive sequential gross margin change in every semi-annual period over ten years.
- Short interest had been picking up ahead of the short sell report. Shares fell 19% before being suspended in the afternoon session.
Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
- A rather unusual price movement came out on February 20 for HLB. On the first trading day after the board of directors’ decision, the price reached the upper daily limit.
- The short covering got to a temporarily excessive level in the process of securing appraisal rights should be the reason that led to the upper limit.
- We should design a trading setup targeting excessive short covering-triggered price overheating in split-off events. At this point, the most likely candidate to pursue a split-off is DB Hitek.
Ihara Science (5999 JP) – Here Comes The Bumpitrage
- In my first piece, Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement I noted that the price was too low. I expected activist efforts.
- The price did not trade below the Tender Offer Price after it opened for trading. That was a sign this wasn’t going to go easy.
- This morning I am made aware of a letter from one of the “active if not activist” shareholders saying the price is too low. Hint: It is.
Techtronic Industries (669 HK): Forensic Analysis Viewpoint
- Jehoshaphat’s short report has alleged that Techtronic Industries (669 HK)/TTI has been inflating its profits dramatically for over a decade with manipulative accounting.
- Our forensic analysis of the allegations suggests that some are credible red flags while others are essentially an exaggeration.
- TTI’s response to Jehoshaphat is pitiful. Valuation is meaningless until management adopts more conservative accounting or compelling disprove the allegations.
SPX Range Ahead of Next Leg Down
- SPX 3,980 is where a mild bounce should unfold. 4,060 sell resistance then the set-up calls for a break below 3,980 to test lower targets.
- This next leg down will cause more damage in EM/Asia and Europe. MACD on the verge of an ugly break below the “0” acceleration line.
- US 10yr yield dip is a buy for a push above the 3.95% pivot resistance with new highs in store.
Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment
- Techtronic Industries (669 HK) was targeted by Jehoshaphat Research (JR) accusing that the company’s profits are inflated dramatically over a decade with manipulative accounting.
- As per the report, routine expenses incurred have been booked under various asset accounts such as deferred development costs thereby showing ever increasing margins for a cyclical business.
- We have assessed the merits of some of these claims using our forensic accounting framework and it appears that most of the claims are very difficult to refute.
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