In today’s briefing:
- MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences
- Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
- Anta Sports (2020 HK) Placement: Limited Passive Inflows
- Alibaba (9988 HK): “Department One” in Reorganization
- HKBN (1310 HK): China Mobile Is the Latest to Show Interest
- Keppel Infrastructure Trust Placement – Very Well Flagged, Should Expect Some Short Covering
- TSMC: Crowded Trade?
- Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
- YFO Goes Hard for Board Spill – Independents AND Executives
- Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences
- The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
- The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
- There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.
Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
- With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
- One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
- Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here.
Anta Sports (2020 HK) Placement: Limited Passive Inflows
- Anta Sports Products (2020 HK) has completed a top-up placement of 119m shares at a price of HK$99.18/share, an 8.84% discount to the last close of the stock.
- The placement has raised HK$11.8bn (US$1.52bn) and the proceeds will be used for the repayment of loans and for daily operational needs.
- There will be small passive inflows in the stock at the close on 20/21 April and some small inflows in August/September.
Alibaba (9988 HK): “Department One” in Reorganization
- Alibaba broke down Taobao Tmall Center, the most important department, into three departments.
- Industry Development Department One is actually “other businesses” after the reorganization.
- Following Department One will help investors to understand Alibaba’s financials.
HKBN (1310 HK): China Mobile Is the Latest to Show Interest
- Reuters reported that China Mobile (600941 CH) is exploring a potential buyout of HKBN Ltd (1310 HK). The shares surged 12.3% to HK$6.57, above I Squared’s rumoured HK$6.00 offer.
- To get an idea of the appropriate offer price, we examine shareholding dealings from substantial shareholders. Our analysis suggests that a scheme offer of around HK$8.50 would likely be required.
- PAG is also a rumoured bidder. The flurry of interest around HKBN suggests a good probability that one of the bidders will come through with a formal offer.
Keppel Infrastructure Trust Placement – Very Well Flagged, Should Expect Some Short Covering
- Keppel Infrastructure Trust (KIT SP) is looking to raise S$125m (US$96m) in its primary placement.
- The proceeds in the deal will be used to partially pay down its bridge loan, the latter used in a series of acquisitions made by the REIT in 2022.
- Including the preferential offering, the deal would be a large one to digest at 9.4% of the REIT’s current mcap and 89.3 days of three month ADV.
TSMC: Crowded Trade?
- Taiwan Semiconductor (TSMC) is by far the most dominant stock holding among active EM investors.
- TSMC is owned by 87.5% of EM funds with an average weight of 6.1%, it is also the largest portfolio holding for 64.5% of managers.
- Despite high levels of positioning, there are no obvious signs that managers are scaling back positions. The risk of not holding TSMC may be greater than playing the contrarian.
Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
- We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
- Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
- Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.
YFO Goes Hard for Board Spill – Independents AND Executives
- At end-March, Toyo Construction (1890 JP) started playing hardball against YFO. They rejected the EGM call; they sent a letter to METI crying “FEFTA Breach!”, and raised the div BIGLY.
- The new div at ¥63/share was meant to get the share price over ¥1,000/share so the YFO bid at that price would not be meaningful. So far, no luck.
- But YFO, which had threatened to propose a new slate, came out today with a list of nine, including two who would be executive directors. 👀👀
Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
- In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
- So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
- That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.
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